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canadian consultation with retail investors - results December 18, 2008

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Yesterday, Canada’s Joint Standing Committee on Retail Investor Issues reported the results of its public consultation on suitability. The Joint Standing Committee received 24 responses to the consultation despite contacting a number of organizations to try to encourage participation. The report doesn’t give any information about any characteristics of the respondents, although it does include the written responses (which give some slight indications of the people who made them). I really enjoyed being able to see more than just an official summary.

legislation, delegated legislation and financial emergencies September 30, 2008

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The Bradford & Bingley Transfer of Securities etc Order was adopted yesterday under the Banking (Special Provisions) Act 2008 on an unusual schedule for UK statutory instruments:

3.1 It was not possible in the case of this Order to comply with the 21-day rule according to which relevant instruments are laid before Parliament for at least 21 days prior to coming into force. The Order was made at 7.40 a.m. on 29th September 2008, came into force at 8.00am on that day and then was laid before Parliament on that day.
3.2 It is important that the transfer of securities in Bradford & Bingley, and the transfer of certain property, rights and liabilities and other related matters, has effect as soon as possible following the making of the Order. It is in everyone’s interest for the transfer of shares and transfer of property to be effected as swiftly as possible to avoid uncertainty .

For many of the provisions of the Statutory Instrument, the speed is understandable. But some of the provisions don’t just address the urgent transfer of assets, but purport to alter primary legislation. For example, the Financial Services Act requires the FSA to publish draft rules and try to bring them to the attention of the public before acting to promulgate rules. The original exception to these requirements stated that they would not apply

if the Authority considers that the delay involved in complying with them would be prejudicial to the interests of consumers.

The Bradford and Bingley Amendment Order adds the following language:

or if it is making rules for the purposes of, or to facilitate or in consequence of, a transfer under section 3 or 8 of the Banking (Special Provisions) Act 2008.

Surely this provision would have been more appropriate in the Banking (Special Provisions) Act itself (which was itself enacted very speedily), rather than in a statutory instrument which came into effect 20 minutes after it was made by the Treasury and was only later laid before Parliament? On the other hand, the statute does seem to give the Treasury an incredibly (excessively?) general power to disapply statutory provisions or rules of law in section 12:

(1) The Treasury may by order make—
(a) such supplementary, incidental or consequential provision, or
(b) such transitory, transitional or saving provision,
as they consider appropriate for the general purposes, or any particular purposes, of this Act or in consequence of any provision made by or under this Act, or for giving full effect to this Act or any such provision.
(2) An order under this section may in particular—
(a) disapply (to such extent as is specified) any specified statutory provision or rule of law…

sifma on cras and the eu commission September 8, 2008

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SIFMA today (the letter is dated 5 September (the final date for responses), although the press release carries today’s date) joins EACT in critiquing the Commission’s proposals for the regulation of cras. Like EACT, SIFMA is very critical of the consultation timetable:

Given the difficulties posed by this framework, it is disappointing that pressure to regulate should cut short a thorough consultation. Precipitate regulatory action produced by extraneous pressure often produces economic distortions, market inefficiencies, and anti-competitive outcomes. For this reason, few disagree that stakeholders should be consulted with sufficient lead time to take full advantage of their expertise, and to ensure that unforeseen, unintended, or undesirable consequences are identified and mitigated. In this case, the financial services industry has been asked to comment on an extensive regulatory apparatus within four weeks – half the time traditionally allotted. It is worth noting that the US Securities and Exchange Commission (SEC) split its CRA reform proposals into two parts and allowed non-congruent 60 day comment periods. To be sure, CRAs have been the subject of several years of regulatory consultation since the Enron collapse, but that dialogue is of little relevance in the present circumstances. None of the previous consultations envisioned regulation on the scale now proposed, nor gave any indication that such measures were contemplated. We wish, therefore, to share our discomfort with the reduction of a bedrock principle of the EU regulatory process to a near formality.

SIFMA also endorses principles rather than “rigid rules”. And says there’s insufficient attention to the self-regulatory possibilities and to ongoing work in other jurisdictions.

consultation and retail investors September 4, 2008

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In an apparent contrast to many official consultation exercises on issues of financial regulation, which seem mostly to be concerned with the views of financial firms, Canada’s Joint Standing Committee on Retail Investor Issues has just published a set of questions about product suitability directed to retail investors (with answers due by October 9):

1) What information about an investment does your adviser give you before and after you buy it? Is there any other information you would like?
2) Should specific investment products be prohibited from sale to the public, or should all products be available to investors and investors be allowed to make their own choice?
3) Should regulators focus on regulating specific products or on regulating how products are sold and distributed?

The Chair of the Committee, who is also Vice Chair of the Ontario Securities Commission, said:

This is part of our ongoing commitment to more effectively integrate the retail investor perspective into our regulatory efforts.

