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[DEFEATED] Fair Depository Standards Act

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Lusane
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[DEFEATED] Fair Depository Standards Act

Postby Lusane » Tue Apr 09, 2019 2:51 am

Fair Depository Standards Act

Category: Regulation | Area of Effect: Customer Protection | Strength: Strong | Proposed by: Lusane

This legislation has been proposed to the World Assembly.





NOTING the World Assembly has a responsibility to ensure the vital protections of consumers in member nations.

BELIEVING an organizational body is essential to spearheading policy change in regards to the practices of financial institutions, investment brokerages, and lenders.

NOTICING a need to further legislation to regulate the practices of institutions that could render harm to a consumer's financial health.

SEEKING to protect from predatory practices of institutions; and further mandate regulation for standards expected to protect consumer deposits.

The World Assembly, therefore;

DEFINES financial institutions as public or private, physical or electronically controlled corporations or government institutions, licensed or unlicensed, according to regulations in the applicable member nation; in which qualifies under at least one of the following:

  1. transacts, trades, or holds funds for a consumer in relation to a deposit based account of any type.
  2. transacts, trades, or holds funds for a government or institution in relation to a deposit based account of any type.

DEFINES investment brokerages as public or private, physical or electronically controlled corporations or government institutions, licensed or unlicensed, according to regulations in the applicable member nation; in which qualifies under at least one of the following:

  1. with a purpose to hold or invest consumer funds in any brokerage with the intent to accrue dividends.
  2. with a purpose to hold or invest government funds in any brokerage with the intent to accrue dividends.
DEFINES lenders as public or private, physical or electronically controlled corporations or government institutions, licensed or unlicensed, according to regulations in the applicable member nation; in which qualifies under the following:

  1. issues collateralized credit products or loans in which a security interest in the form of currency is placed in a transactional account.

DEFINING financial institutions, investment brokerages, and lenders; hereinafter, collectively as “institutions”.

ESTABLISHES the Depository Regulators Committee (“DRC”), a regulatory body under the World Assembly to supervise and render inspections and audits of member nation institutions for direct compliance with regulation for the protection of the consumer;

ESTABLISHES that the DRC shall have the jurisdiction, with reasonable evidence to enact disciplinary actions, fines, or closures of institutions if they are found in violation of the provisions of this Act on a situational basis.

CLARIFIES that institutions will be permitted to appeal any disciplinary actions to an independent agency, and further, be permitted to submit evidence in their defense and provide reasoning for a circumstance in order to revert any action taken.

The World Assembly, therefore:

REQUIRES institutions to hold capital reserve equal to or above nine and one-half percent of their depositor's accounts total value, to limit consumer exposure to insolvency.

REQUIRES institutions to establish uniform disclosure conditions for interest accrued by and paid to consumers on depository accounts and collateralized holdings accounts.

  1. further: this provision shall require a statement made to the depositors upon account opening for applicable interest rates and how they are paid or accrued.

REQUIRES institutions to submit to random audits from the DRC, in response to an inquest brought by an applicable member nation.

PROHIBITS institutions from placing holds, freezes, or closures on depository accounts without reason.

REQUIRES institutions implement systems to combat data errors in regards to account ledgers and information.

REQUIRES institutions to keep accurate, up to date information for the institution's value, and share information with their depositors and the DRC in an annual report.

ENCOURAGES member nations to establish regulation in their jurisdiction to establish further consumer protections.



After battling with my wording and thinking of legislation that is currently in force with the World Assembly, I have completed this Act; to which I think could command meaningful change in member nations.

Category: Regulation -- Consumer Protection
Strength: Strong

Draft #1
The first working edition of the legislation, with no edits.
----------

Fair Depository Standards Act
An act designed to provide protections to consumers.

NOTING the World Assembly has a general responsibility to ensure the vital protections of consumers in applicable member nations.

BELIEVING an organizational body is essential to spearheading actual policy change in regards to the practices of financial institutions, investment brokerages, and lenders.

COMMENDING the World Assembly for its endeavors into consumer protection.

NOTICING no enacted legislation to regulate the operative practices of financial institutions, investment brokerages, and lenders; that could have a direct and irreparable harm to a consumer’s financial wellbeing.

SEEKING to protect consumers from predatory practices of financial institutions, investment brokerages, and lenders; and further mandate regulation in regards to standards expected within institutions, to protect the deposit of said consumers.


The World Assembly therefore;

DEFINES consumers as actual citizens, sole proprietorships, corporations, or businesses; rather they be registered or unregistered, according to laws and regulations in the applicable member nation.

