FROM: U.S. DEFENSE DEPARTMENT
Service Chiefs Detail 2014 Sequestration Effects
By Cheryl Pellerin
American Forces Press Service
WASHINGTON, Sept. 19, 2013 - One after another yesterday in a hearing before a House panel, the nation's service chiefs described how severe budget cuts required by law in fiscal year 2014 would slash their forces, capabilities and readiness and raise security risks to the American people.
The House Armed Services Committee heard testimony on planning for sequestration in fiscal 2014 from Army Chief of Staff Gen. Ray Odierno, Chief of Naval Operations Adm. Jonathan W. Greenert, Air Force Chief of Staff Gen. Mark A. Welsh III and Marine Corps Commandant Gen. James F. Amos.
Sequestration is the name for a decade-long series of severe budget cuts mandated by the Budget Control Act of 2011 that amount to $470 billion taken from defense spending in addition to an equivalent cut that already was planned.
In fiscal 2013 the cuts, implemented only in the last half of the year and leading to six furlough days for DOD civilian employees, were $37 billion. In fiscal 2014 they are estimated to be $52 billion.
It is imperative to preserve the range of strategic options for the commander in chief, the secretary of defense, and Congress, Odierno told the panel.
"Together," the general said, "we must ensure our Army can deliver a trained and ready force that deters conflict but when necessary has the capability and capacity to execute a sustained successful major combat operation. The Budget Control Act with sequestration simply does not allow us to do this."
If Congress does not act to mitigate the magnitude and speed of reductions with sequestration, Odierno said, the Army will not be able to fully execute requirements of the defense strategic guidance issued in 2012.
By the end of fiscal 2014, the Army will have significantly degraded readiness, as 85 percent of active and reserve brigade combat teams will be unprepared for contingency requirements, he said.
From fiscal 2014 to fiscal 2017, as the Army continues to draw down and is restructured into a smaller force, its readiness will continue to degrade and modernization programs will experience extensive shortfalls, the general added.
"We'll be required to end, restructure or delay over 100 acquisition programs, putting at risk the ground combat vehicle program, the armed aerial scout, the production and modernization of our other aviation programs, system upgrades for unmanned aerial vehicles, and the modernization of air defense command-and-control systems, just to name a few," Odierno told the panel.
Only in fiscal 2018 to fiscal 2023 will the Army begin to rebalance readiness and remodernization, the general said, but this will come at the expense of significant reductions in the Army's number of soldiers and its force structure.
The Army will be forced to take further cuts from a wartime high of 570,000 soldiers in the active Army, 358,000 in the Army National Guard and 205,000 in the Army Reserve to no more than 420,000 in the active Army, 315,000 in the Army National Guard and 185,000 in the Army Reserve, the general said.
This represents a total Army end-strength reduction of more than 18 percent over seven years, a 26 percent reduction in the active Army, a 12 percent reduction in the Army National Guard and a 9 percent reduction in the Army Reserve, he explained, adding that it also will cause a 45-percent reduction in active Army brigade combat teams.
"In my view, these reductions will put at substantial risk our ability to conduct even one sustained major combat operation," Odierno said.
Today's international environment and its emerging threats require a joint force with a ground component that has the capability and the capacity to deter and compel adversaries who threaten our national security interests," he said. "Sequestration severely threatens our ability to do this."
The Army is increasing its investment in the cyber domain, however, the general said, adding at least 1,800 people to that effort.. And noting that the Army provides intelligence not only for the Army, but also for the broader strategic and operational force -- he said Army officials are reviewing how they do that, but that the primacy of what it does in the intelligence community will not change.
In his comments to the panel, Greenert said sequestration also would reduce readiness in the Navy's preparations for fiscal 2014, its impacts realized mainly in operations and maintenance and in investments.
"There are several operational impacts, but the most concerning to me is that reductions in operations and maintenance accounts are going to result in having only one nondeployed carrier strike group and one amphibious ready group trained and ready for surge operations," Greenert said.
"We have a covenant with the global combatant commanders and the national command authority," he told the panel. "We provide carrier strike groups forward ready on deployment, and that's generally two. We have two to three, generally three, ready to respond within about 14 days. And then we have about three within 60 to 90 days. That's what we've signed up to. That's called the fleet response plan. That has to change now."
The Navy also will be forced to cancel maintenance, inevitably leading to reduced life for ships and aircraft, he said, adding that the service will conduct only safety-essential renovation of facilities, further increasing the maintenance backlog.
The Navy probably will be compelled to keep a hiring freeze in place for most of its civilian positions, Greenert added, affecting the spectrum and balance of the civilian force.
Because the Navy will not be able to use prior-year funds to mitigate sequestration cuts in its investment accounts as it could in fiscal 2013, without congressional action it will lose at least a Virginia-class submarine, a littoral combat ship, and an afloat forward-staging base, the admiral said.
"We will be forced to delay the delivery of the next aircraft carrier, the Ford, and will delay the mid-life overhaul of the George Washington aircraft carrier. Also we'll cancel procurement of 11 tactical aircraft," he noted.
Greenert said the Navy needs to transfer $1 billion into its operations and maintenance account by January and $1 billion into its procurement accounts post-sequestration to get shipbuilding back on track and to meet its essential needs.
"Other deliveries of programs and weapon systems may be delayed regardless," he added, "depending on the authority that we are granted to reapportion funds between accounts."
On the topics of nuclear deterrence and cyber, Greenert said, "My job is to provide strategic nuclear deterrence, safe and credible, No. 1. Right behind that is cyber. ... We are staying the course on our cyber warrior plan that we've briefed in here. Through any budget scenario ... we have got to maintain that."
In his remarks, Welsh told the panel that if sequestration stays in place in fiscal 2014, the Air Force will be forced to cut flying hours by up to 15 percent.
"Within three to four months, many of our flying units will be unable to maintain mission readiness," he said. "We'll cancel or significantly curtail major exercises again, and we'll reduce our initial pilot production targets."
Over the long term, sequestration will significantly affect the service's force structure, readiness and modernization, Welsh said, adding that over the next five years the service could be forced to cut up to 25,000 total force airmen, or about 4 percent of its people.
"We also will probably have to cut up to 550 aircraft, about 9 percent of our inventory," the general said. "And to achieve the necessary savings in aircraft force structure, we'll be forced to divest entire fleets of aircraft."
To determine the proper force structure, the Air Force will prioritize global, long-range capabilities and multirole platforms needed to operate in a highly contested environment. Other platforms will be at risk, the general said.
"We plan to protect readiness to the maximum extent possible [and to] prioritize full-spectrum training, because if we're not ready for all possible scenarios, we'll be forced to accept what I believe is unnecessary risk, which means we may not get there in time, it may take the joint team longer to win, and our people will be placed at greater risk," Welsh added.
Air Force modernization and recapitalization forecasts will be bleak if sequestration continues, he said, affecting every program.
"We will favor recapitalization over modernization whenever that decision is required," he said. "That's why our top three acquisition priorities will remain the KC-46, the F-35, and the long-range strike bomber."
The U.S. Air Force is the best in the world and a vital piece of the world's best military team, the general said, "but the impacts are going to be significant, and the risk occurs from readiness in the ways it impacts our airmen."
In his remarks to the panel, Amos said that for the Marine Corps to meet requirements of the defense strategic guidance it needs 186,800 active-duty Marines to meet steady-state requirements, go to war, and preserve a 1-to-3 ratio of deployed time to home-station time for Marines.
"Our share of the 2011 Budget Control Act's $487 billion reduction cut our end strength to 182,000," he said. "Based on sequestration, I simply cannot afford a force that size." Sequestration will force the Marines to plow through scarce resources, funding old equipment and weapon systems to try to keep them functional, the general said.
The Marines will be forced to reduce or cancel modernization programs and infrastructure investments to maintain readiness for deployed and next-to-deploy units, he said. Money that should be available for procuring new equipment will be rerouted to maintenance and spare accounts for legacy equipment, including a 42-year-old Nixon-era amphibious assault vehicle, he added.
In February, the Marines initiated a parallel study to the Defense Department's Strategic Choices and Management Review, Amos said.
"Our exhaustive research, backed by independent analysis, determined that a force of 174,000 Marines is the smallest force that can meet mission requirements. This is a force with levels of risk that are minimally acceptable," he said.
"For instance," he added, "assuming that global requirements for Marine forces remain the same over the foreseeable future, a force of 174,000 will drive the Marine Corps to a 1-to-2 dwell –[ratio] for virtually all Marine units -- gone six months, home 12 months, gone six months."
A force of that size accepts risk when the nation commits itself to the next major theater war, Amos said. The Marines would have 11 fewer combat arms battalions and 14 fewer aircraft squadrons.
"This is a single Marine major contingency operation force that would deploy and fight until the war's end," the general said. "In other words, we would come home when the war was over."
