SIFMA Global Weekly Update

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The Week in Review

ESME questions effect of short selling restrictions
The European Securities Markets Expert Group (ESME) has published its report on short selling. The report stated that, for at least 25 major equity markets worldwide, the anticipated effectiveness of restrictions on short selling implemented in September 2008 had not been borne out by the evidence. In its analysis, ESME emphasized the lack of statistical evidence on the effectiveness of the recent measures and the serious uncertainties, compliance cost and burdens due to a lack of international consistency. The report called for short selling restrictions to be applied in extreme circumstances only, as a short-term response to a specific event, not as a matter of course or regular feature of equities markets. ESME called for further consideration as to whether there is merit, on a cost/benefit analysis, in the introduction of a disclosure or transparency regime. (ESME Report)

IOSCO consults on regulatory approach to short selling

IOSCO released a report proposing principles designed to help develop a more consistent international approach to the regulation of short selling. The report recommends a number of principles: (1) Short selling activities should be subject to appropriate controls to reduce or minimize the potential risks that could affect the orderly and efficient functioning and stability of financial markets, (2) Short selling should be subject to a reporting regime that provides timely information to the market or to market authorities; (3) Short selling should be subject to an effective compliance and enforcement system; (4) Short selling regulation should allow appropriate exceptions for certain types of transactions for efficient market functioning and development. (IOSCO Consultation Paper)

European Forum sets out best practices for directors' pay

The European Corporate Governance Forum, which examines best practices in Member States in the field of corporate governance, has issued a public statement concerning the main principles that should govern the remuneration of executive directors. The Forum, while acknowledging that the determination of the pay structure and the levels should be left to companies and shareholders, advocates that certain best practices should be respected. Examples of the best practices that the Forum lists in its statement are: (1) That the level of variable pay should be reasonable in relation to total pay level, (2) severance pay for executive directors should be restricted to two years of annual remuneration and should not be paid if the termination is for poor performance and (3) variable pay should be linked to factors that represent real growth of the company and real creation of wealth for the company and its shareholders.

Brown Seeks Central Role for Europe in Solving Financial Crisis

In a speech before the European Parliament, UK Prime Minister Gordon Brown advocated taking a central role in establishing a new global financial system and working more closely with the U.S. Brown said the world would benefit from a more coordinated stimulus plan and a reformed IMF to help countries that are facing a flight of capital, help them assist restructuring the capacity of their banks and enable them to restore lending to their industries

(For text of speech, contact Steve Pastrick, spastrick@sifma.org)

EU Commission Consults on Further CRD Revisions

DG MARKT published their consultation on the next revision to the CRD on strengthening capital and disclosure requirements for the trading book and complex securitizations. The possible changes stated to be in line with the work done by the Basel Committee, and cover (1) strengthening capital requirements in the trading book; (2) raising capital charges for certain (complex) securitization exposures; and (3) upgrading risk management and disclosure standards for securitization positions. The deadline for comments is April 29.

(DG MARKT Consultation)

Millán Mon report on EU-US relationships

The European Parliament adopted the report in Plenary on March 26. The report reaffirms gradual integration of the financial markets through mutual recognition combined with a degree of convergence of the current regulatory frameworks, recalls that the basic principles for successful integration are free access to markets and advocates the creation of regulations that conform to international standards and apply uniformly to market stakeholders. The report also calls on the EU and the US authorities to avoid setting up barriers to inward investment and enacting legislation having an extra-territorial impact without prior consultation and agreement and urges the EU and US authorities to regulate credit rating agencies in accordance with jointly held principles.

The Weeks Ahead

April

2 April – G20 Leaders meeting, London
3 April – EU Commission/Industry meeting on CDS CCP progress
3 April – Informal ECOFIN
3 April – Deadline for comments on CEBS principles on remuneration
4 April – EU-US Leaders’ summit (Prague)
10 April – Comment deadline on EC Consultation on Improvements to the EU Financial Supervisory Architecture
19 April – Deadline for comments on Basel Committee on Banking Supervision (BCBS) consultation on enhancements to K framework for securitization (ESF response)
Week of 20 April – European Parliament plenary votes on CRD and CRA
21 April – EU Commission updated 2004 Recommendation on remuneration of directors and new Recommendation on remuneration in the financial sector
22 April – EU Commission legislative proposal on hedge funds, private equity and other systemically important market participants
22 April – EU Commission legislative proposals for legal certainty of securities holding and transactions (ESSF/SIFMA responding)
22 April – EU Commission recommendation on executive compensation and remuneration schemes
29 April – Deadline for comments on EU Commission consultation on the next CRD revisions on strengthening capital and disclosure requirements for the trading book and complex securitisations
30 April – Deadline for comment on IOSCO Consultation, “Hedge Funds Oversight”
By April end – CESR report on post-trade price transparency in corporate bonds, CDS and structured products markets

May

May – EU Commission proposals on setting up a European Systemic Risk Council and a European System of Financial Supervisors
5 May – Deadline for comments on IOSCO Consultation on the regulation of short-selling
8 May – Deadline for response to FSA discussion paper on short-selling (joint SIFMA/LIBA/ISLA response)
18 May - Deadline for comments on FSA Consultation Paper on Compensation schemes
20 May – Deadline for comment on IOSCO Consultations, “Principles of Outsourcing by Markets” and “Policies on Direct Electronic Access”
By May end – EU Commission proposals on setting up a European Systemic Risk Council and a European System of Financial Supervisors

June

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