JULY 29, 2011
U.S. lawmakers scrambled to secure a deal on raising the debt ceiling, with time running short before a potential default on August 2. The Federal Reserve began to prepare guidance to banks on how to handle a potential default or credit downgrade. A congressional panel began looking into whether the Obama administration tried to unduly influence Standard & Poor's before the credit rater revised its outlook on the U.S. debt rating to negative. The SEC adopted rules that could help avoid a future flash crash, and Britain warned Germany and other European Union partners not to dilute new bank capital rules.
TOP STORIES Vote delayed on U.S. debt bill as default date looms ...... 6 Lawmaker probing if Treasury meddled in S&P rating ...... 6 SEC adopts large-trader reporting system ...... 7 UK warns against diluting bank capital rules ...... 7
FINANCIAL SERVICES
REGULATORY REFORM U.S. bank regulator nominees back new capital rules ...... 8 Fed readies debt-limit guidance for financial firms ...... 8 U.S. agencies look for credit rating alternatives ...... 9 UK's Cable feels vindicated, now eyes bank reform -report ...... 9 CFTC to consider three final rules at Aug 4 meeting ...... 9 EU seen imposing standards to avert trading glitches ...... 10 India to raise mandatory takeover offer threshold and regulate mutual fund distributors...... 10 Regulators must risk more to push growth, says Greenspan ...... 10 South Korea set to deregulate to grow its own version of Goldman ...... 11 New law to ease EU debt collection ...... 11 China to speed up village bank approvals ...... 11
ENFORCEMENT Lehman executives, auditor must defend investor lawsuit ...... 12 Lehman trustee appeals $1.1 billion win for Barclays ...... 12 Madoff trustee set back in lawsuits vs banks ...... 13 UBS wins Madoff case transfer, GAO probes Picard ...... 13 Fannie/Freddie regulator sues UBS on $900 million loss ...... 13 DoJ presses Wells Fargo on loans ...... 14 Lehman's "flip" appeal flops in landmark UK ruling ...... 14 Broker settles with U.S. states in muni investigation ...... 14 Merrill Lynch units ordered by panel to pay $8.1 million ...... 15 Sky Capital founder guilty in boiler room fraud ...... 15 German "mini Madoff" jailed for 10 years and 8 months ...... 16 STEC says SEC staff may recommend civil injunction ...... 16 Guilty ex-SAC exec no 'greedy yuppie' -lawyer ...... 16 Trader to pay $1 million in metals futures case ...... 17 South Korea warns UBS local unit for leaking clients' trading info ...... 17 Harbottle, law firm News Corp says bungled inquiry ...... 17
SUPERVISION UBS talking to regulators about CoCo alternatives ...... 18 Credit Suisse sees robust CoCo market despite FSB snub ...... 18 Macquarie may face big-bank capital charge, says Moody's...... 18
UK to shine light on bank-insurer liquidity swaps ...... 19 Fed orders RBS Group to improve its U.S. operations ...... 19 EU markets regulator calls for debt transparency at banks ...... 19 China unlikely to raise bank reserve ratio in August ...... 20 South Korea to undertake stress test on banks' FX funding ...... 20 PE deals should bring long-term benefit, says Taiwan regulator ...... 20 UK insurers set up register of bogus claimants ...... 21 U.S. regulators close three small banks ...... 21
ACCOUNTING & FINANCIAL STANDARDS Doubts emerge over US move to global accounting ...... 21 IASB seeks feedback on future accounting rules ...... 22 More U.S. lawsuits target Chinese reverse mergers ...... 22 UK company auditors told to stand up to banks ...... 22 UAE president orders audit bureau shake-up ...... 23
GOVERNANCE U.S. court shoots down SEC shareholder election rule ...... 23 European pay curbs to hit hedge funds, private equity ...... 24 EU Commission asks banks to reveal pay packages...... 24
DERIVATIVES Asia may struggle to meet G20 derivative deadline, says ISDA ...... 24 EU watchdog may ban some ETF retail sales ...... 25
EXCHANGES & TRADING PRACTICES Hong Kong to continue showing firms' names during trading ...... 25 CME rivals sit pat on policies as US default looms ...... 26 SGX proposes new algorithm for equilibrium prices ...... 26 NYSE moves to delist Longtop Financial ...... 26