DEFINES financial institutions as private and/or public, brick-and-mortar or electronically controlled corporations or government departments/institutions, rather licensed or unlicensed, according to laws and regulations in the applicable member nation; in which qualifies under at least one (“1”) of the following:

(1) holds deposits for consumers in transactional accounts, including but not limited to checking, savings, or money market variable accounts.
(2) holds deposits for governments in transactional accounts for treasury typed purposes.

DEFINES investment brokerages as public and/or private brick-and-mortar or electronically controlled corporations or government departments/institutions, rather licensed or unlicensed, according to the laws and regulations in the applicable member nation; in which qualifies under at least one (“1”) of the following:

(1) with a main purpose to hold and/or invest consumer funds in a brokerage based transactional account with the intent to accrue profits.
(2) with a secondary purpose to hold and/or invest government funds in an institutional and or brokerage based transactional account with the intent to accrue profits.
(3) is bound by the regulations mandated by the International Securities and Exchange Commission (ISEC) under General Assembly Resolution #401.

DEFINES lenders as public and/or private brick-and-mortar or electronically controlled corporations or government departments/institutions, rather licensed or unlicensed, according to the laws and regulations in the applicable member nation; in which qualifies under the following:

(1) issues collateralized credit products and/or loans in which a security interest in the form of currency is maintained in a transactional account, including but not limited to checking, savings, or money market variable accounts.

ESTABLISHES the Depository Regulators Committee, an independent regulatory authority under the World Assembly designed to supervise and carry out inspections and audits of member nation financial institutions, investment brokerages, and lenders for direct compliance with outlined regulation for the protection of the consumer;

Under it’s establishment, the Depository Regulators Committee (“DRC”) shall be directed by delegates and/or members of the World Assembly; and shall serve no more than two (“2”) terms of two (“2”) years in office.

ESTABLISHES that the Depository Regulators Committee shall have the power and jurisdiction, with reasonable evidence and findings to enact disciplinary actions, fines, penalties, and/or closures of financial institutions, investment brokerages, and lenders if they are found in violation of the provisions of this Act on a situational basis.

CLARIFIES that financial institutions, investment brokerages, and lenders will be permitted to appeal any disciplinary actions, fines, penalties, and/or closures to the Depository Regulators Committee; and further be permitted to submit evidence in their defense and provide reasoning for extenuating circumstances in order to revert any actions taken.


Affirming regulation appropriate to consumers in applicable member nations, which may or may not be involved in international cross border banking; the World Assembly, therefore:

REQUIRES financial institutions, investment brokerages, and lenders hold a capital reserve equal to or above twenty-five (“25”) percent of their depositor’s account’s total face value, in order to limit consumer exposure to insolvency and insure consumer deposits.

(a) further: the financial institution, investment brokerage, and/or lender may be required to forfeit this capital reserve in the event of insolvency and/or collapse to be paid to the depositor(s) equally to offset their loss.

REQUIRES financial institutions, investment brokerages, and lenders to establish uniform disclosing terms and conditions regarding interest accrued by and paid to consumers on depository accounts, and collateralized holdings accounts.

(a) further: this provision shall require a statement made to the depositor(s) upon account opening regarding any applicable interest rates and how they are paid and/or accrued.

REQUIRES financial institutions, investment brokerages, and lenders to submit to random generalized audits from the Depository Regulators Committee, in response to or in regards thereof an issue or inquest brought by an applicable member nation.

PROHIBITS financial institutions and investment brokerages from placing holds, freezes, and/or closures on consumer depository accounts without reason or due process.

PROHIBITS financial institutions, investment brokerages, and lenders from releasing depositor information without meeting one (“1”) of the following requirements;

(1) received written and/or verbal permission from the depositor(s)/account holder(s) to release information regarding the account to a specific individual or entity.
(2) are in possession of a court order demanding information in regards to a depositor(s)/account holder(s) from an applicable member nation.
(3) an inquest by the Depository Regulators Committee has been initiated, and the institution has been officially informed.

REQUIRES financial institutions, investment brokerages, and lenders implement systems that combat data errors and loss in regards to account ledgers and depositor(s) information.

REQUIRES financial institutions, investment brokerages, and lenders keep accurate and up to date information regarding their institution’s value, and share that information with their depositor(s) and the Depository Regulators Committee in an annual report.

REQUIRES financial institutions, investment brokerages, and lenders affirm their compliance with the provisions of General Assembly Resolution 35, Article 1, Section C.
Removed due to House of Cards, suggested by Maowi.

ENCOURAGES financial institutions, investment brokerages, and lenders to gain information through consumer reporting agencies to further verify the identities and motives of their depositor(s), and/or consumer(s).

ENCOURAGES member nations to build upon and establish more regulation and guidelines in their applicable jurisdictions to command meaningful financial regulatory change.

URGES member nations to scale consumer exposure to unregulated risks and potential loss.


