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Market transparency

In economics, a market is transparent if much is known by many about:

  • What products, services or capital assets are available
  • What price
  • Where

There are two types of price transparency:

  1. I know what price will be charged to me, and
  2. I know what price will be charged to you.

The two types of price transparency have different implications for differential pricing.[1]

A high degree of market transparency can result in disintermediation due to the buyer's increased knowledge of supply pricing.

Transparency is important since it is one of the theoretical conditions required for a free market to be efficient.

Price transparency can, however, lead to higher prices, if it makes sellers reluctant to give steep discounts to certain buyers, or if it facilitates collusion.

Trust transparency

1.1 Introduction

Most people take it for granted that when they own an asset – a bank deposit, say, or a painting – it is a simple matter: they own it, and that is that. In fact, however, ownership is a more complex concept involving a bundle of different rights: these include the legal title to the asset; the right to an income stream from an asset; the right to control the asset and direct how it is used; and other things. Usually these rights are bundled together into one, and you don’t notice the difference. Yet these rights can and frequently are unbundled. For example, if you buy a house on a mortgage, you are the legal owner, but the bank or building society has rights to foreclose and take over the property if you default on the payments.

Trusts are ways to unbundle different the aspects of ownership into separate parts. This can be done for valid and legitimate reasons, or for abusive ones.

A trust typically involves three main parties. One party (“the settlor” or grantor or donor) — typically a wealthy person, hands over control of an asset to a trusted second party (“the trustee”), perhaps a lawyer, who in turn controls the property on behalf of a third party (“the beneficiary”) who might be the settlor’s child, for example. The trustees are the legal owners of the asset (“the trust property”) but they are not the beneficial owners, and apart from fees the trustees should receive no benefits from the assets. Trustees are bound by a “deed of settlement” (or trust deed) in which the settlor lays out instructions about how the assets of a trust can be used; the trustee is bound by law to follow these instructions. Trusts are generally meant to incorporate this split of roles, responsibilities and entitlements (although as described below there are trusts, sometimes known as purpose trusts, for which there is no intended beneficiary.)

(Contrasting the trust with the limited liability company may help illustrate this further. The owners of a limited liability company control it as beneficial owners: they have full control of the company through the company’s bodies – on behalf of themselves.)

Many varieties of trusts exist. The U.S. Internal Revenue Service (IRS) provides a glossary here and the UK Revenue and Customs provides a clear outline of some of the main forms of trusts here.

The historical origins of the trust mechanism help illustrate what is happening. They were first used, the legend goes, in the early Medieval period in Europe when knights (in effect, the settlors) headed off to the Crusades and left their property and land in the hands of trusted stewards (trustees), who would look after them on behalf of third parties – typically their wives and families (the beneficiaries) – under a set of clear instructions (the deed of settlement.)

In more recent times trusts became used typically for inheritance tax purposes: people with assets (settlors) created trusts to pass assets to their children (beneficiaries) and these assets were managed on the beneficiaries’ behalf by trustees. For example: a settlor might say to a trustee: “here is a million dollars. You take it off my hands, and you are instructed to invest it; then when my oldest child is twenty-one you pay him a half of the current value; pay the remainder to my youngest when she is twenty-one.” The trustee should in theory be fully independent of the settlor. Again, although the trustee has legal title to an asset (so, for example, he or she can sell them – though the proceeds must go to the beneficiaries), the trustee is not the beneficial owner – so, for example, if a trustee becomes insolvent, creditors have no claim on it.

A body of law grew up around these arrangements so that they have become enforceable, and an industry has grown up around these laws, often to provide services to facilitate them, and trust facilities have become replicated in many jurisdictions around the world.

Global transparency initiatives

IMF adopts enhanced transparency policies

  • Source: IMF


IMF to Increase Amount and Timeliness of Information

January 8, 2010

Global crisis has increased interest in the Fund's decisions Fund aiming at wider and faster publication of documents Shift from "why" publish to "why not?" Greater transparency in the IMF’s policies and decisions makes it more accountable to the people and governments at the center of its work, the organization concluded after a policy review.

FSA "Transparency as a Regulatory Tool"

Source: Transparency as a Regulatory Tool and Publication of Complaints Data FSA, July 2009

This paper sets out feedback on the responses we received to DP08/3 – Transparency as a Regulatory Tool; it outlines our current policy position and describes our next steps. It also incorporates a Consultation Paper on the proposed publishing of complaints data.

