Following the bankruptcy filing by Pacific Holdings Inc. (8902) this Tuesday, which oversees two listed REITs, the Financial Services Agency (FSA) will increase monitoring of real estate investment trusts (REIT). REITs are structured such that they are guarded from the bankruptcy of the sponsor, but the bankrupt sponsor will not be able to arrange any liquidity to the REITs. FSA is concerned that a failing REIT can have a strong influence over the broader market.
The FSA will also assume more responsibility from next month in the inspection of large securities companies. Currently, the Securities and Exchange Surveillance Commission (SEC) inspects large brokerages. Securities firms used to rely on the trading commissions. However, they have become increasingly dependent on the investing and financing business using their own balance sheet. This has raised concerns of the watchdog, given the impact that the collapse of US investment banks had to the current global crisis. The Diet is currently reviewing legislation that will enable injection of public funds into brokerage firms.
March 13, 2009
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