Mutual fund boards maintain strong governance, survey says

Mutual fund boards maintain strong governance practices to safeguard shareholders’ interests, according to a new report by the Independent Directors Council (IDC) and Investment Company Institute (ICI).© Shutterstock The report – called the Overview of Fund Governance Practices, 1994–2018 – revealed several key findings. For example, it found that independent directors make up three-quarters of […]

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Mutual fund boards maintain strong governance practices to safeguard shareholders’ interests, according to a new report by the Independent Directors Council (IDC) and Investment Company Institute (ICI).

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The report – called the Overview of Fund Governance Practices, 1994–2018 – revealed several key findings. For example, it found that independent directors make up three-quarters of boards in 84 percent of fund complexes – that’s up from 46 percent in 1996. Further, 66 percent of fund complexes have an independent board chair even though there is no legal requirement to have one. Also, 91 percent of participating complexes have an independent director in board leadership.

Also, most fund complexes have mandatory retirement policies for board members with the average age of compulsory retirement set at 75. For complexes that put term limits on directors, the average limit is 16 years. Finally, the survey said that 54 percent of independent directors are represented by dedicated legal counsel, while 41 percent are represented by legal counsel that is different from the adviser’s counsel.

“Boards set a high standard for fund oversight by continuing to adopt strong governance practices even when they aren’t required by regulation,” Amy Lancellotta, managing director of IDC, said. “Our report details these practices and how they have evolved to continue to serve investors’ best interests.”

The report, conducted every two years, is based on research from fund complexes representing nearly 9,000 funds.

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CME Group to offer market data on Google Cloud Platform

CME Group will become the first derivatives marketplace to offer real-time futures and options market data on Google Cloud Platform (GCP).© Shutterstock Through this agreement, CME Group customers will be able to access all real-time CME Group data currently available, including all CME Globex market data and third-party data sources, on the Google Cloud platform […]

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CME Group will become the first derivatives marketplace to offer real-time futures and options market data on Google Cloud Platform (GCP).

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Through this agreement, CME Group customers will be able to access all real-time CME Group data currently available, including all CME Globex market data and third-party data sources, on the Google Cloud platform starting Nov. 17.

“Our clients around the world increasingly are looking for quality real-time data within the cloud,” Trey Berre, global head of data services at CME Group, said. “This innovative collaboration with Google Cloud will not only make it easier for our clients to access the data they need from anywhere with an internet connection but will also make it easier than ever to integrate our market data into new cloud-based technologies.”

Chicago-based CME Group is one of the world’s leading derivatives trading platforms. It enables clients to trade futures, options, cash and OTC markets, optimize portfolios, and analyze data.

“This initiative with CME Group is the latest example of how Google Cloud is committed to working with the financial sector to offer creative, new ways to leverage real-time market data,” Tais O’Dwyer, global director of financial services strategy and solutions, Google Cloud, said. “Pulling from our expertise in data management and our global network, we will continue to engage with key financial services companies like exchanges to help them transform business and meet their customers’ needs.”

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Study probes investor literacy, education needs

Recently released Financial Industry Regulatory Authority (FINRA) study findings determined investors with low levels of financial knowledge lack confidence in their ability to meet their financial goals.© Shutterstock The analysis, New Evidence on the Financial Knowledge and Characteristics of Investors, was conducted by the FINRA Investor Education Foundation (FINRA Foundation) and the Global Financial Literacy […]

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Recently released Financial Industry Regulatory Authority (FINRA) study findings determined investors with low levels of financial knowledge lack confidence in their ability to meet their financial goals.

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The analysis, New Evidence on the Financial Knowledge and Characteristics of Investors, was conducted by the FINRA Investor Education Foundation (FINRA Foundation) and the Global Financial Literacy Excellence Center (GFLEC) at the George Washington University School of Business.

The scope of work examined nearly 15,000 Americans, aged 25 to 65, who were not retired or in school. Investors were categorized into two segments, workplace-only investors and active investors. It also included non-investors for comparison purposes.