------------


Draft #2
The second working edition of the legislation, edited to be under 5,000 characters.
----------
NOTING the World Assembly has a responsibility to ensure the vital protections of consumers in member nations.

BELIEVING an organizational body is essential to spearheading policy change in regards to the practices of financial institutions, investment brokerages, and lenders.

NOTICING no legislation to regulate the practices of institutions that could render harm to a consumer’s financial wellbeing.
NOTICING a need to further legislation to regulate the practices of institutions that could render harm to a consumer's financial health.

SEEKING to protect from predatory practices of institutions; and further mandate regulation for standards expected to protect consumer deposits.

The World Assembly therefore;

DEFINES consumers as citizens, sole proprietorships, corporations, or businesses; rather registered or unregistered, according to regulations in the applicable member nation.
Struck, seemingly unnecessary.

DEFINES financial institutions as public or private, physical or electronically controlled corporations or government institutions, licensed or unlicensed, according to regulations in the applicable member nation; in which qualifies under at least one of the following:

(1) holds deposits for consumers in transactional accounts.
(1) transactions, trades, or holds funds for a consumer in relation to a deposit based account of any type.
(2) holds deposits for governments in transactional accounts.
(2) transacts, trades, or holds funds for a government or institution in relation to a deposit based account of any type.

DEFINES investment brokerages as public or private, physical or electronically controlled corporations or government institutions, licensed or unlicensed, according to regulations in the applicable member nation; in which qualifies under at least one of the following:

(1) with a main purpose to hold or invest consumer funds in a brokerage account with the intent to accrue profits.
(1) with a purpose to hold or invest consumer funds in any brokerage with the intent to accrue dividends.
(2) with a secondary purpose to hold or invest government funds in a brokerage account with the intent to accrue profits.
(2) with a purpose to hold or invest government funds in any brokerage with the intent to accrue dividends.

DEFINES lenders as public or private, physical or electronically controlled corporations or government institutions, licensed or unlicensed, according to regulations in the applicable member nation; in which qualifies under the following:

(1) issues collateralized credit products or loans in which a security interest in the form of currency is placed in a transactional account.

DEFINING financial institutions, investment brokerages, and lenders; hereinafter, collectively as “institutions”.

ESTABLISHES the Depository Regulators Committee (“DRC”), a regulatory body under the World Assembly to supervise and render inspections and audits of member nation institutions for direct compliance with regulation for the protection of the consumer;

Under it’s establishment, the DRC shall be directed by delegates or members of the World Assembly; and shall serve no more than two terms of two years in office.
Struck, due to illegality.

ESTABLISHES that the DRC shall have the jurisdiction, with reasonable evidence to enact disciplinary actions, fines, or closures of institutions if they are found in violation of the provisions of this Act on a situational basis.

CLARIFIES that institutions will be permitted to appeal any disciplinary actions, fines, or closures to the DRC; and further be permitted to submit evidence in their defense and provide reasoning for circumstances in order to revert any actions taken.
CLARIFIES that institutions will be permitted to appeal any disciplinary actions to an independent agency; and further be permitted to submit evidence in their defense and provide reasoning for circumstance in order to revert any action taken.

Affirming regulation to institutions in applicable member nations, which may or may not be involved in cross border banking; the World Assembly, therefore:
Struck, replaced with below to allow for branching between member nations.
The World Assembly, therefore:

REQUIRES institutions hold capital reserve equal or above twenty-five percent of their depositor’s accounts total value, to limit consumer exposure to insolvency and insure deposits.
REQUIRES institutions hold capital reserve equal to or above nine and one half percent of their depositor's accounts total value, to limit consumer exposure to insolvency.

(a) further: the institution may be required to forfeit capital reserve in the event of insolvency or collapse to be paid to the depositors equally to offset their loss.
Struck, due to uselessness.

REQUIRES institutions to establish uniform disclosure conditions for interest accrued by and paid to consumers on depository accounts, and collateralized holdings accounts.

(a) further: this provision shall require a statement made to the depositors upon account opening for applicable interest rates and how they are paid or accrued.

REQUIRES institutions to submit to random audits from the DRC, in response to an inquest brought by an applicable member nation.

PROHIBITS institutions from placing holds, freezes, or closures on depository accounts without reason or due process.
PROHIBITS institutions from placing holds, freezes, or closures on depository accounts without reason.

PROHIBITS institutions from releasing depositor information without meeting one of the following requirements;

(1) received permission from the depositors to release information for the account to a specific individual or entity.
(2) in possession of a court order demanding the information of a depositor from an applicable member nation.
(3) an inquest by the DRC has been initiated, and the institution has been officially notified.

Struck, covered by the Privacy Protection Act.

REQUIRES institutions implement systems to combat data errors in regards to account ledgers and information.

