From the May 2008 issue of Investment Advisor • Subscribe!


UBS Global Asset Management announced that its U.S. Pension Fund Fitness Tracker, a quarterly estimate of the overall health of a typical U.S. defined benefit pension plan, shows pension funding ratios fell 11% in the first quarter of 2008. Furthermore, the past three quarters have seen pension funding ratios fall by almost 24%, according to the Fitness Tracker. To explain the steep decline, UBS cited volatile equity markets that ended the quarter down, thus decreasing the value of the asset pool from which plan participants' benefits are paid, and lower interest rates, which increased the present value of pension liabilities. UBS also reported that investor risk aversion drove both equity markets and bond yields lower in the first quarter, which, in turn, drove funding ratios lower for corporate plan sponsors...

FINRA, NYSE Regulation, Inc., and participants of the Options Regulatory Surveillance Authority are coordinating efforts to "heighten the monitoring and investigation of trading activity in issuers that may be subject to credit market-related volatility." The organizations have set out to remind firms of the prohibitions in FINRA and NYSE Rule 435(5) and FINRA Rule 5120(e) against the circulation in any manner of sensational rumors that might reasonably be expected to affect market conditions, as well as their obligations under FINRA Rule 2110 and NYSE Rule 476 to refrain from any conduct or activity inconsistent with just and equitable principles of trade. Similarly, the SROs reminded firms of the prohibition on trading on material, non-public information. Individuals and entities engaging in such unlawful activity may be subject to civil as well as criminal prosecution...

While noting that it did not endorse any particular course of action, FINRA recently explained the options available to investors holding unexpectedly illiquid auction rate securities (ARS) because of recent developments resulting in many ARS auction failures. First, it suggested ARS investors read the offering documents for their investments carefully to determine if the issuer has made provisions in anticipation of illiquidity and failed auctions; some issuers of bonds or preferred shares may have reserved the right to convert the ARS into a fixed or variable rate security, or to call the instrument at a certain price. ARS investors who cannot liquidate their holdings because of failed auctions have several options open to them, including: continuing to hold, selling in the secondary market, borrowing on margin, and liquidating other investments. FINRA also helpfully suggested that investors may consider selling other securities in their portfolio...

In late March, FINRA issued a letter to its members to highlight new and existing areas that are of particular significance to FINRA's examination program for 2008. One change is that members are no longer required to respond in writing to the Exit Meeting Report but instead may respond within 30 days of the issuance of the Examination Report, which includes exceptions, if any, detected during the course of the examination. Following the review of a response FINRA will send an Examination Disposition Letter, categorizing examination exceptions in one of four classifications: No Further Action, Cautionary Action, Compliance Conference, or Referral to Enforcement for Review and Final Disposition. Other changes include the creation of Firm Gateway, a new tool that provides a single place for regulatory filing and reporting needs, one-click access to common tasks and useful resources, an at-a-glance view of important filing dates and upcoming rule changes, and a consolidated view of regulatory forms and filings. The FINRA letter is available at

Reprints Discuss this story
We welcome your thoughts. Please allow time for your contribution to be approved and posted. Thank you.

Most Recent Videos

Video Library ››