TheCorporateCounsel.net

We now have over 200 amendments to the Dodd bill in the Senate and we’re still bound to get some more. With so many amendments they cover a large swatch of issues, including exempting small companies from Sarbane-Oxley’s Section 404 regarding internal controls (egs. #35 – Vitter Amendment 3764 and #56 – Hutchinson Amendment 3785) and removing proxy access from the bill (#157 – Carper 3887, as noted in this blog).

As is typical on the Hill, some amendments are unrelated to financial reform (eg. #62 – Brownback Amendment 3791 re: the Congo conflict), including one that eliminates cost-of-living increases for members of Congress (#1 – Feingold Amendment 3730)! Perhaps not an appropriate item to bury in a financial reform bill (but I get the idea).

Here’s the Senate Banking Committee’s 251-page report on the Dodd bill from April 30th – and here’s where you can find the list of the 205 amendments (click on “Amendments” in 2nd column). This list is useful as it links to the text of each amendment – but unfortunately you have to drill down to the text of each amendment to determine its subject matter since each is merely described as “Purpose will be available when the amendment is proposed for consideration” in the index.

The Reasons for Last Week’s 1000-Point Plunge: Maybe We’re Better Off Not Knowing?

Yesterday, SEC Chair Schapiro delivered this testimony before the House Capital Markets Subcommittee on the causes of last Thursday’s severe market disruption. As noted in this Washington Post article, the regulators now believe they have a handle on the confluence of events that precipitated the “blip” (but they still don’t know what caused that day’s volatility). A member sent in this commentary about the situation as known so far:

The collective facts so far from the regulators: at 2:32 pm, a CME trader sells heavy S&P 500 futures contracts (an “e-mini”) as part of a “bona-fide hedge,” per the CME. By 2:40, the cash equity markets are off 4% and near 10% a few minutes later.

The SEC says the NYSE institutes market steadying protocol when the selling gets off-the-hook, which has humans take over for electronic orders being routed to NYSE. The automated exchanges read this as a flaw and stop sending orders to NYSE. Market makers (“liquidity providers”) that are tasked with standing in and keeping the cash markets liquid (i.e. order flow) instead withdraw as the high-frequency trading programs go haywire. This is the where the “no bid” period establishes itself.

In other words, when the sh#% hits the fan, we can count on the Wall Street Army to retreat and let the tent fold, while they head for the hills with the cash. Mad Max, or what?

Floyd Norris’ Response: A Rebuttal to “SEC’s Rating Agency Regulatory Scheme Heighten Risk of Insider Trading”

Floyd Norris of the NY Times provides us with this response to a rebuttal to one of his columns noted in yesterday’s blog:

I just saw yesterday’s blog which allows that I don’t know what I am talking about. I think I was misunderstood. Let me take it slowly:

1. The rating agencies are exempt from Regulation FD; they can get info the rest of us don’t have.

2. That has led some people to think the ratings are based on superior information, and that Moody’s (or S&P’s or Fitch’s) opinion is worth more than some other analyst’s – not because of relative skill in analysis, but because of an information gap.

3. Why not end the exemption? If a company feels it is necessary to tell the rating agancy something, let it tell everyone else too. At least that can be done as soon as the new rating is published. (That allows for mergers and other major corporate changes. Effectively, it says that if an agency has inside info – it cannot disclose it until it becomes public.)

4. The fact that Moody’s discloses its rating is irrelevant to this analysis, contrary to what the member quoted says, so long as it (or the company) does not disclose the inside info on which the rating is based.

Your member thinks we are better off to have Moody’s know more, because it can then give us the results of that knowledge. I think we would be better off to have a level playing field, in no small part because it would take away the agencies’ aura, and that if companies knew they would be seen in a better light – and pay lower interest rates – if they released information, it would be released.

Obviously, his (or her) forecast of the future may be better than mine. But how does that prove I do not know what I am talking about?

– Broc Romanek