Warning: Equity Rules May Apply

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Warning: Equity Rules May Apply

Fixed income, watch out.

Fixed income, watch out. That was the general consensus of panelists at The Bond Market Association's legal and compliance conference last week in New York, who predict the debt market will soon be pulled into the same regulatory realm as equities. And, they warn professionals in the fixed income compliance, legal and trading areas of firms should be prepared.

Brandon Becker, a partner with Wilmer, Cutler & Pickering in Washington, says there is a clear presumption among the regulators that equity rules should apply to debt. He adds regulators are asking firms why debt should be treated any differently from equity and though there are many differences between the two, he feels regulators are beginning to approach them the same way. Fixed-income compliance officers should look at the concerns of the equity desks within their firms and start asking the same kinds of questions, he recommends. Firms need to be concerned with what they are selling and to whom, in order to avoid the same troubles which have plagued the equity markets.

Becker adds that firms' reputations may be on the line if they do not act quickly to change their ways of doing fixed-income business. In the present regulatory climate, regulators are in competition to file cases and fixed income can get caught in the middle of that competition. Becker warns that even when firms follow the rules they are at regulatory risk. "[Firms have] to reverse the thought that debt is different," he notes.

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