REQUIRES institutions keep accurate, up to date information for the institutions value, and share information with their depositors and the DRC in an annual report.

ENCOURAGES member nations to establish regulation in their jurisdictions to command financial regulatory change.
ENCOURAGES member nations to establish regulation in their jurisdiction to establish further consumer protections.
----------


Draft #3
The third working edition of the legislation, edited after recommendations from Imperium Anglorum
----------
NOTING the World Assembly has a responsibility to ensure the vital protections of consumers in member nations.

BELIEVING an organizational body is essential to spearheading policy change in regards to the practices of financial institutions, investment brokerages, and lenders.

NOTICING a need to further legislation to regulate the practices of institutions that could render harm to a consumer's financial health.

SEEKING to protect from predatory practices of institutions; and further mandate regulation for standards expected to protect consumer deposits.

The World Assembly therefore;

DEFINES financial institutions as public or private, physical or electronically controlled corporations or government institutions, licensed or unlicensed, according to regulations in the applicable member nation; in which qualifies under at least one of the following:

(1) transacts, trades, or holds funds for a consumer in relation to a deposit based account of any type.
(2) transacts, trades, or holds funds for a government or institution in relation to a deposit based account of any type.

DEFINES investment brokerages as public or private, physical or electronically controlled corporations or government institutions, licensed or unlicensed, according to regulations in the applicable member nation; in which qualifies under at least one of the following:

(1) with a purpose to hold or invest consumer funds in any brokerage with the intent to accrue dividends.
(2) with a purpose to hold or invest government funds in any brokerage with the intent to accrue dividends.

DEFINES lenders as public or private, physical or electronically controlled corporations or government institutions, licensed or unlicensed, according to regulations in the applicable member nation; in which qualifies under the following:

(1) issues collateralized credit products or loans in which a security interest in the form of currency is placed in a transactional account.

DEFINING financial institutions, investment brokerages, and lenders; hereinafter, collectively as “institutions”.

ESTABLISHES the Depository Regulators Committee (“DRC”), a regulatory body under the World Assembly to supervise and render inspections and audits of member nation institutions for direct compliance with regulation for the protection of the consumer;

ESTABLISHES that the DRC shall have the jurisdiction, with reasonable evidence to enact disciplinary actions, fines, or closures of institutions if they are found in violation of the provisions of this Act on a situational basis.

CLARIFIES that institutions will be permitted to appeal any disciplinary actions to an independent agency; and further be permitted to submit evidence in their defense and provide reasoning for circumstance in order to revert any action taken.

The World Assembly, therefore:

REQUIRES institutions hold capital reserve equal to or above nine and one half percent of their depositor's accounts total value, to limit consumer exposure to insolvency.

REQUIRES institutions to establish uniform disclosure conditions for interest accrued by and paid to consumers on depository accounts, and collateralized holdings accounts.

(a) further: this provision shall require a statement made to the depositors upon account opening for applicable interest rates and how they are paid or accrued.

REQUIRES institutions to submit to random audits from the DRC, in response to an inquest brought by an applicable member nation.

PROHIBITS institutions from placing holds, freezes, or closures on depository accounts without reason.
REQUIRES institutions implement systems to combat data errors in regards to account ledgers and information.

REQUIRES institutions keep accurate, up to date information for the institutions value, and share information with their depositors and the DRC in an annual report.

ENCOURAGES member nations to establish regulation in their jurisdiction to establish further consumer protections.
----------


Draft #4
The fourth and current working edition of the legislation, edited for grammar corrections.
----------
NOTING the World Assembly has a responsibility to ensure the vital protections of consumers in member nations.

BELIEVING an organizational body is essential to spearheading policy change in regards to the practices of financial institutions, investment brokerages, and lenders.

NOTICING a need to further legislation to regulate the practices of institutions that could render harm to a consumer's financial health.

SEEKING to protect from predatory practices of institutions; and further mandate regulation for standards expected to protect consumer deposits.

The World Assembly, therefore;

DEFINES financial institutions as public or private, physical or electronically controlled corporations or government institutions, licensed or unlicensed, according to regulations in the applicable member nation; in which qualifies under at least one of the following:

  1. transacts, trades, or holds funds for a consumer in relation to a deposit based account of any type.
  2. transacts, trades, or holds funds for a government or institution in relation to a deposit based account of any type.

DEFINES investment brokerages as public or private, physical or electronically controlled corporations or government institutions, licensed or unlicensed, according to regulations in the applicable member nation; in which qualifies under at least one of the following:

  1. with a purpose to hold or invest consumer funds in any brokerage with the intent to accrue dividends.
  2. with a purpose to hold or invest government funds in any brokerage with the intent to accrue dividends.
DEFINES lenders as public or private, physical or electronically controlled corporations or government institutions, licensed or unlicensed, according to regulations in the applicable member nation; in which qualifies under the following:

  1. issues collateralized credit products or loans in which a security interest in the form of currency is placed in a transactional account.