FUNDS MANAGEMENT Soros to return outsiders' hedge fund money, cites regulations ...... 27 Senator Shelby says Soros hypocrite for reforms dodge...... 27 Funds industry warns UK losing allure over tax, regulation ...... 27
FINANCIAL CRISIS & ECONOMY Bank CEOs warn "grave" consequences if no debt deal ...... 28 Bank cash cushions can soften U.S. credit blow ...... 28 Bank trading slump, risk curbs to spark more European job losses ...... 28 U.S. debt downgrade would hit repo market ...... 29 Australian banks in good shape: central bank ...... 29
TAX Business body warns no UBS tax deal for Credit Suisse ...... 29 Greece mulls retroactive levy for tax evaders ...... 30 CME tax situation 'untenable,' may exit state ...... 30 Philippines issues tax rules on REITs ...... 30 Czech government aims to eliminate dividend tax in 2013 ...... 31
CURRENCY Hong Kong central bank tweaks CNH rules for banks ...... 31 Brazil taxes derivatives to brake currency rally ...... 31 China to press ahead with FX reserves diversification ...... 31 Japan eyes FX speculators ...... 32
TRADE & CROSS BORDER UBS says granted some immunity in LIBOR probe ...... 32 Putin secures WTO assurances from EU executive ...... 33 India oil firms park money with central bank to pay Iran ...... 33
CORRUPTION U.S. says cooperating with China to repatriate graft fugitives ...... 33 UK fraud watchdog recovers 11 million pounds from Macmillan ...... 34 Diageo settles U.S. civil bribery charges ...... 34 India cabinet drafts anti-graft bill, activists slam as weak ...... 34 Finmeccanica chairman probed over slush funds ...... 35 Belgacom CEO indicted on corruption charges ...... 35
COMMODITIES & ENERGY U.S. rules seen shutting 20 per cent of coal power capacity ...... 35 Warehousers need third party checks of info walls, says LME ...... 36 China power regulator eyes say on hot power issues ...... 36 India plans environmental clearances regulator ...... 36
INDUSTRIAL POLICY India closer to opening up multi-brand retailers ...... 37
TELECOMS & MEDIA
TELECOMS Accused AT&T-iPad hacker in plea talks ...... 38
INTERNET & MASS COMMUNICATIONS Nasdaq spends to fend off 'constant' hack attacks ...... 38 UK police arrest suspected teenage hacker ...... 38
INTELLECTUAL PROPERTY RIGHTS Hollywood wins UK piracy victory against BT ...... 39 Chinese city orders two fake Apple Stores to close ...... 39
PEOPLE Warren to leave U.S. consumer financial agency ...... 40 Dubai names new governor for financial centre DIFC ...... 40
COMING UP
"A default on our nation's obligations, or a downgrade of America's credit rating, would be a tremendous blow to business and investor confidence -- raising interest rates for everyone who borrows, undermining the value of the dollar, and roiling stock and bond markets -- and, therefore, dramatically worsening our nation's already difficult economic circumstances." JPMorgan's Jamie Dimon, Goldman Sachs' Lloyd Blankfein and Bank of America's Brian Moynihan, among others, saying in a letter that a debt agreement needs to be reached this week.
"It appears that Mr. Soros talked up financial reform only to sell it short. Don't be surprised to see his fellow Wall Street financiers follow suit. They'll use their political clout and legal muscle to sidestep Dodd-Frank, while their smaller competitors and businesses take the hit." Republican Senator Richard Shelby on news that George Soros was planning to only manage money for himself due to new regulations.
"We are going to make speculation less profitable with all these measures. We are in the middle of a currency war. Imagine if no measures had been taken -- the dollar would be even lower." Brazil's Finance Minister Guido Mantega.
"We recognize that we're under constant attack, and by that I mean literally constant attack." Robert Greifeld, chief executive officer of Nasdaq OMX Group, said in an interview that the group was under hacking attack daily
"Regulatory policy, as a consequence, has become highly skewed towards maximising short-term bailout assistance at a cost to long-term prosperity." Alan Greenspan, writing a column in the Financial Times.
"It cannot be excluded that it may be necessary for ESMA to issue warnings to retail investors about the risks of these products or even to limit the distribution of certain of such funds to retail investors." ESMA Chairman Steven Maijoor on synthetic ETFs.
