-
TIN:
SCHEDULE O
(Form 990 or 990-EZ)
Department of the Treasury
Internal Revenue Service
(Form 990 or 990-EZ)
Department of the Treasury
Internal Revenue Service
Supplemental Information to Form 990 or 990-EZ
Complete to provide information for responses to specific questions on
Form 990 or to provide any additional information.
Attach to Form 990 or 990-EZ.OMB No. 1545-0047
2011
Open to Public
Inspection
Inspection
Name of the organization
Securities Industry and Financial
Markets Association
Markets Association
Employer identification number
32-0178959
32-0178959
| Identifier | Return Reference | Explanation |
|---|---|---|
| Part I, LIne 1 | The Securities Industry and Financial Markets Association (SIFMA) brings together the shared interests of hundreds of securities firms, bank and asset managers. SIFMA's core mission is to support a strong financial industry. The most significant activities SIFMA undertook this year pertained to advocacy on Dodd-Frank Wall Street Reform and Consumer Protection Act rule making - work strategically funded principally from association reserves ($6.3m and $9.1m in current and prior year respectively). Part I, Line 6 The number of volunteers was derived from SIFMA committee participants per the membership data base. | |
| Part III, LIne 4a | Continued development and maintenance of suggested practices that are conducive to efficient conduct of the business of members of the organization: MARKET STRUCTURE The smooth and proper functioning of the securities markets is a key factor in fostering investor trust and confidence. Advances in technology have contributed to increased market efficiency, price discovery and liquidity for all investors. However, a number of recent events, including the systems issues around the initial public offerings of BATS and Facebook, have rightfully brought increased scrutiny on the technology that drives our equity markets. At SIFMA, we are committed to working with industry participants and regulators to develop thoughtful and practical approaches to safeguard them. This year, we worked with regulators, exchanges and market participants to put into place the Limit Up Limit Down Plan to address market volatility and to revise market-wide circuit breakers, both of which we believe will strengthen market safeguards and therefore increase investor confidence. Bringing the power of technological innovation to our financial markets, but with proper controls, requires ongoing collaboration between the industry, exchanges and regulators. As we adapt to an evolving marketplace, SIFMA and our members will continue to seek ways to maintain and improve the underlying structure of our markets. | |
| Part III, Line 4b | Advocacy for issues of importance to its members: On behalf of our members, SIFMA is engaged in a broad range of advocacy efforts - from the implementation of Dodd-Frank to fiscal policy to comprehensive global regulatory coordination - with the intent of ensuring our financial markets are the safest and remain the widest, deepest, most liquid and most transparent in the world. From the earliest days of financial regulatory reform, SIFMA has focused on being an active and productive participant in the process. There are many areas where we believe new regulations were necessary to respond to the financial crisis. Risk must be managed: We supported the development of a systemic risk designation and the establishment of the orderly liquidation regime for failing systemic institutions. Investors must be protected: We have been a constructive advocate for the development of a uniform fiduciary standard of care to protect retail investors, and a leading advocate to enhance the oversight and enforcement of investor protection rules for registered investment advisors. But there are some rules that simply do not work. Where we believe regulators have overstepped or missed the mark - such as with the Volcker Rule and position limits - we have objected, on the basis of sound legal and empirical analysis. The Financial Services Oversight Council (FSOC), the newly formed systemic risk regulator, must now step in to take a stronger leadership role and ensure regulatory agencies are coordinated so the regulations they create do not inadvertently generate new risks. Our fundamental concern is ensuring that regulatory rulemaking is done right - even if it takes longer. The process begins with thorough cost-benefit and economic analysis that appropriately takes into account the impact new rules will have on the markets, market participants, and the economy generally. Our ultimate goal is to ensure final regulations are balanced and consistent with the intent of the legislation, and avoid constraining capital formation and credit availability, or otherwise impeding the markets they are meant to protect. CONSOLIDATED AUDIT TRAIL (CAT) Securities markets and the wide dispersal of activity across many trading centers have become increasingly automated. In 2010, the Securities and Exchange Commission (SEC) proposed a rule that would require Self Regulatory Organizations (SROs) - stock exchanges and national securities associations - to develop a consolidated audit trail (CAT) to track that activity. As envisioned, CAT was intended to enhance the regulators' ability to oversee securities markets. This included investigating illegal activities and monitoring overall market structure through a real-time, comprehensive database of securities quotes and orders. Such real-time reporting would have been extremely costly for firms to implement and would inundate regulators with so much data that the information would be rendered useless. In July, the SEC approved a final rule requiring that SROs establish a CAT, but taking into account the industry's opposition to real-time reporting and instead requiring a next day reporting scheme. Exchanges and SROs are now in the process of developing this CAT system, subject to SEC approval. It will track securities orders across all markets and include information for the entire life-cycle of an order - from origination through routing, cancellation, modification, or execution. On behalf of our members, SIFMA will continue to work with the SEC and SROs to promote cost effective implementation of the necessary infrastructure and systems of this useful and long overdue regulatory tool. | |
