Tag:financial regulation
Preventing the Engine of Doom: A Lesson on Financial Crisis
The Great Financial Crisis of 2008 was a story of greed. In markets where incentives lead to bad behavior, disparately affecting a great deal of society, we rely on regulatory oversight. A domino effect of decisions spanning decades resulted in a global economic disaster, but it could have been prevented with effective regulators.
Agency Officials Trade Stock in Companies their Agencies Oversee
More than 2,500 government officials ranging from the Commerce Department to the Treasury Department reported owning stock in companies whose share prices correspond to decisions made by their respective agencies. With obvious conflicts of interest arising, what has happened, and what are some major takeaways from this investigative report?
Challenges and Opportunities in Regulating Cryptocurrency
Many nations are increasingly attempting to regulate Bitcoin and other forms of cryptocurrency. Increased regulation could help legitimize the currency, but uncertainties about what regulation lies ahead threatens the value of the currencies. A main driver of the increased value of cryptocurrencies is the potential for increased usage in markets globally and greater integration of them into our economy. Regulation may be essential to successfully enabling such integration, because with instability in trade and valuation of the currency it is hard for consumers to know whether they should be spending the currency, or if it will dramatically change in value over the course of a short time period.
Appreciating Taxes
After failing to arrive at a consensus on healthcare reform, the Republican party recently passed a blueprint which marked their shift in focus to something less contentious: the American tax code. If the Republicans are successful, compliance with tax regulation in the United States may soon change. An aspect of the code likely to be reformed is how asset appreciation is taxed.
Is Federal Securities (De)Regulation Obscuring State Blue Skies?
Under Rule 506 of Regulation D (“Reg D”), the U.S. Securities and Exchange Commission (“SEC”) exempts companies making private placements to accredited investors from all federal and state securities registration requirements. As a federal safe harbor, Rule 506 of Regulation D preempts all conflicting state securities regulations, but reserves the states’ rights to require issuers to make notice filings, and to investigate and prosecute securities fraud under state securities laws, commonly known as “Blue Sky Laws.” On its face, Rule 506 of Reg D creates a more efficient securities marketplace. However, the historical lack of consequences for non-compliance at the federal level, combined with inconsistent state notice requirements for using exemptions, further complicates an already over-regulated securities marketplace.
Implementation of Swap Trade Regulation Aimed at Reducing Investment Risk for American Financial Firms
In September 2017, United States economic markets implemented swap-regulating rules to reduce risk to U.S. investment firms. Signed into law in 2016, this regulation curbs the risk associated with swap derivatives in the United States. The Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Financial Conduct Authority, and the Federal Housing Finance Agency (the “Agencies”), constructed a joint rule requiring taxpayer-insured banks and financial institutions to collect greater collateral and provide greater transparency when involved in swap derivative agreements.
Following Classification of Cryptocurrencies as Commodities, Regulators Shift Focus
On March 6th, 2018 the. District Court for the Eastern District of New York upheld the classification of cryptocurrencies, such as Bitcoin and Litecoin, as commodities. The ruling subjects the cryptocurrencies to the regulation of the U.S. Commodity Futures Trading Commission (CFTC).
Challenges and Opportunities in Regulating the Banking Industry
Regulation in the financial sector is critical to preventing crimes that include fraud, money laundering tax evasion, human trafficking, aiding drug trafficking, and even financing terrorism. Despite the importance of regulation and banking institutions’ compliance with such regulations, many laws regarding money laundering are outdated and prevent efficient prevention of such crimes. Additionally, enforcement against large financial institutions is a difficult matter because of the harm that penalizing them could have on the economy.
Mr. Trump’s Swing at Financial Regulation
During his first 67 days in office, Mr. Trump signed 19 executive orders. One such action designed to roll back regulations from the 2010 Dodd-Frank Act (“Act”) received little to no media attention but may have long lasting ramifications in the financial industry.
The S&P 500 Index Committee Does Not Extend an Invitation to Tesla
Tesla satisfied the final requirement to join the S&P 500 when it announced its fourth consecutive quarter of profitability on July 22, 2020. As a result, investors speculated that the electric car maker would be added to the index in short order. However, on September 4, 2020, the U.S. Index Committee, the group responsible for managing the index, announced the addition of three new companies without mentioning Tesla. The news led to a 21% decline in Tesla’s stock price, the largest drop in the company’s history.