US | REUTERS, JULY 28
A Republican plan to cut the U.S. budget deficit stumbled toward a vote in Congress and its expected demise could force a compromise to avert an imminent and unprecedented debt default by the world's largest economy. With the measure short of as many as four votes, according to aides, the Republican-led House of Representatives on July 28 abruptly delayed a vote as Speaker John Boehner struggled to overcome objections from conservative rebels in his own party. World markets, unnerved by the risk of a U.S. default or credit downgrade, watched anxiously. The U.S. stock market's broad S&P 500 index fell for a fourth day and interest rates soared on some Treasury bills that mature in August. International Monetary Fund chief Christine Lagarde warned of the risks of Congress failing to raise the $14.3 trillion debt ceiling, which would mean the U.S. government runs out of money to pay all of its bills after Aug. 2. She said one of the consequences could be a decline of the dollar as a reserve currency and a dent in people's confidence in the dollar. U.S. financial executives added their voices to calls from the business community for Congress to strike a deal that would banish the specter of default. Frantic talks are expected over the weekend to seek a compromise to permit a vote on raising the debt ceiling and staving off a default on Aug. 2.
US | REUTERS, JULY 27-28
A congressional panel is examining whether the Obama administration tried to unduly influence Standard & Poor's before the credit rater revised its outlook on the U.S. debt rating to negative. Randy Neugebauer, the Republican chairman of a House oversight panel, said his staff was probing whether Treasury tried to make material changes to a draft of S&P's news release announcing the negative outlook revision in April 2011. Neugebauer said after a hearing examining oversight of the credit rating industry and the role the raters are playing in U.S. debt talks that he was concerned the administration was trying to influence the rating decision above what would be normal practice. S&P has been the most aggressive of the "big three" credit rating agencies in threatening to downgrade the United States' triple-A rating unless Congress agrees to a credible and meaningful deficit-reduction plan. The House Financial Services oversight subcommittee released a trove of emails between top S&P sovereign credit analysts, S&P President Deven Sharma and senior Treasury officials, including the department's assistant secretary for financial markets, Mary Miller. A review of the emails by Reuters showed efforts by S&P and Treasury officials to hold discussions ahead of the outlook review. They also showed an interest by Treasury in obtaining a draft copy of S&P's press release. But there was no indication in the emails that Treasury was unhappy with the review or tried to influence the press release. Separately, the head of McGraw-Hill Cos Inc, which runs the Standard & Poor's ratings agency, said the criticisms in Europe over S&P's sovereign debt ratings and the calls there for new limits on ratings agencies were "misguided." Chief Executive Harold McGraw III, speaking on an investor conference call discussing the company's quarterly earnings, added that the "legal and regulatory concerns facing the ratings agencies are continuing to abate."
US | REUTERS, JULY 26
U.S. securities regulators adopted rules that could help them investigate a future flash crash by better tracking the activities of large traders like banks, hedge funds and big proprietary trading companies. The approval of the large trader reporting system in a 5-0 vote is the latest action by the Securities and Exchange Commission to revamp market structure. The SEC first proposed its large-trader reporting system in April 2010. A brief period of volatile trading the following month, which became known as the "flash crash," highlighted the need for quicker and more detailed data. The SEC is trying to level the playing field for investors and make markets more transparent. The agency's long to-do list still includes new rules for anonymous trading pools and flash orders that exchanges show to some traders before revealing them to public markets, as well as the creation of a consolidated audit trail. The large trader rule "would significantly bolster our ability to oversee the U.S. securities markets," SEC Chairman Mary Schapiro said. Each large trader would be assigned a unique identification number and would be required to provide that information to the trader's brokers. Brokers would then need to keep track of that ID number, along with the timing of certain trades. That transaction data would be readily available to the SEC upon request, and could help in its effort to police for market manipulation and insider trading.
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UK | REUTERS, JULY 26
Banks must hold only top quality capital in their core safety buffers, Britain's financial services minister said in a veiled warning to Germany and other European Union partners not to dilute new rules. Mark Hoban said there was no reason to shy away from fundamental reforms such as the Basel III global accord to beef up bank capital levels even though the economy is suffering aftershocks from the financial crisis. Britain, the United States and other members of the G20 economies have agreed to implement Basel III in full from 2013 and the euro zone's fragility underscored the need for banks to be well capitalised, he said. Hoban told the Atlantic Council think tank in Washington that it was "incredibly disappointing to see resistance on the implementation of Basel, including from some G20 signatories." Implementing Basel III in full meant ensuring that instruments qualifying as core tier 1 capital must meet the legal form of ordinary shares, Hoban added. Some critics have said the EU's executive European Commission draft law to implement Basel III in the 27-nation bloc, unveiled last week, muddied the waters by saying that hybrid debt known as "silent participations" could be included in core tier 1 capital -- though under strict conditions. Hoban also signalled that Basel III's leverage ratio and liquidity standards should be implemented in hard legal form rather than the non-binding mechanism under the draft EU law.
