Regulation Hits the Big Screen
Regulation is always one of the top stories across the global financial sector. Market structure is constantly evolving and, as such, must be cautiously monitored by regulators around the globe. While regulatory issues are not exactly the most enthralling of discussion topics, I thought it would be fun to compare some of the big ones to films. Below you’ll find a little AFI (American Film Institute) and a little AIFMD (Alternative Investment Fund Managers Directive).
Dodd-Frank Act – Apocalypse Now
“I love the smell of regulation during a meltdown.” While that isn’t exactly the line Lieutenant Colonel Bill Kilgore famously proclaims in Francis Ford Coppola’s masterpiece, Apocalypse Now, it may have been what industry participants were muttering following the 2008 financial crisis (or not). The Dodd-Frank Wall Street Reform & Consumer Protection Act was engineered to combat issues that contributed to the financial crisis of 2008, and prevent such meltdowns from occurring again in the future. It has had a profound impact on the financial sector, but has gone through delays, changes and then some more delays. Apocalypse Now took Coppola so long to complete, he actually filmed The Godfather: Part II from beginning to end in the process. In the end, Apocalypse Now is still regarded as a cinematic masterpiece, looking at a soldier’s experiences during the Vietnam War. Both the film and the Dodd-Frank act experienced their fair share of delays, but both have garnered the results they intended.
Image source: imdb.com
MiFID – The Fast & The Furious Series
Much like the 538 different The Fast and The Furious movies (ok not quite that many), MiFID seems to just go on for centuries. The Markets in Financial Instruments Directive (MiFID) is a European Union directive that was designed to create greater transparency across the industry, regulating everything from where certain assets can be traded to the usage of various financial technology components. In many ways it can be perceived as Europe’s version of Dodd-Frank (although the two are not affiliated in any way). MiFID I was introduced in 2007, and mostly focused on equities trading. MiFID II was introduced in 2014, but has since been delayed a number of times. Now there is speculation that the third iteration of MiFID may take effect even sooner than MiFID II. It raises the question of “When will it end?” That’s the question that comes to my head when I think of The Fast & The Furious franchise. I understand each movie somehow makes more money than the Alibaba IPO, but where is the story going and when will it be over? EU managers continue to ask the same question.
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AIFMD – A Clockwork Orange
What could these two possibly have in common, you ask? Well for one, they both originated in Europe. Two, they both met some initial resistance. The Alternative Investment Fund Managers Directive (AIFMD), now nearly two years out from its introduction in July 2014, was not exactly welcomed with open arms immediately, but has successfully regulated hedge funds and alternative investment managers in Europe since its inception. Although it was widely acclaimed by most upon its release, A Clockwork Orange was viewed by some as very controversial. It is regarded as one of Stanley Kubrick’s best films and has been ranked as one of the greatest movies of all time. While AIFMD certainly does not have the lifespan of A Clockwork Orange or even the widespread acclaim, the overall reception has been positive, with the majority in agreement that it has been good for the industry. However, much like its cinematic counterpart, AIFMD will always be met with some negativity.
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Basel (I, II, III) – Star Wars (Episodes III, IV, V)
Much like the way Star Wars has become a staple in everyday pop culture, Basel has become a mainstay in everyday banking verbiage. The first iteration of Basel was introduced in the late 1980s to outline capital requirements for banks. It has since introduced additional regulations for the global banking sector, such as stress tests and risk management, through Basel II and III. If we discount the mistakes that were Jar Jar Binks and Hayden Christensen, we have two “trilogies” that are cornerstones of their respective industries. While we unfortunately won’t see members of Goldman Sachs or Morgan Stanley fighting off the SEC with light sabers anytime soon, ask them anything pertaining to regulatory and compliance issues and Basel is sure to come up. Similarly, ask any person who has ever seen a movie, and they can surely tell you who Luke Skywalker’s father is.
Image source: imdb.com
If you have any suggestions on financial regulations that remind you of a certain flick, please feel free to post your suggestions and/or thoughts here.