LABEX REFI and STONY BROOK UNIVERSITY A COMPARATIVE OF US AND EUROPEAN FINANCIAL REGULATION

Session I: The Financial System and Global Governance

François-Gilles Le Theule (Executive Director, Labex ReFi, Professor ESCP Europe) & Jonathan Halpern (Partner, Foley & Lardner LLP)

Decision Making Processes in Reforming Financial Regulations

Sometimes we wonder how a new legislation in financial regulation is taken. Why are there so
many inconsistencies between jurisdictions, and historical periods? How is legislation in financial
regulation reformed? Is it just politics, or science has some part to play? This course looks at
European situation through the 2008-2012 period where financial regulation has been substantially
reformed.

Chip Poncy (Financial Integrity Network, former US Department of Treasury)
US Financial Regulations and their international reach

Fred Marcusa (Senior Partner, Kaye Scholer)
Fintech, shadow banking and the unknown unknown

We shall discuss why our financial regulation scheme is as it is, why it has inherent limitations
(because technology, ingenuity and creative application of accounting principles move faster than
political and regulatory responses can) and what the future looks like from here, including possible
impact of the US Elections.

Christian de Boissieu (Professor of Economics, Paris I Panthéon-Sorbonne Univ., President of the
Scientific Committee, Labex Refi, Board Member AMF)
The Unification of European Financial Markets and its Consequences

Comparative of European and U.S. Financial Regulation New York Sep 7-9 2016 2

Session II: Basel III and Prudential Rules

Jean-François Serval (Founder and President of Groupe Audit, Founding Partner of Constantin &
Associates)

Goals and effectiveness in a competitive worldwide financial environment
With taking as synonym Regulation and Standardization the paper goes directly into the core of the
topic. Standardization already a regulation allows the widest use of financial instruments, equitable
access to market places clearings and fair competition required for getting participants’ trust. JF
Serval limits the playfield with another kind of boundaries which are made of the natural laws
precepts. What is property and a sale, don’t steal, don’t lie and what an evidence is. The approach
allows consider vast lands where regulation and Justice can operate. The innovation of JF Serval
and co-author JP Tranié rely on a global approach where any not cleared transactions determine a
balance which is part of the monetary system (M5 and M6). In using this definition, they can with
modern processing tools, correct identification of participants have a granular observation more
efficient than the aggregated one in looking at the interactions between real economy and the
financial one to improve efficiency. Both continents Europe and America do regulate as they
should and the question author deals with is to know how coordinated because of G2O/ FSB their
respective policies in fact are or do they play competition. Evidently, regulation aiming at the
limited scope of the financial institutions and others just miss the target of reducing shadow
banking volume and by cost pushes flows outside the regulated system. QE combined with
imbalances works as a pain reliever but aggravates the risks with conducting low interest rates
policies. Values used for RWA are setting a volatility risk requiring ever more regulation while the
causes to trigger a collapse are not limited. Costs in this approach where regulation is compulsory
become a secondary topic compared with efficiency and risk. What are the ultimate
recommendations of JF Serval? Redefine the framework of regulation. Try to set a leadership to
come to a monetary reform where taking into account the cultures and legal traditions as well as
financial realities the playfield will be harmonized but not unified. General principles as well as
infrastructures regulation could be shared. Not implementation that should be adapted.

Frédéric Siboulet (Managing Director, Deloitte)
Regulatory capital and Risk reporting

We will discuss Basle’s new guidelines consecutive to the Fundamental Review of the Trading
Book. The BCBS’s new guidelines overhaul the capital framework for the market risk of the
trading book. It addresses the shortcoming of Basle 2.5, which was issued under pressure
following the 2008 crisis. The latest quantitative studies suggest that the new guidelines will
increase Risk Weighed Assets requirement by 40 to 50% with the Internal Model Approach (IMA),
while the Sensitivity Based Method could translate into a 100% to 500%, depending on the asset
classes.
Comparative of European and U.S. Financial Regulation New York Sep 7-9 2016 3

Nicolas Dorgeret (European Parliament, ECON Committee)
Overview of the European Union Agenda in Financial Services

This presentation will include an overview of the EU legislative agenda, of ongoing initiatives and
of near-future initiatives in the area of financial services. Under the current European Commission
(2014-2019), the EU legislative agenda has slowly turned away from financial reforms following
the outbreak of the financial crisis. Instead, the focus has recently shifted towards the development
of a Capital Markets Union and the analysis of the cumulative effects of existing legislation.
Finally, the legislative decision-making process in the area EU financial services, including
secondary-level measures required to implement EU legislation, will also be explained.
Developments in the field of post-trading and derivatives' area will serve to illustrate the
presentation.

