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International Association of Risk and Compliance Professionals (IARCP)
1200 G Street N W Suite 800 Washington, DC 20005-6705 USA Tel: 202-449-9750 www.risk-compliance-association.com

Top 10 risk and compliance management related news stories and world events that (for better or for worse) shaped the week's agenda, and what is next
George Lekatis President of the IARCP

Dear Member, ―We will look at how firms make their money, how they pay their staff and whether they are designing, and selling products with customers in mind. This is a change from the traditional regulatory model, which involved setting standards and then looking back at what firms have done.‖ Who said that? Martin Wheatley, Managing Director, FSA, UK (speaking about the ―incentivisation of sales staff‖). A really interesting change in the regulatory model. Read more at N umber 8 of our list. Today we can also enjoy the speech by Jaime Caruana, General Manager, Bank for International Settlements (at the Federal Reserve Bank of Kansas City‘s 36th Economic Policy Symposium). He said that ―There is little doubt that, since the crisis, we have had the widest, deepest and most far-reaching regulatory cooperation in history.

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Participation has broadened, coordination has intensified, and implementation will be peer-reviewed.
Institutionally, all G20 members have joined the BCBS. Similarly, the Financial Stability Board‘s membership has become more inclusive. Emerging market representatives bring useful macroprudential experience to the table.

And attention is being paid to vulnerabilities in the shadow banking system, outside the narrow scope of the regulated sector.
Cooperation has intensified with Basel I I I ‘s requirement for more and better capital, backstopped by a simple leverage ratio and international oversight of weights and implementation. Cooperation has also widened with the inclusion of international standards on liquidity management.‖

But he continued: ―I am acutely aware that, even as intended regulatory cooperation has reached an all-time high, the risks of fragmenting banking along national lines have grown.‖
Read more at N umber 1 of our list.

Welcome to the Top 10.

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Policymaking in an interconnected world Luncheon speech by Jaime Caruana General Manager, Bank for I nternational Settlements The Federal Reserve Bank of Kansas City‘s 36th Economic Policy Symposium on ―The changing policy landscape‖ Jackson H ole

Gabriel Bernardino, Chairman of E IOPA Creating a global insurance supervisory Language Conference on Global I nsurance Supervision

Quarterly Banking Digest, Q2 Important parts and Highlights

10 September 2012 Government lays new Money Laundering regulations before Parliament On 10 September the Government introduced legislation to Parliament to implement important changes to the Money Laundering Regulations 2007.

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For a European Public Space Remarks by Mario Draghi, President of the ECB on receiving the M100 Media Award 2012, Potsdam

Basel I I I Jobs Average salary % change year-on-year +12.50 % (Source: http:/ / www.itjobswatch.co.uk/ jobs/ uk /basel%20iii.do)

Speech by the Chancellor of the Exchequer, Rt H on George Osborne MP at Scotland CBI

The incentivisation of sales staff – are consumers getting a fair deal? Speech by Martin Wheatley – Managing Director, FSA

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Interesting comments for the ComFrame A compilation of comments on a common framework for the supervision of internationally active insurance groups, known as ComFrame by the I nternational Association of Insurance Supervisors (IAIS)

Jumpstart Our Business Startups Act Frequently Asked Questions In these Frequently Asked Questions (―FAQs‖), the Division of Trading and Markets is providing guidance on certain provisions of the Jumpstart Our Business Startups Act (―JOBSAct‖) as they affect firms and their obligations with respect to securities analysts (―analysts‖) and research reports.

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NUMBER 1

Policymaking in an interconnected world
Luncheon speech by Jaime Caruana General Manager, Bank for I nternational Settlements The Federal Reserve Bank of Kansas City‘s 36th Economic Policy Symposium on ―The changing policy landscape‖ Jackson H ole Let me extend my thanks to President George and the organisers for the opportunity to address this gathering – at an event that is more keenly anticipated by policymakers and journalists with every passing year. My question today is: Is there scope for more international cooperation in monetary policy?

After all, we see international cooperation as essential for financial regulation.
Why do we reject keeping one‘s own house in order as a precept for financial regulation but accept it for monetary policy? The question is not a new one. In his famous Critical essays on monetary theory, Sir John H icks argued that individual central banks have only limited influence because: ―… they have been national central banks. Only in a national economy that is largely self-contained, can a national central bank be a true central bank; with the development of world markets, and (especially) of world financial markets, national central banks take a step down, becoming single banks in a world-wide system …. Thus the problem that was (partially) solved by the institution of national central banks has reappeared …. on the world level‖.
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That was in 1967, during the waning days of Bretton-Woods.
And financial integration over the past 45 years has made the problem that H icks identified even more intractable. The burden of my remarks today is that central banks need to take a more international perspective, recognise their collective influence and take into account monetary policy spillovers. Monetary policy that contributes to financial stability needs more of the cooperation that we already practise in financial regulation. Let me break my main question into four questions and then turn to each: 1.What was the state of cooperation in financial regulation and monetary policy before the crisis? 2.Where does cooperation stand after the crisis?

3.Why is the scope for international cooperation in monetary policy often underestimated?
4.Do we need to improve the institutional framework for monetary policy cooperation?

Q1. What was the state of international cooperation in financial regulation and monetary policy before the crisis?
Since the financial liberalisation of the 1970s, the cooperation on regulatory standards for large international banks as embodied in Basel I and I I extended well beyond any cooperation in monetary policy outside the euro area.
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This cooperation involved:
(i)Exchange of information; ( i i ) I nformation-sharing based on a common understanding of how the world works; (iii) Joint decision-making; and (iv) Standards set by an international committee.

The very first papers circulated to the Basel Committee on Banking Supervision (BCBS) in 1975 surveyed the ―Rules and practices to protect the banks‘ solvency and liquidity‖.
It turned out that these varied a great deal. Subsequently, regulators evolved a common intellectual framework and came to speak a common language. In 1988, Basel I went one step further, to joint decision-making. I t set definitions of capital, risk weights for assets, and, crucially, a minimum ratio of capital to assets. These formulations were based on consensus, not enshrined in a treaty or in international law. Instead, the original Basel accord was enacted in national law and enforced by national regulators. In fact, market pressure quickly made Basel I the standard even for banks in countries not represented on the BCBS. The driving forces for this cooperation are well known. As countries liberalised their capital accounts and moved to floating exchange rates, banks seized the opportunity to intermediate international capital flows.
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Soon after, Bankhaus Herstatt and Franklin National collapsed.
These banks were not globally systemically important financial institutions, in today‘s parlance, but their messy failures did help to drive forward international cooperation on bank regulation. When, in August 1982, the big banks suddenly stopped lending to Latin America, Congress increased the IMF‘s resources but demanded higher capital levels for big US banks. Concerns about competitive neutrality then prompted the Federal Reserve to pursue joint action in what became Basel I . Basel I I I, to be discussed in a moment, has marked an even more explicit shift towards internalising the externalities imposed by big banks and banks‘ collective behaviour. By contrast, monetary policy remained mainly national after the breakdown of Bretton Woods. Attempts at cooperation were episodic, mainly relating to exchange rates. This gave monetary cooperation a bad name – especially in countries with current account surpluses, which came under pressure to expand demand. At the level of theory , monetary policy shifted from the 1930s focus on competitive devaluation, first to the post-war treatment of monetary policy as just one instrument in overall macroeconomic stability policy, and then in the past 25 years to the guardian of domestic price stability. Flexible exchange rates, it was thought, would provide buffers against external shocks while policymakers kept their own house in order. In fact, the largest economies not only remained relatively closed but also had banking systems with very low proportions of foreign currency assets. To be sure, the quality of global monetary policy discussions has advanced over the past generation, as a common intellectual framework evolved.

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Indeed, one could argue that monetary policymakers shared a more thoroughly elaborated intellectual framework than did their counterparts in financial regulation.
Even so, this shared framework could be indifferent (or even hostile) to cooperation in monetary policy.

Q2. Where does cooperation stand after the financial crisis?
The short answer is that we have agreed to cooperate more deeply on the regulatory/ financial stability front. But on the monetary policy front, the pre-crisis convergence of views has become strained. There is little doubt that, since the crisis, we have had the widest, deepest and most far-reaching regulatory cooperation in history. Participation has broadened, coordination has intensified, and implementation will be peer-reviewed.

Institutionally, all G20 members have joined the BCBS.
Similarly, the Financial Stability Board‘s membership has become more inclusive. Emerging market representatives bring useful macroprudential experience to the table. And attention is being paid to vulnerabilities in the shadow banking system, outside the narrow scope of the regulated sector. Cooperation has intensified with Basel I I I ‘s requirement for more and better capital, backstopped by a simple leverage ratio and international oversight of weights and implementation. Cooperation has also widened with the inclusion of international standards on liquidity management.
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Recognition of potential procyclicality in the operation of capital standards has led to the adoption of mutual recognition in the new countercyclical capital requirement, which empowers host country authorities.
Tougher solvency standards have been set for banks whose failure could have system-wide effects. We should not minimise the challenges ahead. I am acutely aware that, even as intended regulatory cooperation has reached an all-time high, the risks of fragmenting banking along national lines have grown. While there are long-standing differences in the tax treatment of loan-loss provisions, national bank bonus taxes have been imposed and now financial transaction taxes are being discussed regionally. While Dodd-Frank is improving the funding model of US-chartered banks, other banks that rely on wholesale funding have gained markets share in dollar intermediation. While important advances have been made, serious obstacles remain in concerting resolution regimes given different bankruptcy laws. A particularly troubling source of fragmentation along country lines is the inclination to put up national barriers against contagion. As Mario Draghi has said, ―even though each of them may be right, collectively they have been wrong‖. While regulatory cooperation is the prerequisite for open financial markets and the free flow of funds, capital controls seem to be gaining acceptance as a response to the challenge of managing currencies when yields are zero in most major money markets. These developments threaten to segment financial markets, not only in the euro area but around the world.
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Nevertheless, I remain hopeful that the movement towards global consistency and more harmonisation will prevail over the forces working to fragment international banking regulation and supervision.
On monetary policy cooperation, there were notable steps during the crisis. Widespread, and ultimately in some cases, open-ended, cooperation in foreign-currency funding through central bank swaps had both the monetary goal of controlling the relevant market rates like Libor and the financial-stability goal of providing emergency funding. Such arrangements are temporary. But the willingness of central banks – not least the Federal Reserve – to act quickly and massively averted what could have been a meltdown. The global nature of the crisis also saw episodic cooperation in policy rate setting. For instance, on 8 October 2008, interest rates were simultaneously cut by the Bank of Canada, the Bank of England, the ECB, the Federal Reserve, the Riksbank, the Swiss National Bank and the People‘s Bank of China, in a concerted move that was strongly backed by the Bank of Japan. But a number of issues have strained the pre-crisis convergence of views on monetary policy. What can monetary policy contribute to financial stability? And how does monetary policy work alongside macroprudential action?

