SEC takes new shot to pass trader conflict rule tabled after 2008 crisis By Reuters January 25, 2023 1:23pm Updated A proposed SEC rule would bar traders in asset-backed securities from betting against the very assets they sell to investors.REUTERS WALL STREET[/paste:font] NYSE reveals what sparked stock-trading chaos at opening bell Hopes stir for FTX creditors — but recovery could take years: sources Dow turns positive as stocks rebound despite Microsoft’s dismal forecast I went on 6 dates a week — and didn’t have to buy groceries for 2 years Wall Street’s top regulator on Wednesday unanimously voted to propose a rule barring traders in asset-backed securities from betting against the very assets they sell to investors, behavior that became infamous in the wake of the 2008 global financial crisis. The rule is among the last to be adopted under the landmark Dodd Frank Wall Street reform legislation of 2010, according to SEC officials. The 2010 legislation sought to address the root causes of the mortgage crisis. An earlier version of the conflicts rule first proposed in 2011 was never finalized. The sweeping 2010 reforms, named for their sponsors — Senator Chris Dodd of Connecticut and Representative Barney Frank of Massachusetts — aimed to protect investors and taxpayers by preventing the buildup of risk and liability in the financial system. Among other things, the legislation contained financial stability measures governing banks deemed “too big to fail” and created the Consumer Financial Protection Bureau. SEC Chairman Gary Gensler said the rule would provide exceptions for legitimate activities, such as hedging to mitigate risk, market-making and liquidity commitments. REUTERS In the years after Dodd-Frank’s enactment, Democratic lawmakers complained that the SEC had failed to meet a 270-day deadline to issue a rule implementing Dodd Frank’s ban on betting against the same asset-backed securities traders sell to investors. In unveiling the proposal on Wednesday, SEC Chairman Gary Gensler acknowledged this was an “unfinished step” in post-crisis reform. The proposal is now subject to public comment for at least 60 days. SEC officials say it would provide exceptions for legitimate activities, such as hedging to mitigate risk, market-making and meeting liquidity commitments. But at a public hearing ahead of the vote, Republican members of the commission raised concerns that the proposal in its current form might inhibit legitimate activity, forshadowing likely criticism from industry groups. Republican Commissioner Hester Peirce, a critic of the commission’s current enforcement strategies, said the proposal “cries out for more care in its design,” adding that the rule could have a chilling effect on market participants who are unclear of when and the prohibition applies. According to SEC officials, traders who disclosed bets contrary to clients’ investments would still run afoul of the rule, something Peirce suggested should be allowed “to cure at least certain types of material conflicts.” Better Markets, an advocacy organization that promotes more strict financial sector regulation, welcomed Wednesday’s rule proposal but vowed to study it. Stephen Hall, Better Markets’ legal director, said traders’ conflicts of interest drove the proliferation of sales of worthless mortgage-backed securities, thereby worsening the financial crisis and constituting “some of the most outrageous abuses we saw.” Without citing prominent recent examples of such conflicts of interest in the asset-backed securities market, SEC officials said the conflicts rule was needed to remove the opportunity and incentive for such conduct. What do you think? Be the first to comment. In 2010, Goldman Sachs agreed to pay a record $550 million penalty to resolve SEC allegations that it had misled investors. A Senate investigation later detailed how Goldman had marketed mortgaged-backed securities to investors without disclosing that the investment bank or others had placed substantial bets that these assets would lose value. A Goldman representative declined to comment on specific steps the bank has taken in the intervening years to prevent such conduct.
Intentionally, selling a broken car and then recommending a mechanic, who happens to be your affiliate partner.
one more sliding step toward socialism. A few large banks are easier for the government to control than 10000+small banks.
Shorting the underlying security (MBS) was NEVER the cause of the problem. *** I was going to post a thoough response. But it is not worth it. People who want to believe what is "comfortable" for them have no interest in facts. No idea what case the OP wants to make. But it is probably based on quicksand.
I don't know what that is about. You want detail. OK. *** It was Pres Bill Clinton who started it. And he used that stat (blacks who have recently bought houses) to run for re-election. "See what a great job I am doing" His enforcer was Janet Reno (Attorney General). She threatened to sue these banks if they didn't bend to her will. (Mortgage loans to minorities) But I definitely remember banks running classified ads (very expensive) asking (pleading) blacks to come back in the bank to get the mortgage Loan. Then mortgage loans defaulted like a zipper unzipping. Now a total FUBAR.
There are way more whites (like me) in this country than blacks. Doesn't take a math degree to know there were way more liar loans done by whites. But when the punchbowl is full, race doesn't matter. Everyone gets a cup. I know someone - who worked for a mortgage broker - who should not have been given a mortgage with their lousy credit. Debt prolly at least 3 times their salary with no real assets to speak of.
Liar loans are just a mechanism to cheat the system. When we bought our first house, there were certainly items on the App that bordered on fiction. Nonetheless, we paid the 30 year mortgage off in 12. Always pay your debts. Your turn.
If I buy a car for 50K and put almost nothing down, I'm required to buy insurance to pay off the debt with the bank if I crash the car. So I'm "long" the car while being "long" crashing it. Makes sense in the real world but they want to ban it here? So would PIPEs would also be illegal under this, or is giving a loan and then shorting the common underlying still ok? Asking for an equity manager.