Marines who joined the corps during that period likely would go from drill field to battlefield, he added. Across the joint force, America would start to see shortfalls in the military's ability to accomplish its national strategy.
"Today we are seeing only the tip of the iceberg," Amos said. "Tomorrow's Marines will face violent extremism, battles for influence and natural disasters. Developing states and nonstate actors will acquire new technology and advanced conventional weapons that will challenge our ability to project power and gain access."
To be effective in the new environment, he said, Marines must maintain their forward influence, strategic mobility, power projection, and rapid response capabilities they are known for today.
Sunday, September 22, 2013
CFTC CHAIRMAN GENSLER MAKES REMARKS BEFORE THE ISDA EUROPEAN CONFERENCE
FROM: COMMODITY FUTURES TRADING COMMISSION
Remarks of Chairman Gary Gensler before the ISDA European Conference
September 19, 2013
Thank you, Bob, for that introduction. I would also like to thank the International Swaps and Derivatives Association (ISDA) for the invitation to speak at this annual European conference.
Five years ago this week, the U.S. economy was in a free fall. Federal Reserve Chairman Bernanke and then Treasury Secretary Paulson faced the unthinkable – asking the American people to bail out financial institutions to save the economy.
Five years ago, the swaps market was at the center of the crisis. It cost middle-class Americans – and hardworking people across the globe – their jobs, their pensions and their homes.
Five years ago, there was no reporting of swaps to the public or to regulators
Five years ago, the swaps market was largely uncleared.
Five years ago, unregulated dealers dominated the market.
Five years ago, swaps were not exchange traded – all classic attributes of a dark market.
President Obama then met in 2009 with the G-20 leaders in Pittsburgh. They committed to bringing the swaps market into the light through transparency and oversight.
The President, working with the U.S. Congress, in 2010 gave the task of implementing swaps market reform to the Commodity Futures Trading Commission (CFTC) and security-based swaps market reform to the Securities and Exchange Commission.
Today, the CFTC has substantially completed these reforms.
The CFTC’s 61 final rules, orders and guidance have brought traffic lights, stop signs, and speed limits to the once dark and unregulated swaps roads.
This new era of swaps market reform began to be implemented last October 12. With numerous implementation dates behind us and a number of critical dates coming up, the transition to a reformed swaps market is fully in motion.
This represents a paradigm shift to a transparent, regulated marketplace.
Transparency
Today, the public can see the price and volume of each swap transaction as it occurs on a website, like a modern-day tickertape. Further, half of the swaps market (by volume) is being reported to the public without delay – or as Congress mandated “as soon as technologically practicable.” Soon swaps will be traded on transparent platforms.
This transparency lowers costs for investors, consumers and businesses. It increases liquidity, efficiency and competition.
Regulators have benefited as well. Nearly $400 trillion in market facing swaps now are being reported into data repositories. There is still work to be done to ensure the data in the warehouses is reliable and accessible. There is still work to be done to aggregate across data warehouses as well. But this market transparency is a reality.
This transparency also spans the entire marketplace – cleared as well as bilateral or customized swaps. All categories of market participant from swap dealers to end-users now are to report transactions. Every product, without exception, now must be reported – interest rate; cross currency; foreign exchange; credit index; equity index; and commodities, such as energy and agricultural.
On September 30, the far-flung operations of U.S. financial entities, the guaranteed affiliates and the branches of U.S. persons, also will begin required public reporting.
Further, starting October 2 the public will benefit from the competition and transparency that swap execution facilities (SEFs) will bring to the marketplace. All market participants will have impartial access to SEFs where they can leave live, executable bids or offers in an order book.
We have 18 SEF applications, with seven of them now temporarily registered.
These reforms will finally close what had been known in the U.S. as the “Enron Loophole,” which had allowed for unregistered, multilateral swaps trading platforms.
Five years ago, this market transparency was nonexistent.
Clearing
This month, with the completion of phased implementation, mandatory clearing of interest rate and credit index swaps is a reality. Clearinghouses lower risk and promote access for market participants.
In the month of August, even before our last domestic clearing compliance date, 63 percent of new interest rate swaps were cleared. In total, nearly $180 trillion of the approximately $330 trillion market facing interest rate swaps market, or 53 percent, was cleared at the end of August. This compares to only 21 percent of the market in 2008, according to information on ISDA’s website.
On October 9, the guaranteed affiliates and branches of U.S. persons also will come into central clearing. This includes hedge funds that are operating in the United States but are incorporated in the Cayman Islands.
As we move into 2014, I would anticipate that closer to two-thirds of the interest rate swaps market will be in central clearing.
Yet five years ago, there was no required clearing in the swaps market.
We’ve also made significant progress since the crisis on reforms to protect both futures and swaps customers through the CFTC’s gross margining and the so-called “LSOC” (legal segregation with operational comingling) rules.
Commissioners now are considering final rules that would further strengthen controls around customer funds.
Swap Dealer Oversight
In 2008, swaps were basically not regulated in the United States, Europe or Asia. Among the reasons for this, it was claimed that financial institutions did not need to be specifically regulated for their swaps activity, as they or their affiliates already were generally regulated as banks, investment banks, or insurance companies.
AIG’s downfall was a clear example of what happens with such limited oversight.
Today, we have 82 swap dealers and two major swap participants registered. This group includes the world’s 16 largest financial institutions in the global swaps market, commonly referred to as the G16 dealers. It also includes a number of energy swap dealers.
These reforms help protect the public, lower risk and increase market integrity as swap dealers now must report their transactions and comply with sales practice and other business conduct standards.
Working closely with our counterparts in Europe, we have essentially identical risk mitigation rules that include promoting the timely confirmation of trades and documentation of the trading relationship. Through ISDA protocols, 9,100 market participants have amended their documents to conform to the new U.S. risk mitigation requirements, and 5,200 market participants have conformed to European standards. More than 10,900 market participants are adhering to ISDA’s protocols for sales practices.
These reforms will significantly lower the risk of the swaps market to the public and the economy.
Five years ago, such oversight of swap dealers did not exist.
International Coordination on Swap Market Reform
AIG nearly brought down the U.S. economy through the operations of its offshore guaranteed affiliate.
It wasn’t the only U.S. financial institution that brought risk back home from its far-flung operations during the 2008 crisis.
It was also true at Lehman Brothers, Citigroup, and Bear Stearns. Ten years earlier, it was true at Long-Term Capital Management.
The nature of modern finance is that financial institutions commonly set up hundreds, or even thousands, of legal entities around the globe. When a run starts on any part of an overseas affiliate or branch of a modern financial institution, risk crosses international borders.
The U.S. Congress was clear in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) that the far-flung operations of U.S. enterprises are to be covered by reform.
The CFTC, coordinating closely with global regulators, completed guidance on the cross-border application of the Dodd-Frank Act in July. Swaps market reform covers transactions between non-U.S. swap dealers and guaranteed affiliates of U.S. persons, as well as swaps between two guaranteed affiliates.
Further, the guidance captures offshore hedge funds and collective investment vehicles that have their principal place of business in the U.S. or that are majority owned by U.S. persons.
The guidance embraces the concept of substituted compliances where there are comparable and comprehensive rules abroad. We are currently reviewing submissions for entity-level substituted compliance in six jurisdictions (the European Union, Australia, Canada, Hong Kong, Japan and Switzerland). We’re consulting closely with regulators in those jurisdictions and look forward to making determinations prior to December 21 of this year.
Benchmark Interest Rates
Five years ago, interest rate benchmarks such as LIBOR and Euribor were being readily and pervasively rigged.
Working with the Financial Conduct Authority and the U.S. Justice Department, we brought actions against three global banks for such abuses.
LIBOR and Euribor are critical reference rates for global futures and swaps markets. In the U.S., LIBOR is the reference rate for 70 percent of the futures market and more than half of the swaps market. It is the reference rate for more than $10 trillion in loans.
We must ensure that these benchmark interest rates have market integrity and that they are based on fact, not fiction.
The interbank, unsecured market that the benchmarks are intended to measure, however, essentially no longer exists, particularly for longer tenors.
The U.S. Financial Stability Oversight Council recommended that U.S. regulators work with foreign regulators, international bodies, and market participants to promptly identify alternative interest rate benchmarks anchored in observable transactions and supported by appropriate governance structures, and to develop a plan to accomplish a transition.
An International Organization of Securities Commissions (IOSCO) task force took an important step in announcing new principles in July that require benchmarks to be anchored by observable transactions and subject to robust governance processes that address potential conflicts of interest.
Building on IOSCO’s work, the Financial Stability Board is initiating a review of alternatives to existing benchmark interest rates, as well as considering any potential transition issues.
I want to thank Martin Wheatley, with whom I’ve worked so closely on these issues, for all of his efforts and leadership.