Q3. Why is the scope for international cooperation in monetary policy often underestimated?
This question raises three more. First, do flexible exchange rates insulate economies as some theory suggests?
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Second, are bond markets so globally integrated that policies affecting yields in major countries now have a bigger impact on yields in other countries than they once did, possibly exerting an even larger effect than local policies and conditions?
And third, can central banks properly assess the aggregate impact of their actions on global outcomes, or do they suffer from a fallacy of composition? Starting with exchange rates, flexible rates do of course help to insulate a country from inflationary or deflationary shocks coming from abroad. But they do it imperfectly. First, since major currencies are used internationally, the policy rates set by their issuers directly affect monetary conditions elsewhere. Borrowing in foreign currencies may be rare in the biggest economies, but it can be significant elsewhere. And common monetary and risk factors affect the flow of international bank credit and portfolio capital. Since the crisis, while credit to US households and businesses has barely resumed its growth, dollar loans to such borrowers in the rest of the world has grown at up to 20% and has reached about $7 trillion. Second, the foreign exchange market‘s behaviour does not always satisfy the textbook interest rate or purchasing power parity conditions. Exchange rate movements do not merely compensate for interest or inflation differentials.

Instead, most of the time, currencies with an interest rate advantage actually appreciate against lower yielding currencies and can do so for some time, making the domestic industry less competitive.

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The depreciation of higher-yielding currencies tends to happen fast during episodes of stress in global asset markets, and many emerging market economies have found this destabilising.
Next, there is the issue of international bond markets. As policy interest rates and official bond purchases affect bond yields, their effects ripple across globally integrated bond markets. This happens even with independent setting of policy rates and floating exchange rates. Large-scale bond purchases can have global effects whether they are part of an explicit monetary policy or a side-effect of currency intervention. There is evidence that the large Japanese interventions of 2003–04 lowered global bond yields, as dollars purchased in the foreign exchange market were invested in bonds. There is also evidence that the Federal Reserve‘s recent large-scale bond-buying has also reduced global bond yields. So the integration of global bond markets makes for a global interest in policies that, intentionally or not, affect bond yields in major markets. Turning to the possibility of a fallacy of composition, I believe that an international perspective is essential if we are to correctly assess the impact of central bank policies on global outcomes. The price dynamics in commodity markets – which are increasingly similar to those in financial markets – could be taken as a signal of global demand pressure rather than being considered by central banks as a supply shock for each of them. Similarly, each emerging market central bank might hesitate to raise interest rates out of concern for capital inflows, given the very low interest rates prevailing in major currencies.
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Indeed, if central banks were to take an international perspective, they might discover that they would all be better off by raising rates, thereby setting global average interest rates more appropriately.
These questions are not easy to answer. How can we cope with these spillovers: the interconnections arising from the behaviour of exchange rates, the globalisation of bond markets, and the collective impact of policies? John H icks knew that the one simple answer to the limitations he identified – a global central bank – would be totally unrealistic. National central banks have national mandates, and meeting these is already difficult enough. We know less about the workings of international linkages than we do about domestic linkages. How interest rates will affect the major centres in other countries depends in part on those countries‘ own policies and institutions. And it would not be difficult to add to this list. A number of factors combine to make nation states less than willing to cooperate on monetary policy. For instance, monetary policy can be redistributional, shifting wealth and income between creditors and debtors. This makes it even more politically charged than regulatory policy – if that is possible. Nevertheless, I do not believe that monetary policy can be restricted to keeping one‘s ―house in order‖ at all times.

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While such house-keeping is necessary, monetary policy does require international perspective and cooperation, particularly when it provides the backing for financial stability.

Q4. Do we need to improve the institutional setting for monetary cooperation?
We hope that the structural trend that deepens interdependence, namely the globalisation of financial markets, continues.

If it does, there will be periods, in good times and bad, when international spillovers will be substantial and highly relevant for monetary policy.
If this notion and the underlying analysis are accepted, then the question arises of how to strengthen cooperation in monetary policy. This does not necessarily mean monetary policy coordination at the global level, but it does require central banks to better appreciate, internalise and share the side effects that arise from individual monetary policies.

This will require a shift to a more global analytical approach, one that seeks to factor in collective behaviour, interactions and feedback effects.
This would also help us to better frame international cooperation. I therefore tend to agree with the recent call from prominent academics and practitioners for global considerations to play a more explicit role in monetary policy frameworks. But I am more sceptical about their proposal to formalise cooperative arrangements. The major central banks would not be able to publicly outline the mutual consistency of their policies. Drawing attention to areas of inconsistency and dissent would probably undermine effective cooperation.
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Traditionally, the BIS and the various Basel committees have always sought to complement the domestic analysis at central banks with a more global perspective.
The informal but structured nature of the meetings that take place at the BIS has often facilitated analysis and discussion of the many international dimensions of monetary policies. For example, after providing support to a central bank review of global liquidity we are working on regular indicators that seek to capture global financial conditions. These and other global measures also serve as inputs to vulnerability analysis and the early warning exercise conducted by the Financial Stability Board and the I MF. The I MF is playing a role as well, with its spillover reports and macroeconomic policies consistency analysis Let me conclude by saying that much needs to be done. Moving towards a more cooperative approach makes more sense than reversing the internationalisation of markets and segmenting those markets in the hope of protecting them against spillovers. We need more research on these questions and I hope that some of the powerful analytic talents represented here at Jackson H ole will be brought to bear on them.

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NUMBER 2
Gabriel Bernardino, Chairman of E IOPA

Creating a global insurance supervisory Language
Conference on Global I nsurance Supervision Good evening, ladies and gentlemen, On behalf of EIOPA I would like to thank the International Center for Insurance Regulation for the cooperation and efforts in organising together with us this Conference on Global I nsurance Supervision. I am very happy to see today so many colleagues from the supervisory authorities as well as prominent experts and executive officers of the insurance industry. Our purpose with this Conference is to create a platform of discussion and exchange of views about the international context of insurance supervision. Your presence and contribution to this event is key to its success and will certainly contribute to a better understanding of the different regimes and will foster further convergence of practices of insurance supervision worldwide. Insurance markets are increasingly global. Many insurance groups have nowadays a huge part of their revenues coming from business outside their home countries. This creates new opportunities but also new challenges for insurers, but also for supervisors. The promotion of sound and stable insurance markets calls for more international cooperation.
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We firmly believe that the best way to reinforce financial stability and consumer protection is to develop strong global regulatory and supervisory standards.
This will create a level playing field for international players, foster a common language between supervisors and improve international cooperation and information exchange.

I would like to share with you some views on the ways of improving the efficiency of supervision from a global perspective.
ComFrame ( Common Framework for the Supervision of I nternationally Active Insurance Groups (IAIGs) - ComFrame is an integrated, multilateral and multidisciplinary framework for the group(wide supervision of internationally active insurance groups. ComFrame was initiated in response to the recognition that, despite the growing relevance of IAIGs in the global insurance marketplace, no internationally coherent framework exists for the supervision of such large, global groups. I would like to stress that EIOPA is highly committed to contribute to the establishment of such standards and, in this regard, we consider our participation in the I AIS very important. EIOPA is actively contributing to the work of ComFrame. We consider it necessary to enhance regulatory capital requirements in order to achieve adequate consumer protection on a global level. Of course, while calling for this measure, we take into account different perspectives and developments worldwide.

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Seen historically, the EU had experienced comparable discussions a decade ago.
We fully support the move to enhanced group-wide supervision. Cooperation between supervisors in colleges is essential for the proper supervisory approach to Internationally Active I nsurance Groups. We believe that information sharing and supervisory cooperation under conditions of professional secrecy is a key, determinative element of effective supervision. We need more shared supervision. Furthermore, Comframe should comprise a capital element, establishing strong principles for group capital calculations concerning the risks included, the metrics used to assess them and the overall level of confidence. Without this consistency, there is no level playing field internationally. It is not about one unique system, but about a set of strong principles that would deliver a range of closer and compatible systems. Comframe should not be another regime on top of the already existent ones. The local regimes should evolve to comply with Comframe. This is my vision. I recognize that we cannot deliver this immediately, but at the I AIS we need to set a timetable and concrete milestones to develop this concept in a step by step approach. We need to be courageous and open-minded. We need to be open to change and evolution because the industry reality is also evolving and changing.

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An extra effort needs to be done by all of us because like Charles Kettering (a famous American inventor) said one day: ―People are very open minded about new things as long as they're exactly like the old ones.‖

Systemic risk in insurance
The crisis prompted a new look at systemic risk, including in the insurance sector. The identification and regulation of Globally Systemically I mportant Insurers is currently being discussed under the umbrella of the Financial Stability Board and the I AIS. EIOPA is keen to contribute to a robust identification process of G-SIIs and to develop appropriate regulatory and supervisory tools to deal with their characteristics.

Traditionally, systemic risk was a banking concept.
However, the recent crisis showed us that certain activities developed under the insurance sector can also pose systemic risk. Insurance companies or groups that engage in non-traditional, or non-insurance, activities (for example: CDS, financial guarantees or leveraging assets to enhance investment returns through securities lending are more vulnerable to financial market developments and, importantly, more likely to amplify, or contribute to, systemic risk. Of course, this assessment may change over time, depending on the innovations and changes in insurance business models, especially in life insurance, as well as in the complex interactions between insurance groups and financial markets. We should be especially attentive to any kind of maturity transformation and leveraging occurring in the insurance sector. As a consequence, the identification of a systemically important insurer as such, should be a direct reflection of its source of systemic importance.
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While the size of traditional insurance activity is still an important factor, it should not be the dominant factor in the identification process.
Clearly, the non-traditional and non-insurance activities and the degree of interconnectedness with other components of the financial system are more relevant from a systemic point of view. Consequently, the differences between insurers and banks in the impact of failures suggest that requirements for loss absorbency and resolution regimes for insurers should accept these salient differences and propose solutions that differentiate accordingly. As a conclusion I would like to underline that we should have no illusions: the creation of global insurance supervisory standards is a very long process that is complicated by the difference of cultures and uneven development of supervisory systems in different countries. But it is important that the regulators all over the world are willing to reach mutual understanding and to develop a common supervisory language, which will help us to promote stability of the financial markets, to enhance their transparency and to foster consumer protection. Together we can achieve these objectives.