1.3 In May 2008 we published a Discussion Paper (DP), DP08/3 – Transparency as a Regulatory Tool. The paper looked at what we currently do and don’t disclose. Its aim was to stimulate an informed and energetic debate which recognised the powerful advantages that transparency can offer while at the same time carefully considering the disadvantages and limitations (including statutory barriers) of some forms of disclosure. Importantly, the paper reflected a clear distinction between simply making information available – which could in some cases cause confusion and have a negative impact – and publishing information in a way that improves how markets function by providing useful clarification.

FSA on transparency for credit institutions

  • 1.3 We have previously observed that high quality disclosure by CIs is an important factor in fostering market confidence.2 The onset of the financial crisis raised questions about financial reporting disclosures, particularly for complex financial instruments held by CIs. Some market participants were concerned – especially in the earlier stages of the financial crisis − that CIs’ published accounting figures did not capture the reality of emerging problems, which damaged market confidence.
  • 1.4 A wide range of other stakeholders including the House of Commons Treasury Committee, the Bank of England and the International Monetary Fund have also commented on CI disclosures or CIs’ financial reporting in general.
  • 1.5 DP09/5 reflected on the issues arising from these and other factors, and set out potential ways to enhance CI disclosures. At the core of DP09/5 was the discussion of whether CI disclosures could be enhanced by using prescribed templates or by applying a voluntary code of disclosure, based on principles and supplementary guidance. In this regard, the British Bankers’ Association (BBA) developed a draft Code for Financial Reporting Disclosure (the draft BBA Code, which we included as an annex in DP09/5) and the UK’s largest CIs – Barclays plc, HSBC Holdings plc, Lloyds Banking Group plc, Nationwide Building Society, Santander UK plc (formerly Abbey National plc), Standard Chartered plc and The Royal Bank of Scotland Group plc – agreed to implement the Code in their 2009 annual reports.
  • 1.6 DP09/5 also discussed and raised questions about other topics related to disclosure, including Pillar 3 reports, regulatory returns, standardised Key Performance Indicators (KPIs) and quarterly reporting.

CESR on corporate bond, CDS and structured product transparency

The Committee of European Securities Regulators recommends the Commission to introduce a mandatory trade transparency regime for non-equity markets 10 Jul. 2009

CESR publishes today its final report (Ref. CESR/09-348) and feedback statement CESR/09-349) on the transparency of corporate bond, structured finance product and credit derivatives markets.

CESR is of the view that current market-led initiatives have not provided a sufficient level of transparency.

CESR considers that an increased level of transparency would be beneficial to the market and that a harmonised approach to post-trade transparency would be preferable to national initiatives taken in this area on the basis of the flexibility allowed by MiFID.

CESR has therefore considered it necessary to inform the European Institutions on the main conclusions reached in its report and to recommend the adoption of a mandatory trade transparency regime for corporate bond, structured finance product and credit derivatives markets as soon as practicable.

IOSCO publishes principles for periodic disclosure

The Technical Committee of the International Organization of Securities Commission (IOSCO) has published a final report – Principles for Periodic Disclosure by Listed Entities (Periodic Disclosure Principles) – that includes a set of recommendations for disclosures that could be provided in the periodic reports, particularly annual reports, of listed entities whose securities are listed or admitted to trading on a regulated market in which retail investors participate.

The Periodic Disclosure Principles also cover other issues related to periodic disclosure, such as the timeliness of disclosures, disclosure criteria and storage of information.

The report is available on the IOSCO website.


The Periodic Disclosure Principles are intended to provide a useful framework for securities regulators that are reviewing or revising their regulatory disclosure regime for periodic reports.

The Periodic Disclosure Principles provide guidance to securities regulators for use in developing or reviewing their disclosure regimes for the periodic reports of listed entities with securities listed or admitted to trading on a regulated market in which retail investors participate. These periodic reports enhance investor protection by providing relevant information which facilitates investor decision-making, allow investors to compare the performance of the same company over regular intervals and enable investors to make comparisons between different companies.

These principles form part of IOSCO’s ongoing work to develop principles for disclosure by issuers of listed securities to investors in the public capital markets. These proposed principles complement IOSCO’s existing disclosure principles which provide guidance for:

  • International Disclosure Standards for Cross-Border Offerings and Initial Listings by Foreign Issuers, September 19981
  • International Disclosure Principles for Cross-Border Offerings and Listings of Debt Securities by Foreign Issuers, March 20072; and
  • Principles for Ongoing Disclosure and Material Development Reporting by Listed Entities, October 20023.