DEFINING financial institutions, investment brokerages, and lenders; hereinafter, collectively as “institutions”.

ESTABLISHES the Depository Regulators Committee (“DRC”), a regulatory body under the World Assembly to supervise and render inspections and audits of member nation institutions for direct compliance with regulation for the protection of the consumer;

ESTABLISHES that the DRC shall have the jurisdiction, with reasonable evidence to enact disciplinary actions, fines, or closures of institutions if they are found in violation of the provisions of this Act on a situational basis.

CLARIFIES that institutions will be permitted to appeal any disciplinary actions to an independent agency, and further, be permitted to submit evidence in their defense and provide reasoning for a circumstance in order to revert any action taken.

The World Assembly, therefore:

REQUIRES institutions to hold capital reserve equal to or above nine and one-half percent of their depositor's accounts total value, to limit consumer exposure to insolvency.

REQUIRES institutions to establish uniform disclosure conditions for interest accrued by and paid to consumers on depository accounts and collateralized holdings accounts.

  1. further: this provision shall require a statement made to the depositors upon account opening for applicable interest rates and how they are paid or accrued.

REQUIRES institutions to submit to random audits from the DRC, in response to an inquest brought by an applicable member nation.

PROHIBITS institutions from placing holds, freezes, or closures on depository accounts without reason.

REQUIRES institutions implement systems to combat data errors in regards to account ledgers and information.

REQUIRES institutions to keep accurate, up to date information for the institution's value, and share information with their depositors and the DRC in an annual report.

ENCOURAGES member nations to establish regulation in their jurisdiction to establish further consumer protections.[/box]

----------


How is this issue the purview of the World Assembly?
Internationally, the World Assembly has the autonomous authority and a vital role to ensure protection to not only its member nations but their citizens. In a modern world, depository operations happen across borders and ensuring the same sweeping protections to consumers allows confidence in the financial system at work, and bodes well for an increase in domestic profit.

Additions, edits, and notes are GREATLY appreciated. Thank you for your time and consideration.
Last edited by Wrapper on Fri Apr 19, 2019 1:22 am, edited 15 times in total.
President of the Federal Republic of Lusane
Drafted Legislation

Audemus Jura Nostra Defendere
Fair Depository Standards Act

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Maowi
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Postby Maowi » Tue Apr 09, 2019 3:44 am

Lusane wrote:REQUIRES financial institutions, investment brokerages, and lenders affirm their compliance with the provisions of General Assembly Resolution 35, Article 1, Section C.


OOC: On my phone at the moment, but giving it a quick glance I think right now this would be illegal for House of Cards. You need to actually state the provisions - if GAR 35 got repealed (unlikely, but still) this clause wouldn't mean anything.

Also, I don't think you have to write each number both as a word and in digits. Just one should be fine?

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Lusane
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Postby Lusane » Tue Apr 09, 2019 4:28 am

Maowi wrote:
Lusane wrote:REQUIRES financial institutions, investment brokerages, and lenders affirm their compliance with the provisions of General Assembly Resolution 35, Article 1, Section C.


OOC: On my phone at the moment, but giving it a quick glance I think right now this would be illegal for House of Cards. You need to actually state the provisions - if GAR 35 got repealed (unlikely, but still) this clause wouldn't mean anything.

Also, I don't think you have to write each number both as a word and in digits. Just one should be fine?


OOC: I can definitely remove this provision. And apologies about the word and digits, just trying to be as clear as possible. :)
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Kenmoria
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Postby Kenmoria » Tue Apr 09, 2019 4:35 am

(OOC: There is a character limit of 5000 for GA proposals, and this currently measures over 6800, so you need to reduce the length by quite a lot.)
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Araraukar
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Postby Araraukar » Tue Apr 09, 2019 4:39 am

Kenmoria wrote:(OOC: There is a character limit of 5000 for GA proposals, and this currently measures over 6800, so you need to reduce the length by quite a lot.)

OOC: To do this, I would suggest breaking it up into separate resolutions. There's enough stuff here for three at least.
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Lusane
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Postby Lusane » Tue Apr 09, 2019 4:41 am

Araraukar wrote:
Kenmoria wrote:(OOC: There is a character limit of 5000 for GA proposals, and this currently measures over 6800, so you need to reduce the length by quite a lot.)

OOC: To do this, I would suggest breaking it up into separate resolutions. There's enough stuff here for three at least.