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NUMBER 3

Quarterly Banking Digest, Q2 Important parts and Highlights
- Capitalisation improved slightly as system-wide leverage declines. The aggregate risk asset ratio (RAR) increased to 22.1% during the quarter due to a decline in risk-weighted assets (down 0.7%) and an increase in capital (up 0.6%). - Some banks continue to experience significant asset quality challenges driven by the recessionary environment. Although non-performing loans (NPLs) relative to total loans declined from 8.3% to 8.1%, large exposures to the real estate sector have led to a rise in specific provisioning and charge-offs, which has affected the banks‘ earnings capacity. - Sector earnings have been impacted by higher provisions. Provisions to NPLs increased from 16.2% to 26.2% in Q2 2012 as a result of prudent efforts aimed at mitigating the impact of future asset impairments. As a result, the annualised RoE declined from 8.9% in Q1 2012 to 1.2% in Q2 2012, and the annualised RoA fell from 1.0% in Q1 2012 to 0.1% in Q2 2012. - The Bermuda dollar funding gap widens further. The BD$ loan-to-deposit ratio increased to 154.0% (up from 151.0% in Q1 2012 and 142.0% a year earlier) as BD$-denominated customer deposits declined (down 1.3%). H owever, the large FX-denominated deposits, which declined by 5.1% during the quarter, continues to supplement the BD$ funding gap. - Lower investment activity and interbank lending have mitigated negative effects on domestic credit supply thus far. Lending remained stable despite de-leveraging during the quarter resulting from decreases in investment activity and deposits with other financial institutions.

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Table V shows the liquidity condition of the banking sector over the last five quarters.

Profitability
Quarterly returns declined sharply as banks start absorbing non-performing loan balances aggressively. Despite stable net interest income over the quarter, increases in provisions resulted in lower profitability in the sector on average. Annualised RoE and RoA decreased to 1.2% (Q1 2012: 8.9%) and 0.1% (Q1 2012: 1.0%), respectively.

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NUMBER 4

10 September 2012 Government lays new Money Laundering regulations before Parliament
On 10 September the Government introduced legislation to Parliament to implement important changes to the Money Laundering Regulations 2007. The changes will reduce the regulatory burden imposed by the current regulations, while strengthening the overall anti-money laundering regime. These proposals were set out in July 2012 following extensive consultation and are expected to save firms around £ 3 million a year. The changes to the Regulations will come into force on 1 October.

Notes
The Government announced the changes it was bringing forward to Money Laundering regulations in July 2012.The Money Laundering Regulations 2007 require regulated businesses to have appropriate systems and controls in place to identify and verify the identity of their customers and carry out ongoing monitoring as appropriate, based on their own assessment of the risk from money launderingand terrorist finance. The Government‘s approach to money laundering regulation is designed to make the UK financial system a hostile environment for money laundering and terrorist finance, while minimising the regulatory burden imposed on UK businesses.

Changes to Money Laundering Regulations to reduce burden on British businesses
On 17 July 2012 the Government published its response to a consultation on changes to the Money Laundering Regulations 2007 and the impact assessment of the proposed changes.
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Following the consultation the Government will now take forward proposals to reduce the regulatory burden imposed by the current regulations, while strengthening the overall anti-money laundering regime.
The proposed changes to the regulations will apply to businesses that are at low risk of money laundering and terrorist financing and are therefore not required to be regulated to the same extent as other institutions, under current global standards. The aim of the changes is to make the UK‘s money laundering regime more effective and proportionate, with the proposed changes saving firms around £ 3 million a year. The Government committed to performing a post-implementation review of the 2007 Regulations, which implement the European Union Third Money Laundering Directive, two years after they came into force. This review was undertaken in 2009-10, in conjunction with the Better Regulation Executive, and entailed an extensive call for evidence, meetings, conferences and interviews. The Government‘s response to the review was published in June 2011 and contained a consultation on seventeen proposals to improve the regime, reducing the impact of the regulations. The changes to the Regulations are intended to come into force on 1 October.

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NUMBER 5

For a European Public Space
Remarks by Mario Draghi, President of the ECB on receiving the M100 Media Award 2012, Potsdam Important parts It is no secret that the course of European integration is currently difficult. The global economy is facing serious challenges. These challenges are not all of Europe‘s making, as some observers would have us believe. But Europe is perhaps experiencing them more acutely than others. The reasons for this are complex. But one part of the explanation is clear: the original institutional design of the euro area did not meet expectations. In the euro area we have a single monetary policy, but our economic and financial policies are only loosely coordinated. This is because the euro area is a union of nation-states with strong national traditions and preferences. While there was sufficient consensus to share a currency, economic and financial policies remained organised largely at the national level. The global crisis has revealed the vulnerabilities in this arrangement. Loose coordination of policies neither ensures stability nor does it facilitate effective crisis management.

The institutional design of the euro area therefore has to be reviewed to put our economic and monetary union (EMU) on a more secure footing.
But how should this be done? There are two possible paths.
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The first is to go ―back to the past‖, to make the original design work better.
The second is to develop a new architecture that properly reflects lessons of the crisis. In my view, the first path is not viable. We have seen that the euro area is too interconnected for economic and financial policies to be a purely national responsibility. We must find ways to guarantee that national decisions do not harm other members of the monetary union. In the event of a crisis, there should be effective mechanisms for crisis management. And where necessary, this means going beyond coordination, because this is a matter of europäische I nnenpolitik. We have also seen that maintaining stability requires common institutions that can react to events. The euro is the world‘s second most important currency. It makes up 25% of the world‘s foreign exchange reserves. 1.5 trillion euros are traded daily on the world‘s foreign exchange markets. And it is used daily by the 330 million citizens of the euro area. A currency that plays a central role in the lives of so many people has to be managed with effective decision-making. The second path, designing a new architecture, is therefore the only way forward. The key challenge today is to present a vision to Europe‘s citizens of what this would entail – which is precisely the theme of this conference. Together with the Presidents of the European Council, the European Commission and the Eurogroup, I have been given the task of working on such a vision for the next decade.

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We have aimed to be as pragmatic as possible: to establish what are the minimum requirements to make the euro function to its full potential.
And our conclusions are both realistic and attainable. Member States will have to pool more sovereignty in selected policy areas. This is a clear lesson of the crisis. But we will not need to cede all powers to Brussels. Sovereignty will only be pooled where it is essential to ensure a stable and prosperous monetary union. This will be accompanied by broad democratic participation and legitimation. Our vision for EMU has four pillars – fiscal union, financial union, economic union and political union. Progress on all four should be made simultaneously. The first three pillars will help to steer fiscal, financial and economic policies in a sustainable way. They will also help to create institutions commensurate with the degree of monetary integration in the euro area. But today I would like to focus briefly on the fourth pillar, political union. This pillar is essential for engaging euro area citizens more deeply and making the other three pillars legitimate. Some observers argue that because of the common decision-making implied by the other three pillars, political union has to come first. I do not agree. Political integration can and will develop in parallel with economic integration. Over the past 60 years of European integration, this has always been the sequence. For example, public engagement with euro area issues has naturally deepened through responding to the crisis.
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To commit money via the European Stability Mechanism, Member States have had to explain the responsibilities of euro membership to their citizens.
Parliaments are now taking a sharper interest in European affairs. Closer economic integration has de facto strengthened democratic engagement. But this does not mean that we should not strive to strengthen democratic participation in Europe further.

Democratic engagement already takes place through the Council of Ministers – where citizens are represented by elected ministers – and the European Parliament – where citizens elect their MEPs directly.
But more has to be done to make the voice of Europe‘s citizens heard. We need what in Germany is called demokratische Teilhabe. And this is where you are needed. I would like to ask all of you – journalists and publishers but also policy makers and academics – to help to develop a genuine European public space, eine europäische Öffentlichkeit.

Most of us in Europe are exposed mainly to our national media in our national languages.
These media naturally define our perspective: our sense of the ―public‖ tends to stop at national borders. But this no longer describes reality. What is happening in other Member States matters to all of us. Problems that cross borders require citizens to find consensus around common solutions.

Again, the crisis is itself having an effect.
For example, newspapers in some countries now take a keen interest in the welfare systems of other countries. Citizens closely follow the elections of ministers they would previously have never heard of.
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Certainly, there is an unwelcome side to this related to the potential for reviving outdated national stereotypes.
But there is also a positive side insofar as it leads citizens in the euro area to develop a sense of belonging together and to care about decisions in other regions. One way to strengthen this trend would be to exchange more media between countries. And here I would like to invite your contribution. Could you consider, for example, publishing what we might call ―imported pages‖ from foreign newspapers? This would allow citizens to get a better sense of how issues are seen in other countries; it would increase cultural sensitivity; and it could generate Europe-wide debates that divide along policy lines rather than national lines. Over time, such debate would help to put European decision-making on a more legitimate footing. ― Imported pages‖ are but one idea, a starting point. I t is with your dedication and creativity that more such ideas can be developed.

It is a privilege to be part of the European project, for citizens and journalists alike.
But it is also comes with responsibilities, for citizens and journalists alike. Ultimately, a genuine European public space is essential for supporting the long-term vision of the euro area. Citizens need to be in basic agreement that, within a monetary union, certain economic models are no longer possible. They must understand that there are limits to national discretion in economic policies that affect the area as a whole. In other words, there needs to be a new consensus on economic policies that will reinvigorate the European social model and make it fit for the 21st century.

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This is a discussion we must begin today . Setting EMU on a path towards stability is essential so that we can move permanently beyond the crisis.
It will send a clear signal to citizens and financial markets that the euro area is committed to staying the course. And it will remove any grounds for doubting the euro‘s future. There are many reasons to be optimistic that Europe will find this path. The pattern over recent decades has always been to move forward towards a stronger and more united Europe.