Principles for the Periodic Disclosure by Listed Entities

The following principles have been identified as essential for any periodic disclosure regime:

  1. Periodic reports should contain relevant information;
  2. For those periodic reports in which financial statements are included, the persons responsible for the financial statements provided should be clearly identified, and should state that the financial information provided in the report is fairly presented;
  3. The issuer’s internal control over financial reporting should be assessed or reviewed;
  4. Information should be available to the public on a timely basis;
  5. Periodic reports should be filed with the relevant regulator;
  6. The information should be stored to facilitate public access to the information;
  7. Disclosure criteria;
  8. Equal access to disclosure; and
  9. Equivalence of disclosure

IOSCO on post-trade transparency of structured products

II.B. Benefits of enhanced post-trade transparency (Section 4.1 of the Consultation Report)

Improved price discovery and reduction of information asymmetries

Some respondents focused on the information asymmetry between the buy-side and sell-side. One respondent noted that sell-side sees a much larger volume of trading, and can use this information to the detriment of the buy-side. Another respondent argued that the lack of post-trade transparency helps to extend the market dislocation that recently occurred, as participants were fearful of being gamed by other market participants and had no way of determining market prices.

One respondent stressed that an analysis should be done to ensure that regulatory objectives/benefits are appropriately balanced with market quality objectives. This respondent stated that some potential benefits include:

  1. the ability to monitor quality and consistency of executions as well as valuations;
  2. the ability to monitor for risk build-ups at specific firms;
  3. the possibility to identify and study apparent correlations and/or market impacts between trading of a particular SFP and another product; and
  4. the ability to develop an audit trail of transactions to detect instances of market abuse. This respondent also stressed the value in conducting studies during times of market stress as well as during more normal periods.

One respondent supported the publication of trade information on a periodic basis and further supported the use of time frames similar to those contained in the FINRA TRACE feed and Xtracter TRAX feed (intervals of less than one hour).

Valuation of products and portfolios

One respondent stated that the report should more directly address the accounting issues that could arise if post-trade transparency regimes are mandated, such as the use of prices available through reporting systems when such prices may not be an accurate reflection of current market values.

On the other hand, one respondent noted the current difficulties faced in making mark-to-market valuations of SFPs, and argued that increased post-trade transparency would encourage improvements in valuation methodologies, while another mentioned the importance of prices for risk management processes.

One respondent noted that the difficulty in valuing SFPs is making it more difficult for asset managers to comply with their fiduciary duties. Another respondent stated its belief that post-trade transparency would facilitate the price discovery process and would assist those who prepare financial statements in meeting reporting and disclosure requirements.

CESR - Waivers from pre-trade transparency under MiFID

The Markets in Financial Instruments Directive (MiFID) allows competent authorities to waive the obligation for operators of Regulated Markets and Multilateral Trading Facilities (MTFs) regarding pre-trade transparency requirements for shares1 in respect of certain market models, types of orders and sizes of orders. MiFID allows competent authorities to grant four types of waivers which are contained in Articles 18 and 20 of the Commission Regulation 1287/2006 (MiFID Implementing Regulation). Possible waivers apply to:

  • Systems where the price is determined by reference to a price generated by another system. This waiver can be granted only for systems where the reference price is widely published and regarded generally by market participants as a reliable reference price. Systems that formalise negotiated transactions, provided the transaction:
  • Takes place at or within the current volume-weighted spread reflected on the order book or the quotes of market makers in that share or, where the share is not traded continuously, within a percentage of a suitable reference price set in advance by the operator of the Regulated Market or MTF; or
  • Is subject to conditions other than the current market price of the share (e.g. a volume weighted average price transaction). Orders that are held in an order management facility maintained by a Regulated Market or MTF pending those orders being disclosed to the market. Transactions which are large in scale. An order shall be considered to be large in scale compared with normal market size if it is equal to or larger than the minimum size of order specified in Table 2 in Annex II of the MiFID Implementing Regulation.
  • Where an operator of a Regulated Market or an MTF seeks to rely on a pre-trade transparency waiver, the arrangements will be considered at CESR level at the initiative of the relevant CESR Member. This is consistent with CESR‟s role to achieve supervisory convergence and is without prejudice to any policy work that CESR might conduct in this area. CESR‟s consideration of the arrangements covered in this document has been based solely on the information provided to it by the relevant CESR Member. According to the existing legal framework, the responsibility for the final decision on the waivers lies with the national competent authorities.

