The European Systemic Risk Board (the Board) published a recommendation that the European Union should adopt rules to prevent funds from taking on excessive debt and from allocating inadequate reserves to compensate for assets that are hard to sell.  The board went so far as to suggest stronger liquidity stress tests, improved liquidity management and tighter supervision.  Private funds whose portfolios are comprised of leveraged and complex derivatives are paying close attention to this call for action by the Board as it comes on the heels of a separate announcement detailing the International Organization of Securities Commissions’ (IOSCO)  focus on improving how complex derivative products are being offered to retail investors.  IOSCO is proposing everything from new leverage limits, minimum margin requirements and a host of other measures for products like binary options and contracts for differences.  Asset managers who sought to reposition their derivative strategies in registered funds will need to monitor these developments closely with their counsel and consider repositioning certain strategies through over-the-counter transactions.  While IOSCO’s proposal impacts EU as well as U.S. regulators alike, the impact would be minimal in the United States considering existing caps on Reg T and portfolio margining leverage capabilities along with restrictions on U.S. retail persons trading contracts for differences.  For those who have benefitted from arranged financing or enhanced leverage platforms generally offered through UK broker dealers, it is important to determine whether the existing leverage model can be repositioned under alternative portfolio margining/stress models by consulting with qualified counsel.

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Photo of Nanette Aguirre Nanette Aguirre

Nanette Aguirre concentrates on private funds alternative investments with an emphasis on derivatives and structured products and corresponding regulation. Her experience includes negotiating all forms of synthetic trading including international derivative (ISDA), repos, and prime brokerage enhanced leverage arrangements with global institutions. She

Nanette Aguirre concentrates on private funds alternative investments with an emphasis on derivatives and structured products and corresponding regulation. Her experience includes negotiating all forms of synthetic trading including international derivative (ISDA), repos, and prime brokerage enhanced leverage arrangements with global institutions. She works closely with emerging private fund managers to strategize their launch, trading and ongoing compliance. Additionally, she regularly advises on regulatory issues affecting the derivatives market, including without limitation, Dodd-Frank and related cross-border regulation. Nanette works throughout Latin America, in countries like Mexico and Colombia, as well as other emerging regions including Nigeria, advising banks, endowments, clearing organizations, and other financial institutions.

She has structured and negotiated finance and derivative transactions (including Indian and Chinese swaps, and generally, hedging securitization vehicles, credit and fund-linked derivatives, loan, credit default and equity swaps), exchange traded derivative agreements (including SEFs, and Futures and Options), repurchase agreements, securities lending agreements, prime brokerage (Reg T, Portfolio Margining and Enhanced Leverage), clearing (ISDA-FIA, DTCC, ISDA Amend/Markit.com), electronic trading agreements, tri-party and give-up arrangements. She has assembled derivative use plans for corporates, including leading insurance companies.

Nanette is an active member of the alternative investment community. Nanette sits on the board of the Florida Alternative Investment Association (“FLAIA”) and Minorities in Restructuring and Alternative Investments (“MRAI”). She also works closely with other MWBE and emerging manager associations. Prior to Greenberg Traurig, Nanette spent eleven years in the Structured Products and Derivatives department of a major New York law firm serving the financial services sector and working closely with some of the industry’s largest hedge funds, mutual funds and pension plans.