When we have faced challenges, we have invariably found solutions.
Those who have predicted the worst have turned out to be mistaken. What‘s more, the solutions we need do not require extreme approaches or impossible choices. They require a structured and achievable path towards completing EMU. This is fully within our reach today. I am confident that one day I can return to this beautiful historical setting sans souci. In the meantime, I am most grateful for your support. Thank you once again for this award and your kind words tonight and thank you very much for your attention.

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NUMBER 6

Basel I I I Jobs Average salary % change year-on-year +12.50 %
(Source: http:/ / www.itjobswatch.co.uk/ jobs/ uk /basel%20iii.do) The first part of the table below looks at the demand for Basel I I I skills in IT jobs advertised across the UK. Included is a guide to the average salaries offered in I T jobs that have cited Basel I I I over the 3 months to 1 1 September 2012 with a comparison to the same period in the previous 2 years.

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Note:
IT Jobs Watch provides a unique perspective on today's information technology job market. They present a concise and accurate map of the prevailing UK IT job market conditions. One of our favourite web sites. http:/ / www.itjobswatch.co.uk

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NUMBER 7

Speech by the Chancellor of the Exchequer, Rt Hon George Osborne MP
at Scotland CBI Thank you N osheena, for your introduction and may I say it‘s a real pleasure to be here. I would like to begin by congratulating the CBI and the Scottish business community.

Over the last few years you have achieved amazing things in difficult economic times.
Of the 900,000 new private sector jobs created in the UK over the last 2 years, 85,000 have been here in Scotland. Of the 15,000 net new manufacturing jobs created in the UK over the last year, 4,000 – almost one third – have been here in Scotland. That is the fastest increase in the number of Scottish manufacturing jobs since records began. Politicians often claim that their Government has ―created‖ thousands of jobs. But I know that‘s not true. Governments don‘t create jobs – you do. The people in this room and beyond, who take risks, have the ambition and drive to build businesses. And our job is to create the conditions to help you do it. That‘s why the message of all the changes we have made this week is simple: this Government means business.

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In my own department I ‘m particularly delighted that Paul Deighton, the man who delivered the best Olympic Games ever, has agreed to join the Government as the Minister responsible for delivering the economic infrastructure that the whole United Kingdom needs if we are to remain competitive.
The economic outlook remains uncertain but there are some positive signs. Our economy is healing – jobs are being created, manufacturing and exports have grown as a share of our economy, our trade with the emerging world is soaring, inflation is down, much of the necessary deleveraging in our banking system has been achieved, and the world is once again investing in Britain. But the scale of the challenge is so great that there are no quick fixes or easy routes to recovery. The debts built up in our economy over the last decade will take time to unwind. Added to that was a steady decline in competitiveness, the full extent of which was masked by the tide of the borrowing boom but which has been exposed once that tide receded. None of this has been made easier by the eurozone crisis, which first flared up the weekend before this Coalition Government was formed and has cast a long shadow of uncertainty over our economy ever since. Our strategy remains the same one set out at the beginning of this Government. Fiscal responsibility to show the world that we will deal with our debts and keep interest rates low. Monetary activism to support demand and spread the benefits of those low interest rates through the economy. And a far-reaching programme of supply side reform to restore our lost
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competitiveness and deliver real prosperity for the future instead of the illusion of prosperity built on debt.
Despite strong headwinds that strategy is already delivering results. The deficit is down by a quarter in just two years, and the safe haven status that our credibility has earned is delivering record low interest rates. That is a direct benefit to the taxpayer, our private sector and our indebted banking sector – and without it our economic future would be bleak. Imagine what a sharp rise in interest rates would do now to Scottish businesses and Scottish families. Monetary policy has supported demand and steered a steady path through a series of external price shocks so that inflation is coming back towards target. But monetary activism means much more than this. Last month the Treasury and Bank of England launched the multi-billion pound Funding for Lending Scheme. It is already having an impact through reducing the price of mortgages and business lending and it is a perfect example of the firepower that the UK as a whole is able to deploy. And this week we are introducing a new Bill in the Westminster Parliament that will allow us to use our hard-won fiscal credibility to provide guarantees for new infrastructure projects right across the UK.

The full benefits of our programme of supply side reform will only come in the medium term but it is already having an impact.
Yesterday the World Economic Forum confirmed that the UK has improved its global competitiveness ranking for the second year in a row, from 1 1th to 10th and now to 8th in the world.
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As they put it, ―The United Kingdom continues to make up lost ground in the rankings this year, rising by two more places and now settling firmly back in the top 10.‖
We have already embarked on radical reforms right across government, not least in welfare where we are tackling deeply entrenched problems to ensure that work always pays. We have already made our corporate tax system one of the most competitive in the world with a commitment to get to a 22p headline rate – the lowest of any major western economy – and a clear ambition to go further. So much so that global companies like WPP, who left the UK only a few years ago, are now returning to our shores. And the changes this year to the taxation regime in the North Sea, with new certainty on decommissioning costs and a new gas field allowance, are forecast by the industry to generate billions of pounds of new investment. I will be making new announcements about the N orth Sea tax regime tomorrow that should bring more investment and more jobs here in Scotland. We are already reducing regulatory burdens and reforming employment law, with an extension of the qualifying period for unfair dismissal from one year to two years and the introduction of fees for employment tribunals. But now, in all these areas and more, I am determined that we will go further, deliver more and make our competitive edge even sharper. That is precisely what the Scottish economy needs in order to deliver prosperity for the Scottish people. Now I know there are those on both sides who call for a change of course. Some say cut more; others say ―no‖, spend more.

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We are pushing for more economic reform and faster delivery.
But nobody is offering a credible or convincing alternative economic strategy. There is no easy path to recovery and prosperity. We in Britain have to confront our problems head on, be honest about the scale of the challenge, and be consistent in our determination to succeed. Of course the challenges we face are not simply economic and financial. Last year the Scottish Government won a mandate to hold an independence referendum. As a result Scotland is facing its biggest decision for three centuries. My sense is that people want the referendum process settled quickly so we can move on to the real debate about Scotland‘s future. Scots rightly want to know where they stand on a whole host of issues – business prospects, jobs, pensions, public services… That‘s why the UK Government is committed to facilitating the process and ending the uncertainty that is disruptive for UK and Scottish business alike. There‘s a deal to be done. We‘re ready to do it. And we can do it – if the Scottish Government is serious about honouring its election promise to let the Scottish people have their say. Respect for the right of the Scottish Government to hold an independence referendum should not be misinterpreted as indifference about the outcome.

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This Government passionately believes that Scotland is stronger as part of the UK and the UK is stronger with Scotland in it.
As the Prime Minister has already said, our argument is not that Scotland can‘t go it alone as a separate country should Scots choose to do so. It‘s why would you want to? Why would you want to, when as a United Kingdom we‘ve already achieved so much?

And when - by pooling our talents and resources across the UK - we can achieve so much more.
I spoke earlier about the unprecedented economic challenges we face. I ‘ ve spent many, many hours discussing with my fellow Finance Ministers within the European Union how best to respond to the continuing hangover from the financial crisis and the decade of debt. As the members of the Eurozone strive to come closer together, the world would be rightly puzzled if Britain‘s response was to break apart one of the most successful political and economic unions there has ever been. The British union – and its success - is as much a Scottish creation as it is the creation of any other part of the UK. Scots were among the first – and most successful – in taking advantage of the new trading opportunities opened up by union. Glance at any atlas and you‘ll find Scottish place names on every continent. The influence of Scots has been felt in economic development across the globe. David Dunbar Buick - born in Arbroath - who founded the famous Detroit car company.
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Thomas Glover - an important figure in Mitsubishi‘s history - who made an immense contribution to the modernisation and industrialisation of Japan.
And William McKinnon whose businesses - forerunners of Inchcape spanned the shores of the I ndian Ocean, from the coast of East Africa to the new lands of Australia. Today the advocates of independence argue that Britain‘s value to Scotland is spent.

That union is no longer in Scotland‘s economic interests.
And that those who continue to believe in Britain are wallowing in nostalgia. I want to take this argument head-on. I make no apology for sharing all of the instinctive emotional attachment to Scotland‘s place within the UK. Our shared history and culture. Distinct yet intertwined identities. A whole greater than the sum of its individual parts. And I reject the idea that while Britain has a glorious history, it has little relevance in tackling the challenges and grasping the opportunities of the modern world. 300 years of working together means that today the hard-headed economic interests of Scotland and the rest of the UK are inextricably bound up together. Our economic integration and interdependence runs wide and deep. Working people, investment, goods and services all move freely across the UK.
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There are more than 800,000 Scots who live and work in other parts of the UK and half a million people from other parts of the UK who live and work in Scotland.
Each year around 50,000 people move to Scotland from the rest of the UK, and nearly as many people move the other way. High levels of investment come from the rest of the UK into Scotland, with UK firms employing one in five Scottish workers and contributing around a quarter of Scottish turnover in 2010.

