William C. Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, spoke at the Global Economic Policy Forum and focused on options and resolutions to end "too big to fail" financial institutions. In order to solve "too big to fail," Mr. Dudley made two suggestions: (i) make the financial system more stable by reducing the degree of disruption that results when failures occur, thereby lowering the risk of a failure in the first place, and (ii) eliminate the artificial advantages that large, complex firms "might have" which create incentives to become bigger and

The SEC announced sanctions against a New York-based audit firm, Sherb Co. LLP, and its founder, two other partners, and an audit manager for their roles in the failed audits of three China-based companies publicly traded in the U.S. An SEC investigation found that Sherb Co. and its auditors falsely represented in audit reports that they had conducted the audits in accordance with U.S. auditing standards, when in fact they were improperly conducted. One of the companies audited, China Sky One Medical Inc., has since been charged by the SEC with financial fraud. See: SEC Order against Sherb Co

Various regulators, including SEC Chair Mary Jo White and SEC Director of Investment Management Norm Champ, spoke at the the Managed Funds Association ("MFA") Outlook 2013 Conference. Chair White spoke about the new alternatives market place and emphasized that investors must be protected in this new, publicly-oriented market. She went on to state that the SEC would like to prevent investor harm, not just react after an event has occurred. Additionally, she discussed the growing importance of the hedge fund industry and expressed interest in working closely with hedge fund professionals to

Governor Jeremy C. Stein delivered a speech at the Federal Reserve Bank of Chicago and International Monetary Fund Conference which echoed themes of his previous speeches, focusing on "fire sales" in securities financing transactions and laying out a case for further policy attention to the issue. As in prior speeches, Governor Stein discussed the welfare economics of fire sales, explaining that a forced sale of an asset is not just an event that leads to prices being driven below long-run fundamental values, but one that involves market failure or externality of the sort that might elicit a

The Board of Governors of the Federal Reserve System ("FRB") issued a final policy statement describing the processes it will use to develop scenarios for future capital planning and stress testing exercises. The policy statement will be used to develop scenarios for both annual supervisory and company-run stress tests, and describes the characteristics of the stress test scenarios and procedures for formulating the scenarios. Although the policy statement is not effective until January 1, 2014, the macroeconomic scenarios released last week for the 2014 stress testing exercise are said to be