Conclusion
In the five years since the financial crisis, the swaps market has experienced a paradigm shift.
No longer is the market closed and dark.
With the substantially completed reforms, the public and regulators have transparency. We have a majority of the market moving to central clearing. We have oversight of swap dealers, including the far-flung operations of U.S financial institutions.
The public and the markets are benefitting from these common-sense rules of the road.
I’d like to close by saying that the CFTC is currently an underfunded agency. We are only slightly larger than we were 20 years ago. At that time, we oversaw just the futures market, which is less than a tenth of the size of the swaps market we now oversee as well.
It is critical to the public’s confidence in these markets that the regulator is well funded.
Investments in both people and technology are needed for effective market oversight – like having more cops on the beat.
It’s only with a well-funded CFTC that market participants, including this association’s members, will get timely reviews of applications and petitions and answers to your questions.
Last Updated: September 19, 2013
Remarks of Chairman Gary Gensler before the ISDA European Conference
September 19, 2013
Thank you, Bob, for that introduction. I would also like to thank the International Swaps and Derivatives Association (ISDA) for the invitation to speak at this annual European conference.
Five years ago this week, the U.S. economy was in a free fall. Federal Reserve Chairman Bernanke and then Treasury Secretary Paulson faced the unthinkable – asking the American people to bail out financial institutions to save the economy.
Five years ago, the swaps market was at the center of the crisis. It cost middle-class Americans – and hardworking people across the globe – their jobs, their pensions and their homes.
Five years ago, there was no reporting of swaps to the public or to regulators
Five years ago, the swaps market was largely uncleared.
Five years ago, unregulated dealers dominated the market.
Five years ago, swaps were not exchange traded – all classic attributes of a dark market.
President Obama then met in 2009 with the G-20 leaders in Pittsburgh. They committed to bringing the swaps market into the light through transparency and oversight.
The President, working with the U.S. Congress, in 2010 gave the task of implementing swaps market reform to the Commodity Futures Trading Commission (CFTC) and security-based swaps market reform to the Securities and Exchange Commission.
Today, the CFTC has substantially completed these reforms.
The CFTC’s 61 final rules, orders and guidance have brought traffic lights, stop signs, and speed limits to the once dark and unregulated swaps roads.
This new era of swaps market reform began to be implemented last October 12. With numerous implementation dates behind us and a number of critical dates coming up, the transition to a reformed swaps market is fully in motion.
This represents a paradigm shift to a transparent, regulated marketplace.
Transparency
Today, the public can see the price and volume of each swap transaction as it occurs on a website, like a modern-day tickertape. Further, half of the swaps market (by volume) is being reported to the public without delay – or as Congress mandated “as soon as technologically practicable.” Soon swaps will be traded on transparent platforms.
This transparency lowers costs for investors, consumers and businesses. It increases liquidity, efficiency and competition.
Regulators have benefited as well. Nearly $400 trillion in market facing swaps now are being reported into data repositories. There is still work to be done to ensure the data in the warehouses is reliable and accessible. There is still work to be done to aggregate across data warehouses as well. But this market transparency is a reality.
This transparency also spans the entire marketplace – cleared as well as bilateral or customized swaps. All categories of market participant from swap dealers to end-users now are to report transactions. Every product, without exception, now must be reported – interest rate; cross currency; foreign exchange; credit index; equity index; and commodities, such as energy and agricultural.
On September 30, the far-flung operations of U.S. financial entities, the guaranteed affiliates and the branches of U.S. persons, also will begin required public reporting.
Further, starting October 2 the public will benefit from the competition and transparency that swap execution facilities (SEFs) will bring to the marketplace. All market participants will have impartial access to SEFs where they can leave live, executable bids or offers in an order book.
We have 18 SEF applications, with seven of them now temporarily registered.
These reforms will finally close what had been known in the U.S. as the “Enron Loophole,” which had allowed for unregistered, multilateral swaps trading platforms.
Five years ago, this market transparency was nonexistent.
Clearing
This month, with the completion of phased implementation, mandatory clearing of interest rate and credit index swaps is a reality. Clearinghouses lower risk and promote access for market participants.
In the month of August, even before our last domestic clearing compliance date, 63 percent of new interest rate swaps were cleared. In total, nearly $180 trillion of the approximately $330 trillion market facing interest rate swaps market, or 53 percent, was cleared at the end of August. This compares to only 21 percent of the market in 2008, according to information on ISDA’s website.
On October 9, the guaranteed affiliates and branches of U.S. persons also will come into central clearing. This includes hedge funds that are operating in the United States but are incorporated in the Cayman Islands.
As we move into 2014, I would anticipate that closer to two-thirds of the interest rate swaps market will be in central clearing.
Yet five years ago, there was no required clearing in the swaps market.
We’ve also made significant progress since the crisis on reforms to protect both futures and swaps customers through the CFTC’s gross margining and the so-called “LSOC” (legal segregation with operational comingling) rules.
Commissioners now are considering final rules that would further strengthen controls around customer funds.
Swap Dealer Oversight
In 2008, swaps were basically not regulated in the United States, Europe or Asia. Among the reasons for this, it was claimed that financial institutions did not need to be specifically regulated for their swaps activity, as they or their affiliates already were generally regulated as banks, investment banks, or insurance companies.
AIG’s downfall was a clear example of what happens with such limited oversight.
Today, we have 82 swap dealers and two major swap participants registered. This group includes the world’s 16 largest financial institutions in the global swaps market, commonly referred to as the G16 dealers. It also includes a number of energy swap dealers.
These reforms help protect the public, lower risk and increase market integrity as swap dealers now must report their transactions and comply with sales practice and other business conduct standards.
Working closely with our counterparts in Europe, we have essentially identical risk mitigation rules that include promoting the timely confirmation of trades and documentation of the trading relationship. Through ISDA protocols, 9,100 market participants have amended their documents to conform to the new U.S. risk mitigation requirements, and 5,200 market participants have conformed to European standards. More than 10,900 market participants are adhering to ISDA’s protocols for sales practices.
These reforms will significantly lower the risk of the swaps market to the public and the economy.
Five years ago, such oversight of swap dealers did not exist.
International Coordination on Swap Market Reform
AIG nearly brought down the U.S. economy through the operations of its offshore guaranteed affiliate.
It wasn’t the only U.S. financial institution that brought risk back home from its far-flung operations during the 2008 crisis.
It was also true at Lehman Brothers, Citigroup, and Bear Stearns. Ten years earlier, it was true at Long-Term Capital Management.
The nature of modern finance is that financial institutions commonly set up hundreds, or even thousands, of legal entities around the globe. When a run starts on any part of an overseas affiliate or branch of a modern financial institution, risk crosses international borders.
The U.S. Congress was clear in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) that the far-flung operations of U.S. enterprises are to be covered by reform.
The CFTC, coordinating closely with global regulators, completed guidance on the cross-border application of the Dodd-Frank Act in July. Swaps market reform covers transactions between non-U.S. swap dealers and guaranteed affiliates of U.S. persons, as well as swaps between two guaranteed affiliates.
Further, the guidance captures offshore hedge funds and collective investment vehicles that have their principal place of business in the U.S. or that are majority owned by U.S. persons.
The guidance embraces the concept of substituted compliances where there are comparable and comprehensive rules abroad. We are currently reviewing submissions for entity-level substituted compliance in six jurisdictions (the European Union, Australia, Canada, Hong Kong, Japan and Switzerland). We’re consulting closely with regulators in those jurisdictions and look forward to making determinations prior to December 21 of this year.
Benchmark Interest Rates
Five years ago, interest rate benchmarks such as LIBOR and Euribor were being readily and pervasively rigged.
Working with the Financial Conduct Authority and the U.S. Justice Department, we brought actions against three global banks for such abuses.
LIBOR and Euribor are critical reference rates for global futures and swaps markets. In the U.S., LIBOR is the reference rate for 70 percent of the futures market and more than half of the swaps market. It is the reference rate for more than $10 trillion in loans.
We must ensure that these benchmark interest rates have market integrity and that they are based on fact, not fiction.
The interbank, unsecured market that the benchmarks are intended to measure, however, essentially no longer exists, particularly for longer tenors.
The U.S. Financial Stability Oversight Council recommended that U.S. regulators work with foreign regulators, international bodies, and market participants to promptly identify alternative interest rate benchmarks anchored in observable transactions and supported by appropriate governance structures, and to develop a plan to accomplish a transition.
An International Organization of Securities Commissions (IOSCO) task force took an important step in announcing new principles in July that require benchmarks to be anchored by observable transactions and subject to robust governance processes that address potential conflicts of interest.
Building on IOSCO’s work, the Financial Stability Board is initiating a review of alternatives to existing benchmark interest rates, as well as considering any potential transition issues.
