Equitable Solution? SEC, CFTC Enhancing Cooperation

The SEC and CFTC entered into a mutual cooperation agreement that promises to encourage a stronger working relationship between the two key regulatory agencies with jurisdiction over structured financial products.
Practitioners should expect to see more coordination and solidarity from both the SEC and CFTC in reviews and investigations of new financial products.
Regulatory consolidation is consistent with trend of industry cross-border consolidation.

All Roads Lead to the Chief Compliance Officer: a Report from the Recent Institutional Investor Events Chief Compliance Officer Forum

Detailed coverage of Institutional Investor Events’ Third Annual Chief Compliance Officer Forum.
SEC focusing on, with respect to hedge funds: valuation, disclosure, insider trading and preferential redemption terms.
SEC has recommended forensic tests that hedge fund advisers can perform to help ensure the integrity of valuations of portfolio securities.
FASB 157 specifies factors for hedge fund advisers to consider when measuring fair values.

President’s Working Group on Financial Markets released a set of comprehensive recommendations designed to stabilize the current turmoil in the financial markets, including the following key recommendations:
Reform of the mortgage origination process.
Improve investors’ contribution to market discipline.
Reform the credit rating processes and practices regarding structured credit and other securitized credit products.
Strengthen global financial institutions’ risk management practices.
Enhance prudential regulatory policies.
Enhance the OTC derivatives market infrastructure.

According to the Senior Supervisors Group, firms that dealt most successfully with the market turmoil of late 2007 demonstrated:
Better flow of information across the firm and more rigorous internal valuation mechanisms.
Effective management of funding liquidity, capital and the balance sheet.
Informative and responsive risk management practices.
In particular, three business lines where varying practices differentiated performance in response to the credit crunch were: CDO structuring, trading and warehousing; leveraged financing loans; and conduit and SIV businesses.

Dealing With Deficiencies: How to Ensure Smooth SEC Examinations and Prepare to Respond to Inevitable Deficiency Letters (Part One of Two)