US | REUTERS, JULY 26
U.S. bank regulator nominees said that they support tougher capital standards that international policymakers agreed to earlier in July. Some banks have balked at the reforms, which would roughly triple current capital standards, arguing they will restrict the amount banks can lend and hurt the economy. But supporters of the standards say the new rules would provide more stability to the financial system and minimize the kind of chaos that occurred during the 2007-2009 financial crisis. Having strong capital levels in place in advance of an economic downturn is critically important, Thomas Curry told the Senate Banking Committee. President Barack Obama has nominated Curry, a board member at the Federal Deposit Insurance Corp, to head the Office of the Comptroller of the Currency. Obama's nominee to head the FDIC, Martin Gruenberg, also threw his support behind the international capital agreement, known as Basel III.
US | REUTERS, JULY 28
The Federal Reserve plans to provide guidance to banks soon on how to handle the potentially turbulent financial waters if the United States exhausts its borrowing authority. Fed spokeswoman Barbara Hagenbaugh said the Fed expected to be able to give additional guidance to financial institutions "when there is greater clarity from the Congress and when Treasury outlines its specific operational plans." The Treasury has said it will not be able to borrow more funds after August 2 if Congress does not raise the nation's $14.3 trillion debt ceiling by then, raising the prospect of a government default. Officials say a debt default would damage the U.S. economy for years to come and likely provoke a severe financial crisis, but they have been hesitant to discuss contingency planning. U.S. officials say the Treasury will soon lay out a plan for how the government will operate if it appears Congress may miss the Aug. 2 deadline. An announcement could come as soon as late on July 29. This would pave the way for the Fed, which acts as the government's bank, to make its plans clear. Fed officials said that the U.S. central bank might need to reevaluate the way it discounts the Treasury securities that banks use as collateral for emergency loans. Among issues of concern to banks is whether the government would back up money market mutual funds if Treasury debt receives a ratings downgrade. Another topic the Fed may need to address is how capital requirements for banks might change if there were large inflows or outflows of funds in response to a debt downgrade. While the Fed would likely step in to provide liquidity if financial markets appeared at risk of seizing up, the guidance for banks is likely to be more mundane. The Office of the Comptroller of
the Currency said it plans to advise the national banks it regulates that when assessing customer overdrafts, they should consider whether a customer failed to receive a government check due to the debt ceiling impasse. The Fed could be expected to follow suit.
US | REUTERS, JULY 25
U.S. banking regulators expect to release proposals for replacing the work of credit rating agencies in their regulations later in 2011 when comprehensive tougher capital standards are unveiled, the Federal Reserve said. In a report to Congress, the Fed said that banking agencies are still working to find alternatives to the credit raters' work, a task that has proven to be difficult. The Fed said regulators expect to propose alternatives when they unveil rules for implementing tougher capital requirements for banks required by Dodd-Frank and the recent international agreement known as Basel III. These rules are expected as early as this summer. Acting Comptroller of the Currency John Walsh has pushed for Congress to revisit the ban to at least allow the use of their work in some instances. He and other regulators have warned it will be difficult to implement new, tougher capital standards for banks without some relief from the ban. In its report, the Fed said it identified 46 references to credit rating agencies in its rules, most of which dealt with capital requirements.
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UK | REUTERS, JULY 25
British Business Secretary Vince Cable feels "vindicated" by the phone-hacking scandal and said he has returned his focus to a proposal by the Independent Commission on Banking to separate retail banks from their investment bank siblings, the Financial Times reported. The Liberal Democrat politician, who was heavily criticised for his past comments on "declaring war" on Rupert Murdoch over Murdoch's BSkyB bid, told the FT the ICB's interim report as "very good," but said it was "a little odd" the ICB dismissed his own preference for a full separation of retail and investment banking. He told the newspaper that the banks' record of lending to small and medium-sized companies was still "not good" and it was "abundantly clear" the UK has not yet enjoyed a strong recovery.