I want to thank Martin Wheatley, with whom I’ve worked so closely on these issues, for all of his efforts and leadership.
Conclusion
In the five years since the financial crisis, the swaps market has experienced a paradigm shift.
No longer is the market closed and dark.
With the substantially completed reforms, the public and regulators have transparency. We have a majority of the market moving to central clearing. We have oversight of swap dealers, including the far-flung operations of U.S financial institutions.
The public and the markets are benefitting from these common-sense rules of the road.
I’d like to close by saying that the CFTC is currently an underfunded agency. We are only slightly larger than we were 20 years ago. At that time, we oversaw just the futures market, which is less than a tenth of the size of the swaps market we now oversee as well.
It is critical to the public’s confidence in these markets that the regulator is well funded.
Investments in both people and technology are needed for effective market oversight – like having more cops on the beat.
It’s only with a well-funded CFTC that market participants, including this association’s members, will get timely reviews of applications and petitions and answers to your questions.
Last Updated: September 19, 2013
TRAFFICKER IN BLACK RHINOCEROS HORNS ARRESTED
FROM: U.S. JUSTICE DEPARTMENT
Wednesday, September 18, 2013
Rhino Horn Trafficker Arrested and Detained
Irish National Arrested for Passing Fraudulent Documents in Connection with His Sale of Four Black Rhinoceros Horns for $50,000
Earlier today, a federal magistrate judge in Brooklyn detained an Irish national who was arrested on Saturday and charged in a complaint for false labeling in connection with his alleged role in international rhinoceros horn smuggling in violation of the Lacey Act. The arrest and charge is a result of “Operation Crash,” a nationwide effort led by the U.S. Fish & Wildlife Service (FWS) and the Justice Department to investigate and prosecute those involved in the black market trade of endangered rhinoceros horns.
The Department of Justice filed a complaint in federal court in the Eastern District of New York alleging that Michael Slattery, Jr., a 25-year-old Irish national, fraudulently purchased a set of black rhinoceros horns in Texas and then travelled to New York and used a falsified document to sell the horns for $50,000.
The charge and arrest were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and Robert G. Dreher, Acting Assistant Attorney General for the Justice Department’s Environmental and Natural Resources Division.
According to the complaint filed in on September 14, 2013, in 2010 Slattery traveled from England to Texas to acquire black rhinoceros horns. Slattery and others then used a day laborer with a Texas driver’s license as a straw buyer to purchase two horns from an auction house in Austin. The complaint charges that Slattery and his group then traveled to New York where they presented a fraudulent Endangered Species Bill of Sale and sold those two and two other horns to an individual for $50,000.
According to court records and government statements made in court, Slattery is a member of The Rathkeale Rovers (also known as the “Irish Travelers”), which are tight-knit extended family groups that live a nomadic lifestyle. The group leverages the rising price for rhinoceros horns in the black market to be used for traditional medicines and carving. According to information made public by Europol, the Rathkeale Rovers have been involved in an epidemic of raids on museums in Europe in which rhinoceros horns have been stolen.
Rhinoceros are an herbivore species of prehistoric origin and one of the largest remaining mega-fauna on earth. They have no known predators other than humans. All species of rhinoceros are protected under United States and international law, and all black rhinoceros species are endangered. Since 1976, trade in rhinoceros horn has been regulated under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), a treaty signed by more than 175 countries around the world to protect fish, wildlife and plants that are or may become imperiled due to the demands of international markets. Nevertheless, the demand for rhinoceros horn and black market prices have skyrocketed in recent years due to the value that some cultures have placed on ornamental carvings, good luck charms or alleged medicinal purposes, leading to a decimation of the global rhinoceros population. In China, there is a tradition dating back centuries of intricately carved rhinoceros horn cups. Drinking from such a cup was believed to bring good health and such carvings are highly prized by collectors. As a result of this demand, rhino populations have declined by more than 90 percent since 1970. South Africa, for example, has witnessed a rapid escalation in poaching of live animals, rising from 13 in 2007 to more than 618 in 2012.
The charge in the complaint is merely and allegation, and the defendant is presumed innocent unless and until proven guilty. The government’s case is being prosecuted by Assistant U.S. Attorney Julia Nestor of the Eastern District of New York and Trial Attorney Gary N. Donner of the Justice Department’s Environmental and Natural Resources Division.
Wednesday, September 18, 2013
Rhino Horn Trafficker Arrested and Detained
Irish National Arrested for Passing Fraudulent Documents in Connection with His Sale of Four Black Rhinoceros Horns for $50,000
Earlier today, a federal magistrate judge in Brooklyn detained an Irish national who was arrested on Saturday and charged in a complaint for false labeling in connection with his alleged role in international rhinoceros horn smuggling in violation of the Lacey Act. The arrest and charge is a result of “Operation Crash,” a nationwide effort led by the U.S. Fish & Wildlife Service (FWS) and the Justice Department to investigate and prosecute those involved in the black market trade of endangered rhinoceros horns.
The Department of Justice filed a complaint in federal court in the Eastern District of New York alleging that Michael Slattery, Jr., a 25-year-old Irish national, fraudulently purchased a set of black rhinoceros horns in Texas and then travelled to New York and used a falsified document to sell the horns for $50,000.
The charge and arrest were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and Robert G. Dreher, Acting Assistant Attorney General for the Justice Department’s Environmental and Natural Resources Division.
According to the complaint filed in on September 14, 2013, in 2010 Slattery traveled from England to Texas to acquire black rhinoceros horns. Slattery and others then used a day laborer with a Texas driver’s license as a straw buyer to purchase two horns from an auction house in Austin. The complaint charges that Slattery and his group then traveled to New York where they presented a fraudulent Endangered Species Bill of Sale and sold those two and two other horns to an individual for $50,000.
According to court records and government statements made in court, Slattery is a member of The Rathkeale Rovers (also known as the “Irish Travelers”), which are tight-knit extended family groups that live a nomadic lifestyle. The group leverages the rising price for rhinoceros horns in the black market to be used for traditional medicines and carving. According to information made public by Europol, the Rathkeale Rovers have been involved in an epidemic of raids on museums in Europe in which rhinoceros horns have been stolen.
Rhinoceros are an herbivore species of prehistoric origin and one of the largest remaining mega-fauna on earth. They have no known predators other than humans. All species of rhinoceros are protected under United States and international law, and all black rhinoceros species are endangered. Since 1976, trade in rhinoceros horn has been regulated under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), a treaty signed by more than 175 countries around the world to protect fish, wildlife and plants that are or may become imperiled due to the demands of international markets. Nevertheless, the demand for rhinoceros horn and black market prices have skyrocketed in recent years due to the value that some cultures have placed on ornamental carvings, good luck charms or alleged medicinal purposes, leading to a decimation of the global rhinoceros population. In China, there is a tradition dating back centuries of intricately carved rhinoceros horn cups. Drinking from such a cup was believed to bring good health and such carvings are highly prized by collectors. As a result of this demand, rhino populations have declined by more than 90 percent since 1970. South Africa, for example, has witnessed a rapid escalation in poaching of live animals, rising from 13 in 2007 to more than 618 in 2012.
The charge in the complaint is merely and allegation, and the defendant is presumed innocent unless and until proven guilty. The government’s case is being prosecuted by Assistant U.S. Attorney Julia Nestor of the Eastern District of New York and Trial Attorney Gary N. Donner of the Justice Department’s Environmental and Natural Resources Division.
SEC VOTES ON EXECUTIVE "PAY RATIO" PROPOSAL AND DISSENTING OPINION
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
Sept. 18, 2013
The Securities and Exchange Commission today voted 3-2 to propose a new rule that would require public companies to disclose the ratio of the compensation of its chief executive officer (CEO) to the median compensation of its employees.
The new rule, required under the Dodd-Frank Act, would not prescribe a specific methodology for companies to use in calculating a “pay ratio.” Instead, companies would have the flexibility to determine the median annual total compensation of its employees in a way that best suits its particular circumstances.
“This proposal would provide companies significant flexibility in complying with the disclosure requirement while still fulfilling the statutory mandate,” said SEC Chair Mary Jo White. “We are very interested in receiving comments on the proposed approach and the flexibility it affords.”
The proposal will have a 60-day public comment period following its publication in the Federal Register.
Dissenting Statement of Commissioner Daniel M. Gallagher Concerning the Proposal of Rules to Implement the Section 953(b) Pay Ratio Disclosure Provision of the Dodd-Frank Act
Commissioner Daniel M. Gallagher
SEC Open Meeting, Washington, D.C.
Sept. 18, 2013
Today, the Commission will vote on proposed rules to implement yet another Dodd-Frank mandate having nothing to do with the SEC’s mission and everything to do with the politics of not letting a serious crisis go to waste.