“Investors are seeing a rapid evolution of the financial landscape, from the introduction of more complex financial products and instruments to a fundamental shift in the retirement system that places responsibility for saving and investing squarely on the shoulders of individual Americans,” Gerri Walsh, president of the FINRA Foundation, said. “Fewer workers today have defined benefit pension plans and the rise of defined contribution plans, like 401Ks, require an understanding of financial markets and basic personal finance that many investors lack.”

The results showed, among other determinations, that workplace-only investors were more likely to include individuals who were divorced or separated, had lower incomes and less education and were less likely to be self-employed. When presented with financial literacy questions measuring understanding of interest rates, inflation, and risk diversification, only 32 percent of workplace-only investors could answer the questions correctly, compared to 44 percent of active investors. Higher levels of financial knowledge were associated with participation in private retirement savings accounts and financial markets, even when controlled for risk preferences or confidence in one’s ability to reach financial goals.

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IRS issues recommendations on how to recognize abusive schemes

The Government Accountability Office (GAO) has issued the Internal Revenue Service (IRS) a series of recommendations to address identifying tax-exempt entity abusive schemes.© Shutterstock The GAO’s analysis determined the IRS does not consistently analyze data from its offices to help identify the schemes, although information may be available in existing databases. The GAO learned IRS […]

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The Government Accountability Office (GAO) has issued the Internal Revenue Service (IRS) a series of recommendations to address identifying tax-exempt entity abusive schemes.

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The GAO’s analysis determined the IRS does not consistently analyze data from its offices to help identify the schemes, although information may be available in existing databases.

The GAO learned IRS database project codes to identify data on abusive tax schemes are not linked across IRS’s audit divisions, the agency has not leveraged a database with cross-divisional information to facilitate its analysis and monitoring of audit data across divisions, and has not used existing analytic tools to mine the narrative fields of tax forms.

The GAO maintains each of those elements could provide audit leads on abusive schemes involving tax-exempt entities.

To alleviate the issues, the GAO has recommended the Commissioner of Internal Revenue should undertake a risk assessment of tax-exempt entity Form 8886-T filings; link audit data on abusive tax schemes involving tax-exempt entities across operating divisions and use the linked data to assess emerging issues and develop policy responses; test the ability of the Return Inventory Classification System to facilitate analysis and monitoring of audit data across the operating divisions and to support the IRS’s enforcement objectives; use existing data analytic tools to further mine Form 8886 and Form 8918 data; and develop guidance to help managers ensure referrals about abusive schemes involving tax-exempt entities are made across operating divisions.

The GAO said the IRS agreed with each of the recommendations.

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Cybersecurity is the top concern among community banks

A survey of community banks revealed that cybersecurity is their top concern.© Shutterstock The sixth annual community bank survey, conducted by the Conference of State Bank Supervisors (CSBS), revealed that 70 percent of respondents ranked cybersecurity as their most significant risk. Further, 36 percent of banks said funding costs were the most likely factor to […]

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A survey of community banks revealed that cybersecurity is their top concern.

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The sixth annual community bank survey, conducted by the Conference of State Bank Supervisors (CSBS), revealed that 70 percent of respondents ranked cybersecurity as their most significant risk.

Further, 36 percent of banks said funding costs were the most likely factor to influence future profitability. This is up sharply from 11 percent in 2016. Also, there has been a considerable shift in how banks view regulation. Just 4 percent said that regulation was most likely to influence profitability, compared to the 60 percent who called it a concern two years ago.

Also, concerns about compliance costs increased 4 percent in the most recent survey, while 30 percent considered depopulation an important limitation to retaining core deposits. Additionally, the number of banks offering digital and online services remains largely unchanged due to the costs.

CSBS polled representatives from 571 community banks in 37 states to compile the data.

The survey was accompanied by a feature called “Five Questions for Five Bankers.” State bank commissioners asked five questions to five community bankers in 30 states, addressing the effectiveness of the Economic Growth, Regulatory Relief and Consumer Protection Act, S. 2155, and the community bank business model. They also asked about funding and liquidity concerns, technology, and cybersecurity.