Just as there are Scottish firms, like Scottish and Southern Energy, First Group and RBS who are significant employers in other parts of the UK.
This deep integration means, for example, that Scottish manufacturers can produce goods in factories financed through capital in the City of London and built by Scottish engineers. Goods that combine raw materials from Wales and components built in England, powered by electricity from Scotland‘s offshore wind industry. And goods which are sold to the rest of the UK and across the world through the UK‘s road, rail and port infrastructure. Each year Scotland exports around £ 45bn worth of goods and services to the rest of the UK - equivalent to 40 per cent of Scotland‘s total output. This is more than twice as much as Scotland exports to the rest of the world put together. And what better illustration of our shared economic interests and mutual dependence could there be than two of Scotland‘s most important sectors – renewable energy and financial services. The energy that Scotland generates helps us to meet demand across the whole of the UK. It is the larger UK consumer base that ensures the significant investment costs required for this infrastructure are widely spread and do not fall on
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Scots alone.
And then there is Scotland‘s 90,000 strong financial services industry with its distinct contribution to the overall strength of the UK‘s world-leading financial services sector. Scotland is renowned for the expertise of its investment managers and life companies – the Alliance Trust, Baillie Gifford and Standard Life to name but a few. Those working in the industry would be the first to acknowledge the benefits they derive from the close ties with the rest of the UK industry and, in particular the City of London. Just as those in the City will recognise the historic role and expertise within the financial centres of Edinburgh, Glasgow, Aberdeen and Dundee. It‘s little wonder that the economic fundamentals of the Scottish economy are so aligned with the rest of the UK, and that its structure and movements are similar. Productivity in Scotland is 99 per cent of the UK average, the closest of any nation or region within the UK to the overall UK average. The employment rate in Scotland is 101 per cent of the UK average, again the closest of any nation or region. And earnings are now 97 per cent of the UK average, rising in recent years. These facts reflect the hard work – including by many of you in this room – who have strengthened the Scottish economy and fostered enterprise. So I am clear: full political and economic union across the UK - a source of many of our past successes - continues to underpin the UK‘s and Scotland‘s strength and credibility today and into the future.
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At the heart of the UK‘s strength are the institutions and frameworks we share.
It‘s these institutions that support our fully integrated domestic market – more deeply integrated than any single market between separate states could ever be – and help to drive our prosperity. Now I know that the proponents of independence - applying the most reassuring bed-side manner - say that an independent Scotland would retain everything from the pound and the Bank of England to UK financial services regulation. However, I simply don‘t think it‘s credible to suggest simultaneously that in an independent Scotland everything will change and nothing will change. For one thing, although Scotland has always shared the benefit of the UK‘s interest rates, which are now at record lows, it‘s very unlikely that the government of an independent Scotland could borrow as cheaply. And it‘s the interest rate on government bonds that is one of the key determinants underpinning the cost of all credit in the economy. So there would be higher interest rates: a sobering thought for all Scottish households with mortgages and all Scottish businesses. And let‘s be clear: independence would change the UK‘s current institutional arrangements for ever. Scotland and the rest of the UK would become separate, foreign countries. What‘s the point otherwise? Let me take one of our oldest institutions, our single UK currency, the pound Sterling. A single currency that has supported more than three centuries of economic and social integration.
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How can we foresee what effect abandoning this 300 year-old commitment – or even talk of abandoning it – could have on confidence and prosperity?
After flirting with the Euro and floating other possible arrangements, the Scottish Government‘s latest position is that an independent Scotland would seek to enter a formal monetary union within a sterling zone. But the conundrum of the Eurozone crisis is how difficult it is to combine currency union with full fiscal and political independence.

The members of the Eurozone are now faced with what I ‘ ve described as the ―remorseless logic‖ – the very lesson of the Eurozone crisis – that you can‘t have monetary union without greater fiscal and political integration. Greater fiscal integration – because membership of a monetary union means greater interdependence, not greater independence.
That‘s why the eurozone are developing plans to control the fiscal positions of individual member states so that they can avoid the risks of contagion for all members of the union. Greater political integration – because sharing a currency – and perhaps a central bank – means policies that are consistent not divergent. Members must be prepared to forgo individual interests and circumstances for the interests of the union as a whole. So it‘s difficult to argue for establishing a monetary union while pursuing fiscal and political separation. In a world in which a separate, independent Scotland wished to pursue divergent economic policies, what mechanism could there be for the Bank of England to set monetary policy, as it does now, to suit conditions in both Scotland and the rest of the UK? As Chancellor of the Exchequer, I have seen no such credible mechanisms proposed by those advocating independence.

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I am not clear they exist.
If the Scottish Government cannot provide answers to these basic questions about Scotland‘s currency then the Scottish people are entitled to ask this basic question in return: what path is the Scottish Government leading them down? We‘re better together. And what about regulation of key sectors of the economy such as financial services or energy? Do the separatists propose to dismantle established regulatory regimes for markets that are highly integrated on a UK-wide basis? Or are they saying that the point of achieving independence is to surrender regulatory authority over key sectors in the Scottish economy to what would become a foreign sovereign authority? These are choices independence forces upon you, with consequences that are unknown - and unknowable - at the time you make them. Again, if the Scottish Government cannot provide answers to these questions, then the Scottish people are entitled to question what path the Scottish Government is leading them down. By contrast devolution within the UK provides Scotland with the best of both worlds. Substantial control over its own national affairs combined with the strength that flows from being an important part of a much larger entity. In a globalised economy the UK‘s scale matters. Far from holding Scotland back, the UK provides Scotland with a strong, stable and secure platform. The UK has broad shoulders.

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When Alistair Darling was doing my job, UK taxpayers spent £45bn recapitalising RBS – and the bank also received £ 275bn of state support in the form of guarantees and funding.
This support is equivalent to around two years of Scotland‘s total output on any measure. A disorderly collapse of Scotland‘s banks would have been devastating for depositors, jobs and growth in Scotland. That‘s why I argue that the whole of the UK benefits from having a Government with the necessary fiscal firepower, backed by a credible central bank, which can deliver an effective co-ordinated response to a major bank failure. The UK has a large and diversified economy supported by a broad tax base of 30 million individual taxpayers and nearly 2 million registered businesses. We‘re better together. And together our voice is heard abroad. However broad our shoulders, future prosperity depends - as it has always done – on our success as a trading nation. I particularly want to thank the CBI for all the work they are doing to push Scottish exports. Scots have never been parochial in their view of the world. You have always lifted your gaze beyond the horizon. At a time when the global community is striving to remove barriers to trade, I don‘t believe it‘s in anyone‘s interests here at home to erect new borders and barriers to Scotland‘s ability to compete in the world market. Being part of the UK opens doors for Scotland and Scottish business.

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There are enormous advantages to being part of one of the biggest and best Embassy, Consular and trade networks anywhere in the world.
14,000 people in nearly 270 diplomatic offices, backed by a further 10,000 locals in the 170 countries in which we operate. This is just one example of a broader and fundamental point. Britain‘s influence – and Scotland‘s reach - is truly global. Scotland walks taller and shouts louder as part of the United Kingdom. So here in Glasgow tonight – a City that has played and continues to play such an important part in the story of Scotland and Britain. Let‘s remember the great contributions of the past. Celebrate the great work being done today by businesses the length and breadth of this country. And look forward to what we can achieve together in the days, months and years to come. For our vision for Britain is of an economy, open to trade … …a Britain that extends choice and opportunities for all the people of the UK… …a Britain that cherishes the rich diversity of these islands… …a Britain that taps into the talents to be found in every part of our country to build a more prosperous future for us all. Scotland has played and continues to play a central role in making Britain the country it is today. A country attractive to inward investment. A country exporting around the globe. One of the best places in the world to do business. And I hope that when the Scottish people come to deliver their verdict,
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Scotland will continue to play that central role within the United Kingdom in shaping our country‘s future.
We are better together.

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NUMBER 8

The incentivisation of sales staff – are consumers getting a fair deal?
Speech by Martin Wheatley – Managing Director, FSA

Introduction
We all know what it is like to walk into a bank to do something simple, like pay a credit card bill, only for the person behind the counter to ask if you would like to extend your credit, take out more insurance or look at their competitive mortgage rates? To be honest, I only have a credit card to shop online, I have all the insurance I need and the mortgage on my house is fixed. Banks for me were all about making sure my money was safe and my best interests were looked after. The type of place where you would go in, have a pleasant chat with the clerk and go about your daily business. Some time ago, financial institutions changed their view of consumers from people to serve, to people to sell to. One of the reasons why this happens is obvious – people in our financial institutions are being encouraged to sell to us through incentive schemes, bonuses and rewards. We have found evidence of poor practice and we are concerned that this reward culture is contributing to mis-selling. You can read our concerns in a report published today, which makes it clear this is a problem across the industry.

Why we are here today?
I am here today to talk about how we as the regulator intend to change this culture of viewing consumers simply as sales targets.
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This paper marks the start of a programme of work that will be taken forward by the Financial Conduct Authority – an organisation I will lead and that will focus on making sure markets work well so consumers get a fair deal.
Poorly designed incentive schemes are a universal problem across many industries. Financial regulators have struggled to get to grips with them, and many consumers have paid the price. We know dealing with this will not be an easy task – financial incentives are central to how businesses operate and are at the heart of problems we have seen over the years. This is ingrained within firms‘ business models, and we need a cultural shift across the industry to deal with it. The main points that I want you all to take away from today‘s speech are: - we have found that most incentive schemes that we looked at are likely to drive mis-selling, and this risk is not being properly managed; - while we will be looking at our rules and also the way we supervise, we expect firms to act now to clean up their act in regards to our findings; and - this work will be taken forward by the FCA and we will be taking a closer look at how firms incentivise their staff.

Why is this so important now?
It has been too easy , for too long, for those selling or giving advice to be motivated solely by the rewards on offer to them, rather than how to enrich their customer. This paper comes at a time when it‘s clear that people no longer believe that they will be treated fairly.

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Recent scandals on Libor and the mis-selling of interest rate products to small businesses have added to scepticism about where customers are placed in financial firms‘ list of priorities.
But what is also still clear is that we need financial services more than ever. Most of us need to save more for our retirements, but many are not doing enough. And all of us need a strong, profitable financial services industry that can give us the advice we need to guide us, that can help to protect us from the unforeseen, and that can deliver the products that will help us achieve our life goals. But the lack of trust and confidence is amplified each time that someone working for a bank, insurer, or investment firm sells products predominantly driven by financial incentives for themselves and profit for their firms, rather than the needs of their customers. And while public attention has been on the huge rewards on offer to the few, the effect of more modest rewards on the many needs to be dealt with. We need to deal with how incentives and bonuses are used by firms across financial services to drive sales, and the knock-on effect this has on their customers. In particular it is how front line staff have to hit performance targets, make sales and sign up customers to make a decent living. Even when – as they sometimes tell us – they do not want to be a part of that type of culture. This bonus-based approach has played a role in many scandals we have seen over the years. Incentive schemes on PPI were rotten to the core and made a bad problem worse. This is not like when you go to a fast food restaurant and the server asks ‗do you want fries with that?‘, or ‗do you want to go large?‘.
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We all know they ask these questions because they are encouraged to make the most of every sale, and when customers are standing at the counter, they are more likely to say yes.
But then we also know what to expect – chiefly lots of salt, calories and a bigger waistline. But far fewer of us actually have such a clear understanding of financial services. We also mostly trust those selling or giving advice to be acting in our best interests. These are often complex and long-term products that turn into long-term problems if they go wrong. The cost of going large may cost us a few pence – the cost of buying the wrong mortgage could see you lose your home. And while it is annoying that when you buy a TV they only seem interested in selling you the warranty, that is nothing compared to trying to find a safe home for your money, only for the person in the bank to only seem interested in selling you a confusing product that could put your life savings at risk. When that happens it is often because the person selling has a financial incentive to meet targets or sell a certain product. And based on evidence we will publish today, you will often find the firm is not doing enough to prevent that happening. What I expect those running firms to do is start looking at what their schemes are set up to do. The dictionary tells us incentives are something that incites an action.