Shining light on the "shadow financial system"

This same shadow financial system is now at the heart of the global financial crisis. It shields from view and from accurate appraisal the depths of the global problem with subprime mortgages and other collateralized debt obligations, credit default swaps, derivatives contracts, and more.

Lending has nearly collapsed, since financial institutions are unable to discern the quality of assets of those needing funds. Lack of transparency in the global financial system affects rich and poor countries alike. This may be a first in modern history, where the same economic phenomenon impacts the haves and have nots in similar proportions.

Solutions to the current crisis highlight the need for improved regulation and greater transparency. In commentary to date, much more emphasis has been given to strengthening financial regulation, while meaningful improvements in global transparency are seldom mentioned. We believe this is precisely the wrong balance. We believe that much more can be accomplished through transparency than through regulation.

While regulation simply tries to provide a tighter set of rules governing financial transactions, transparency requires that the shadow financial system itself be largely dismantled. The Task Force on Financial Integrity and Economic Development advocates five priorities in addressing the current global financial crisis, each one focusing on transparency and extending initiatives that have already begun to be put into place:

  1. Curtailment of mispricing in trade imports and exports;
  2. Country-by-country accounting of sales, profits, and taxes paid by multinational corporations;
  3. Confirmation of beneficial ownership in all banking and securities accounts;
  4. Automatic cross-border exchange of tax information on personal and business accounts;
  5. Harmonization of predicate offenses under anti-money laundering laws across all Financial Action Task Force cooperating countries.

Thus, transparency means public records, multiple oversight mechanisms to review financial structures, a genuine curtailment of tax-evading activities, and trade conducted without disadvantaging weaker nations. Through transparency the shadow financial system, currently moving upwards of one trillion dollars a year of illicit money out of developing countries, will be contained. This will result in 80 percent of the world’s 6.5 billion people being able to participate in a free-market system that is not biased against them.

Transparency means that economic prosperity has a chance of becoming a reality for all.

However, we are deeply concerned that what appears to be a focus on “stabilizing” the financial system could in fact mean maintaining the status quo, merely accompanied by improvements around the regulatory edges. In resolving the current financial crisis, the interests of developed and developing countries should be identical—elimination of the realities that caused the global meltdown. This requires, not adjustments, but sharp curtailment of the shadow financial system at the heart of the crisis. Resolving this issue must be the key concern in rebuilding the global free-market system.

Tenth day of the spring and autumn sittings

(1) There be laid on the table, by each minister in the Senate, in respect of each department or agency administered by that minister, or by a minister in the House of Representatives represented by that minister, by not later than the tenth day of the spring and autumn sittings, a letter of advice that an indexed list of the titles of all relevant files, including new parts of existing files, created in the preceding six months commencing on 1 January and on 1 July, respectively, has been placed on the Internet.

(2) Each department and agency shall provide, on its Internet home page, access to an indexed list of the titles of all relevant files, including new parts of existing files, created from 1 January 1998 in the central office of that department or agency (departments and agencies may choose to maintain online an indexed list of all new files created from that date or to maintain online an indexed list of, as a minimum, the most recent year’s file creations).

(3) For the purposes of this resolution:

"autumn sittings"means the period of sittings of the Senate first commencing on a day after 1 January in any year;

"indexed list"means a list in which file titles may be grouped by classifications used internally within departments or agencies, such as "policy", "legislation", "advisings", etc.

"relevant files" includes files relating to the policy advising functions of the department or agency, including any relating to the development of legislation and other matters of public administration, but need not include:

(a) files transferred to the Australian Archives;

(b) case related files (e.g., personal representations or dealing with the personal affairs of departmental or agency clients or taxpayers); and

(c) files essentially related to the internal administration of the department or agency (e.g., staff or personnel matters);

"spring sittings" means the period of sittings of the Senate first commencing on a day after 31 July in any year; and

"title" means the name or title of the file, excluding any part of that name or title which would necessarily disclose commercially confidential, identifiably personal or national security matters.

(4) This order is of continuing effect.

(30 May 1996 J.279, amended 3 December 1998 J.265 )

What is the Corruption Perceptions Index?

