[DRAFT #1] Repeal GA#633 "IIRP"

[Tinhampton]

Character count: 3,326
Word count: 519

Alexander Smith, Tinhamptonian Delegate-Ambassador to the World Assembly: I have several concerns about the target resolution. I believe that this would be one of the more broadly agreeable ones.
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Repeal "Independent investment Research Protocol"
A resolution to repeal previously passed legislation.

Category: Repeal

Target: GA#633

Proposed by: Tinhampton

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General Assembly Resolution #633 “Independent investment Research Protocol” (Category: Free Trade; Strength: Mild) shall be struck out and rendered null and void.

Observing Article 3b of GA#633, which forbids participants in cases concerning "any published investment research" (hereinafter "PIR") in "any member state" from including "the direction of any proprietary or client positions taken by any institution" in their evidence,

Recognising that, in certain cases (hereinafter "illegal investments"), investments can be used in clear violation of either domestic law (such as investing in a business whose sole purpose is to extract fossil fuels where the member state in question requires all investors to divest from such investments) or World Assembly law (such as investing in a business in a member state which is being sanctioned under Article IV.4 of GA#440 "Administrative Compliance Act" and for which there is no reason under currently-active laws passed before GA#440 to invest in it),

Concerned that, where an investor in a certain member state makes illegal investments as a result of PIR intended purely for domestic consumption whose authors were directed to recommend such investments in their PIR, there is no means of bringing to justice any entity involved with that PIR via that member's courts (particularly on the grounds that the entity recommended those investments and thus encouraged domestic investors to violate laws), but instead only via some court of the WA,

Affirming that the only WA courts currently in existence are those of the World Assembly Judiciary Committee, who may only accept cases about such directions where the plaintiff is proven to have been harmed by them (per Article 4 of GA#466 "World Assembly Justice Accord"), an obviously difficult barrier to reach given the difficulty of demonstrating that the harm would not have been caused in lieu of that direction,

Adding that - since only an institution can commission investment research and only analysts can write it, as per GA#633's definitions - this incentivises actors in member states wishing to violate WA sanctions to:

1. lobby their member state to introduce only wafer-thin regulations on analysts, their qualifications and financial institutions, because GA#633 requires member states to ensure that analysts are "regulated and qualified" and demands that an institution be "a financial institution regulated by at least one member state" without it or any other WA law defining how such regulation or qualification be attained,
2. create their own "financial institution" and pack its "research department" with their own hand-picked "analysts" once this has happened,
3. commission those analysts, via their financial institution, to write a report on how to make investments that violate WA sanctions, and to make it clear that they are supporting the position the institution is taking in favour of violating WA sanctions, and
4. have them publish that report, then distribute it to all qualified investors in that member state, and finally sit back and relax as droves of investors make corresponding investments that violate WA sanctions, and

Hopeful that this repeal will pave the way for improved future legislation which specifically aims at protecting investment research rather than shielding those who thus recommend illegal investments in the process...

The General Assembly hereby repeals GA#633 "Independent investment Research Protocol."

[Tinhampton]

Drafts containing substandard financial advice

[The Ice States]

As discussed with Tinhampton privately, I support this.

[Simone Republic]

As discussed with Tinhampton privately, I support this.

Do either one of you actually understand what this resolution does? Clauses 2, 3, 4 are all honest mistake violations. Actually clause 5 as well.

[The Ice States]

As discussed with Tinhampton privately, I support this.

Do either one of you actually understand what this resolution does? Clauses 2, 3, 4 are all honest mistake violations. Actually clause 5 as well.

If you want to challenge this proposal please post a separate challenge thread. Not that I understand how "2" (which I presume means the "Recognising" clause) even makes any claim about #633, how "Concerned" is a misrepresentation given the subsequent arguments, or how "Affirming" misrepresents the only resolution mentioned, #466, which factually does do what the clause claims. Without an argument I also don't see how "5" is illegal.

[Fachumonn]

As discussed with Tinhampton privately, I support this.

Do either one of you actually understand what this resolution does? Clauses 2, 3, 4 are all honest mistake violations. Actually clause 5 as well.

Maybe from your viewpoint, but looking at what's actually in the resolution I can't see it.