OOC: The current proposal is 7233 characters, according to MS Word. I can work on either scaling back the provisions, wording wise: or splitting it into separate proposals. However, I am not sure how I would split it, any suggestions for doing that?
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Bears Armed
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Postby Bears Armed » Tue Apr 09, 2019 4:43 am

Lusane wrote:
Araraukar wrote:OOC: To do this, I would suggest breaking it up into separate resolutions. There's enough stuff here for three at least.


OOC: The current proposal is 7233 characters, according to MS Word. I can work on either scaling back the provisions, wording wise: or splitting it into separate proposals. However, I am not sure how I would split it, any suggestions for doing that?
OOC
Just remember that, under the 'House of Cards' rule, each of the separate proposals must be capable of standing by itself without relying on any of the others...
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Lusane
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Postby Lusane » Tue Apr 09, 2019 4:46 am

Bears Armed wrote:
Lusane wrote:
OOC: The current proposal is 7233 characters, according to MS Word. I can work on either scaling back the provisions, wording wise: or splitting it into separate proposals. However, I am not sure how I would split it, any suggestions for doing that?
OOC
Just remember that, under the 'House of Cards' rule, each of the separate proposals must be capable of standing by itself without relying on any of the others...


OOC: With that said, I think to begin with; I will work on trying to trim the wording down a bit, first. Then see how that comes out.
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Lusane
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Postby Lusane » Tue Apr 09, 2019 5:27 am

OOC: I have edited and posted a new draft, under Draft #2. This draft has been edited and reworded to be under the 5,000 character limit for GA Resolutions. Further thoughts welcomed.
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Kenmoria
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Postby Kenmoria » Tue Apr 09, 2019 8:14 am

“A lot of your definitions seem to be quite close to the common meanings of the words you are defining, so I question why you need to define them at all. Was there a particular reason everything that is being defined, is? If not, you can bring back some of your active clauses.”
A representative democracy with a parliament of 535 seats
Kenmoria is Laissez-Faire on economy but centre-left on social issues
Located in Europe and border France to the right and Spain below
NS stats and policies are not canon, use the factbooks
Not in the WA despite coincidentally following nearly all resolutions
This is due to a problem with how the WA contradicts democracy
However we do have a WA mission and often participate in drafting
Current ambassador: James Lewitt

For more information, read the factbooks here.

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Lusane
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Founded: Apr 04, 2019
New York Times Democracy

Postby Lusane » Tue Apr 09, 2019 11:24 am

Kenmoria wrote:“A lot of your definitions seem to be quite close to the common meanings of the words you are defining, so I question why you need to define them at all. Was there a particular reason everything that is being defined, is? If not, you can bring back some of your active clauses.”


"The definitions are designed to clearly outlay what exactly qualifies the institution under the provision, as definitions should. I would be very interested in hearing your thoughts on how I could better clean up the definitions in the provisions itself."
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Imperium Anglorum
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Postby Imperium Anglorum » Tue Apr 09, 2019 2:54 pm

This proposal confuses a jumble of different terms which have specific meanings. There are also a number of conceptual issues that have to do with the specifics of how banks and bank regulation work, a few of them not entirely minor. Exact specifications to follow.

Comments directed to "Draft 2", missed and mashed below. While I dislike this response format, the length of the proposal calls for breaking it up somewhat.

Lusane wrote:NOTICING no legislation to regulate the practices of institutions that could render harm to a consumer’s financial wellbeing.

Well, that's obviously untrue. If I regulate mutual funds and anything similar to them to death, people suddenly don't have the service provided by low-risk high-return retirement assets. But more on the topic of banking, the (recently ended) policy of heavy scrutiny for de novo bank charters has led to the massive fall in the number of new banks being formed. This has significant knock-on effects, harming small lenders and credit relationship networks that disproportionately harm small (and new) businesses. On a macroeconomic level, this has similar harms to competition and job creation.

Lusane wrote:DEFINES consumers as citizens, sole proprietorships, corporations, or businesses; rather registered or unregistered, according to regulations in the applicable member nation.

Unnecessary.

Lusane wrote:DEFINES financial institutions as public or private, physical or electronically controlled corporations or government institutions, licensed or unlicensed, according to regulations in the applicable member nation; in which qualifies under at least one of the following:

(1) holds deposits for consumers in transactional accounts.
(2) holds deposits for governments in transactional accounts.

A poor definition. You just told me that financial institutions are depository ones. That's untrue. Pull out a NAICS book and you'll see they're classified under different subsections (52X).

Lusane wrote:DEFINES investment brokerages as public or private, physical or electronically controlled corporations or government institutions, licensed or unlicensed, according to regulations in the applicable member nation; in which qualifies under at least one of the following:

(1) with a main purpose to hold or invest consumer funds in a brokerage account with the intent to accrue profits.
(2) with a secondary purpose to hold or invest government funds in a brokerage account with the intent to accrue profits.