The Corruption Perceptions Index (CPI) measures the perceived level of public-sector corruption in 180 countries and territories around the world. The CPI is a "survey of surveys", based on 13 different expert and business surveys.

Financial Secrecy Index

Secrecy is a central feature of the global financial system. Jurisdictions compete with each other to provide it, in order to attract financial flows – with appalling effects elsewhere. It is essential to identify the worst culprits in providing this secrecy. But nobody has ever tried to do this in a systematic, objective way – until now.

The Financial Secrecy Index (FSI) creates a ranking which identifies the jurisdictions that are most aggressive in providing secrecy in international finance, and which most actively shun co-operation with other jurisdictions. It attaches a weighting to each jurisdiction, according to the scale of cross-border financial services activity that it hosts.

The two measures – the opacity score, and the weighting, are combined to create the Financial Secrecy Index. Nothing like this has been done before.

Click here for the ranking and the supporting data...

What the Index reveals

Most of the jurisdictions listed in the FSI have been described as tax havens. There is a tendency to think of the secrecy providers as “sunny places for shady people” - palm fringed Caribbean islands filled with shady law firms, luxury yachts and the brass plates of anonymous shell companies.

The FSI reveals a much bigger story. The major global players in the supply of financial secrecy are mostly not tiny, isolated islands, but rich nations operating their own specialised jurisdictions of secrecy, often with links to smaller ‘satellite’ jurisdictions which act as conduits for illicit financial flows into the mainstream capital markets.

Secrecy jurisdictions

What is a secrecy jurisdiction?

The definition of a secrecy jurisdiction is in three parts. This reflects the complexity of what they do.

Firstly, secrecy jurisdictions are places that intentionally create regulation for the primary benefit and use of those not resident in their geographical domain.

This is important. To be a secrecy jurisdiction a place must deliberately create law that can be used by people who are not resident in its own territory. Or, to put it another way, it must deliberately create laws that wholly or mainly relates to activities that take place ‘elsewhere’ as far as it is concerned.

Secondly, we say secrecy jurisdictions deliberately design the regulation they create for use by people who do not live in their territories so that it undermines the legislation or regulation of another jurisdiction.

Again, we think this important because. It’s one thing to create laws that help people who are not resident in your country. As a matter of fact many countries will do that, to encourage tourism for example. The difference this part of the definition suggests is that this legislation has what we would consider malicious intent: it is designed to undermine the rule of law in another country. That is a serious allegation to make.

Thirdly, we argue that to assist those from other places who want to make use of the laws that a secrecy jurisdiction provides those secrecy jurisdictions also create a deliberate, legally backed veil of secrecy that ensures that those from outside the jurisdiction making use of its regulation cannot be identified to be doing so.

This last point is no minor issue: by suggesting this we are saying that secrecy jurisdictions knowingly assist people from outside their domains break the law in the places where they live and make it as hard as possible for that law breaking to be discovered. As such we are suggesting that those secrecy jurisdictions are complicit in the law breaking process.

US transparency initiatives

Lawmakers strip SEC power to keep secrets

Ten weeks after enacting the Dodd-Frank regulatory overhaul legislation, President Barack Obama has deleted a provision that protected the Securities and Exchange Commission from a federal open-government law.

Mr. Obama yesterday signed a bill that repealed SEC exemptions from the Freedom of Information Act contained in the reform measure. Under Dodd-Frank, the SEC was allowed to refuse to disclose information it obtained while conducting surveillance, risk assessment or other oversight work.

The agency said that it needed the FOIA waiver to reassure investment advisers and companies that information it gathers would not fall into the hands of competitors. Critics of the exemptions said that they would undermine SEC accountability by giving the agency more latitude to decline FOIA requests.

“This new law will ensure that the Freedom of Information Act remains an effective tool to provide public access to information about the stability of our financial markets,” Sen. Patrick Leahy, D-Vermont, chairman of the Senate Judiciary Committee, said after House passage of the repeal bill on Sept. 23.

The Senate approved the measure on Sept. 21. Both the House and Senate votes were unanimous.

The scope of SEC oversight extends to private investment funds under Dodd-Frank. In House testimony last month, SEC Chairman Mary Schapiro said current exemptions don't cover non-financial firms, such as private-equity and hedge funds, the agency must now monitor.

The bill Mr. Obama signed “specifies that that any entity regulated by the SEC is a ‘financial institution' for purposes of Freedom of Information Act exemption,” according to a White House statement.

