Archive for the ‘Regulatory’ Category

CESR reports today on the progress made under the protocol for the supervision of branches in the context of the Markets in Financial Instruments Directive (MiFID).

In the months since the implementation of MiFID on 1 November 2007, 16 agreements for cooperation on the supervision of branches have been concluded between CESR Members. This progress is an important step in order to achieve effective and transparent supervision and to enhance co-operation amongst supervisors.

Further information can be found in the CESR press release published today.

XinHuaNet writes that employees of financial institutes who take advantage of non-public information for personal gains in trading will face criminal prosecution, according to the draft amendment to the Criminal Law submitted to China’s top legislature Monday. Employees of fund management companies, securities firms, commercial banks and other financial establishments could be jailed for up to 10 years and fined up to five times of their illegal gains, if they seek, or advise others, to profit from non-public information, the draft says.

The draft amendment, submitted to the Standing Committee of the National People’s Congress (NPC) for its first hearing, marks the country’s latest initiative to crack down on insider trading.

The existing Criminal Law bans individuals with access to classified information from trading in related stocks and securities. The prohibition did not include other non-public information such as the fund flow information of the company’s trusted funds

    The amendment came after an insider trading case involving TangJian, a fund manager at the Shanghai-based China International Fund Management Co., in which JP Morgan Asset Management (UK) Limited holds a 49-percent stake.

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The Financial Services Authority (FSA) published yesterday (5 June) Market Watch 27, an update of the thematic review of controls over inside information, following the publication of Market Watch 21 in July last year.

The update includes a set of Principles of Good Practice (“The Principles”) for the handling of inside information that were drawn up by industry practitioners representing different areas involved in M&A activity, such as issuers, corporate finance houses, lawyers, accountants, public relations firms and financial printers.

The Principles, which highlight the importance of restricting access to price sensitive information, are voluntary to adopt, broad based and largely focused on the areas identified as requiring the most attention:

1. Policies and procedures
2. Awareness and training
3. “Need to know” and other information controls
4. Passing price sensitive information to third parties
5. Information technology security
6. Personal dealing policies

Work, in partnership with the industry, to reduce the leakage of price sensitive information relating to M&A activity therefore improving market cleanliness is a core part of the FSA’s strategy for tackling market abuse. Insider dealing is a criminal offence which the FSA will prosecute vigorously.

Richard Lambert, director-general of the CBI, welcomed the Principles published by FSA: “It is vital that investors have faith and confidence in honest and open capital markets. Insider trading destroys trust and these principles of good practice will help ensure transparency and fairness in the markets.”

Adam Kinsley, director of Regulation at the London Stock Exchange, said: “We support the FSA and the industry bodies who drafted this guidance, and share their objective to ensure that UK markets continue to be regarded as well-regulated and clean. These principles published by the FSA today provide helpful guidance to anyone who comes into contact with inside information. They will help ensure the UK remains a world-leading financial centre with high standards and good practices.”

Market Watch 27 also provides a detailed update on the follow up work that FSA has undertaken with FSA regulated firms and contains examples where individual firms strengthened their controls. It also reports on industry dialogue on two important topics: how to increase the focus at firms on the need to properly consider when to undertake internal leak enquiries, and whether more can be done to reduce the number of insiders on deals.

See full text of the official press release

CESR has published the first draft of 3rd set of guidance on the common operation of the Makret Abuse Directive (MAD) as part of its efforts to prepare ground for more convergent implementation and application of the MAD regime.

According to CESR’s Work Program (CESR/07-416) the issues to be covered in a 3rd set of guidance include:

• Harmonisation of requirements for insiders lists

• Suspicious Transactions Reporting (STRs)

• Stabilisation Regime as Level 3

• The notion of inside information to be analysed as a Level 3 topic.

3rd set of guidance will be published for European–wide consultation in two steps: A first consultation paper, published on 20 May 2008, covers the topics on insider lists and STRs and will be open for consultation over summer.

A second consultation paper dealing with the topics on stabilization and the notion of inside information shall be published later this year.