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Analysis examines financial services transformation

The Insured Retirement Institute (IRI), Allianz Life, and LifeYield LLC recently crafted an analysis regarding the significant transformation taking place in the financial services industry. © Shutterstock Improving Financial Outcomes and Client Confidence Through the Confluence of Human and Digital Advice addresses the changes now underway, enabling financial advisors to provide comprehensive solutions for improved […]

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The Insured Retirement Institute (IRI), Allianz Life, and LifeYield LLC recently crafted an analysis regarding the significant transformation taking place in the financial services industry.

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Improving Financial Outcomes and Client Confidence Through the Confluence of Human and Digital Advice addresses the changes now underway, enabling financial advisors to provide comprehensive solutions for improved financial outcomes and greater investor confidence.

“The future of financial advice is undergoing a significant transformation in which managing the full household portfolio in a comprehensive and optimized way is the new standard,” said Jack Sharry, executive vice president of LifeYield LLC and a member of the white paper’s advisory board. “Modern annuities will play an important and integrated role in enhancing clients’ ability to achieve their retirement goals.”

The white paper seeks to aid advisors in better meeting the needs of the fast-growing segment of retiree and pre-retiree clients.

The breakdown showed how modern annuities could be incorporated into household-level portfolios and viewed in the context of a broader, more comprehensive plan to help address the challenges clients face as they prepare for and manage their retirement.

The paper authors noted human and digital advice, modern product design, aggregated data solutions are among the tools helping clients visualize their wealth landscape while empowering advisors to provide clarity on how clients can improve financial results across all holdings in a household.

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Survey assesses Tax Cuts and Jobs Act effectiveness

The National Federation of Independent Business (NFIB) has released findings of the most recent survey assessing the effectiveness of the Tax Cuts and Jobs Act. © Shutterstock “This new data confirms what small business owners have been telling the Committee: the Tax Cuts and Jobs Act has been good for America’s small businesses,” Rep. Steve […]

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The National Federation of Independent Business (NFIB) has released findings of the most recent survey assessing the effectiveness of the Tax Cuts and Jobs Act.

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“This new data confirms what small business owners have been telling the Committee: the Tax Cuts and Jobs Act has been good for America’s small businesses,” Rep. Steve Chabot (R-OH), House Committee on Small Business ranking member, said. “As we heard at a recent Committee hearing, small business owners are using the savings from the tax cuts to expand facilities, purchase equipment, and create jobs.”

The analysis showed 82 percent of small business owners think the tax cuts were positive for the overall economy; 66 percent reported the Tax Cuts and Jobs Act was positive or very positive for their business; and 81 percent considered the small business deduction on qualified business income as important or very important.

The provision most frequently viewed as important to small business owners and their businesses is the creation of the Small Business Deduction, per the survey results, with up to 20 percent of qualified business income as an allowable tax deduction. The mention of it provokes a strong, positive reaction with 51 percent of owners saying that it is a very important provision and another 30 percent somewhat important provision to them and their businesses.

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LexisNexis Risk Solutions examines smaller lending institution fraud impact

Findings generated from a LexisNexis Risk Solutions analysis determined lending fraud financially impacts smaller banks, credit unions, and digital lenders at twice the rate of larger competitors.© Shutterstock The data and technology solutions firm’s 2019 Small and Mid-Sized Business (SMB) Lending Fraud Survey sought feedback from 134 individuals responsible for making risk and fraud assessments […]

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Findings generated from a LexisNexis Risk Solutions analysis determined lending fraud financially impacts smaller banks, credit unions, and digital lenders at twice the rate of larger competitors.

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The data and technology solutions firm’s 2019 Small and Mid-Sized Business (SMB) Lending Fraud Survey sought feedback from 134 individuals responsible for making risk and fraud assessments or decisions for SMB customers.

