Morning Bell

• Experts raise concerns about SEC's new derivatives rule
  With the option for big banks to monitor their own risk internally, the Securities and Exchange Commission's proposal that banks hold more capital for their securities derivatives may fail, experts say. The complex modeling that banks will use may enable them to simply produce the result they want, some point out. "You have to ask the question: If the regulators can't figure out the value-at-risk modeling, what is the point of all this?" asks former Goldman Sachs banker Wallace Turbeville. MarketWatch (10/19)     

Industry News

• Analysis: "Regulatory cliff" compounds uncertainty
  Corporate America faces not only the "fiscal cliff" involving tax increases and other changes, it also is keeping an eye on a pending "regulatory cliff." CEOs are watching the Federal Register for final rules from a variety of government departments. There's still time to register for SIFMA's Annual Meeting on Tuesday, where top regulators and experts will discuss the regulatory cliff, the fiscal cliff and more. Barron's (free content) (10/20)     

• U.S. stocks outperform every other major asset class
  For the first time since 1995, U.S. stocks are outpacing all other major asset classes, including corporate bonds, Treasurys and commodities. "We see good earnings growth and improving economic outlook, we see good equity valuations and easy monetary policy, we see skeptical investors and low positioning in equity assets," said Max King of Investec Asset Management. "This is a major green light for equities and the fact that people don't see it is great." Bloomberg (10/22)     

• High-yield bonds are not expected to appreciate further
  High-yield bonds have produced excellent returns for investors as defaults have not materialized despite a weak economy. However, the party is not expected to last. Financial Times (tiered subscription model) (10/19)     

• FX market loses confidence in central banks' stimulus efforts
  JPMorgan Chase's G7 Volatility Index declined to a five-year low, a signal that the foreign-exchange market's confidence is waning over the abilities of central banks to bolster the global economy. Average daily forex volume was down 39% in September, compared with September 2011, according to the EBS trading platform from ICAP. Bloomberg (10/22)     

• Citi takes loss on business line as Volcker rule looms
  In anticipation of the Volcker rule, Citigroup has cut ties with the liquid funds of its Citi Capital Advisors businesses, which are now a discontinued line of business. Citi lost $31 million in the third quarter because of the deal. A year earlier, it posted a $1 million gain on the venture. Learn more at SIFMA's Volcker Rule Resource Center. The Wall Street Journal/Dow Jones Newswires (10/19)     

Washington Roundup

• Basel Committee will take a close look at securitization
  The Basel Committee on Banking Supervision plans a review of how securitization is regulated, said Secretary-General Wayne Byres. "What will come out before the end of the year will be more a concept paper than a detailed set of rules," he said. "It'll pose some questions." Bloomberg (10/22)     

• Municipal adviser shield may be defined down
  A bill backed by SIFMA and passed in the House of Representatives would exclude many people from the definition of financial adviser in relation to advice offered to towns, cities and states. The bill, designed to shield these public entities from abuses, faces an uncertain future in the Senate. However, major backing for the bill may shape the Securities and Exchange Commission's criteria for municipal advisers. Reuters (10/19)     

• Banks making strong inroads on the capital front, Fitch says
  Fitch Ratings said Friday that big U.S. banks are on track to meet international requirements on capital ratios in this decade. Bank of America is leading the pack, Fitch notes, ratcheting up its key capital ratio under Basel III rules by more than 1%, to 8.97%. The Federal Reserve views the improvements as a way to avoid a financial meltdown. CBS MoneyWatch/The Associated Press (10/19)     

• Other News

• SEC aims to improve muni-market disclosure, Walter says
  The Bond Buyer (free content) (10/19)     

Asset/Wealth Management Report

• Financial advisers warn wealthy clients to sell assets
  Many financial advisers are telling their high-net-worth clients to sell or restructure financial assets before the end of 2012 to avoid triggering capital gains taxes next year. Advisers at companies including Bank of America, Bank of New York Mellon, JPMorgan Chase and U.S. Bancorp are talking with their wealthy clients about shifting assets to tax-deferred accounts, converting IRAs, selling appreciated securities, making large gifts to heirs and exercising stock options. Bloomberg (10/19)     

Hot Topics

Top five news stories selected by SIFMA SmartBrief readers in the past week.

• Experts discuss mandating use of "drop copies" (Traders Magazine)

• Pandit resigns as Citigroup CEO; Corbat takes reins (The Washington Post)

• Non-U.S. regulators urge CFTC to reconsider swap rules (Financial Times)

• Wells Fargo creates unit at its investment bank (Bloomberg)

• CFTC delays implementation of some swaps rules (Bloomberg)

• Results based on number of times each story was clicked by readers.

SIFMA News

• Diversity & Inclusion Conference -- Oct. 25 -- New York City
  SIFMA is proud to present the 2012 Diversity Conference on Oct. 25 at the SIFMA Conference Center in New York City. This year's conference, What's Next: Taking Inclusion to the Next Level in the Securities Industry, will include new regulatory information on Dodd-Frank Section 342 as well as diversity best practices from SIFMA member firms. Speakers include: Karen Sumberg, Executive Vice President, Center for Talent and Innovation; Damon Phillips, Professor, Columbia Business School; Carla Harris, Managing Director, Emerging Managers Program, Morgan Stanley; and many more. We invite all levels of business professionals to this momentous event!     

• SIFMA Annual Meeting Exclusive: Bipartisan discussion by 2 of the "Gang of Eight" on congressional attempt to avoid the "fiscal cliff"
  Sens. Saxby Chambliss, R-Ga., and Mark Warner, D-Va., are members of the "Gang of Eight," a group of four Democratic and four Republican senators tasked as Congress' last resort to broker a compromise tax-reform plan that would prevent a drop of the United States off the "fiscal cliff" at the start of 2013. They will provide their inside perspectives on the critical importance of avoiding the drop, what must occur for that to happen and the probability that they can be successful, as well as other insights into the future of U.S. competitiveness. Register today!     

• SIFMA Insurance and Risk Linked Securities Conference -- March 5-6 -- New York City

• SIFMA FATCA Symposium -- Nov. 19 -- New York City

SmartQuote

The importance of money flows from it being a link between the present and the future." --John Maynard Keynes, British economist