Many High Frequency Traders Becoming Registered Broker Dealers
These changes would result in increased regulatory control over high-frequency trading, and high speed trading firms might convert into broker dealers. Through SEC Registration, the firms would be authorized to buy and sell securities. By registering with FINRA, the firms would be authorized to buy them on behalf of customers. By registering as a brokerage firm, the companies would be subject to the same legal, compliance, and regulatory reporting standards in place for broker dealers.
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Regulatory Oversight and Financial Reform in Senate
According to the NY Times "the plan would create a nine-member council, led by the Treasury secretary, to watch for systemic risks, and direct the Federal Reserve to supervise the nation's largest and most interconnected financial institutions, not just banks." For the most part, the regulatory architecture for oversight of the financial system will remain the same despite criticism that the current system is too fragmented. The bill also inclues new provisions to restrict the ability of banks to engage in certain types of speculative trading to minimize systemic risk and "build a safer financial system."
Though the revised version of the bill contained many concessions to Senate Republicans, it is expected that they will introduce new amendments, particularly related to the Consumer Financial Protection Bureau that would be created from the legislation. In order to get hte legislation passed through Senate, the Democrats would need the support of at least one Republican. If the legislation passes in the Senate, the next step would be to reconcile the Senate Legislation with the House's version of financial reform that passed in late 2009.
For a summary of the Restoring American Financial Stability Act - Click here
For the full text of the Restoring American Financial Stability Act - Click here
To learn more about how ACI can work with your firm to achieve accurate books & records and keep up with regulatory changes contact info@acisecure.com.
Financial Regulatory Reform Press Conference March 2010
Chris Dodd (D-CT), Chairman of the U.S. Senate Banking Committee, is expected to release his financial regulatory reform legislation at a 2 p.m. press conference on March 15, 2010. For a summary of the legislation visit http://banking.senate.gov/public/.
ACI is expanding our services and compliance programs to include consulting assistance and compliance support to help your firm be in compliance with new regulations under financial regulatory reform legislation.
To watch Chairman Dodd's 2 p.m. press conference on the CSPAN Website click here.
Hedge Fund Regulation is Likely
There are currently several proposals on the floor of Congress that would affect the future of hedge fund regulatory requirements. The proposals call for increased transparency and accountability of hedge funds in a governmental mission to minimize systemic risk. The following proposals are currently being considered:
- Consumer Financial Protection Agency Act of 2009
- Private Fund Transparency Act of 2009
- Hedge Fund Advisor's Registration Act
- Private Fund Investment Advisers Registration Act of 2009
- Hedge Fund Transparency Act of 2009
All of the aforementioned proposals would eliminate the private advisor exemption that currently excludes hedge funds under 15 clients from having to register with the SEC. Though it's uncertain which of the proposals will pass, it is apparent that hedge funds can expect registration and development of a compliance program to be a requirement in their near futures - likely to pass by the end of the year with a 6 month implementation schedule. By eliminating the hedge fund registration exemption, all of these bills would require hedge funds to register with the SEC, have compliance policies and procedures and a code of ethics, develop business continuity plans, and implement an anti-money laundering program. What's more, as SEC regulated firms, Hedge Funds can also expect to be subject to an annual audit by FINRA or another examination body that will be examining the compliance program with increased scrutiny to avoid another messy scandal.
To this point, Rick Nummi a former senior attorney at the SEC who helped to write the Hedge Fund Examination module and currently serves as an Executive Consultant at Accounting & Compliance International suggests that regulations and examinations are just going to get more focused. Nummi says "FINRA Management will have "game changing" directives to their exam staff to avoid another Madoff/Stanford/Bluestein. The primary driver will be/currently is, ‘If you (the FINRA Exam Staff) don't find it (while you are onboard a firm examining) and it happens (another embarrassing fraudster) on my (Senior FINRA Staff) watch, you (the examiner) will be castrated (fired)'. It doesn't matter what the priorities are, there will be no quarter given to lax compliance staff."
To cope with the looming registration requirement, it is advisable to register your hedge fund sooner rather than later and to appoint your firm's Chief-Compliance Officer before these experience compliance professionals become a precious and expensive commodity. Compliance firm's such as Nummi's Accounting & Compliance International can spearhead the registration process for your firm and develop a customized compliance manual to help you create a strong compliance infrastructure. If you're not ready to register, you should run your firm as if you are registered and follow compliance best practices for Investment Advisors (under SEC Rule 206), which include appointment of a CCO, development of a compliance manual, and an annual review of your program. A strong compliance infrastructure will inspire investor confidence and benefit your firm. You should also be sure to maintain for review accurate books and records that might be required for inspection.
For a comprehensive list of documentation that your firm should keep on file review Books and Records to be maintained by Hedge Funds. The regulatory landscape is changing for Hedge Funds and keeping up with those changes is imperative for your firm to remain competitive, compliance, and successful. If you would like to inquire into Hedge Fund Registration or Compliance for your firm, contact Accounting & Compliance International (ACI) and request a complimentary consultation with one of our representatives: Email: info@acisecure.com or Phone: 212-668-8700. Website: www.acisecure.com.