The analysis stemmed from the quest to better understand SMB lending frauds volume, how it is being identified and tracked, the types of fraud experienced, what’s being done to combat it and if there are differences in SMB lending fraud based on the size or type of organization.

The work showed fraud monetary losses for smaller banks amounting to 4.5 percent and 5.8 percent of overall revenue, compared to 2.9 percent for larger institutions, with fake identities, synthetic identities, cyberattacks on account creation or identity spoofing for account takeover on existing accounts serving as some of the fraud vehicles used.

“Digital lenders, in particular, are ripe for target by fraudsters since they emphasize speed and application efficiency over fraud prevention,” Ben Cutler, vice president of business risk and specialty markets at LexisNexis Risk Solutions, said. “Over the past 24 months, digital lenders alone realized a rise in fraud attacks of 8.2 percent, almost as much as large financial institutions at 8.6 percent. Given historical and expected fraud rates, it’s no surprise that digital lenders plan to increase investment in anti-fraud initiatives in 2020.”

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Report examines consumer bankruptcy trends

The Consumer Financial Protection Bureau’s latest quarterly consumer credit trends report probed the nuances of consumer bankruptcy trends and its wide-ranging impact.© Shutterstock The analysis describes how the volume and types of bankruptcy filings have changed throughout the period 2001 – 2018, including the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) and the Great […]

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The Consumer Financial Protection Bureau’s latest quarterly consumer credit trends report probed the nuances of consumer bankruptcy trends and its wide-ranging impact.

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The analysis describes how the volume and types of bankruptcy filings have changed throughout the period 2001 – 2018, including the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) and the Great Recession.

The breakdown noted the significance of how and by whom the bankruptcy system is being used, which is critical to review because of the role bankruptcy can play in helping consumers recover from financial shocks, the relationship between bankruptcy and debt collection and the impact the system can have on the cost and availability of credit.

The scope of work included data analysis from the Bureau’s Consumer Credit Panel (CCP), which officials said is a longitudinal, nationally representative sample of approximately five million de-identified credit records maintained by one of the three nationwide credit reporting companies.

The report determined from 2001 to 2004, about 75 percent of personal bankruptcy filers used Chapter 7; bankruptcy petitions generally result in a discharge or dismissal; less than half of Chapter 13 filers complete their repayment plans and receive a discharge; and median credit scores increase steadily from year-to-year after consumers file a bankruptcy petition.

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New report highlights need for business resilience

The Depository Trust & Clearing Corporation (DTCC) issued a new white paper that calls for the financial industry to make business resilience, an organization’s ability to safeguard its critical services, a priority. © Shutterstock The paper, titled Resilience First, warns that disruptions to critical business services could create market instability. It says a paradigm shift […]

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The Depository Trust & Clearing Corporation (DTCC) issued a new white paper that calls for the financial industry to make business resilience, an organization’s ability to safeguard its critical services, a priority.

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The paper, titled Resilience First, warns that disruptions to critical business services could create market instability. It says a paradigm shift is required to protect the global financial system from the significant threats posed by cyber-attacks, the rapid development and adoption of new technologies, the increased interconnectedness of the financial ecosystem, and growing industry-wide concentration risks, among other dynamics.

“With the threat of potential disruptions continuing to grow, firms can no longer afford to focus on disaster recovery, business continuity management and cybersecurity in isolation,” Dan Thieke, managing director, Business Risk & Resilience Management, said. “Resilience initiatives should look holistically at threats and aim to safeguard critical business services against a wide range of technical, physical, logical, or financial disruptions.”

DTCC, a company that provides market infrastructure for the financial services industry, said a collaborative approach to business resilience is required. Business resilience efforts should be broadened to include all relevant stakeholders and incorporate resilience into the initial design of new products and services. The paper discusses the core principles and guidelines to further resilience efforts.

“We are committed to leveraging our experience to lead the discussion on the evolution of industry-wide resilience. This is a key strategic enabler that is consistent with our mission to deliver the world’s most resilient and secure post-trade infrastructure for our clients,” Thieke said.

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