[Simone Republic]

Do either one of you actually understand what this resolution does? Clauses 2, 3, 4 are all honest mistake violations. Actually clause 5 as well.

Maybe from your viewpoint, but looking at what's actually in the resolution I can't see it.

It's based on Series 16 in the US which is a Master (graduate/postgraduate) level qualification. (I deliberately picked an extremely technical topic).

I am not saying that either Tin or Mage are acting in bad faith, I am saying that there's a lot of technicalities which Tin does not grasp simply because it deals with a very technical area of law, namely securities law dealing with the separation of research from investment banking and from investments. It's been pointed out before by Sanctaria that I wrote certain topics on maritime law which isn't even a subject available in universities in Ireland because Ireland does not have a tradition in running shipping registries.

I would not, for example, know how to operate on a patient with cancer since I have no training as a doctor, much less surgeon, much less an oncologist.

[The Overmind]

Maybe from your viewpoint, but looking at what's actually in the resolution I can't see it.

It's based on Series 16 in the US which is a Master (graduate/postgraduate) level qualification. (I deliberately picked an extremely technical topic).

I am not saying that either Tin or Mage are acting in bad faith, I am saying that there's a lot of technicalities which Tin does not grasp simply because it deals with a very technical area of law, namely securities law dealing with the separation of research from investment banking and from investments. It's been pointed out before by Sanctaria that I wrote certain topics on maritime law which isn't even a subject available in universities in Ireland because Ireland does not have a tradition in running shipping registries.

I would not, for example, know how to operate on a patient with cancer since I have no training as a doctor, much less surgeon, much less an oncologist.

Doesn't it then fall to, and behoove, you to actually explain what is wrong in plain English if you're going to write resolutions on the topic in a game populated largely by laypersons? I am a neuroscience researcher. I wouldn't write a resolution based on complex principles in neuroscience that I know even entry-level researchers struggle with, and then just ask people trying to repeal it if they even understand it.

[B1G JIM SLADE]

"Watcheng ze cool kids fight eez vairy éntairtainéng. Ai suppairt zis repéahl éffairt. Best of luck!"

[Simone Republic]

Doesn't it then fall to, and behoove, you to actually explain what is wrong in plain English if you're going to write resolutions on the topic in a game populated largely by laypersons? I am a neuroscience researcher. I wouldn't write a resolution based on complex principles in neuroscience that I know even entry-level researchers struggle with, and then just ask people trying to repeal it if they even understand it.

Reply entirely OOC:

I gave an overview in about 900 words (and longer than the actual resolution) in the actual basics of securities laws covering this area when I originally passed it, although I did not always explain line by line why each clause was written that way. It's more accessible if you read from the original explanation given, which I've copied in the next reply for convenience.

viewtopic.php?f=10&t=524869

There were some line-by-line explanations - for example, clause 1(b) and clause 3(a) were amended pursuant to your feedback (as Heavens Reach) over whether publishing neuroscience research and publishing investment research involved a "publish or die" mentality (both do, but it's not why I wrote clause 1(b) that way and I eventually changed it), and clause 3(a) was deliberate on my part to take the standard of libel up from a preponderance of evidence basis (as you mentioned) to beyond reasonable doubt as you asked specifically why I specified that standard. To quote what I said earlier in reply to you:

[T]he very high burden of proof is extremely deliberate and brings it up to the standard of US libel laws against politicians (hence my reference to NYT v Sullivan). It basically prevents cases (a number of jurisdictions are very prone to this) where analysts putting out "Sell" recommendations are frequently sued for spreading false information or libel just to silence them.

Do either one of you actually understand what this resolution does? Clauses 2, 3, 4 are all honest mistake violations. Actually clause 5 as well.

If you want to challenge this proposal please post a separate challenge thread. Not that I understand how "2" (which I presume means the "Recognising" clause) even makes any claim about #633, how "Concerned" is a misrepresentation given the subsequent arguments, or how "Affirming" misrepresents the only resolution mentioned, #466, which factually does do what the clause claims. Without an argument I also don't see how "5" is illegal.