Interested parties are welcome to submit their comments to the draft guidance set out in the first paper and send their responses via CESR’s website (www.cesr.eu) under section “Consultations”. The consultation closes on 30 September 2008.

Full text of the first draft of 3rd set of guidance is available at:

http://www.cesr.eu/popup2.php?id=5054

CESR welcomes the report of the Financial Stability Forum (FSF) on Enhancing Market and Institutional Resilience published 7 April, and launches work to address some of its recommendations, as well as to implement some of the decisions taken by Europe’s Ministers at the informal ECOFIN Council of 4 and 5 April 2008. This action can therefore be seen as part of the response by CESR to issues raised by the current market turmoil. This work will be undertaken, where appropriate, in close co-ordination with our fellow Level 3 Committees covering banking, insurance and pensions (namely, CEBS and CEIOPS). The Chairman of CESR, Eddy Wymeersch noted:

“Europe’s securities regulators are currently assessing and instigating action which will contribute to the efforts being made to re-establish confidence in financial markets at a global level through IOSCO and the FSF. Today, as a first instance, we announce the launch of work in a number of key areas which will include, amongst others, finalising CESR’s work on credit rating agencies and intensifying existing efforts to co-ordinate on the investigation of market abuse. Further new work will be launched in the area of valuation of assets; market transparency and risk management by investment firms. In addition, in response to the particular request of the ECOFIN Council, CESR will develop a framework for a periodic contribution which will seek to identify major sources of potential risks in financial markets for the Financial Stability Table of the Economic and Financial Committee.”

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Market abuse: CESR will seek to strengthen its current efforts to increase co-operation between its members in joint-investigations on possible cases of market abuse emerging during this period of market turbulence. At present an MOU exists to facilitate the sharing of information by Members; urgent issues groups are also established to co-ordinate and conduct joint investigations; and work has been undertaken to exchange experience and share approaches to investigations to improve best practice. Further work to review additional steps which might be taken to intensify these efforts will be conducted by CESR-Pol, chaired by Kurt Pribil the Chief Executive Officer of the Financial Market Authority (FMA) in Austria.

Market transparency: CESR will review the conclusions contained in its technical advice to the Commission on “non-equities market transparency” (published 9 August 2007 Ref. CESR/07- 284b). In particular, it will focus on aspects of post trade transparency for both retail and wholesale markets. This work will be conducted by the MiFID Expert Group, chaired by Jean- Paul Servais, Chairman of the Commission Bancaire, Financière et des Assurances (the CBFA), Belgium.

Read the whole press release …

Interesting article and discussion in today’s DowJones US Financial News section regarding information sharing between different regulators and companies traded in various countries.

European financial regulators are in danger of being seen as complacent after claiming that nothing needs to change about how they communicate with each other after the Société Générale scandal.

The French securities regulator, the Autorité des Marchés Financiers, was criticized for its delay in informing other financial watchdogs about the troubles at SocGen in January.

Bankers said they were astonished at the lack of communication between market regulators, and there were calls for improvements to the structure.

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As The Autralian wrote today stockbrokers will find themselves facing fines as high as $1 million for serious market manipulation under new Australian Securities Exchange regulations in force from Monday.

The quadrupling of the maximum fine for serious disciplinary matters for brokers and futures traders, from the current limit of $250,000, is a consequence of a recent push by the ASX to bring the Australian fine regime into line with international practice.

The ASX has found itself in the firing line because of recent trading practices in the market downturn such as short selling and stock lending, which have led to calls for more disclosure of which sales are “short” and which stocks are borrowed. Short-selling involves selling shares the vendor does not own, most usually having borrowed stock to cover the position, with the aim of buying back shares at a lower price.

The new $1 million maximum fine represents a significant step up compared to the total of $570,000 in fines collected by the ASX disciplinary tribunal from broker members for the six months to the end of December and the total of $410,000 collected for the financial year ended June 30, 2007. The fines are potentially in addition to referrals by the ASX’s market supervision arm to the Australian Securities and Investments Commission for possible breaches of the Corporations Act such as insider trading, breaches of continuous disclosure and market manipulation. Read the whole story …