The pay ratio computation that the proposed rules would require is sure to cost a lot and teach very little. Its only conceivable purpose is to name and, presumably in the view of its proponents, shame U.S. issuers and their executives. This political wish-list mandate represents another page of the Dodd-Frank playbook for special interest groups who seem intent on turning the notion of materiality-based disclosure on its head.
There are no – count them, zero – benefits that our staff have been able to discern. As the proposal explains, “[T]he lack of a specific market failure identified as motivating the enactment of this provision poses significant challenges in quantifying potential economic benefits, if any, from the pay ratio disclosure[.]”[1]
So much for the benefits. If you don’t have a good imagination – or a robust political agenda – you simply won’t find any.
* * *
It could have been worse, and I commend, as always, our expert staff in the Division of Corporation Finance, under the Chair’s direction, for taking a somewhat more flexible approach to the proposal than many which have been considered. But the fact that the Commission could have imposed even greater costs does not create some otherwise absent benefit to mitigate the wasteful costs of the proposal. It merely confirms that there are even more costly ways to accomplish nothing.
So why do this at all? Simple. Dodd-Frank says we must.[2] Crossing one more required rule proposal off our long to-do list of unfinished Dodd-Frank mandates might be the closest thing to a benefit that an objective analysis can squeeze out of today’s proposal.
It's important not to forget, however, that the pay ratio mandate, unlike so many in Dodd-Frank, carries no congressionally imposed deadline. We need not act on it now or soon. It has, nevertheless, jumped to the front of the queue.
We must, therefore, acknowledge as another cost of the rule the decision not to do something else, something more pressing, something that would have yielded discernible benefits – a JOBS Act rulemaking to address the ongoing employment crisis in this country, perhaps, or something – anything – to do with the financial crisis – maybe, for example, the Dodd-Frank section 939A rulemaking that is years overdue.
Given the tremendous strain placed on our resources by Dodd-Frank's seemingly endless stream of mandates as well as our "day job" of doing the blocking-and-tackling work that actually protects investors, maintains fair, orderly, and efficient markets, and facilitates capital formation, today's rulemaking represents a significant and distressing misallocation of time and resources.
* * *
Section 953(b) of Dodd-Frank mandates the application of the pay ratio requirement to “each issuer.” A flexible approach, designed to reduce costs to issuers, would have defined the word “issuer” simply to mean the registrant itself, thus requiring issuers to include only their own employees in the median employee compensation calculation. Such an interpretation would also have the benefit of being consistent with the plain language of the statute. It would have been consistent with the definition of the term “issuer” in both the Securities Act and the Exchange Act, which define the term to mean any person who issues or proposes to issue any security.[3]
This morning’s proposal, however, interprets the term “issuer” by reference to Item 402 of Regulation S-K, which has enterprise-wide applicability and so concludes that in section 953(b) the term “issuer” should likewise have enterprise-wide scope.[4] This inflexible interpretation has the effect of bringing exponentially more entities – and all of their employees’ compensation – into the pay ratio provision’s costly ambit.
Even more problematically, the proposal would extend the scope of the proposed rules further by requiring the calculation of the median salary and, therefore, the resulting ratio, to be global – that is, applicable not only to the full-time U.S. employees of the issuer and its subsidiaries, but to all of its employees everywhere in the world – including the worldwide employees of its subsidiaries. And the median calculation must include seasonal, temporary, and part-time employees – assuming they are on the rolls at fiscal year’s end – without, however, requiring annualization of their compensation.[5]
Even from the perspective of the 953(b) supporters, these interpretations of the statute are unnecessary overkill. Requiring issuers to calculate the median salary based solely on their own full-time employees located in the United States would still have yielded pay ratio figures more than impressive enough to serve the law’s scapegoating and shaming goals. Such a calculation would still have been complex, although much less costly and more in line with our responsibility as regulators to strike an appropriate balance between costs and benefits.
In addition, a more reasonable, literal interpretation of the statutory mandate would have avoided the distortions the chosen method inevitably introduces. Why, after all, should we require a global calculation, thereby introducing a non-scientific and uninstructive comparison that ignores the variances in the costs of labor and the costs of living in widely disparate economies worldwide?[6] Of what conceivable use could comparing the pay of workers in developing nations to that of U.S. CEOs be to the investors the SEC is tasked with protecting? Why include part-time and temporary and seasonal employees? Why incorporate currency exchange assumptions or pay variations due to governmental social benefits schemes that vary from country to country? These and other extraneous variables introduce a degree of complexity and obfuscation that renders meaningless what was meant to be a simple ratio.
The only logical conclusion is that the real point of this exercise is to ensure the most eye-poppingly huge ratios possible. Gimmicks like these don’t belong in corporate filings. The agency would sanction issuers who acted so “creatively” in other areas of their 10K or proxy disclosure.
* * *
Finally, I remind the Commission, once again, that the Exchange Act mandates that we consider the effect of what we do on competition,[7] which even the proposal itself acknowledges by noting, “the competitive impact of compliance with the disclosure requirements prescribed by Section 953(b) could disproportionately fall on U.S. companies with large workforces and global operations….”[8] Notwithstanding this clear mandate, today’s proposal continues a trend of politically motivated new disclosure requirements that impose unnecessary compliance costs on U.S. issuers, reducing their international competitiveness while providing no benefits to investors and political benefits to special interest groups.[9]
* * *
Putting the most positive face possible on today’s proposal, then, its benefits are not so much elusive, as illusory. Indeed, the “benefits” portion of our economists’ evaluation of the proposed rules is really just a discussion of relative costs. It amounts to this: Congress told us to do it, and since we could have done it in a more costly way than we did, the result is an implicit net benefit. I believe this is the best that DERA could do with such a rotten mandate, but none of us should be happy about it.
I cannot see any way to support today’s proposal. I lament the time wasted on it, and I urge investors, public companies and others directly affected by the proposal to submit detailed, data-heavy comments.
[1] Release at p. 91 (“Economic Analysis”).
[2] Note, however, that on June 19, 2013, a bipartisan majority of the House Financial Services Committee reported favorably H.R. 1135, which would repeal Section 953(b).
[3] Securities Act, sec. 2(a)(4); Exchange Act, sec. 3(a)(8).
[4] “By directing the Commission to amend Item 402, we believe that Section 953(b) is intended to cover employees on an enterprise-wide basis, including both the registrant and its subsidiaries, which is the same approach as that taken for other Item 402 information” (Release at p. 110), and “we believe it is appropriate to apply the same definition of subsidiary that is used for other disclosure under Item 402” (id. at 111).
[5] The Release permits annualization for permanent employees, which would include those employed at fiscal year’s end but not for the whole fiscal year, as well as permanent part-time employees. It does not permit annualization for seasonal or temporary employees employed at year’s end. Release at 33-34 and 114-15.
[6] The Release acknowledges that any comparison of registrants’ pay ratios would be uninstructive: “[W]e do not believe that precise comparability or conformity of disclosure from registrant to registrant is necessarily achievable due to the variety of factors that could cause the ratio to differ…” (Release at 35).
[7] Exchange Act, sec. 23(a)(2).
[8] Release at p. 104 (“Economic Analysis”).
[9] See, e.g., Release No. 34-67716 (“Conflict Minerals”), Aug. 22, 2012, and Rel. No. 34-67717 (“Disclosure of Payments by Resource Extraction Issuers”), Aug. 22, 2012 (subsequently vacated and remanded).
Sept. 18, 2013
The Securities and Exchange Commission today voted 3-2 to propose a new rule that would require public companies to disclose the ratio of the compensation of its chief executive officer (CEO) to the median compensation of its employees.
The new rule, required under the Dodd-Frank Act, would not prescribe a specific methodology for companies to use in calculating a “pay ratio.” Instead, companies would have the flexibility to determine the median annual total compensation of its employees in a way that best suits its particular circumstances.
“This proposal would provide companies significant flexibility in complying with the disclosure requirement while still fulfilling the statutory mandate,” said SEC Chair Mary Jo White. “We are very interested in receiving comments on the proposed approach and the flexibility it affords.”
The proposal will have a 60-day public comment period following its publication in the Federal Register.
Dissenting Statement of Commissioner Daniel M. Gallagher Concerning the Proposal of Rules to Implement the Section 953(b) Pay Ratio Disclosure Provision of the Dodd-Frank Act
Commissioner Daniel M. Gallagher
SEC Open Meeting, Washington, D.C.
Sept. 18, 2013
Today, the Commission will vote on proposed rules to implement yet another Dodd-Frank mandate having nothing to do with the SEC’s mission and everything to do with the politics of not letting a serious crisis go to waste.
