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Industry Watch

Economic Update, Richard B. Hoey, Chief Economist, The Bank of New York Mellon Corporation
February 08, 2012 - For 2012, we have three themes and three risk concerns. The three main themes are (1) global growth recession, (2) lower inflation for now and (3) monetary ease. The three main risk concerns are (1) the European financial stresses, (2) the Chinese property market and (3) the Middle East risks, with oil supply vulnerabilities as the main concern.

SEC Rule Mandates Large Trader Registration by December 2011
November 30, 2011 - The Securities and Exchange Commission (SEC), spurred by the May 6, 2010, disruption and concerns of systemic risk in the U.S. securities market, adopted Rule 13h-1 in July 2011. Known as the large trader rule, it is designed to enable the SEC to identify and monitor market participants who engage in significant trading activity.

Investment Insights by Lockwood Advisors, Inc. - Second Quarter 2011
July 20, 2011 - Despite the equity market's continued upward trajectory during April, numerous economic headwinds and political issues took their toll on financial markets during May and June. This ultimately resulted in little change to equity market prices during the second quarter of 2011. Supply and demand imbalances in the housing market, persistently high levels of unemployment and underemployment, and escalated debt levels weighed on consumers and depressed confidence levels.

Capital Markets Brief: Smoothing Out the Journey of Investing by Lockwood Advisors, Inc. - June 2011
June 10, 2011 - Has diversification failed investors? And is there a right time to invest? The financial and real estate market crises that began in 2007 and the rapid equity market rise since early 2009 have left some advisors and investors wondering if the time-honored principles of portfolio diversification and the importance of proper asset allocation no longer apply. Chasing recent, strong-performing asset classes or strategies may be tempting to investors; but, unfortunately, it is often a detrimental strategy. The variability of returns among different asset classes poses difficulties in asset allocation. We believe within this variability lies the investor's greatest opportunity.

Call to Action Against the DOL Redefinition of Fiduciary
May 11, 2011 - In October 2010, the Department of Labor (DOL) proposed a redefinition of fiduciary under the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code. Many provisions of the regulation do not correspond to existing laws, including the Investment Advisers Act of 1940. They are also inconsistent with the efforts by the Securities and Exchange Commission to establish a uniform fiduciary standard, as mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Investment Insights by Lockwood Advisors, Inc. - First Quarter 2011
April 21, 2011 - The U.S. equity markets overcame the tension introduced by two major global events on the way to delivering positive first quarter returns. The civil unrest, uprisings and rebellions that took place in the Middle East and North Africa temporarily negated positive stock market momentum, as global investors weighed the near- and long-term effects of potential regime change and possible energy supply disruption. The global political strife was followed by natural disaster in Japan. The events temporarily sent global equity markets tumbling as concerns over shorter-term supply chain disruptions were balanced with questions over what effects the tragedy would have on the world's third-largest economy and nuclear energy programs around the globe.

Investment Insights by Lockwood Advisors, Inc. - Fourth Quarter 2010
January 20, 2011 - Disregarding what we believe are challenging economic fundamentals, investors saw riskier asset classes move higher during the fourth quarter of 2010 to close the calendar year with positive momentum. U.S. stocks generated positive returns across the board, led by higher beta segments of the market with greater sensitivity to equity price fluctuations. This risk-on environment has led to outsized returns in what we believe to be riskier areas of the market. Despite the overhang created by uncertainty surrounding the European credit crisis, overseas equity markets generated sizeable returns for investors, where emerging markets outpaced their developed counterparts. In keeping with the risk-on investing environment, emerging economies continued to benefit from a flood of new capital seeking higher growth rates and investment opportunities viewed by many as more attractive than those offered in more developed nations. Higher-quality U.S. bonds suffered from a back up in yields, with longer-dated credits feeling the most price pain. Investor concerns over several U.S. municipal bond segments, in our view, negatively impacted the performance of the broad tax-free market.

Corporate Governance
January 10, 2011 - The governance of public companies is driven by the proper election of a board of directors by the proxy voting of shareholders. An important factor in voting is how securities firms allocate votes to their customers. At the moment, firms allocate votes using various methods; lack of a consistent method can lead to confusion and to votes not being properly allocated. Pershing and BNY Mellon strongly support the notion of "pre-reconciliation," that is, reducing reduces the number of votes held by the number of shares loaned to others.

The Dodd-Frank Wall Street Reform and Consumer Protection Act and the Impact on the Hedge Fund Industry
January 10, 2011 - The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), signed into law on July 21, 2010, will potentially have a dramatic impact on hedge funds and their advisers. The links below describe some of the long-term effects of Dodd-Frank on hedge funds and their investment advisers.