Pierre-Charles Pradier (Professor of Economics, Paris I Panthéon-Sorbonne University, LabEx
ReFi)

Insurance Regulation: an EU/US Comparison
1. A comparison of the US and EU insurance sectors
2. Common history
3. Focus on capital requirements
4. Systemic risk regulation
Conclusion: convergence? And agenda…

Thursday, September 8, 2016
Session III: Supervision and Enforcement

Alain Pietrancosta (Professor of Law, Paris I Panthéon-Sorbonne University, Labex Refi, European
Banking Institute) & Robert Stern (Partner, Orrick LLP)
Insider Trading in Europe and in the United States

Mr. Pietrancosta and Mr. Stern will discuss the differences between the EU’s insider dealing laws
and the United States’ insider trading prohibitions. The presentation will first provide a general
overview of the legal elements and scope of each of the respective regulatory regimes including a
discussion of the significant recent developments in the United States’ insider trading law with a
focus on the Supreme Court’s upcoming decision U.S. v. Salman. Thereafter, Mr. Pietrancosta and
Mr. Stern will discuss the preventative measures and enforcement sanctions that the EU and US
regulatory agencies employ and analyze some recent convictions and acquittals of note.

Comparative of European and U.S. Financial Regulation New York Sep 7-9 2016 4

Michel Perez (President MAPI LLC, LabEx ReFi Representative in the USA)
The American Deferred Prosecution Agreement (DPA) Procedure and its European Avatars

In the United States, at the beginning of the 21st century, a sea change in the enforcement of
corporate criminal law occurred when the Department of Justice (“DOJ”) and other agencies started
to use extensively pretrial diversion procedures known as DPA ("Deferred Prosecution
Agreement") and NPA ("Non Prosecution Agreement"). These procedures have become a mainstay
of white collar criminal law enforcement and have significantly altered corporate behavior.
Generally considered efficient as they bring relatively quick resolution to complex cases and could
impose substantial monetary penalties and force corporations to hire monitors with vast powers to
improve compliance, DPAs, and especially NPAs, are criticized for a lack of judicial oversight,
sometimes opaque and unfair enforcement actions and are considered by some European critics as
"instruments of American hegemony".
Yet, willy nilly, a growing number of European countries are adopting legislations which create in
their own jurisdictions new procedures which allow pretrial diversion and look like DPA avatars.
The instances of the European Union themselves have promoted pre-trial settlements in
competition related cases and the Court of Justice of the European Union, implicitly approved the
introduction of criminal settlements as long as the principle ne bis in idem is ensured and
fundamental rights are respected.
We will analyze the trends in the United States in the usage of DPAs and NPAs; evaluate the
efforts to institute similar procedures in Europe and assess their future as well as the requirements
to develop compatible, if not identical, procedures to efficiently prosecute corporate criminality on
both sides of the Atlantic Ocean.

John P. Drohan III (Partner, Drohan Lee LLP, President ACI-FMA)
SEC New Rules & Perspectives

Jonathan Halpern (Partner, Foley & Lardner LLP)
The US Department of Justice: Enforcement Powers and Actions

Marco Dell’Erba (Post-Doctoral Fellow, Labex ReFi)
Distressed banks and short selling in Europe and the US

In the aftermath of the last financial crisis, short selling became a topical issue among American
and European regulators. In the EU, the European Regulation on short selling (the SSR) was
adopted. Last February the SSR has been applied to restrict short selling of the stocks of Monte dei
Paschi di Siena (MPS). Bad management decisions and illegal activities have hurt the financial
stability of one of the oldest banks in the world. This situation coupled with other factors, inter alia
the European sovereign debt crisis, have spurred speculative investment ideas among hedge funds
in search for troubled assets, that implemented distressed securities strategies through short selling,
in particular exploiting the market making exemption under the SSR. The MPS case proves that the
market making exemption may offer an opportunity to circumvent the ban on short selling and
raises some policy considerations on how to make the SSR more effective, preventing the
circumvention of the kind of temporary short sale restriction adopted in the MPS case.
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Session IV: Capital Markets and Supervision

Patrick Simonnet (Director, Head of Audit, Credit Suisse)
The new focus on Behavior and Culture in Capital Markets

The session on “Behavior and Culture in Capital Markets” will provide the audience with an
opportunity to better comprehend and define the conduct and culture risks, understand the
regulators’ high expectations and reflect upon effective risk management strategies to address these
risks.

Anastasia Sotiropoulou (Professor of Law, Saint-Étienne University)
Bank resolution: the European approach

Bank regulation has undergone fundamental changes as a result of the recent financial crisis. Policy
makers on both sides of the Atlantic have especially introduced new regulations in order to prevent
the use of taxpayers’ money to save failing banks. This seminar will examine the resolution regime
established in Europe by the Bank Recovery and Resolution Directive with the aim to highlight its
principal aspects and how it still differs from its US equivalent.

Nasser Saber (author of the book “Speculative Capital”)
Regulation of Derivatives and Systemic Risk: what are we regulating?