| Part III, line 4b (continued) | VOLCKER RULE SIFMA's primary concern with the Volcker Rule as proposed by the regulatory agencies is the impact it would have on traditional market making activities: reducing market liquidity, discouraging investment, limiting credit availability and increasing the cost of capital for companies. The narrowly-crafted exemption for permitted market making activity exceeds Congressional intent, while the overly prescriptive compliance requirements will hinder the market making functions of banks and bank-affiliated broker-dealers, and limit the access to liquidity enjoyed by asset managers and other investors. Yet, given all that, the line between pure proprietary trading and what actions financial institutions can take as market makers remains unclear. The overall effect is a stifling of economic growth and job creation. Cost/Impact Analyses: A SIFMA-commissioned study by Oliver Wyman quantified the potential impact of the proposed Volcker Rule on the U.S. corporate bond market, estimating that an overly restrictive implementation could: -Cost investors: $90 to $315 billion in mark-to-market loss of value on their existing holdings, as these assets become less liquid and therefore less valuable -Cost corporate issuers: $12 to $43 billion per year in borrowing costs over time, as investors demand higher interest payments on the less liquid securities they hold -Cost investors an additional: $1 to $4 billion in annual transaction costs, as the level and depth of liquidity in the asset class is reduced The effects of the proposed Volcker rule will extend well beyond corporate credit, but this market was used due to its critical importance to businesses, investors, and the economy as a whole. It is a critical source of funding for American businesses (with nearly $1 trillion raised each year) and an essential element of a diversified investment strategy for U.S. investors, who hold approximately $3 trillion in corporate debt across direct holdings, pensions and mutual funds. SIFMA also commissioned a White Paper by Stanford University Business School Professor Darrell Duffie. His conclusion: the proposed Volcker Rule would reduce the quality and capacity of market making services that banks and bank-affiliated broker-dealers provide investors. Some banks would exit the market-making business altogether, while others may significantly reduce the capital devoted to market making. He noted that under the proposed Volcker Rule, investors and issuers of securities would find it more costly to borrow, raise capital, invest, hedge risks, and obtain liquidity for their existing positions. Duffie argues that the proposed Volcker Rule would eventually lead to market making migrating away from the regulated banking sector, with unpredictable and adverse consequences for financial stability. SIFMA continues to partner with industry and academic experts to provide needed research and cost-benefit analysis to regulators and key constituents during the Volcker Rule's rulemaking and implementation process. We will also press regulators to conduct comprehensive quantitative cost-benefit analysis before issuing any final rules. | |
| Part III, line 4b (continued) | EMINENT DOMAIN In 2012, some municipalities argued that eminent domain could be used to seize and restructure mortgage notes: specifically, loans held in non-government guaranteed mortgage-backed securities (MBS) whose borrowers owe more on the home than it's worth, but are current on their payments. A private company would use investor capital to fund the seizures, write down the principal, and refinance the loan. That new mortgage would then be re-securitized (at a significant profit) through government guarantee programs, specifically Ginnie Mae. The rationale was that it would allow borrowers to remain in their homes, keep neighborhoods stable, and therefore promote a public good. Minimized or ignored were losses to investors in MBS holding the loans and the effect on availability of credit for future borrowers. The most notable instance involved San Francisco-based Mortgage Resolution Partners (MRP), which approached San Bernardino County officials with a plan to purchase underwater mortgages for, at most, 85% of the fair value of the property. The loans would then be refinanced at a premium to the current market value of the home, with the difference retained as profit. That profit would come at the expense of savers who hold MBS that bought the original loan-investment funds often managing the retirement savings of individual investors and other working Americans. But there are other downsides to the plan. While the private fund would profit, the municipality would take on significant liability risks and long-term costs. As performing mortgage loans were seized, credit availability in that municipality would likely decline as lenders would be forced to underwrite defensively. Putting aside the very real public policy issues of a private company realizing significant profits from the use of public powers, SIFMA, after