Monthly Commentary and Market Outlook by Lockwood Advisors, Inc. - November 2010
January 05, 2011 - The debt concerns facing various European countries re-emerged as a focal point for investors during November as Ireland received an aid package from the European Union and the International Monetary Fund. Many speculate that this will not be the remedy, nor the last aid package distributed, as bond yields have increased substantially for other European nations exhibiting similar debt and deficit characteristics. Elsewhere in the world, tensions on the Korean peninsula have been elevated, as a result of North Korea's shelling of a South Korean island. Both nations have increased their levels of military exercise.

Foreign Account Tax Compliance Act (FATCA)
December 17, 2010 - The Foreign Account Tax Compliance Act (FATCA), which was enacted as part of the Hiring Incentives to Restore Employment (HIRE) Act on March 18, 2010, increases the ability of the Internal Revenue Service (IRS) to police tax evasion by U.S. persons holding financial assets outside the United States.

Monthly Commentary and Market Outlook by Lockwood Advisors, Inc. - October 2010
November 30, 2010 - The financial markets traded in October with an eye toward November, eagerly anticipating the outcome of the mid-term elections, as well as the Federal Open Market Committee meeting, both of which took place in the first few days of November. Many market participants looked toward these events in hopes of gaining more clarity into the markets direction.

Capital Markets Brief: Are We There Yet? by Lockwood Advisors, Inc. - November 2010
November 19, 2010 - On September 20, 2010, the National Bureau of Economic Research (NBER) made the announcement that it has determined an official end to the nation's most recent recessionary period. The NBER concluded that the recession, which began in December 2007, had actually culminated fourteen months ago in June 2009. And, while the U.S. stock markets treated the news with a favorable reception, the declaration left many pondering the relevancy of what may be a stale conclusion. At present, there are numerous indications that the U.S. economy is not functioning particularly robustly, and many may wonder exactly how it was reasoned that the recession ended over a year ago.

Monthly Commentary and Market Outlook by Lockwood Advisors, Inc. - September 2010
October 27, 2010 - The National Bureau of Economic Research (NBER) announced in September that the U.S. recession officially ended in June 2009. President Obama quickly noted that it does not feel like the recession has ended for many on Main Street who continue to struggle with unemployment and other issues. Warren Buffett also questioned this conclusion, pointing out that "common sense" analysis indicates that the country is not out of the recession yet.

Investment Insights by Lockwood Advisors, Inc. - Third Quarter 2010
October 19, 2010 - As equity market bulls and bears played "tug of war" during the third quarter of 2010, buyers closed out the quarter with the upper hand. The Dow Jones Industrial AverageSM put in its best quarter in 70 years, as the U.S. equity markets finished the third quarter of 2010 with positive gains. In fact, almost every developed and emerging country stock index tracked by MSCI Barra gained during the quarter, with Ireland being the only exception.

Monthly Commentary and Market Outlook by Lockwood Advisors, Inc. - August 2010
September 21, 2010 - In order to continue monetary accommodation and support economic recovery, the Federal Reserve announced that it plans to keep the assets on its balance sheet at the current level of approximately $2.05 trillion, and use the proceeds from maturing mortgage-backed securities to buy Treasury securities.

The Dodd-Frank Wall Street Reform and Consumer Protection Act
September 20, 2010 - The number of legal and regulatory changes impacting the financial industry has been unprecedented over the last two years. We are all asking what the immediate impact of this legislation will be for broker-dealers, registered investment advisers, and investors.

The most recent, and prominent, legislation is the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). This legislation, signed by President Obama in July 2010, will affect almost every aspect of the financial services industry.

Many of the provisions of Dodd-Frank mandate studies, create new governmental agencies or delegate rulemaking to various governmental agencies, such as the Securities and Exchange Commission (SEC). These agencies may need to draft and implement approximately 250 rules to finalize what Dodd-Frank began in July 2010.

Investment Insights by Lockwood Advisors, Inc. - Second Quarter 2010
September 01, 2010 - After more than a year of near-constant growth, the equity markets took a breather in the second quarter. Equity indices across the globe contracted during the past three months, as many investors de-risked positions by shifting to cash and fixed income instruments. This retracement in the rally of equity prices is, in our view, a product of an atmosphere of increased uncertainty in the financial markets.

Capital Markets Brief: A Tale of Two Currencies by Lockwood Advisors, Inc. - August 2010
August 23, 2010 - Nothing seems to rattle the U.S.financial markets quite like the periodic rumblings of currency adjustment that come from China.

QUESTIONS

If you have questions about how recent regulatory changes may impact your business, please
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Resources

Financial Industry Regulatory Authority
www.finra.org

Internal Revenue Service/
Treasury Department
www.irs.gov
Final Regulations for Cost Basis Reporting

Securities Industry and Financial Markets Association
www.sifma.org

U.S. Securities and Exchange Commission
www.sec.gov

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