It will be interesting to see what sort of response the Committee gets to this consultation.

cras, the commission, and consultation September 3, 2008

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EACT, the European Associations of Corporate Treasurers, don’t like the Commission’s proposals for regulating credit rating agencies. EACT have produced a 23 page response to the Commission’s consultation, a consultation period which expires on Friday, and was truncated:

It was not possible for Commission services to start the consultation period earlier given the fact that the advice of the Committee of European Securities Regulators (CESR) and the report of European Securities Markets Expert group (ESME) were delivered only in May and June this year respectively. These contributions had been prepared on the request of the Commission and offered the necessary basis for the Commission services’ work in this area. Moreover, a substantial amount of time in the preparatory phase has been devoted to eventually unsuccessful attempts to create a self-regulatory solution for the CRA industry.
Neither is it possible to extend the consultation period later in September: in view of the forthcoming elections, the European Parliament has agreed with the European Commission to accept the Commission proposals to be dealt in co-decision only by October 2008 at the latest. This implies that the Commission services will need to launch and finalise an Interservice Consultation in September 2008 in order to meet this deadline. Commission services will compensate the short consultation period by individually encouraging important stakeholders (including regulators, Member States and the CRAs) to participate in the public consultation.

I’m not convinced that making sure to encourage the important stakeholders to participate really does compensate for a shortened consultation period (especially one that has taken place while many people have been on vacation, as noted by EACT). And this is yet another consultation exercise which seems to be being carried out only in English. As to the substance, EACT suggests the proposed rules are too detailed (rules-based regulation, rather than principles-based regulation), will impede competition, and risk conflicting with rules being introduced in other jurisdictions.

basle committee and consultation September 1, 2008

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Increased transparency at the Basle Commitee on Banking Supervision, which has published the full text of comments it has received on Principles for Sound Liquidity Risk Management and Supervision (published in June this year). In the past, when it did comment on responses to consultations, the BCBS tended to publicise the gist of comments rather than the full text (for example this overview of comments on sound credit risk assessment and valuation for loans). In publishing the comments on liquidity risk management, the committee stated:

Interested parties were invited to provide written comments by 29 July 2008, with such comments to be published on the Bank for International Settlements’ website unless confidential treatment was requested. As a result, the Committee received 30 comments for publication…
The Committee wishes to thank those who have taken the time and effort to express their views. These comments will no doubt assist the Committee in its efforts to finalise its liquidity guidance.

There are limits to transparency here, however: the BCBS does not state whether or not any respondents made comments which they asked to be kept confidential.

banking consultation: mainly for experts July 24, 2008

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The consultation on a special resolution regime to deal with the resolution of failing banks states:

The publication of this document is intended to enable all stakeholders with an interest, particularly those with relevant technical expertise and knowledge, to engage with the Authorities on the detail of the proposals, prior to the introduction of the primary legislation later in 2008.

financial regulation and consumers July 9, 2008

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The FSA’s most recent quarterly consultation document is out (all 110 pages) and on page 6 it notes:

The proposals in Chapter 11 will be of particular interest to consumers.

Chapter 11 deals with changes to allow the Financial Ombudsman Service to deal with complaints about debt administration services. Most of the document looks pretty technical on a quick skim, and it may be right that this is the most interesting aspect for consumers. But why, then, bury it in a long document full of stuff most consumers will never know exists, let alone read? It’s not flagged on the FSA’s consumer pages. Perhaps this is just a note to encourage the Financial Services Consumer Panel to focus on this part of the consultation.

more weird uk government youtube videos June 5, 2008

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A couple of weeks ago the UK Government invited comments on its draft legislative programme for the next session, including via a youtube video with the title “The Prime Minister Launches “Your Voice”". The Prime Minister barely appears here:

consultation in the eu June 4, 2008

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In order to respond to the EU Commission’s consultation on an EU consumer safety mark it is necessary to specify whether you are “A consumer, professional user (e.g. hair-dresser, carpenter, doctor, etc.) or professional in the supply chain”, “An enterprise / enterprise association” or “A market surveillance or customs authority”. Presumably the distinction between the first two categories is meant to be between individuals and firms, even though enterprises could be enterprises comprising users of products as well as producers. If you pick the consumer etc route, identifying yourself with greater detail is optional. You have to say how much attention you pay to a range of issues when purchasing products, including safety, price, place of origin, and brand. And then there’s a question about which of these issues matter in the context of a strange set of products: mobile phones, ladders, light bulbs, teddy bears, computer game consoles, bicycle helmets, saucepans, carpets, t shirts, office chairs, shampoo, cheese, electric kettles, drilling machines, and cars. Perhaps I am missing something, but safety isn’t an issue I worry about when buying t shirts, and with respect to other products in the list I care quite a bit about environmental and ethical/social issues that the survey isn’t concerned with. So I didn’t submit a response.