The pay ratio computation that the proposed rules would require is sure to cost a lot and teach very little. Its only conceivable purpose is to name and, presumably in the view of its proponents, shame U.S. issuers and their executives. This political wish-list mandate represents another page of the Dodd-Frank playbook for special interest groups who seem intent on turning the notion of materiality-based disclosure on its head.
There are no – count them, zero – benefits that our staff have been able to discern. As the proposal explains, “[T]he lack of a specific market failure identified as motivating the enactment of this provision poses significant challenges in quantifying potential economic benefits, if any, from the pay ratio disclosure[.]”[1]
So much for the benefits. If you don’t have a good imagination – or a robust political agenda – you simply won’t find any.
* * *
It could have been worse, and I commend, as always, our expert staff in the Division of Corporation Finance, under the Chair’s direction, for taking a somewhat more flexible approach to the proposal than many which have been considered. But the fact that the Commission could have imposed even greater costs does not create some otherwise absent benefit to mitigate the wasteful costs of the proposal. It merely confirms that there are even more costly ways to accomplish nothing.
So why do this at all? Simple. Dodd-Frank says we must.[2] Crossing one more required rule proposal off our long to-do list of unfinished Dodd-Frank mandates might be the closest thing to a benefit that an objective analysis can squeeze out of today’s proposal.
It's important not to forget, however, that the pay ratio mandate, unlike so many in Dodd-Frank, carries no congressionally imposed deadline. We need not act on it now or soon. It has, nevertheless, jumped to the front of the queue.
We must, therefore, acknowledge as another cost of the rule the decision not to do something else, something more pressing, something that would have yielded discernible benefits – a JOBS Act rulemaking to address the ongoing employment crisis in this country, perhaps, or something – anything – to do with the financial crisis – maybe, for example, the Dodd-Frank section 939A rulemaking that is years overdue.
Given the tremendous strain placed on our resources by Dodd-Frank's seemingly endless stream of mandates as well as our "day job" of doing the blocking-and-tackling work that actually protects investors, maintains fair, orderly, and efficient markets, and facilitates capital formation, today's rulemaking represents a significant and distressing misallocation of time and resources.
* * *
Section 953(b) of Dodd-Frank mandates the application of the pay ratio requirement to “each issuer.” A flexible approach, designed to reduce costs to issuers, would have defined the word “issuer” simply to mean the registrant itself, thus requiring issuers to include only their own employees in the median employee compensation calculation. Such an interpretation would also have the benefit of being consistent with the plain language of the statute. It would have been consistent with the definition of the term “issuer” in both the Securities Act and the Exchange Act, which define the term to mean any person who issues or proposes to issue any security.[3]
This morning’s proposal, however, interprets the term “issuer” by reference to Item 402 of Regulation S-K, which has enterprise-wide applicability and so concludes that in section 953(b) the term “issuer” should likewise have enterprise-wide scope.[4] This inflexible interpretation has the effect of bringing exponentially more entities – and all of their employees’ compensation – into the pay ratio provision’s costly ambit.
Even more problematically, the proposal would extend the scope of the proposed rules further by requiring the calculation of the median salary and, therefore, the resulting ratio, to be global – that is, applicable not only to the full-time U.S. employees of the issuer and its subsidiaries, but to all of its employees everywhere in the world – including the worldwide employees of its subsidiaries. And the median calculation must include seasonal, temporary, and part-time employees – assuming they are on the rolls at fiscal year’s end – without, however, requiring annualization of their compensation.[5]
Even from the perspective of the 953(b) supporters, these interpretations of the statute are unnecessary overkill. Requiring issuers to calculate the median salary based solely on their own full-time employees located in the United States would still have yielded pay ratio figures more than impressive enough to serve the law’s scapegoating and shaming goals. Such a calculation would still have been complex, although much less costly and more in line with our responsibility as regulators to strike an appropriate balance between costs and benefits.
In addition, a more reasonable, literal interpretation of the statutory mandate would have avoided the distortions the chosen method inevitably introduces. Why, after all, should we require a global calculation, thereby introducing a non-scientific and uninstructive comparison that ignores the variances in the costs of labor and the costs of living in widely disparate economies worldwide?[6] Of what conceivable use could comparing the pay of workers in developing nations to that of U.S. CEOs be to the investors the SEC is tasked with protecting? Why include part-time and temporary and seasonal employees? Why incorporate currency exchange assumptions or pay variations due to governmental social benefits schemes that vary from country to country? These and other extraneous variables introduce a degree of complexity and obfuscation that renders meaningless what was meant to be a simple ratio.
The only logical conclusion is that the real point of this exercise is to ensure the most eye-poppingly huge ratios possible. Gimmicks like these don’t belong in corporate filings. The agency would sanction issuers who acted so “creatively” in other areas of their 10K or proxy disclosure.
* * *
Finally, I remind the Commission, once again, that the Exchange Act mandates that we consider the effect of what we do on competition,[7] which even the proposal itself acknowledges by noting, “the competitive impact of compliance with the disclosure requirements prescribed by Section 953(b) could disproportionately fall on U.S. companies with large workforces and global operations….”[8] Notwithstanding this clear mandate, today’s proposal continues a trend of politically motivated new disclosure requirements that impose unnecessary compliance costs on U.S. issuers, reducing their international competitiveness while providing no benefits to investors and political benefits to special interest groups.[9]
* * *
Putting the most positive face possible on today’s proposal, then, its benefits are not so much elusive, as illusory. Indeed, the “benefits” portion of our economists’ evaluation of the proposed rules is really just a discussion of relative costs. It amounts to this: Congress told us to do it, and since we could have done it in a more costly way than we did, the result is an implicit net benefit. I believe this is the best that DERA could do with such a rotten mandate, but none of us should be happy about it.
I cannot see any way to support today’s proposal. I lament the time wasted on it, and I urge investors, public companies and others directly affected by the proposal to submit detailed, data-heavy comments.
[1] Release at p. 91 (“Economic Analysis”).
[2] Note, however, that on June 19, 2013, a bipartisan majority of the House Financial Services Committee reported favorably H.R. 1135, which would repeal Section 953(b).
[3] Securities Act, sec. 2(a)(4); Exchange Act, sec. 3(a)(8).
[4] “By directing the Commission to amend Item 402, we believe that Section 953(b) is intended to cover employees on an enterprise-wide basis, including both the registrant and its subsidiaries, which is the same approach as that taken for other Item 402 information” (Release at p. 110), and “we believe it is appropriate to apply the same definition of subsidiary that is used for other disclosure under Item 402” (id. at 111).
[5] The Release permits annualization for permanent employees, which would include those employed at fiscal year’s end but not for the whole fiscal year, as well as permanent part-time employees. It does not permit annualization for seasonal or temporary employees employed at year’s end. Release at 33-34 and 114-15.
[6] The Release acknowledges that any comparison of registrants’ pay ratios would be uninstructive: “[W]e do not believe that precise comparability or conformity of disclosure from registrant to registrant is necessarily achievable due to the variety of factors that could cause the ratio to differ…” (Release at 35).
[7] Exchange Act, sec. 23(a)(2).
[8] Release at p. 104 (“Economic Analysis”).
[9] See, e.g., Release No. 34-67716 (“Conflict Minerals”), Aug. 22, 2012, and Rel. No. 34-67717 (“Disclosure of Payments by Resource Extraction Issuers”), Aug. 22, 2012 (subsequently vacated and remanded).
FTC WARNS PUBLIC OF POSSIBLE DONATION SCAMS AFTER COLORADO FLOODING DISASTER
FROM: FEDERAL TRADE COMMISSION
If You're Helping Colorado Flood Victims, Make Sure Your Donations Count
In the wake of the flooding in Colorado, the Federal Trade Commission, the nation’s consumer protection agency, urges people to be wary of charity scams.
If you’re looking for a way to give, do some research to ensure that your donation will go to a reputable organization. Urgent appeals that you get in person, by phone or mail, by e-mail, on websites, or on social networking sites may not be on the up-and-up. Unfortunately, legitimate charities face competition from fraudsters who either solicit for bogus charities or aren't entirely honest about how a so-called charity will use your contribution.
If you’re asked to make a charitable donation to support victims of the flooding in Colorado, consider these tips:
Donate to charities you know and trust. Be alert for charities that seem to have sprung up overnight in connection with current events.
Ask if a caller is a paid fundraiser, who they work for, and what percentage of your donation goes to the charity and to the fundraiser. If you don’t get a clear answer – or if you don’t like the answer – consider donating to a different organization.
Don’t give out personal or financial information – including your credit card or bank account number – a unless you know the charity is reputable.
Never send cash: you can’t be sure the organization will receive your donation, and you won’t have a record for tax purposes.
Check out the charity with the Better Business Bureau's (BBB) Wise Giving Alliance, Charity Navigator, Charity Watch, or GuideStar.
Find out if the charity or fundraiser must be registered in your state by contacting the National Association of State Charity Officials.