The bipartisan support for the repeal bill demonstrates the qualms that members of Congress had over the extra FOIA allowances given to the SEC. But the matter has not been settled.

Rep. Israel introduces the Public Online Information Act

IN THE LAST scene of "Raiders of the Lost Ark," a clerk wheels the crated Ark of the Covenant into a cavernous government warehouse, destined to be lost among endless rows of nondescript boxes. The film's protagonist, Indiana Jones, mutters: "Fools, bureaucratic fools. . . . They don't know what they've got there."

As far as we know, the U.S. government isn't in possession of the Ark. But it is the repository for valuable information that is often stowed away in some agency basement or federal warehouse, inaccessible to most Americans. Although more public information is posted online than ever, there is no law that requires this. Rep. Steve Israel (D-N.Y.), who alluded to the Indiana Jones movie during a recent news conference, hopes to change that.

Mr. Israel has introduced the Public Online Information Act (POIA), a sensible and modest bill that could nevertheless be a catalyst for important changes in how the federal government thinks about and handles public information. It could also lead to greater transparency in the workings of the government.

If government information is not posted online, Mr. Israel asserts, then it should not be considered truly "public." Or, in the words of the Sunlight Foundation, a nonprofit good-government group that helped Mr. Israel with the legislation, "public equals online."

Under the proposed law, information generated by executive agencies and deemed public must be posted online. Documents would be linked to a searchable catalogue, making it easier for users to locate pertinent information. The legislation appropriately preserves protections for sensitive information already exempt from disclosure, including that which touches on national security, personal privacy or trade secrets.

The Office of Management and Budget and the chief information officers of agencies would be responsible for establishing rules to govern postings; agencies would be given three years to get the structures in order. Documents that are created and deemed public after the three years elapse must be displayed online.

The bill has limitations. Public information generated by Congress, including real-time lobbying registrations, is exempt from the mandatory provision, as are public filings within the judicial branch. These concessions were made to boost the chances of passage, but they must be addressed in the future if the goal of government-wide transparency is to be achieved.

US Treasury announces "Open Government Plan"

"As part of a commitment to increase transparency in government and maintain accountability of taxpayer dollars, the U.S. Department of the Treasury today announced an open government effort that will increase public access to data and information. Under this initiative, Treasury has compiled and will now make available new data on tax returns, more user friendly information on transactions under the Troubled Asset Relief Program (TARP), and a new report on bank trading and derivatives.

"This government-wide effort is the next step in creating the conditions for a permanent culture of openness," said Dan Tangherlini, Assistant Secretary for Management. "As we continue to build a new foundation for our economy through the implementation of financial and economic recovery policies, we remain committed to creating a new foundation of transparency and openness in government practice."

Treasury's open government effort includes making publicly available the following sets of information and reports:

  • New Data on Tax Returns. For the first time, Treasury has released Internal Revenue Service (IRS) Statistics of Migration Data. This data set shows migration patterns of tax filers moving across country and state lines. This free information will be of use to local officials, real estate developers, business planners, and researchers.
  • New Format for TARP Transaction Report. Treasury's Office of Financial Stability releases a TARP Transaction Report for every new TARP transaction including investments made and funds repaid. In an effort to make the reports more user-friendly, they will now be available in XML format for easy sorting of data.
  • Quarterly Report on Bank Trading and Derivatives. This new report, made available by the Office of the Comptroller of Currency, provides information on the federal government's supervision of banks as well as the investment activities of financial institutions.

Yesterday, the White House issued an Open Government Directive requiring federal agencies to take immediate, specific steps to open their operations to the public. Called for by President Obama on his first full day in office, the Open Government Directive puts accountability and accessibility at the center of how the federal government operates and sets an unprecedented standard for government agencies, insisting that they achieve key milestones in transparency, collaboration, and participation.

  • US government's transparency initiative

Request to open GSE political documents to review

Judicial Watch, the public interest group that investigates and prosecutes government corruption, announced today that it has filed a new motion in its Freedom of Information Act (FOIA) lawsuit against the Federal Housing Finance Agency (FHFA) that would force the Obama administration to release documents related to political contributions made by the mortgage giants Fannie Mae and Freddie Mac. According to the FHFA, Fannie Mae and Freddie Mac might possess documents responsive to Judicial Watch's initial FOIA request; however, the agency claims it is not obligated to release such documents to the public. Judicial Watch maintains that since Fannie Mae and Freddie Mac are now wholly operated by the federal government they are subject to FOIA law.