Frankly, this was written 18 months ago, and in the intervening time period, I've become quite tired of aspects of this game and in particular, I find it tiresome (like many) the tactic of trying to repeal resolutions without even remotely understanding what the original resolution actually does or preparing an adequate replacement.

If this ever gets submitted, yes there will obviously be a legality challenge.

[Simone Republic]

This is copied from the top of the original resolution which I originally wrote 18 months ago:
viewtopic.php?f=10&t=524869

Simple background to this resolution

A quick explainer of what this resolution does (as it's admittedly a very technical topic although it concerns one of the few areas of securities law that is implemented globally - a bit of background to those who don't work in finance:
1. Investment banks publish what is called "investment research", which recommends that investors buy or sell stocks (or other financial instruments). (This is what you hear on news channels saying that "XYZ Bank recommends a BUY on a stock!" These are called "ratings".

All of these are written by investment analysts employed by investment banks and distributed globally. Investors anywhere in the world can receive ratings on US stocks, for example. There are also other ratings on bonds, funds and other financial instruments, or the direction of markets in general.

2. There are rules to ensure that the investment analysts are separated in their work from other departments in the same bank.

This was a direct result of the Enron scandal in 2000, when several banks vying for business with Enron were accused of pressuring their analysts to put "Buy" ratings on Enron stock, even as Enron was teetering towards collapse.

3. As a result, reforms were put in place to safeguard the independence of analysts, so that banks cannot pressure their analysts to put a favorable view on a stock to try to win business.

Indirectly, this proposal protects investors (from small to large investors) from getting biased or misleading opinions on stocks and other investments.

It also has a technical requirement applicable when analysts behave like journalists and write widely distributed that the standard of proof for libel is legally tightened, to make it harder for rich companies to sue to silence analysts.

Globally, the rest of the world adopted the principles called "IOSCO Statement of Principles for Addressing Sell Side Securities Analyst Conflicts of Interest", published by the International Organization of Securities Commissions, which is the global coordinator for securities regulators. This resolution basically imports the principles from the IOSCO Statement into the World Assembly (although the text is conceptually closer to Sarbanes-Oxley). It is a global issue as investment research is largely distributed globally.

Technical background to this resolution

This is a fairly technical proposal and assumes some background knowledge in governance requirements in independence in investment research.

Clause 1 is based off the Global Analyst Research Settlements in 2003 and it is also very roughly based on Title V of the Sarbanes-Oxley Act). It is significantly less stringent than the EU rules known as MIFID.

Globally it is a derivative of the IOSCO Statement of of Principles for Addressing Sell Side Securities Analyst Conflicts of Interest from the International Organization of Securities Commissions, although the US rules came earlier (largely due to the Enron and Worldcom scandals).

https://www.iosco.org/library/pubdocs/p ... OPD150.pdf

Clause 2 is based on the imposition of the US Supreme Court New York Times Co. v Sullivan standard on published opinions in research and basically requires an extremely high standard of proof for issuers from suing analysts for a negative opinion. (For those familiar with the topic, this is broadly similar to preventing SLAPP suits, but this time against analysts, not journalists).

Clause 1(c)(i) and Clause 2(c) together restrict short-sellers from being sued on the grounds that their analysis is taking the same direction as their proprietary position although they can still be sued on the grounds of actual malice. Clause 1(c)(ii) covers research published by nominated brokers in the UK and other jurisdictions that permit some form of indirectly paid research.

Why is this an international issue

I strongly consider this an international issue given that most investors (effectively, anyone with a retirement savings (or 401(k), occupational pension, superannuation) have some exposure to international bonds, equities, derivatives etc indirectly through their savings schemes and therefore benefit from global regulations on investment research, which significantly influences decisions made by investment managers on their behalf.

This issue is globally regulated in real life through MIFID II (for any institution doing business in the EU) and Global Analyst Research Settlements (and Series 16) for anyone doing business in the US. Indirectly it is globally recommended practice from the International Organization of Securities Commissions.

For our non-capitalist role regions

IC: I also consider this issue to be worthy of commendation to our democratic socialist/communist colleagues in WA since this imposes an additional burden of honesty on the part of investment banks, and that even if your WA member state is socialist, you may still have investments in other capitalist states and this will still indirectly protect you from investment banks playing games with ratings.