The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.
If You're Helping Colorado Flood Victims, Make Sure Your Donations Count
In the wake of the flooding in Colorado, the Federal Trade Commission, the nation’s consumer protection agency, urges people to be wary of charity scams.
If you’re looking for a way to give, do some research to ensure that your donation will go to a reputable organization. Urgent appeals that you get in person, by phone or mail, by e-mail, on websites, or on social networking sites may not be on the up-and-up. Unfortunately, legitimate charities face competition from fraudsters who either solicit for bogus charities or aren't entirely honest about how a so-called charity will use your contribution.
If you’re asked to make a charitable donation to support victims of the flooding in Colorado, consider these tips:
Donate to charities you know and trust. Be alert for charities that seem to have sprung up overnight in connection with current events.
Ask if a caller is a paid fundraiser, who they work for, and what percentage of your donation goes to the charity and to the fundraiser. If you don’t get a clear answer – or if you don’t like the answer – consider donating to a different organization.
Don’t give out personal or financial information – including your credit card or bank account number – a unless you know the charity is reputable.
Never send cash: you can’t be sure the organization will receive your donation, and you won’t have a record for tax purposes.
Check out the charity with the Better Business Bureau's (BBB) Wise Giving Alliance, Charity Navigator, Charity Watch, or GuideStar.
Find out if the charity or fundraiser must be registered in your state by contacting the National Association of State Charity Officials.
The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.
Saturday, September 21, 2013
DOD OFFICIAL SITES LESSONS LEARNED FROM FORT HOOD SHOOTINGS
FROM: U.S. DEPARTMENT OF DEFENSE
Officials: Fort Hood Lessons May Have Saved Lives at Navy Yard
By Cheryl Pellerin
American Forces Press Service
WASHINGTON, Sept. 20, 2013 - Of 89 recommendations that came from two reviews of the 2009 shooting that killed 13 people at Fort Hood in Texas, 52 are fully implemented, and some may have helped to save lives during the Navy Yard shooting here Sept. 16, senior defense officials said.
The officials, who briefed reporters here this week, were unable to discuss the ongoing investigation involving a civilian contractor, 34-year-old Aaron Alexis, who killed 12 people and wounded several others at the Naval Sea Systems Command headquarters building before being killed by police.
But they did discuss results of the Defense Department's 2010 independent review of events at Fort Hood and final recommendations from that review, and of a 2012 Defense Science Board review sought by DOD to look deeper into the motivations of Fort Hood shooter Nidal Hasan, a U.S. Army major and psychiatrist, and other potential violent actors.
"In the area of response, there are a few very specific things that I believe helped save lives as a result and led to a faster response time [and] greater cooperation between local law enforcement with the FBI and in terms of warning people ... on the Navy Yard at the time," a senior defense official said.
Specifically, he added, as a result of one of the DOD recommendations, the department is using a North American telephone network feature called enhanced 911, or E-911, to push out alert notices during emergencies on DOD installations.
Because of some of the recommendations, the official said, guards have received training for scenarios in which they must respond to emergencies involving an active shooter or shooters, and there are new information-sharing agreements between the FBI and local law enforcement agencies that allow military-civilian collaboration.
"There are two examples of how we've increased information sharing," the official said. First, "the Department of Defense and the FBI signed a memorandum of understanding by which if either organization has information about a threat to or from DOD personnel, we are obligated to share with each other."
The senior defense official said that's important because DOD persons and installations are a prime target of what's called homegrown violent extremism.
For those wanting to commit acts of violence, DOD people and facilities often are the target, he added, "so it matters to us when FBI has an operational case that they share information about threats that might be around a particular location or base."
Second, he said, the Defense Department now has people working in a significant number of FBI-led joint terrorism task forces, giving DOD personnel insight into and awareness of FBI cases and how they may be relevant to DOD safety and security.
"I think we're in a significantly better place," the official said. "Obviously we're not there fully, based on Monday's events, but there has been a lot of progress."
After the Fort Hood incident, he added, then-Defense Secretary Robert M. Gates established an independent review of events that produced an August 2010 report and 79 recommendations to improve the ability to identify patterns that might lead to violence and to safety and security on installations.
One of the recommendations was to ask the Defense Science Board to look for useful indicators of warning in individuals who might be prone to acts of violence, the official said, adding that the board's task force provided 10 recommendations of its own, for a total of 89 recommendations from reviews of the Fort Hood incident.
About 52 of the recommendations have been adopted and fully implemented, he said, and the vast majority of the remaining recommendations have been agreed to. Most are in various stages of implementation, he added.
The defense official said that some of the remaining tasks have to do with a Defense Science Board recommendation that the defense secretary direct a departmentwide requirement for the military departments and DOD agencies to establish a multidisciplinary threat management unit that identifies, assesses and responds to or manages threats of targeted violence.
"The kinds of things we're wrestling with right now [are], 'How tailored do they have to be? Should there be one unique to the Navy, one to the Army, one to the Marines, one to the Air Force? Do you have something at headquarters?" he said.
And DOD officials are still working through some of the privacy issues involved in sharing information, he said.
"When an individual is assigned to one base and events and incidents that might happen at a base don't rise to the level of criminality -- because for criminal cases there's a pre-existing system by which that information is captured permanently -- and here someone could be going through a difficult period of life, and it could be a one-time incident," he explained.
"We're trying to make sure we have a system by which we are appropriately protecting [people] but providing information to the experts who need to know it," the official said.
Such details, he added, "are difficult and important things for our military families."
In March, the official said, Defense Secretary Chuck Hagel issued an instruction directing rapid completion of the remaining tasks. "So this is something that's been very much on his mind as well," he added.
This week, before a news conference with Pentagon reporters, Hagel and Army Gen. Martin E. Dempsey, chairman of the Joint Chiefs of Staff, expressed condolences to the families and coworkers of the 12 Navy employees gunned down at the Navy Yard.
Hagel said he's asked Deputy Defense Secretary Ash Carter to lead two departmentwide reviews. The first will examine physical security and access procedures at all DOD installations.
In the second, Carter will look at DOD practices and procedures for granting and renewing security clearances, including those held by contractors. He will coordinate with officials at the Office of the Director of National Intelligence and the Office of Management and Budget, Hagel said.
The secretary also has directed an independent panel to conduct its own assessment of security at DOD facilities and of the department's security clearance procedures and practices.
Officials: Fort Hood Lessons May Have Saved Lives at Navy Yard
By Cheryl Pellerin
American Forces Press Service
WASHINGTON, Sept. 20, 2013 - Of 89 recommendations that came from two reviews of the 2009 shooting that killed 13 people at Fort Hood in Texas, 52 are fully implemented, and some may have helped to save lives during the Navy Yard shooting here Sept. 16, senior defense officials said.
The officials, who briefed reporters here this week, were unable to discuss the ongoing investigation involving a civilian contractor, 34-year-old Aaron Alexis, who killed 12 people and wounded several others at the Naval Sea Systems Command headquarters building before being killed by police.
But they did discuss results of the Defense Department's 2010 independent review of events at Fort Hood and final recommendations from that review, and of a 2012 Defense Science Board review sought by DOD to look deeper into the motivations of Fort Hood shooter Nidal Hasan, a U.S. Army major and psychiatrist, and other potential violent actors.
"In the area of response, there are a few very specific things that I believe helped save lives as a result and led to a faster response time [and] greater cooperation between local law enforcement with the FBI and in terms of warning people ... on the Navy Yard at the time," a senior defense official said.
Specifically, he added, as a result of one of the DOD recommendations, the department is using a North American telephone network feature called enhanced 911, or E-911, to push out alert notices during emergencies on DOD installations.
Because of some of the recommendations, the official said, guards have received training for scenarios in which they must respond to emergencies involving an active shooter or shooters, and there are new information-sharing agreements between the FBI and local law enforcement agencies that allow military-civilian collaboration.
"There are two examples of how we've increased information sharing," the official said. First, "the Department of Defense and the FBI signed a memorandum of understanding by which if either organization has information about a threat to or from DOD personnel, we are obligated to share with each other."
The senior defense official said that's important because DOD persons and installations are a prime target of what's called homegrown violent extremism.
For those wanting to commit acts of violence, DOD people and facilities often are the target, he added, "so it matters to us when FBI has an operational case that they share information about threats that might be around a particular location or base."
Second, he said, the Defense Department now has people working in a significant number of FBI-led joint terrorism task forces, giving DOD personnel insight into and awareness of FBI cases and how they may be relevant to DOD safety and security.
"I think we're in a significantly better place," the official said. "Obviously we're not there fully, based on Monday's events, but there has been a lot of progress."