It is critical for regulators to understand the role and impact of derivatives on global financial
markets. The $550 trillion notional amount of derivatives that the BIS reported for 2015 does not
include the synthetic derivatives, so it grossly – by a factor of many multiples – undercounts the
size of capital earmarked for derivatives-type trading. The author has shown elsewhere that such
capital is the glue that holds the financial markets together. This chapter explains the nature of that
mechanism. No policy prescription is offered, only a description of the conditions that derivatives
create in the markets and the consequences of a disturbing in them.

Friday, September 9, 2016
Session V: Capital Markets & Supervision

Carole Basri (Lawyer, Adjunct Professor, Fordham Law)
Corporate Compliance

Learn how to construct an "effective" corporate compliance program and the importance of the
Yates Memorandum.

Marie-Anne Barbat-Layani (General Manager of the French Banking Federation)
Global Banking and Local Regulations

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Edouard-François de Lencquesaing (Chairman, European Institute of Financial Regulation,
Labex ReFi)
The French contribution to the European CMU and US compatibilities

Behind the idea of compatibilities & CMU it is important to share views on structural & strategical
evolutions or issues. Compatibilities implies 2 issues: global financial efficiency (robustness) in a
multipolar dynamic/competition & diversity vs uniformity.
CMU, means a choice of political model in financing the economy toward growth & employment
issues: balance between credit & markets.
In this environment the world is not “flat” but must articulate & maintain a diversified
compatibility, it is a necessity to face the global systemic risk.

I - The crisis triggered the fact that the world is moving toward a kind of multipolar governance
II - The European project : Europe must be part of it, meaning not just a trade union
III - Banking Union vs CMU : how to balance credit & markets a financing model
IV - Regulation means trust: how to build a cross border trust a condition for compatibilities
V - Conclusion : innovation & responsibilities

Session VI: Accounting Principles & Norms

Shyam Sunder (James L. Franks Professor of Economics, Accounting & Finance -Yale School of
Management)
What is better financial reporting and how do we get there?

Jonathan Glover (James L. Dohr Professor of Accounting, Graduate School of Business -
Columbia University)
Financial Engineering and the Arms Race Between Accounting Standard Setters and Preparers

This essay analyzes some problems that accounting standard setters confront in erecting barriers to
managers bent on boosting their firms’ financial reports through financial engineering (FE)
activities. It also poses some unsolved research questions regarding interactions between preparers
and standard setters. It starts by discussing the history of lease accounting to illustrate the
institutional disadvantage of standard setters relative to preparers in their speeds of response. Then,
the essay presents a general theorem that shows that, independent of how accounting standards are
written, it is impossible to eliminate all FE efforts of preparers. It also discusses the desirability of
choosing accounting standards on the basis of the FE efforts the standards induce preparers to
engage in. Then, the essay turns to accounting boards’ concepts statements; it points out that no
concept statement recognizes the general lack of goal congruence between preparers and standard
setters in their desires to produce informative financial statements. We also point out the relative
lack of concern in recent concept statements for the representational faithfulness of the financial
reporting of transactions. The essay asserts that these oversights may be responsible, in part, for
standard setters promulgating recent standards that result in difficult-to-audit financial reports. The
essay also discusses factors other than accounting standards that contribute to FE, including the
high-powered incentives of managers, the limited disclosures and/or information sources outside
Comparative of European and U.S. Financial Regulation New York Sep 7-9 2016 7
the face of firms’ financial statements about a firm’s FE efforts, firms’ principal sources of
financing, the increasing complexity of transactions, the difficulties in auditing certain transactions,
and the roles of the courts and culture. The essay ends by proposing some other recommendations
on how standards can be written to reduce FE.

Session VII: International Cooperation or Confrontation?

Gerard Hertig (Professor of Law, ETH Zurich)
Tax Havens, Modern Banking and Information Exchanges

Nowadays, the attractiveness of tax havens is increasingly a function of their legal system and
estate planning advantages. To some extent, this evolution reflects the adoption of international tax
information exchange agreements. But something more fundamental is driving this change.
Globalization and stricter prudential requirements force banks to implement more demanding
‘know your customer’ and ‘manage your exposure’ standards. The information so gathered is a rich
and thus tempting target for ‘home jurisdiction’ tax authorities. As a result, traditional tax havens
are emphasizing their advantages in terms of financial instruments and legal vehicles. Conversely,
there is evidence that established financial centers have started to compete on non-resident tax
scope and rates.

Elizabeth McCaul (Partner in Charge, Promontory)
What Do Regulators and Regulated Entities Expect in Practice?

Promontory is a leading strategy, risk management, and regulatory compliance consulting firm
focusing primarily on the financial services industry. We help our clients address their most
difficult, technically complex, and sensitive concerns, particularly those at the intersection of
strategy, risk, and regulation. Expectations from regulators and supervisors regarding risk controls
are higher than ever, as are the penalties for non-compliance. We have observed both a
convergence of financial regulations as well as differences in implementation between the United
States and Europe, and we will discuss these trends across these four key areas:
· Anti-Money Laundering and Sanctions
· Market Abuse
· Intermediate Holding Company
· Recovery and Resolution Planning