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Tax regulation is a ‘labyrinth’ that is constantly changing, and is an entity that plays a prominent role in securities finance, according to panellists at the Risk Management Association’s (RMA’s) 38th Securities Finance and Collateral Management Conference.
Attendees of the event were welcomed with an introduction of the RMA by its co-chairs Nehal Udeshi, head of securities finance at BNY Mellon, and Christopher Galli, US head of trading services operations at J.P. Morgan.
Speakers on the first panel also included RMA’s Securities Lending Council chair Mark Whipple, alongside State Street’s global head of automation, analytics and platform services Nick Delikaris and global head of tax for securities finance George Rapalje, as well as BBH’s senior counsel Ranada Fergerson.
For firms operating global programmes across multiple jurisdictions, tax regulation is a challenge that requires a dedication of resources.
The panel found that issues regarding tax regulation have inspired new opportunities for the RMA to collaborate with other industry groups. Reinforcing the need for committees such as RMA’s LTR Tax Subcommittee, it has become a challenge impacting all market participants.
Some firms have identified a ‘manifestation’ of tax rules and changes in tax practices from authorities; attendees of the panel heard that these changes are ‘having a real impact on the market’ as record data activity is ‘now curtailed in significant markets’.
The industry faces a time of immense regulatory and technology change, which will present a number of challenges and opportunities for the market, a panellist indicated.
Closely monitoring impending regulation, the RMA proceeds to review the US Securities and Exchange Commission’s (SEC’s) reporting rule 10c-1. The Commission is hosting an open meeting on Friday 13 October to discuss the regulation, as well as short selling rules.
In addition, the RMA will monitor Treasury clearing rules, in particular, the bilateral clearing of repo transactions in regards to the SEC’s clearing proposal, which was announced in 2022.
The RMA team is also preparing for the adoption of the anticipated shorter settlement cycle T+1 — which will go into effect come May 2024 in the US, Canada and Mexico. Association representatives said the group is working diligently to ensure securities lending is not ‘harmed’ in the process.
Among the regulatory landscape, the SEC’s Form N-PX remains a key topic for the RMA’s committees as the Association intends to clarify and simplify the language that is received by investors regarding recalls of proxy votes.
On 2 November 2022, the US Securities and Exchange Commission (SEC) adopted amendments to Form N-PX designed to enhance the reporting of proxy votes by registered funds and the reporting of executive compensation (‘say-on-pay’) votes by institutional investment managers.
Form N-PX was introduced two decades ago and its basic principle was to inform investors how funds voted shares held on their behalf, also known as voting proxies. The changes have come as a result of investors' concerns surrounding the lack of readily usable information.
The RMA faces its own internal changes as it works to merge with Chicago-based group Bank Administration Institute (BAI). Discussing the move, the Association assured attendees that it will continue to remain fully committed to securities lending.
Attracting 520 attendees this year, the RMA hopes to continue to extend its communication channels to all players within this niche industry as it identifies key regulatory focuses for members.
