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According to the Collins English Dictionary 10th Edition fraud can be defined as: "deceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage".[1] In the broadest sense, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation. Defrauding people or entities of money or valuables is a common purpose of fraud, but there have also been fraudulent "discoveries", e.g. in science, to gain prestige rather than immediate monetary gain
*As defined in Wikipedia

Sunday, June 9, 2013

Goldman Sachs Invited to Create Own Model of Compliance

What comes after de-regulation of the financial system?  Why, what comes after that is self-regulation by the banks!  Goldman Sachs has been invited by the SEC to "design their own models for trading with clients that need SEC approval."  The regulators are delegating their regulatory authority to the banks.  It seems passing strange to give the very same banks (with the very same executives in charge) the ability to make their own rules after they brought the world TGR (The Great Recession) on the heels of the financial crisis of 2008.

By letting the banks model their own laws, even with agreement from the SEC, the door is open to loopholes and laxness of the rules.  By increasing the complexity of the rules on CDS with myriads of suggestions, the clarity of the rules can become muddied.  Out of complexity comes misuse and abuse.  What is being created is just another bank conflict of interest contributing to the whole process that is supposed to lead to reform.

It would be better to simply break up Goldman Sachs into its commercial banking section and separate that from its gambling investment section.  That makes more sense.

Hedge Funds Win Collateral Reprieve in SEC Dodd-Frank Shift (1)
By Silla Brush and Matthew Leising - Bloomberg Businessweek

Hedge funds and asset managers won relief from Dodd-Frank Act collateral requirements for credit-default swaps under a policy shift disclosed today in letters posted on the U.S. Securities and Exchange Commission’s website. 

The letters to banks including JPMorgan Chase & Co. and Goldman Sachs Group Inc. (GS) revised a measure released in March that called for some clients to put up double the collateral dealers post for portfolio margin accounts at Atlanta-based IntercontinentalExchange Inc. (ICE) The banks instead will be able collect collateral from clients according to clearinghouse rules for six months.

During the six-month period, banks must design their own models for trading with clients that will then need SEC approval, the agency said in the letters dated today. The SEC suggested guidelines, including requiring enough margin to handle a 10-day liquidation with 99 percent confidence. The policy affects portfolio accounts with credit swaps tied to single securities offsetting those tied to indexes.

Read the rest of the article here
Letter from SEC to Goldman here


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