Firms need to ask what type of action it is they incite.
Is it to get the best deal for the customer, or is it to get the best deal for the person or firm selling it? It is too often the latter. I t needs to be more balanced.
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Aligning incentive schemes to good consumer outcomes
I need to be clear here that I do not have an issue with firms having incentive schemes. We believe that firms can have incentive schemes that are well managed and can benefit their customers. Where we have identified problematic areas, these firms have already started to change their schemes or systems and controls. What we are now telling firms is that if you do have an incentive scheme, it has to be structured and managed in a way that treats the people it will affect fairly. As the FCA this will be important to us and we will look at features of incentive schemes and related controls and how they deliver fair consumer outcomes. And it is obvious firms need to make sure performance incentives are aligned to the goals of an organisation. There is a problem of course if the goals are simply to sell as many products as possible – firms need to make money, but not at the expense of clients and customers. This is about motivating people to do what is right. It comes back to organisational culture and ethics and the truism that what is good for customers is good for firms. We do not want to keep hearing of instances, such as PPI, where consumers think they had to buy a product or protection on another product when they did not need it. People parting with their money need to be sure they are being sold a product for the right reasons, rather than just because it makes a lot of money for those selling it. Firms need to ask – am I getting the best outcome for my customers here? This has to become part of firms‘ culture and part of how they do business.
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The customer needs to be truly at the heart of any businesses set on a strategy of sustainable growth for a long-term future.
I believe this comes down to those running firms focusing on the delivery of quality products and services and less on reward. We need to break the link between incentives and customers getting a poor deal. Getting this right is going to be a priority for me, and it should be for all firms as well.

The FCA will expect all firms to have a culture that puts their customer first, sorting out incentive schemes seems to me to be a simple way to start doing this, and a solid way of helping the industry to rebuild some of the trust that has been lost in recent years.
We know this isn‘t an easy job and we can‘t do this alone. Making such a change is going to take time and it‘s going to need your full support - ultimately we need you to help us. By making these changes your customers will be happier and ultimately your businesses will do better.

The report
Today we are publishing some disturbing findings from our recent research that illustrate that firms need to start putting their customers first when they set up their financial incentive schemes. We looked at 22 firms of all sizes, including high street banks, building societies, insurance companies and investment firms. And what we found is not pretty. Most of the incentive schemes we looked at were likely to drive people to mis-sell to meet targets and receive a bonus, and these risks were not being properly managed. In particular, firms failed to identify how incentives might encourage staff to mis-sell, suggesting they had not properly thought about the risks or simply turned a blind eye to them.
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They also relied too much on the routine monitoring of staff, not taking account of the features of their incentive schemes for example, looking out for spikes in the sales of each individual before the end of a bonus period.
I will give you some illustrations of where firms are going wrong and examples of high-risk incentive schemes we have seen. Some sales managers earned a bonus based on the volume of sales made by the staff they supervised. This may sound reasonable, until you add in that some of them also played a significant role in checking whether the sales were fair to the customer. This created a clear conflict, yet some of the firms we looked at did not think this was an issue to worry about. Another is that few firms with face-to-face sales staff had properly considered the risks of bad practice when the salesperson is talking to the customer – such as leaving out important information or pressuring customers to buy a particular product. Our work found that too many firms had not thought about checking what is actually said to customers. Here are a few of the worst examples: - One firm operated a ‗first past the post‘ system, where the first 21 sales staff to reach a target could earn a ‗super bonus‘ of £ 10,000. - At one firm the basic salaries of sales staff could move up or down by more than £ 10,000 a year depending on how much they sold. - Another firm excessively incentivised one product over another, therefore – despite claiming to offer impartial advice – there was a clear risk that its advisers would sell the product that earned them more money. We also found that the same firm made more money from sales of that particular product than any other, hence the bigger incentives for sales staff.

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- And another firm allowed sales staff to earn a bonus of 100% of their basic salary for the sale of loans and PPI, but the bonus was only payable to those who had sold PPI to at least half their customers. And I find it alarming that particularly risky incentive schemes, with the potential for sales staff to earn significant bonuses, without proper safeguards in place, were common across the firms we assessed.
Our report today must act as a wake up call to all firms. It sets out the scale of problems we have found and a roadmap to put this right, with clear expectations and proposed guidance to help firms meet our requirements. We expect all firms to read our paper and think how it affects their firm. We have made sure the firms where we found failings are fixing their incentive schemes, improving governance and controls and, in the worst cases, checking past sales to identify if mis-selling has occurred.

What firms need to do
And today I am setting out the steps that all financial firms need to take to put this right.

1. First, look at your incentive schemes to see if they increase the risk of mis-selling, and if so how. 2. Second, review whether your governance and controls are adequate. 3. Third, take action to deal with any weaknesses and flaws identified. Firms need to change how they incentivise their staff and learn to manage their risks.
CEO‘s are ultimately accountable for the way their staff are incentivised, so we expect them to take a real interest in fixing this. Recurring problems need to be investigated, action taken and redress paid to consumers who have lost out.

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I want to draw a line in the sand here, and use the report we are publishing today to set out our clear expectations.
This marks the start of a programme of work to reduce these risks, which the FCA will take forward, and that will involve further supervisory work, involving a wider review of incentive schemes, enforcement proceedings and a possible strengthening our rules. I am going to be personally involved in getting this right. This will be part of the ongoing improvements we make to regulation as we seek to make markets work well and give people a fair deal. The reforms the FCA will carry out are the opportunity to do things differently and when we begin our life next year you will see a new approach from us, driven by our new culture and our new way of working. At the heart of this culture will be the ability and the appetite to protect consumers better. Dealing with behaviour – or people‘s conduct – is at the top of our agenda. From boardroom to point of sale, the behaviour and attitude of financial firms needs to be examined and assessed – especially in terms of what experience and outcomes it offers customers. This will include pre-emptive regulation that takes a broad and deep look at firms‘ businesses individually and across the board. We will look for the bigger issues, find them earlier and deal with them quickly once we spot them. We will look at how firms make their money, how they pay their staff and whether they are designing, and selling products with customers in mind.

This is a change from the traditional regulatory model, which involved setting standards and then looking back at what firms have done.
We will continue with that, but for far less of our time. Instead, we will be making a judgement on what the businesses we regulate are doing now,

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and what they plan to do in the future, looking at how they are making their money, and whether they are ‗good profits‘.
In short, whether they are carrying out their business in a way that is treating their customers fairly.

And when it comes to dealing with problems, regulators in the past just looked at what has happened. We will find out why it has happened.
It is obvious to me that you cannot get to the bottom of what is causing harm unless you deal with the root causes of problems and the wider issues that run across firms. This will be part of a cultural shift for us, so that we are thinking about things from a consumer perspective. The FCA can be the template and the way forward for a new type of regulator, one that nurtures and applies a fresh set of operational values dedicated to understanding, anticipating and intervening to ensure that the financial markets fulfil their potential and promise to deliver a fair deal for consumers.

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NUMBER 9

Interesting comments for the ComFrame
A compilation of comments on a common framework for the supervision of internationally active insurance groups, known as ComFrame by the I nternational Association of I nsurance Supervisors (IAIS)

Bermuda, Association of Bermuda I nsurers and Reinsurers
ABIR does not support the current proposal to include companies that do business in 3+ jurisdictions as the first basis on which to determine a company may qualify as an I AIG.

(Note: IAIG stands for Internationally Active Insurance Group) (Note: ABIR stands for Association of Bermuda Insurers and Reinsurers)
ABIR would respectfully submit that one of the objectives of ComFrame is to develop harmonization of the application of group supervision and in this regard, if for example, a group is operating in 3 jurisdictions within the EEA, then under the proposed regime harmonization in principle will have been already statutorily mandated, thus the purpose of introducing another group supervisory regime is not clear. We would propose that an I AIG is one which operates with legal entities in multiple jurisdictions which have separate and distinct regulatory systems across 3+ supervisory frameworks; for example, Canada; US; Bermuda; India, etc. ComFrame should be applied only to those internationally active groups that have a global footprint and operate with legal entities in jurisdictions on multiple continents. The EU and the United States would each count as a single jurisdiction since they operate with a common cross-state regulatory system. ABIR also recommends that a smaller number of groups -say the 20 largest–be targeted with COMFRAME; experiment first, learn from that
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before expanding the net.
ABIR also is concerned with the proposed "constrained supervisory discretion" which grants "involved supervisors" the ability to consider an insurance group an IAIG even if it does not meet some of the proposed criteria or to exclude it as an IAIG. This type of discretion creates uncertainty for groups since it may be "deemed' to be an I AIG even if it doesn't meet the criteria. Whilst the ComFrame Paper provides examples of when this may be employed, the proposal is too far reaching. Given the proposed constrained supervisory discretion on the part of the supervisors, does ComFrame also propose an appeals process by which an identified I AIG can seek to have that designation lifted?

Canada, Office of the Superintendent of Financial I nstitutions
OSFI believes that the current criteria and process may be too prescriptive or mechanical. Further, OSFI discourages developing a discrete list of I AIGs that is determined mainly using quantitative requirements. Instead, a general definition as to the nature, size, complexity, international activity and risk profile of institutions to which ComFrame should apply would assist the supervisor in applying supervisory discretion to determine I AIGs. Rather than ranking insurers quantitatively and determining a cut-off point for IAIGs, the general definition should be applied on a continuum.

China, China Insurance Regulatory Commission
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The indentifying standards of IAIG include size, international activity, and constrained discretion, which can reasonably identify insurance group companies with international activity and the identification processes are comprehensive and reasonable.
In our opinion, the "constrained discretion" should be prudently used while taking into consideration the development stage of each country's insurance market and the nature, function and risk condition of insurance groups.