careful research, acted decisively to highlight the danger of this bad proposal, specifically surfacing concerns about the ultimate legality and constitutionality of any eminent domain mortgage seizure plan. For legal clarity, we retained counsel who published a memo outlining the legal and constitutional concerns with MRP's plan. We formed a coalition of more than two dozen industry groups with continuing outreach to municipalities and the Federal Housing Finance Authority, including coordinated educational efforts for federal regulators. And we testified at the Congressional level and at several local hearings. SIFMA swiftly and credibly made the case that use of eminent domain to seize underwater mortgages would lead both to a contraction in credit availability and a significant loss to savers. In short, more harm than good. IMPLEMENTATION OF NEW DERIVATIVES REGULATION While SIFMA supports the primary goals of Title VII - to increase transparency and mitigate risk in the over-the-counter derivatives market - the continuing lack of coordination between rulemaking agencies on the implementation of reforms remains. Inconsistencies in timing as well as substance between the rule sets of the two principal regulators of derivatives, the Commodities Futures Trading Commission and the Securities and Exchange Commission, could present insurmountable conflicts for firms tasked with complying with both - and many rules are yet to be promulgated in final form. Further, such inconsistencies could reach an even larger scale absent coordination with international regulators. Indeed, the extent to which US rules apply to activities conducted in other jurisdictions, is still to be determined. Through a series of letters and meetings with regulators on derivatives regulatory reform, SIFMA stressed the need for global coordination as well as the dangers of an overly expansive application of Title VII requirements abroad. Another area covered in regulatory dialogue has been the challenges that remain concerning to implement, or "operationalize," the new rules; implementation of Title VII rules should be phased in a sequence that ensures enough time is given for both development of proper compliance programs and collection of market data essential to regulatory oversight. Significant and serial dependencies and interdependencies are at the core of this transition, and have not always been taken to account. | |
| Part III, Line 4b (Continued) | POSITION LIMITS SIFMA supports greater transparency in the swaps marketplace. However, the CFTC's final position limits rule deviated from Congressional intent. It would have subjected market participants to onerous regulatory requirements, and could have adversely impacted commodities markets and market participants, including end-users, by reducing liquidity and increasing price volatility. SIFMA, in a joint lawsuit with the International Swaps and Derivatives Association, asserted that the CFTC's decision-making process in enacting the position limits rule was procedurally flawed: -The CFTC adopted the Rule without making findings as to the necessity and appropriateness of the position limits, as required by statute. -The CFTC failed to conduct any meaningful cost-benefit analysis and lacked a reasoned basis for its rule. Commodity price volatility studies by government agencies and others have yielded little, if any, support for the idea that position limits curb speculation or that speculation is the cause of volatility. Rather, the evidence is overwhelming that position limits are, at best, unnecessary and may, at worst, negatively impact commodity markets and users. In October, a Federal judge in Washington D.C. vacated or struck down the Position Limits Rule and remanded it back to the CFTC. FOREIGN ACCOUNT TAX COMPLIANCE ACT (FATCA) FATCA is intended to improve offshore tax compliance. It is the most comprehensive statute ever passed on the subject; the proposed regulations are nearly 400 pages long. And, through information reporting and withholding, virtually the entire burden for implementing it falls on U.S. and foreign financial services firms. Suffice to say, the final rules are expected to significantly impact the systems and operations of both U.S. and non-U.S. companies. Modifications to internal systems, control frameworks, processes and procedures will need to be made before FATCA goes into effect. SIFMA's comments to the Department of the Treasury and the IRS included the need to extend some compliance deadlines from 2013 to 2014, and the recommendation that, to the greatest extent possible, existing customer systems be employed rather than require developing unique and costly new systems. The regulations proposed in February 2012 gave due consideration to both of those requests, and indicated a willingness on the part of the United States and certain European countries to tackle tax evasion while addressing the legal impediments related to local data privacy and security. Promoting compliance without disrupting the operation of financial markets will still impose significant challenges and costs for many U.S. financial services firms and their customers. Fully assessing the impact of these new rules on financial markets, on bilateral and multilateral tax cooperation, and on foreign investment in the United States takes time; SIFMA is committed to working closely with the IRS and Treasury as implementation continues. REGULATION OF MUNICIPAL ADVISORS In December 2010, the Securities and Exchange Commission (SEC) proposed a rule to implement municipal advisor provisions in Dodd-Frank that went far beyond what Congress intended and authorized. Rather than focusing on unregulated advisory