Suddenly, if my main purpose is to hold government deposits with a side-bae of investing consumer funds, I'm exempt. More importantly, however, given an accounting definition of a profit (and not the economic one, which is more suited to the concept of an abnormal profit), you do not take on liabilities but for the purpose of finding assets which provide more cash than that necessary to attract and hold the liabilities (i.e. deposits, from the bank balance sheet perspective).

Lusane wrote:DEFINES lenders as public or private, physical or electronically controlled corporations or government institutions, licensed or unlicensed, according to regulations in the applicable member nation; in which qualifies under the following:

(1) issues collateralized credit products or loans in which a security interest in the form of currency is placed in a transactional account.

Either I'm not understanding the grammar here, or you seem to be trying to tie a security interest to an amount of currency. Collateralised debt obligations (writ large, not referring to the specific securitised instrument) are predicated on a person not having the cash on hand (also why debt is fundamentally a liquidity transaction and central to all and any form of exchange). These security interests, i.e. collateral, are generally in the form of property: for mortgages, a house; for car loans, the car; etc.

If one already has money to put down, they probably wouldn't need to borrow as much, given there is no interest rate spread between possible assets and the loan rate. But the specific requirement that it is in a transaction account doesn't make sense, especially as you cannot put a house in one and it becomes trivial for lenders to evade regulations by not doing these specific sorts of actions.

Lusane wrote:ESTABLISHES the Depository Regulators Committee (“DRC”), a regulatory body under the World Assembly to supervise and render inspections and audits of member nation institutions for direct compliance with regulation for the protection of the consumer;

(Cross-reference α) Generally, one faces trade-offs between consumers and producers. Producers don't generally like it when they get regulated to death, and too high of a cost or too high of a burden leads to their leaving the market. Market exit is bad for consumers in at least two ways (somewhat rehashing comments at the top): (1) consolidation of the remaining market players allowing them to extract rents and (2) reduction in the services which are offered writ large. People voluntarily borrow things so they need them now. There is also definitely scope of argue whether those people are deceived or ignorant of the implications of their borrowing, which is especially likely when dealing with something like student loans, targeted towards young and generally financially illiterate people. That does not change the fact they, at the point of taking the loan, believed doing so would grant them more utility than not doing so.

Lusane wrote:Under it’s establishment, the DRC shall be directed by delegates or members of the World Assembly; and shall serve no more than two terms of two years in office.

This uses the word "establishment" wrong, it should be something like "mandate". Moreover, dictating the composition of a committee is prohibited under the GA proposal rules.

Lusane wrote:ESTABLISHES that the DRC shall have the jurisdiction, with reasonable evidence to enact disciplinary actions, fines, or closures of institutions if they are found in violation of the provisions of this Act on a situational basis.

Situational doesn't mean anything here, unless you meant something like "consistent". Moreover, on a structuring level, you should give a list of the actual provisions you want to implement before creating an enforcement mechanism for them. Just put this at the bottom. However that is, jurisdiction is the wrong word, say "empower".

Lusane wrote:CLARIFIES that institutions will be permitted to appeal any disciplinary actions, fines, or closures to the DRC; and further be permitted to submit evidence in their defense and provide reasoning for circumstances in order to revert any actions taken.

Appeals against actions taken by a body to that exact body are useless. Review by an independent agency is probably what you mean here.

Lusane wrote:Affirming regulation to institutions in applicable member nations, which may or may not be involved in cross border banking; the World Assembly, therefore:

Why is this here? What is the purpose of blocking the possibility of legislation to permit branching between member nations?

Lusane wrote:REQUIRES institutions hold capital reserve equal or above twenty-five percent of their depositor’s accounts total value, to limit consumer exposure to insolvency and insure deposits.

(a) further: the institution may be required to forfeit capital reserve in the event of insolvency or collapse to be paid to the depositors equally to offset their loss.

First, this is astonishingly high. Most modern nations do not have capital reserve ratios above 10 per cent. That is in part because of higher confidence in the financial system due to deposit insurance but also because 10 per cent of a bank's depositors do not suddenly come looking for their money back, even in a run.

Second, capital reserves do not insure deposits. Third, higher capital reserves reduce the quantity of loanable funds. This has three effects: (1) fewer investments are made, meaning that firms and households cannot borrow as much to fund purchases of capital machinery or smooth their consumption; (2) a supply reduction causes there to be higher interest rates, harming people with adjustable rate loans and also increasing the price necessary to make investments profitable, which also reduces the number of investments which have positive net present value; and (3) makes it more difficult for banks generally to survive, biting into all the harms spoken of above (see supra at α).