After the Fort Hood incident, he added, then-Defense Secretary Robert M. Gates established an independent review of events that produced an August 2010 report and 79 recommendations to improve the ability to identify patterns that might lead to violence and to safety and security on installations.
One of the recommendations was to ask the Defense Science Board to look for useful indicators of warning in individuals who might be prone to acts of violence, the official said, adding that the board's task force provided 10 recommendations of its own, for a total of 89 recommendations from reviews of the Fort Hood incident.
About 52 of the recommendations have been adopted and fully implemented, he said, and the vast majority of the remaining recommendations have been agreed to. Most are in various stages of implementation, he added.
The defense official said that some of the remaining tasks have to do with a Defense Science Board recommendation that the defense secretary direct a departmentwide requirement for the military departments and DOD agencies to establish a multidisciplinary threat management unit that identifies, assesses and responds to or manages threats of targeted violence.
"The kinds of things we're wrestling with right now [are], 'How tailored do they have to be? Should there be one unique to the Navy, one to the Army, one to the Marines, one to the Air Force? Do you have something at headquarters?" he said.
And DOD officials are still working through some of the privacy issues involved in sharing information, he said.
"When an individual is assigned to one base and events and incidents that might happen at a base don't rise to the level of criminality -- because for criminal cases there's a pre-existing system by which that information is captured permanently -- and here someone could be going through a difficult period of life, and it could be a one-time incident," he explained.
"We're trying to make sure we have a system by which we are appropriately protecting [people] but providing information to the experts who need to know it," the official said.
Such details, he added, "are difficult and important things for our military families."
In March, the official said, Defense Secretary Chuck Hagel issued an instruction directing rapid completion of the remaining tasks. "So this is something that's been very much on his mind as well," he added.
This week, before a news conference with Pentagon reporters, Hagel and Army Gen. Martin E. Dempsey, chairman of the Joint Chiefs of Staff, expressed condolences to the families and coworkers of the 12 Navy employees gunned down at the Navy Yard.
Hagel said he's asked Deputy Defense Secretary Ash Carter to lead two departmentwide reviews. The first will examine physical security and access procedures at all DOD installations.
In the second, Carter will look at DOD practices and procedures for granting and renewing security clearances, including those held by contractors. He will coordinate with officials at the Office of the Director of National Intelligence and the Office of Management and Budget, Hagel said.
The secretary also has directed an independent panel to conduct its own assessment of security at DOD facilities and of the department's security clearance procedures and practices.
SECRETARY OF STATE KERRY MAKES REMARKS WITH SOMALI PRESIDENT SHEIKH MOHAMUD
FROM: U.S. STATE DEPARTMENT
Remarks With Somali President Hassan Sheikh Mohamud Before Their Meeting
Remarks
John Kerry
Secretary of State
Washington, DC
September 20, 2013
SECRETARY KERRY: Good morning, everybody. It’s my privilege to welcome to Washington and to the State Department His Excellency, the President of Somalia Hassan Sheikh Mohamud. Actually, I’m welcoming him back to Washington, and we have met previously and I’m very pleased to be able to welcome him here.
The United States, obviously, has been engaged in helping Somalia fight back against tribal terror and the challenges to the cohesion of the state of Somalia. And the President and his allies have really done an amazing job of fighting back and building a state structure. There’s work yet to be done in Puntland and Somaliland, and we encourage you to continue the work of reaching out, of reconciliation and rebuilding the democracy, and I know he’s committed to that.
Also, I want to thank the President for his rapid support of the Joint Statement on Syria. We appreciate that kind of global recognition of what is at stake in Syria.
And finally, I’d just say that Somalia is working hard now to create its own ability to defend itself, to defend the state. We will continue to work. There is a United Nations mission there. We are committed to both – to the independent ability of the state of Somalia as well as the United Nations mission to help it in this transition. And we’re very happy to welcome the President here to talk today about issues of mutual interest.
Thank you, Mr. President.
PRESIDENT MOHAMUD: Thank you. Thank you, Secretary. And it’s – really, it was a pleasure and privilege to be here again this year in the State Department and the United States. And we – as the Secretary said rightly we’re working very hard together to establish the national institutions in all areas, particularly in security, where we are working very hard with the UNOSOM forces, and our national army is now taking shape and building up, of course, with the support of the United States Government that has always been with us. And this is a time we came here to share the ideas, the way forward we have, and particularly, the Vision 2016, where we want Somalia to go into the poll stations and make a voting for the first time in 40 years – more than 40 years, even.
And as you rightly said, we have been engaging with different stakeholders in Somalia. The federal government has the leadership, the parliament, all visiting different corners of Somalia to consult on this event. And the product of that consultation was the recent compact document signed in Brussels of the 16th of this month. I, myself, and the Prime Minister, the Speaker of the House, the parliamentarians, key ministers have been traveling all over Somalia. Although the situation in traveling locally is very difficult, but even then, you have to sit with the people, listen them, share with them the plans that we are intending, and asking them the type of Somalia they want to see in the future.
So based on that, we have signed agreements with Puntland State, and recently agreement with the Jubba regional administrations. And of course, we also did the same with Ahlu Sunna Wal Jama’a in the central region. So it takes some time. We have our own differences, but we are in a better shape than ever before now. We’re shaping for the first time a united and federal Somalia. The constitution is progressing and the federal system is working very hard. This federal government is working on all its capability to establish the federal unities in an orderly manner and with – in accordance and compliance with the federal constitution.
So there’s a huge progress that is going on in Somalia, and again, we are very much grateful with the support we received from the United States Government through bilateral and through multilateral. Thank you very much.
SECRETARY KERRY: Thank you, Mr. President.
PRESIDENT MOHAMUD: Thank you.
SECRETARY KERRY: Thank you, sir, very much. Please come. Thank you.
Remarks With Somali President Hassan Sheikh Mohamud Before Their Meeting
Remarks
John Kerry
Secretary of State
Washington, DC
September 20, 2013
SECRETARY KERRY: Good morning, everybody. It’s my privilege to welcome to Washington and to the State Department His Excellency, the President of Somalia Hassan Sheikh Mohamud. Actually, I’m welcoming him back to Washington, and we have met previously and I’m very pleased to be able to welcome him here.
The United States, obviously, has been engaged in helping Somalia fight back against tribal terror and the challenges to the cohesion of the state of Somalia. And the President and his allies have really done an amazing job of fighting back and building a state structure. There’s work yet to be done in Puntland and Somaliland, and we encourage you to continue the work of reaching out, of reconciliation and rebuilding the democracy, and I know he’s committed to that.
Also, I want to thank the President for his rapid support of the Joint Statement on Syria. We appreciate that kind of global recognition of what is at stake in Syria.
And finally, I’d just say that Somalia is working hard now to create its own ability to defend itself, to defend the state. We will continue to work. There is a United Nations mission there. We are committed to both – to the independent ability of the state of Somalia as well as the United Nations mission to help it in this transition. And we’re very happy to welcome the President here to talk today about issues of mutual interest.
Thank you, Mr. President.
PRESIDENT MOHAMUD: Thank you. Thank you, Secretary. And it’s – really, it was a pleasure and privilege to be here again this year in the State Department and the United States. And we – as the Secretary said rightly we’re working very hard together to establish the national institutions in all areas, particularly in security, where we are working very hard with the UNOSOM forces, and our national army is now taking shape and building up, of course, with the support of the United States Government that has always been with us. And this is a time we came here to share the ideas, the way forward we have, and particularly, the Vision 2016, where we want Somalia to go into the poll stations and make a voting for the first time in 40 years – more than 40 years, even.
And as you rightly said, we have been engaging with different stakeholders in Somalia. The federal government has the leadership, the parliament, all visiting different corners of Somalia to consult on this event. And the product of that consultation was the recent compact document signed in Brussels of the 16th of this month. I, myself, and the Prime Minister, the Speaker of the House, the parliamentarians, key ministers have been traveling all over Somalia. Although the situation in traveling locally is very difficult, but even then, you have to sit with the people, listen them, share with them the plans that we are intending, and asking them the type of Somalia they want to see in the future.
So based on that, we have signed agreements with Puntland State, and recently agreement with the Jubba regional administrations. And of course, we also did the same with Ahlu Sunna Wal Jama’a in the central region. So it takes some time. We have our own differences, but we are in a better shape than ever before now. We’re shaping for the first time a united and federal Somalia. The constitution is progressing and the federal system is working very hard. This federal government is working on all its capability to establish the federal unities in an orderly manner and with – in accordance and compliance with the federal constitution.
So there’s a huge progress that is going on in Somalia, and again, we are very much grateful with the support we received from the United States Government through bilateral and through multilateral. Thank you very much.
SECRETARY KERRY: Thank you, Mr. President.
PRESIDENT MOHAMUD: Thank you.
SECRETARY KERRY: Thank you, sir, very much. Please come. Thank you.
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