Judicial Watch filed its original FOIA request on May 29, 2009. The FHFA acknowledged receipt of Judicial Watch's FOIA request July 1, 2009. The agency claimed that while Fannie Mae and Freddie Mac might possess the requested documents, the FHFA was not obligated to release them under FOIA because the agency does not "control" them. As noted in a recent Obama administration court filing: "...Any records created by or held in the custody of the Enterprises [Fannie Mae and Freddie Mac] reflecting their political campaign contributions or policies, stipulations and requirements concerning campaign contributions necessarily are private corporate documents. They are not 'agency records' subject to disclosure under FOIA."

According to Judicial Watch's motion filed on March 5, 2009, Fannie and Freddie are no longer private enterprises, and therefore their records are subject to FOIA law:

"At issue in this Freedom of Information Act ('FOIA') lawsuit is whether FHFA, the federal agency that has custody and control of the records of Federal National Mortgage Association ('Fannie Mae') and Federal Home Loan Mortgage Company ('Freddie Mac'), must comply with a FOIA request for records relating to those previously independent entities. Until they were seized by FHFA in September 2008, Fannie Mae and Freddie Mac were private corporations with independent directors, officers, and shareholders. Since that time, FHFA, a federal agency subject to FOIA, has assumed full legal custody and control of the records of these previously independent entities. Hence, these records are subject to FOIA like any other agency records."

Disclosures for stock buybacks

Here is the abstract:

Publicly traded companies distribute cash to shareholders primarily in two ways - either through dividends or through anonymous repurchases of the companies' own stock on the open market. Companies must announce a repurchase authorization, but do not actually have to repurchase any stock, and until recently did not have to disclose whether or not they were in fact repurchasing any stock. Scholars and regulators noticed that companies frequently announced repurchases but then appeared not to complete them.

Scholars and regulators became concerned that such announcements might be used by insiders to exploit public investors. To increase transparency and reduce opportunities for exploitive behavior, the SEC required that companies disclose their repurchase activity for the past quarter in their 10-Q and 10-K filings beginning in January 2004. This paper tracks the 365 repurchase programs announced in 2004 and finds that since the SEC disclosure requirement went into effect, companies are more likely to complete their announced repurchases and do so within a shorter time period after the repurchase announcement.

Source: Securities Law Prof Blog

GAO on "Electronic Government"

Highlights of GAO-10-365, a report to congressional committees

What GAO Found

The Federal Funding Accountability and Transparency Act of 2006 (FFATA) is intended to increase the transparency of and accountability for the over $1 trillion that federal agencies award each year in contracts, loans, grants, and other awards. Among other things, the act required the Office of Management and Budget (OMB) to establish, no later than January 1, 2008, a publicly accessible Web site containing data on federal awards. The act also authorized OMB to issue guidance to federal agencies on reporting award data and instructs agencies to comply with that guidance.

OMB launched the site ( in December 2007. GAO’s objectives were to determine the extent to which:

  1. OMB is complying with FFATA requirements to make federal award data available,
  2. federal agencies are reporting required award data, and
  3. inconsistencies exist between data on the Web site and records at federal agencies. To do this, GAO reviewed FFATA requirements and OMB guidance, interviewed OMB and agency officials, and examined a sample of awards reported to OMB.

What GAO Recommends

GAO is recommending that OMB, among other things, include all required data on the site, ensure complete reporting, and clarify guidance for verifying agency-reported data. In comments on a draft of this report, OMB generally agreed with GAO’s findings and recommendations.

OMB has taken steps to comply with the requirements of FFATA; of nine requirements GAO reviewed, OMB has satisfied six and partially satisfied one. For example, it established a publicly accessible Web site containing data on federal awards that allows searches of data by all required data elements and provides for totals and downloadable data. However, OMB has only partially satisfied the requirement to conduct a pilot program on collecting subaward data beginning no later than July 2007—two pilot programs began in 2008, after the statutory deadline. OMB has not yet satisfied two requirements.

First, it has not included subaward data on the Web site, which was required by January 2009, and it does not have a specific plan in place for collecting and reporting such data. Until OMB ensures that subaward data are included on the site, it is not fully meeting its requirements under FFATA and the usefulness of the information on the site will be limited.