Fourth, bank failure is caused (excepting in cases where government shuts down the bank, e.g. the US OCC revoking a national bank's charter) by the bank running out of capital. If it runs out of capital, there is no capital to be forfeit to be paid back to anyone. The subsection to this clause doesn't make any sense.

Lusane wrote:PROHIBITS institutions from placing holds, freezes, or closures on depository accounts without reason or due process.

Due process means that one respects the law, insofar as it is followed (which ipso facto, if we are discussing it, it is), the phrase's inclusion here is meaningless.

Lusane wrote:PROHIBITS institutions from releasing depositor information without meeting one of the following requirements;

(1) received permission from the depositors to release information for the account to a specific individual or entity.
(2) in possession of a court order demanding the information of a depositor from an applicable member nation.
(3) an inquest by the DRC has been initiated, and the institution has been officially notified.

The last one is badly worded and could be interpreted poorly. The second one doesn't reflect the possibility of legislative enquiry requiring information to be provided to the committee or legislature for oversight purposes. More generally, it's unnecessary, Privacy Protection Act already provides for privacy protections of financial transactions.

Lusane wrote:REQUIRES institutions implement systems to combat data errors in regards to account ledgers and information.

REQUIRES institutions keep accurate, up to date information for the institutions value, and share information with their depositors and the DRC in an annual report.

Yes... one would expect an institution to want to know exactly how much money that institution itself has so to not come up wanting at some peculiar point.

Lusane wrote:ENCOURAGES member nations to establish regulation in their jurisdictions to command financial regulatory change.

To what end?
Last edited by Imperium Anglorum on Tue Apr 09, 2019 4:01 pm, edited 2 times in total.

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Postby Lusane » Tue Apr 09, 2019 5:24 pm

Imperium Anglorum wrote:Proposed Changes.


OOC: I have made some substantial edits to the draft, and placed the final updates in Draft #3. I did want to note, in regards to collateralized credit products; this provision is designed to deal with secured credit cards, secured loans, credit-builder typed opportunities, and partially-secured lines of credit, only when currency is used as the security object.
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Postby Lusane » Wed Apr 10, 2019 10:54 am

OOC: Bump.
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Postby Kenmoria » Wed Apr 10, 2019 11:07 am

“In your penultimate clause, there should be an apostrophe with the second ‘institutions’, as you are describing the value of the institutions.”
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Postby Imperium Anglorum » Wed Apr 10, 2019 11:13 am

There are a number of grammar issues in your draft, mostly on verb agreement, I would recommend doing a close proofread, probably in something like Grammarly or Hemmingway.

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Postby Lusane » Wed Apr 10, 2019 6:07 pm

Kenmoria wrote:“In your penultimate clause, there should be an apostrophe with the second ‘institutions’, as you are describing the value of the institutions.”

"Oh you're right, we'll make the edit right away."

Imperium Anglorum wrote:There are a number of grammar issues in your draft, mostly on verb agreement, I would recommend doing a close proofread, probably in something like Grammarly or Hemmingway.

OOC: Did a quick run through Grammarly and made the necessary changes, thanks for the note.
Last edited by Lusane on Wed Apr 10, 2019 6:09 pm, edited 1 time in total.
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Postby Kolm » Thu Apr 11, 2019 10:28 am

It would be easier to read this if it used the NSCode "list."
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Postby Lusane » Thu Apr 11, 2019 11:40 am

Kolm wrote:It would be easier to read this if it used the NSCode "list."


OOC: Thanks for the note, I will be sure to implement that when I get home this afternoon.
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Postby Kolm » Thu Apr 11, 2019 1:36 pm

Lusane wrote:
Kolm wrote:It would be easier to read this if it used the NSCode "list."


OOC: Thanks for the note, I will be sure to implement that when I get home this afternoon.

https://www.nationstates.net/page=dispatch/id=330837
Here's the link to a complete list of NSCodes. It helped me format my proposal.
Shuguya Qúlmari Qehúgu
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Postby Lusane » Thu Apr 11, 2019 5:26 pm

Kolm wrote:
Lusane wrote:
OOC: Thanks for the note, I will be sure to implement that when I get home this afternoon.

https://www.nationstates.net/page=dispatch/id=330837
Here's the link to a complete list of NSCodes. It helped me format my proposal.


Thank you!
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Postby Lusane » Fri Apr 12, 2019 4:52 am

OOC: Bump.
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Postby Lusane » Sat Apr 13, 2019 5:59 am

OOC: Proposed to WA.
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Postby Cataluna » Sat Apr 13, 2019 11:11 pm

I plan on voting for this because the author was very sweet and polite.
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Postby Lusane » Sun Apr 14, 2019 2:20 am

A quorum has been reached on the proposal, and it has been placed in queue.
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