The New Global Regulatory Landscape: Impacts on Finance and Investment PDF
Preview The New Global Regulatory Landscape: Impacts on Finance and Investment
THE NEW GLOBAL REGULATORY LANDSCAPE This page intentionally left blank The New Global Regulatory Landscape Impacts on Finance and Investment ROSS K. M GILL C AND TERENCE A. SHEPPEY © Ross K.McGill and Terence A.Sheppey 2005 All rights reserved.No reproduction,copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced,copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988,or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency,90 Tottenham Court Road, London W1T 4LP. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright,Designs and Patents Act 1988. First published 2005 by PALGRAVE MACMILLAN Houndmills,Basingstoke,Hampshire RG21 6XS and 175 Fifth Avenue,New York,N.Y.10010 Companies and representatives throughout the world PALGRAVE MACMILLAN is the global academic imprint of the Palgrave Macmillan division of St.Martin’s Press,LLC and of Palgrave Macmillan Ltd.Macmillan®is a registered trademark in the United States,United Kingdom and other countries. Palgrave is a registered trademark in the European Union and other countries. ISBN 978-1-349-52160-9 ISBN 978-0-230-51198-9 (eBook) DOI 10.1057/9780230511989 This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. A catalogue record for this book is available from the British Library. A catalog record for this book is available from the Library of Congress. 10 9 8 7 6 5 4 3 2 1 14 13 12 11 10 09 08 07 06 05 Contents List of figures and tables ix Preface and acknowledgments xi About the authors xv List of abbreviations xvii PART I 1 Introduction:The New Global Regulatory Landscape 3 Who should read this book and why 5 The investor’s perspective 6 Yield strategy and activism 7 Regulatory impacts on investment returns 7 Protecting information 8 The intermediary chain 8 1 The Strategic View 10 Corporate governance and e-governance 10 Money laundering 11 International terrorism 11 Financial disclosure 12 Investor activism 12 Technology 13 The storage, transmission, and processing of data 13 Access to data, remote banking, and e-money 14 2 The Historical Perspective 15 The United Kingdom 15 Financial services 20 Markets and players 21 Consolidation 22 The UK regulatory map 23 The US situation 25 The European Union 27 v vi CONTENTS Consolidation 28 Single regulator 29 The future of regulation in Europe 29 Enforcement 31 International cooperation 32 European passport 33 Difficulties in gaining agreement 33 European Financial Service Action Plan (FSAP) 35 Lamfalussy 36 Deregulation and liberalization 37 Deregulation 38 Privatization 38 France 39 Denmark 40 Sweden 40 Ireland 40 Italy 41 Spain 41 United Kingdom 41 Germany 42 Compliance 46 PART II 49 3 Regulatory Overview 51 United Kingdom 52 The Combined Code on Corporate Governance 52 Higgs Review 56 Turnbull Report 63 MLR 2003 67 Freedom of Information Act 71 ISO 17799 73 Companies (Audit, Investigations and Community Enterprise) Act 2004 75 Operating and Financial Review (OFR) 78 Financial Services and Markets Act (FISMA) 2000 80 United States of America 83 Sarbanes–Oxley 83 USASection 1441 NRA 87 The USAPatriot Act 98 Gramm–Leach–Bliley 103 Safe Harbor 106 Securities and Exchange Commission Act 1934 111 Europe 113 CONTENTS vii Basel II 113 UCITS III 116 Data protection 120 E-Commerce Directive 2000/37/EC 125 EU Framework Directive for Electronic Signatures (1999/93/EC) 130 Asia/Pacific 132 Financial Transactions Reports Act 1988 (Australia) 132 India and data protection 134 Global 137 Double tax agreements 137 International Financial Reporting Standards (IFRS) 141 The IASC Foundation and IASB Framework 141 IASB Framework for the Preparation and Presentation of Financial Statements 144 PART III 147 4 Regulatory Overlaps and their Impact 149 EU Data Protection Directives and US Safe Harbor Act 150 MLR 2003 and the principle of client confidentiality 153 Sarbanes–Oxley and MLR 2003 155 Freedom of information, the Data Protection Act, and MLR 2003 156 Freedom of information and data protection 156 The USAPatriot Act, Section 1441 NRARegulations, and MLR 2004 157 UCITS III and US double tax agreements 158 Sarbanes–Oxley and the Turnbull guidance 161 Issues for institutional investors 165 5 Compliance 167 Aframework for compliance 167 Letter and spirit 167 Compliance and regulation 168 Avoidance and evasion 169 The regulators 169 The investor 170 Reporting 170 Financial reporting 171 Advantages for financial services companies 171 Documentation and information 172 Regulatory requirements for documentation 173 Information value and loss 176 Benchmarking and assessment methodologies 176 viii CONTENTS Global Regulatory Impact Assessment (GRIA) 177 Data Processing Risk Assessment (DPRA) 180 Audit 180 Internal auditing 185 External auditors 186 Governance 188 Institutional and corporate scandals 188 The United States: FASB 189 Corporate governance 190 PART IV 193 6 Other Operational Issues 195 Operational compliance 195 Information technology 197 Inter-departmental liaison 200 Risk profiling versus liability 202 Operational risk management 203 Internal controls and operational risk 203 Governance and standards 204 7 Investor Issues 206 Types of consumer 206 The smaller investor 206 Institutional investors 207 Changing investors 207 Redress 207 Confidentiality 208 Documentation 209 Education 210 Financial literacy 211 8 The Future 213 Drivers for change 213 Information and identity 213 Information 213 The global regulatory highway 214 Identity 215 GRIA 217 Electronic signatures 217 Appendix:The Regulators 219 Bibliography 227 Index 229 Figures and Tables FIGURES 2.1 The UK regulatory web 25 3.1 Turnbull guidance and the Combined Code 65 3.2 Overview of financial services model as it relates to US 1441 NRARegulations 93 3.3 Data protection decision tree 124 3.4 Process flow for a remedial tax reclaim 139 4.1 Risk mitigation in personal data transfer between the European Union and the United States 152 5.1 An overview of the GRIAanalytical process map using the intermediary thread 177 5.2 Segregation of overlap types 179 5.3 Extraterritorial audit process 182 6.1 Key elements of a typical PCOAanalysis 198 TABLES 3.1 Typical effects of failure to adhere to double tax agreements 140 4.1 Sarbanes–Oxley requirements and Turnbull 163 6.1 The signature alternative 199 ix
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