Second, OMB has yet to submit a required annual report to Congress detailing the use of the site and the reporting burden placed on award recipients. However, OMB officials stated that they are collecting the necessary information and plan to issue the report in 2010.

While currently contains required fiscal year 2008 information on federal assistance awards from 29 agencies, 9 agencies did not report a total of 15 awards. These agencies, which include the Department of the Treasury and the U.S. Election Assistance Commission, stated that they plan to report future awards as required. Nevertheless, OMB has not implemented a process to identify nonreporting agencies as originally planned and instead has relied on agencies’ voluntary compliance with OMB guidance to ensure complete and accurate reporting. Without a more effective approach to ensuring that all agencies report applicable awards, the utility of will be impaired by gaps in the required information.

In a random sample of 100 awards, GAO identified numerous inconsistencies between data and records provided by awarding agencies. Each of the 100 awards had at least one required data field that was blank or inconsistent with agency records—or for which agency records lacked sufficient information to evaluate their consistency with data on

The most common data fields with inconsistencies or omissions included titles describing the purpose of the award and the city where award-funded work was to be performed. These errors can be attributed, in part, to a lack of specific OMB guidance on how agencies should fill in these fields and how they should perform the required validation of their data submissions.

In addition, publicly available information that OMB provides on the completeness of agency-provided data does not address a required data field relating to the city where work for the award was to be performed. Until OMB and agencies better ensure that complete and accurate information is included on, the Web site will be limited in providing the public with a view into the details of federal spending.

GAO 'Integrity Committee's' review of US Inspector General's

Department of Justice (DOJ) to determine whether, if substantiated they would constitute a violation of federal criminal law. If a criminal investigation is warranted the Public Integrity Section refers the matter to the appropriate law enforcement agency. The Integrity Committee reviews all allegations of administrative misconduct that are not criminal in nature to determine if they fall within its jurisdiction, and if so the Committee may perform an administrative investigation or take steps to close the matters.

We reviewed case files for 165 allegations that the Integrity Committee opened and closed during calendar years 2005 through 2007 and found that the Committee’s activities were consistent with the requirements of Executive Order No. 12993 and the Committee’s implementing policy and procedures. The Integrity Committee received allegations about IGs and their staff in 35 separate federal agencies and entities. The nature of the wrongdoing reported in the allegations involved seven areas of alleged misconduct that included the failure to investigate certain matters, and the mismanagement, waste, and abuse of government resources. DOJ determined that none of these allegations warranted a criminal investigation.

The Integrity Committee reviewed the allegations for administrative misconduct and determined that 93 of the 165 allegations were within its jurisdiction because they alleged wrongdoing by an IG or an IG staff member acting with the knowledge of the IG. For those allegations within its jurisdiction, the Integrity Committee conducted 2 separate investigations that addressed 41 allegations. The Integrity Committee closed the remaining 52 allegations within its jurisdiction

  1. because the matters were within the IG’s discretion to decide where to apply audit and investigative resources,
  2. after additional information was obtained indicating a lack of evidence of wrongdoing,
  3. after referral of allegations to the responsible IG for action when no indication of wrongdoing is determined, or
  4. after referral of the allegations to an agency with jurisdiction.

In addition, the Integrity Committee determined that 72 allegations were outside its jurisdiction because they involved lower level IG staff or agency officials, and failed to demonstrate administrative misconduct against an IG or IG staff member acting with the knowledge of the IG.

The Reform Act continues the functions carried out by the Integrity Committee under Executive Order No. 12993 but with the permanence of statute. In addition, the Reform Act provides new guidance and greater transparency over the Committee’s activities. Specifically, the Reform Act requires

  • IGs to annually designate the positions of staff subject to Integrity Committee review;
  • the Integrity Committee to establish policies and procedures necessary to ensure fairness and consistency in its investigations, such as providing the person under investigation the opportunity to respond, which may help to facilitate the Committee’s investigations; and
  • the Integrity Committee to provide the results of its investigations to congressional committees, agency heads, and the President shortly after completion, and to annually report by December 31 to Congress and the President on certain activities during the preceding fiscal year as specified by the act, which significantly enhances transparency of the Committee’s process.

In addition, the Integrity Committee has revised its policy and procedures to implement the Reform Act. Among other things, its revised policy changed the definition of administrative misconduct so that it includes the review of conduct so serious that it may undermine the independence or integrity reasonably expected of an IG or senior IG staff member.


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