firms as Congress intended, the SEC proposed to shoehorn a diverse group of entities-including volunteer members of issuer governing boards, banks, broker-dealers, investment advisors and others-into the definition of municipal advisor. Under the proposed rule, many of the parties that would be captured in the SEC's definition, like banks and broker-dealers, are already heavily regulated. For others, like issuer board members, new regulation of financial advisors (FAs) would be inappropriate and harmful. SIFMA advocated aggressively for a municipal advisor rule that is in line with Congress' intent. As one component of our advocacy, SIFMA worked closely with U.S. representatives Bob Dold (R-IL) and Gwen Moore (D-WI) on a bill (H.R. 2827) that would clarify provisions of Dodd-Frank that address regulation of municipal advisors. The bill would create a bright-line test for determining who is a municipal advisor based on engagement for compensation to provide advisory services. The bill is especially important in its distinction between advisor and dealer regulation. Under the legislation, when a dealer is serving as underwriter, they would fall under broker-dealer rules. When they are serving as a FA, they would be under municipal advisor rules. The House Financial Services Committee approved the measure with unanimous bipartisan support. The full House of Representatives passed the bill by voice vote without objection. While the House acted on the bill too late in the session for the Senate to seriously consider the legislation, Sen. Roger Wicker (R-MS) introduced a Senate companion bill (S. 3620). Assuming the bill is not enacted before the end of the current Congress, it is likely to be reintroduced in 2013. In addition, there are strong indications that the SEC has taken the legislative effort on municipal advisor regulation seriously, and it is likely that the legislation will influence the SEC's final Municipal Advisors rule. | |
| Part III, Line 4c | SIFMA offers many conference and seminars tailored to meet the diverse needs of its members. They act as a medium through which ideas, experience and information can be exchanged by members for their mutual benefit. | |
| Part III, Line 4d | Continued serving as a source of market information, including statistics on many facets of the market place and publishing research reports, trade newsletters and other periodicals and books. | |
| Part VI, LIne 6 | SIFMA is a membership organization with the following classes of membership: Broker-Dealer Members and Asset Manager Members Each Broker-Dealer Member and Asset Manager Member shall be entitled to vote with respect to the election of Directors and other matters as may be submitted at any annual or other meeting of Members entitled to vote. Associate Members Associate Members shall not be entitled to vote with respect to the election of Directors and other matters as may be submitted at any annual or other meeting of Members entitled to vote, and shall not be eligible to serve as Directors of the Association. | |
| PART VI-A, Line 11A | The Accounting department of the Organization prepares the Form 990 based on audited financial information. The draft Form 990 is then reviewed by management and an external independent accounting firm. The Audit and Finance Committee will review the final draft signed off by the external independent tax accountant. This review will be noted as an agenda item at an Audit and Finance Committee meeting and will be duly noted in the minutes. The Form 990 will be provided to all voting members of the Board of Trustees prior to submission to the IRS. | |
| PART VI-B, Line 12c | Any employee in a position where his or her objectivity may be questioned because of an individual interest or family or personal relationship is required to notify the General Counsel. Similarly, any employee aware of any transaction or relationship that could reasonably be expected to give rise to a personal conflict of interest is required to discuss the matter promptly with the General Counsel. In addition, once every year directors and all the employees of SIFMA are required to review a copy of the Conflict of Interest Policy and to acknowledge in writing that he or she is compliant. | |
| PART VI-B, Line 15 | The Executive Committee and the Board acting as compensation committee hires consultants to review comparable packages for any new incoming CEO and officers. The consultant presents data for comparable positions both locally and nationally and the Board's Executive Committee makes the final decision for the salary package. Currently, CEO and a key senior officer have employment contracts which were approved by the Executive Committee and the Board, governing annual salary increase and any bonus payments. For the remaining senior officers, the annual salary increase and bonus payments are determined by the annual evaluation process which must be approved by the Board's Executive Committee. Documentation of the deliberations and decision-making process are included in the board minutes. | |
| PART VI-C, Line 19 | The Organization does not make public its governing documents, conflict of interest policy and financial statements. | |
| Part XI, LIne 5 | Net unrealized appreciation on long-term investments $2,747,784 Post-retirement related changes other than net periodic post retirement benefit cost (937,022) Amortization of curtailment (1,129,391) Transfer in 35,670 ----------- Total other changes: $717,041 =========== |
For Paperwork Reduction Act Notice, see the Instructions for Form 990 or 990-EZ.
Cat. No. 51056K
Schedule O (Form 990 or 990-EZ) 2011
Additional Data
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