Tag Archives: SEC

Good news, social media people! The Securities and Exchange Commission has declared that social media are widely used and available, and therefore suitable venues for releasing official corporate information.  Over at the New York Times DealBook blog, Michael De La Merced notes that the SEC has reversed direction on their intepretation of the Regulation Fair Disclosure (Reg FD) rule.  That rule says that public companies must make important information available to all investors at the same time, so none have any advantage in acting on the news.  The SEC now recognizes that a disclosure via social media meets this test - as long as investors have been notified that such information may be found in those channels.

Sounds like a great way to get a ton of twitter followers, just tell your shareholders that you'll be releasing earnings numbers via your twitter account.  Props to the SEC for recognizing what's really already happening, and also for ruling in the spirit of the rule.  This can only lead to greater transparency of corporate information, and that's always good for investors.

Today, the Facebook black hole sucked yet another casualty into their never-ending post-IPO news onslaught: Morgan Stanley. The bulge bank is currently under investigation by regulators for their potential involvement in some Facebook pre-IPO foul play.

As the lead underwriter of Facebook’s IPO, Morgan Stanley apparently had some inside info on the social network in regards to the future success investors could see after the company went public. Rueters reported that a Morgan Stanley analyst had downsized his revenue projection for Facebook after the network filed documents with the SEC stating there was a chance their revenue could struggle as it’s users attention was turned to mobile devices. The question now that’s ruffling feathers of the FINRA and SEC members is ‘did certain investors receive privileged pre-IPO information that should have been shared more liberally?’

This allegation brings up a very interesting correlation: how the massive influx in tech startups, and in technological advancements in general, is affecting the big banks. For Morgan Stanley, it’s in equity underwriting. An article on CNNMoney revealed the firm has landed deals to underwrite IPOs of some of the biggest names in the web biz, like LinkedIn, Groupon, and of course, Facebook - which have all generated $1.2 billion in fees. As the tech revolution keeps on trucking, Morgan Stanley becomes increasingly reliant on its tech deals for revenue generation. Right now, 13% of their investment banking fees are produced by these deals (Goldman pulls in about 9%, while JPMorgan takes 7% of theirs from tech).

Now this is where things could get messy for Morgan Stanley. If the looming Facebook-IPO-info situation does blow up, their juicy chunk of equity underwriting fees could be looking a little less hearty - fast.


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A question came in from an attendee of last week's PIIGS panel discussion which wasn't directly related to the topic at hand, but which is clearly something that's on forex traders' minds these days. The question was "Is there a chance Dodd-Frank bill could end retail FX in the U.S." This is something I wrote about on my own blog last week, but I'll address it here again because it's something, which clearly needs further comment.

To answer the question very directly and succinctly, there is absolutely zero chance Dodd-Frank kills US retail forex.

That direct enough? :)

This question perhaps could have legitimately been asked a year ago when the bill was passed, but to bring it up now is useless. Basically, what Dodd-Frank said in regards to retail forex in the US is that the overseeing regulatory agencies must put regulations in place within a state period of time (a year I believe) or a prohibition would be put in place. The reason this has come up recently is that an SEC ruling came out which basically said (in order to meet the Dodd-Frank deadline) that existing rules regarding retail forex trading would stay as they are for a year while the agency considered new rules.

The fact that this SEC news has caused consternation in the retail forex trading community reflects the lack of understanding of how the market is regulated in the U.S. The SEC is only responsible for "securities" firms, which basically means stock brokers and stock exchanges. That means there are only a couple of minor forex players (and would-be players) falling under SEC purview.

The CFTC is the major regulator for retail forex trading in the US. The vast majority of forex brokers serving US customers are registered with that agency. The CFTC has already put through new rules. In fact, it was in the process of doing so even before Dodd-Frank. They didn't kill the US retail forex business then, even though there were loads of voices screaming that the FIFO, no-hedging, and 50:1 leverage limitation changes would do just that. The business is alive and well and not going anywhere.

I actually think the SEC could only really have a positive impact on US retail forex trading. The worst the agency could do is ban it for securities firms all together, but that's not something that's going to have any real impact on the industry because of the small footprint of stock brokers. If the SEC went the other way, though, and put the stock brokers in some kind of favorable position relative to the CTFC-regulated firms (or at least didn't put them in a disadvantaged position) it could actually create more positive competition in the industry.