EU, European Insurance and Occupational Pensions Authority (EIOPA)
EIOPA strongly supports the work of the I AIS to develop a set of internationally consistent standards for the regulation and supervision of IAIGs. EIOPA would like to thank the I AIS for the work conducted up to now. Let us first express that E IOPA considers the restructuring of the ComFrame Paper to be an important improvement from the point of view of readability, focus, addressee perspective, among others. I n general the ComFrame criteria and process for identifying IAIGs seem to be appropriate. However there are no explicit rules to define the Head of the IAIG in case where there is no legal entity that controls or exerts dominant influence over the other elements of the I AIG. Another aspect which is not fully explained refers to cases in which entities may be excluded from supervision. The ComFrame only refers to the principle of proportionality whereas clearer and more detailed guidance would be helpful. Moreover, E IOPA thinks that some redundancies with I CP's notions could be deleted
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UK, Association of British Insurers
The criteria are too wide - insurers that are active only in countries that are part of a single regulatory and supervisory regime should not be classed as being internationally active. ComFrame should bring clarity to regulation and supervision of groups whose individual legal entities operate under multiple regulatory regimes - where a group is active in several countries which are all covered by the same regime, this need does not arise. It should not take three years before a designation as an I AIG can be retracted - this would lead to a situation where, for example, an insurer that had previously been designated an IAIG but had made significant changes to its business and was no longer internationally active in a meaningful way would still be subject to ComFrame for two years to no obvious benefit for policyholders, the company or the supervisors. In contrast other non-internationally active insurers operating on an identical basis but which had not previously been an I AIG would not be subject to ComFrame. If an insurer ceases to meet the criteria for an I AIG then neither the company nor supervisors will materially benefit from the application of ComFrame. An insurer's designation as an I AIG or not should be reviewed and updated at least annually.

USA, N AIC
The process for identifying I AIGs appears to be collaborative in nature and indicative of how ComFrame, as a working framework, should operate.
The criteria used to identify I AIGs should be clear and focused on identifying those entities which have a large presence internationally.
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The criteria should be simple and allow the involved supervisors to adjust using their judgment if circumstances necessitate a different answer ("constrained supervisory discretion"). The criteria currently under consideration by the IAIS attempts to strike a balance but should be carefully reviewed with these objectives in mind. As discussion on future steps (Field Testing, Implementation, etc.) progresses over the next year, the criteria and process for identifying may need to be reassessed to ensure it is appropriate to meet the intended objectives. With respect to the current draft, consideration should be given as to whether the criteria for the number of jurisdictions in which an I AIG operates should include threshold percentage of market share. This could either be part of the criteria itself or part of the supervisory discretion process. To read more: http:/ / iaisweb.org/ db/ content/ 3 /16037.pdf

Note:
ComFrame is a major project of the I AIS. While the ultimate role of ComFrame remains under discussion and development, the intent is given by its name —a common framework — one that lays out how supervisors around the globe can work together to supervise internationally active insurance groups (IAIGs) and close regulatory gaps. IAIGs are the largest, most complex insurance entities. ComFrame has three main objectives which include: 1) Developing methods of operating group-wide supervision of I AIGs;

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2)Establishing a comprehensive framework for supervisors to address group-wide activities and risks, and
3)Fostering global convergence. ComFrame is neither intended to be a forum to create prescriptive ways to promote a particular means for solvency standards, nor to create additional layers of regulation. ComFrame is expected to evolve over time. It will be developed over a three-year period with the Development Phase completed by the end of 2013.

The I AIS will issue a comprehensive report detailing the end of the Development Phase, following which there will be one or more impact assessments of both qualitative and quantitative requirements for IAIGs.

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NUMBER 10

Jumpstart Our Business Startups Act Frequently Asked Questions
In these Frequently Asked Questions (―FAQs‖), the Division of Trading and Markets (―staff‖) is providing guidance on certain provisions of the Jumpstart Our Business Startups Act (―JOBS Act‖) as they affect firms and their obligations with respect to securities analysts (―analysts‖) and research reports. These FAQs are not rules, regulations or statements of the Commission. The Commission has neither approved nor disapproved these FAQs. The staff may update these questions and answers periodically.

Background
These FAQs address questions about certain research provisions in Title I of the JOBS Act. These provisions include: Analyst Communications. Section 105(b) of the JOBS Act amends Section 15D of the Securities Exchange Act of 1934 (―Exchange Act‖) to prohibit the Commission or a national securities association registered under Section 15A of the Exchange Act from adopting or maintaining any rule or regulation in connection with an initial public offering (― IPO‖) of the common equity of an emerging growth company that: - Restricts, based on functional role, which associated persons of a broker, dealer, or member of a national securities association, may arrange for communications between an analyst and a potential investor; or - Restricts an analyst from participating in any communications with the management of an emerging growth company that is also attended by any other associated person of a broker, dealer, or
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member of a national securities association whose functional role is other than as an analyst.
Testing the Waters. Section 105(c) of the JOBS Act amends Section 5 of the SecuritiesAct of 1933 (―Securities Act‖) to permit an emerging growth company or any person authorized to act on behalf of an emerging growth company to engage in oral or written communications with potential investors that are qualified institutional buyers or institutions that are accredited investors as defined in Securities Act Rules 144A and 501(a) (or any successors to such rules) either prior to or following the date of filing of a registration statement with respect to such securities with the Commission, subject to the requirement of Section 5(b)(2) of the Securities Act. Section 5(b)(2) of the Securities Act makes it unlawful for any person to, directly or indirectly, carry or cause to be carried through the mails or in interstate commerce any such security for the purpose of sale or for delivery after sale unless accompanied or preceded by a prospectus that meets the requirements of Section 10(a) of the Securities Act. Post Offering Communications. Section 105(d) of the JOBS Act prohibits the Commission or any national securities association registered under Section 15A of the Exchange Act from adopting or maintaining any rule or regulation that prohibits any broker, dealer, or member of a national securities association from publishing or distributing any research report or making a public appearance, with respect to the securities of an emerging growth company, either: - Within any prescribed period of time following the I PO date of the emerging growth company; or - Within any prescribed period of time prior to the expiration date of any agreement between the broker, dealer, or member of a national securities association and the emerging growth company or its shareholders that restricts or prohibits the sale of securities held by the emerging growth company or its shareholders after the I PO date.

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Responses to Frequently Asked Questions
Question: Does the ability of an emerging growth company to ―test the waters‖ under Section 105(c) of the JOBS Act conflict with Rule 15c2-8(e) under the Exchange Act? Answer: Section 105(c) of the JOBS Act allows emerging growth companies to continue to ―test the waters‖ after a registration statement has been filed under the Securities Act. As described below, we believe that this activity can take place in a manner consistent with the requirements of Rule 15c2-8(e). Rule 15c2-8(e) states that it is a deceptive act or practice for a broker or dealer to participate in the distribution of securities with respect to which a registration statement has been filed under the Securities Act unless, among other things, the broker or dealer takes reasonable steps to make available a copy of the preliminary prospectus relating to such securities to each of that broker or dealer‘s associated persons who are expected, prior to the effective date, to solicit customers‘ orders for such securities before sales efforts by such associated persons. A broker or dealer participating in such a distribution also is required to take reasonable steps to make available to these associated persons a copy of any amended preliminary prospectus promptly after the filing thereof. The JOBSAct did not change the meaning of the term ―solicit customers' orders‖ for purposes of Rule 15c2-8(e). Whether an activity falls within the meaning of that term is based on the relevant facts and circumstances. An underwriter, for example, may wish to seek non-binding indications of interest from its customers in relation to a potential offering for the purpose of gathering information from prospective investors. This information can assist in the underwriter‘s determination of the appropriate price, volume and market demand for a potential offering.

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In such circumstances, the underwriter might ask its customers how many shares they might seek to purchase in the potential offering at various price ranges without requiring the customer to make any commitment to order.
Generally, if an underwriter is requesting from a customer a non-binding indication of interest that includes the amount of shares the customer might purchase in the potential offering at particular price levels – but does not ask the customer to commit to purchase the relevant securities – the underwriter, absent other factors, would likely not be soliciting a customer order for purposes of Rule 15c2-8(e). Finally, Rule 15c2-8 is applicable only where a registration statement has been filed with the Commission under the Securities Act. Submitting a confidential draft registration statement for staff review in accordance with Section 106(a) of the JOBS Act does not constitute a ―filing‖ of a registration statement for these purposes. Question: I n 2003 and 2004, the Commission, self-regulatory organizations (―SROs‖), and other regulators instituted settled enforcement actions against 12 broker-dealers to address conflicts of interest between the firms‘ research and investment banking functions (―Global Settlement‖). Does the JOBS Act affect the structural reforms mandated by Global Settlement or any other part of that court order? Answer: The JOBS Act does not amend or modify the Global Settlement. If the settling firms were to seek an amendment or modification of the Global Settlement in light of the JOBS Act, one or more of the settling firms would have to make an application to the court. Under the terms of the Global Settlement, the Commission would have an opportunity to consider any such request and the Commission could support or oppose a proposed amendment or modification after considering whether it would be in the public interest. Any amendment or modification to the Global Settlement would have to be approved by the court overseeing the Global Settlement. The Global Settlement also provides that a provision of the Global Settlement can be modified or removed if the Commission adopts a rule
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(or approves an SRO rule) ―with the stated intent to supersede‖ that provision.
Question: Section 105(b) of the JOBS Act prohibits the Commission or a national securities association from adopting or maintaining any rule or regulation in connection with an I PO of common equity of an emerging growth company restricting, based on functional role, which associated persons of a broker, dealer, or member may arrange for communications between an analyst and a potential investor. Does this ―arranging‖ provision of the JOBS Act affect any existing Commission or SRO rule?

Answer: Under Section 105(b) of the JOBS Act, an associated person of a broker-dealer, including investment banking personnel, may arrange communications between analysts and investors.
This activity would include, for example, an investment banker forwarding a list of clients to the analyst that the analyst could, at his or her own discretion and with appropriate controls, contact. In turn, an analyst could forward a list of potential clients it intends to communicate with to investment banking as a means to facilitate scheduling. I nvestment bankers can also arrange, but not participate in, calls between analysts and clients. Although neither the Commission nor the SROs have a rule that directly prohibits this activity, the staff has been asked whether we would consider such arranging activity, without more, to be a method for investment banking personnel to direct a research analyst to engage in sales or marketing efforts or any communication with a current or prospective customer regarding an investment banking services transaction in violation of NASD Rule 271 1(c)(6) and NYSE Rule 472(b)(6)(ii). The staff would not read N ASD Rule 2711(c)(6) and NYSE Rule 472(b)(6)(ii) to prohibit such activity.

Firms should be mindful that other provisions of the Exchange Act and Commission and SRO rules were not changed by the JOBS Act, such as the requirement that communications with current or prospective customers related to an investment banking services transaction be fair, balanced, and not misleading taking into consideration the overall context in which the communication was made.
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Firms subject to the Global Settlement should also be mindful of the requirements of that court order as they remain in place, including the requirement to create and enforce firewalls between research and investment banking personnel reasonably designed to prohibit all communications between the two except as expressly permitted.
Firms are also reminded that they need to have appropriate policies and procedures to ensure compliance with the federal securities laws and SRO rules. Question: Does Section 105 of the JOBS Act now allow analysts to attend meetings with company management in the presence of investment banking personnel in connection with the I PO of an emerging growth company? Answer: Section 105(b) of the JOBS Act permits analysts to participate in any communication with the management of an emerging growth company concerning an IPO that is also attended by any other associated person of a broker, dealer, or member of a national securities association whose functional role is other than as an analyst. The staff interprets this section as primarily reflecting a Congressional intent to allow analysts to participate in emerging growth company management presentations with sales force personnel so that the issuer‘s management would not need to make separate and duplicative presentations to analysts at a time when senior management resources are limited. This approach is consistent with a recommendation in the October 20, 2011 ―Rebuilding the I PO On-Ramp‖ report issued by the I PO Task Force. The Global Settlement was not affected by the JOBS Act. Accordingly, analysts of Global Settlement firms are still subject to the provisions of that court order, including the requirement to create and enforce firewalls between research and investment banking personnel reasonably designed to prohibit all communications between the two except as expressly permitted in the court order.

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Unless an exception to this requirement is applicable, the analyst is not permitted to participate in a communication in the presence of investment banking personnel.
In addition, other Commission and SRO rules regarding analysts continue to apply. Prior to enactment of Section 105(b), SRO rules prohibited analysts of non-Global Settlement firms from attending meetings with issuer management that are also attended by investment banking personnel in connection with an I PO, including pitch meetings.

Pursuant to Section 105(b), analysts may now attend such meetings, provided that the issuer qualifies as an emerging growth company.
Section 105(b) does not, however, permit analysts to engage in otherwise prohibited conduct in such meetings. Section 105(b) does not, for example, affect SRO rules that otherwise prohibit an analyst from engaging in efforts to solicit investment banking business. Section 105(b) also does not affect other prohibitions as discussed below. Therefore, before a firm is formally retained to underwrite an offering, analysts of non-Global Settlement firms in attendance at such meetings could, for example, introduce themselves, outline their research program and the types of factors that the analyst would consider in his or her analysis of a company, and ask follow-up questions to better understand a factual statement made by the emerging growth company‘s management. In addition, after the firm is formally retained to underwrite the offering, analysts at non-Global Settlement firms could, for example, participate in presentations by the management of an emerging growth company to educate a firm‘s sales force about the company and discuss industry trends, provide information obtained from investing customers, and communicate their views. Firms and analysts should be mindful of the antifraud provisions of the federal securities laws, the Global Settlement, and any other Commission or SRO rule that governs research analyst conflicts.

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An analyst, for example, remains prohibited from changing his or her research as a result of a communication in an effort to obtain investment banking business.
In addition, an analyst continues to be prohibited from giving tacit acquiescence to overtures from the management of an emerging growth company that attempt to create an expectation of favorable research coverage if the analyst‘s firm is chosen to underwrite the emerging growth company‘s I PO. Further, an analyst remains prohibited from providing views that are inconsistent with the analyst‘s personal views about the emerging growth company or its securities, or from making a statement that is misleading taking into consideration the overall context in which the statement was made. Moreover, investment banking personnel remain prohibited from directly or indirectly directing a research analyst to engage in sales or marketing efforts related to an investment banking services transaction. Firms should ensure that they have instituted and enforce appropriate controls to make sure that analysts are not engaging in prohibited conduct, such as solicitation, at any meetings with company management that are also attended by investment banking personnel, or otherwise. The examples given above are not exhaustive. Question: Does the JOBS Act permit an analyst to participate in a roadshow or otherwise engage in communications with a current or prospective customer in the presence of investment banking department personnel or the management of an emerging growth company about an investment banking services transaction?

Answer: As discussed above, Section 105(b)(2) of the JOBS Act allows a firm to avoid the ministerial burdens of organizing separate and potentially duplicative meetings and presentations among an emerging growth company‘s management team, investment banking personnel, and research analysts.

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Section 105(b)(2) did not address communications where investors are present together with company management, analysts and investment banking personnel.
This provision of the JOBS Act thus does not affect NASD Rules 2711(c)(5)(A) and (B) and N YSE Rules 472(b)(6)(i)(a) and (b), which prohibit analysts from participating in roadshows or otherwise engaging in communications with customers about an investment banking transaction in the presence of investment bankers or the company‘s management. These rules – which are intended to reduce the pressure on analysts to give overly optimistic assessments of investment banking deals and guard against analysts being perceived as part of the sales and marketing team for a transaction – apply to communications with customers and other investors and do not depend on whether analysts, investment bankers, and management are participating jointly in such communications. Moreover, as noted above, the Global Settlement is not affected by the JOBS Act, so firms subject to that court order must be mindful of its provisions. Question: Does Section 105(d) of the JOBS Act affect the SRO rules that establish quiet periods after the expiration of a lock-up agreement?What about the SRO rules that establish quiet periods before and after the termination or waiver of a lock-up agreement and the SRO rules that apply to quiet periods for secondary offerings? Answer: The JOBS Act permits the publication or distribution of a research report or public appearances with respect to the securities of an emerging growth company at any time after an I PO or prior to the expiration date of any lock-up agreements. Although the JOBS Act does not explicitly permit publication or distribution of a research report or public appearance relating to an emerging growth company before the termination or waiver of a lock-up agreement, the staff believes that the intent of Congress in adopting this provision was to fully address the quiet periods imposed by the SRO rules

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on research relating to emerging growth companies prior to the end of a lock-up agreement.
Therefore, the staff interprets Section 105(d)(2) of the JOBS Act to apply equally to N ASD Rule 2711(f)(4) and NYSE Rule 472(f)(4) no matter by which method the lock-up agreement ends – by termination, expiration, or waiver – prior to the termination, expiration, or waiver of the agreement. The JOBS Act did not explicitly permit publication or distribution of a research report or public appearance relating to an emerging growth company after the expiration, termination, or waiver of a lock-up agreement. It also did not expressly address quiet periods after a secondary offering of an emerging growth company‘s securities. The staff believes that the policies underlying the change in Section 105(d) are equally applicable to quiet periods during these other time periods. We understand that FIN RA is considering filing with the Commission a proposal to eliminate the remaining quiet periods imposed by N ASD Rules 2711(f)(1), (2), and (4) and NYSE Rules 472(f)(1) through (4) with regard to an emerging growth company and its securities. We expect this filing would eliminate these other quiet periods related to emerging growth companies not addressed by Section 105(d). Question: Does the definition of research report under the JOBS Act affect the analysis of the types of communications that constitute a research report for purposes of Regulation Analyst Certification (―Regulation AC‖)? Answer: No. In general, under Regulation AC the following communications would not be research reports if they do not include an analysis of, or recommend or rate, individual securities or companies: - Reports discussing broad-based indices, such as the Russell 2000 or S&P 500 index. - Reports commenting on economic, political, or market conditions.

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- Reports commenting on or analyzing particular types of debt securities or characteristics of debt securities.
- Technical analysis concerning the demand and supply for a sector, index, or industry based on trading volume and price. - Reports that recommend increasing or decreasing holdings in particular industries or sectors or types of securities. The following communications would generally not be research reports even if they recommend or rate individual securities or companies:

- Statistical summaries of multiple companies' financial data (including listings of current ratings) that do not include any analysis of individual companies' data.
- An analysis prepared for a specific person or a limited group of fewer than fifteen persons. - Periodic reports or other communications prepared for investment company shareholders or discretionary investment account clients discussing past performance or the basis for previously made discretionary investment decisions.

- Internal communications that are not given to customers.
The Commission stated in the adopting release for Regulation AC that ―[i]t is not possible to provide a complete list of all types of communications that would or would not fall within the definition of research report. Whether a particular communication constitutes a research report for the purpose of Regulation AC will turn on the individual facts and circumstances surrounding that communication.‖ Question: I s there anything else that firms should consider when making changes based on research provisions of the JOBS Act? Answer: We remind firms contemplating new activities based on the research provisions of the JOBS Act to review and update their policies and procedures, as well as their educational and training efforts, to make corresponding changes to promote compliance with Commission and

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SRO rules that are designed to minimize conflicts of interest and facilitate the objectivity and reliability of research.

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Certified Risk and Compliance Management Professional (CRCMP) Distance learning and online certification program.
Companies like IBM, Accenture etc. consider the CRCMP a preferred certificate. You may find more if you search (CRCMP preferred certificate) using any search engine. The all-inclusive cost is $297. What is included in the price:

A.The official presentations we use in our instructor-led classes (3285 slides)
The 2309 slides are needed for the exam, as all the questions are based on these slides. The remaining 976 slides are for reference. You can find the course synopsis at: www.risk-compliance-association.com/ Certified_Risk_Compliance_Tra ining.htm

B. Up to 3 Online Exams
You have to pass one exam. If you fail, you must study the official presentations and try again, but you do not need to spend money. Up to 3 exams are included in the price. To learn more you may visit: www.risk-compliance-association.com/ Questions_About_The_Certifica tion_And_The_Exams_1.pdf www.risk-compliance-association.com/ CRCMP_Certification_Steps_1.p df

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C.Personalized Certificate printed in full color.
Processing, printing, packing and posting to your office or home.

D.The Dodd Frank Act and the new Risk Management Standards (976 slides, included in the 3285 slides)
The US Dodd-Frank Wall Street Reform and Consumer Protection Act is the most significant piece of legislation concerning the financial services industry in about 80 years. What does it mean for risk and compliance management professionals?It means new challenges, new jobs, new careers, and new opportunities. The bill establishes new risk management and corporate governance principles, sets up an early warning system to protect the economy from future threats, and brings more transparency and accountability. It also amends important sections of the Sarbanes Oxley Act. For example, it significantly expands whistleblower protections under the Sarbanes Oxley Act and creates additional anti-retaliation requirements. You will find more information at: www.risk-compliance-association.com/ Distance_Learning_and_Certific ation.htm

I nternational Association of Risk and Compliance Professionals (I ARCP) www.risk-compliance-association.com

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