US | REUTERS, JULY 28
The U.S. futures regulator said it will hold its next rule-making meeting on Aug 4 to discuss three more rules it expects to finalize to implement the Dodd-Frank financial reform law. The U.S. Commodity Futures Trading Commission said the meeting would consider three final rules including agricultural swaps, swap data registration and implementation of whistle-blower protections. Commissioners also were slated to vote on a schedule of meetings for the rest of this year, the CFTC said. Consideration of the whistle-blower rule had been originally set for July 19 but was delayed while the agency awaited a review from the General Accounting Office on how whistle-blower funds can be spent. The CFTC is kicking into high gear. The agency expects to vote on at least 17 rules during July and August, 20 rules in September and October and nine rules in November and December, according to one CFTC commissioner.
EU | REUTERS, JULY 27
Regulators will impose minimum technical standards on trading platforms after crashes have become more commonplace due to reliability being sacrificed for speed, a consultancy said. Frederic Ponzo, managing partner at GreySpark, which advises investment banks on trading, said systems are becoming leaner to bump up speed, making them brittle and prone to glitches. As a result, he said, corners have been cut for the benefit of latency reduction. GreySpark published research on the upcoming draft European Union law, known as MiFID II, which will have far-reaching effects by extending share trading rules to commodities, foreign exchange and bonds. Ponzo expects its implementing measures to include minimum technical standards for platforms. He said the industry is already gearing up for such rules to cover aspects such as maintaining the capacity to handle tens of thousands of orders a second.
INDIA | REUTERS, JULY 28
India raised the ownership trigger for a mandatory takeover offer in a company to 25 percent from 15 percent now, a move that could draw more private equity and other investors into listed companies. The chairman of Securities and Exchange Board of India also said it will require such investors to offer to buy at least 26 percent more of the company, from the 20 percent minimum currently. Earlier, a panel had recommended that a mandatory offer be made for 100 percent of the shares in a company once the minimum threshold was met, which many analysts had said would raise the cost of acquisitions for domestic companies and deter consolidation. Under current regulations, if an entity buys more than 15 percent in another company, it has to make a mandatory open offer for a further 20 percent stake. Chairman U.K. Sinha also said that SEBI would regulate distributors of mutual fund products.
GLOBAL | REUTERS, JULY 27
Regulators have to be willing to risk more in order to encourage growth, former Federal Reserve Chairman Alan Greenspan wrote in the Financial Times. In a guest column for the FT, Greenspan said governments since the 2008 financial crisis and Japanese earthquake had become more risk averse, fostering a bias which he said "led to an excess of buffers at the expense of our standards of living." Citing new rules that require banks to stockpile hefty capital levels, he said the "deep uncertainty" had unsettled bank lending, and that the excess reserves seemed "to have taken on the status of a buffer, rather than actively participating in," and engendered lending and economic activity. U.S. regulators, he added, had "regrettably" almost always chosen to intervene in the bailout of troubled major companies since the banking crisis.
SOUTH KOREA | REUTERS, JULY 26
South Korea unveiled a series of steps to deregulate its lagging brokerage sector, hoping a Korean version of Goldman Sachs would emerge from one of the least competitive sectors of Asia's fourth-largest economy. The regulators expect the new measures, part of an overall capital markets revamp, to encourage mergers and acquisitions in the brokerage sector and nurture global financial players. The Financial Services Commission (FSC) said it will revise regulations to allow home-grown investment banks to provide corporate financing as part of a move to grow the non-banking financial sector and channel funds to liquidity-strapped mid-sized firms. If successful, the regulatory steps could help homegrown firms take market share from global heavyweights Goldman Sachs, JPMorgan Chase & Co and Credit Suisse in a Korean market that has shown a growing appetite for deals in recent years. Some 40 local brokerages are competing against each other and against about 20 foreign firms in South Korea. Under the proposed changes, South Korea will let brokerages with equity capital in excess of 3 trillion won be reclassified as investment banks and offer corporate financing, an area that commercial banks have dominated so far. Investment banks will also be allowed to bypass exchanges or alternative trading platforms in trading shares of unlisted firms, a move aimed at growing and channeling funds to startups. They will also take on a new role of providing financing to hedge funds for derivatives investments, FSC said. Other key revisions include allowing new stock exchanges and alternative trading systems to end the more than five-decade monopoly of the Korea Exchange, possibly lowering stock-trading costs.
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EU | REUTERS, JULY 25
The European Commission proposed new rules to make it easier to recover debts from bank accounts anywhere in the 27-country bloc. EU companies lose about 2.6 percent of turnover every year to unrecovered debts, according to the Commission, the EU's executive. About 60 percent of cross-border debt remains unrecovered every year, a total of 600 million euros, it added. The new rules, which still need to be approved by EU governments and the European Parliament, would help creditors to recover money lost in cross-border deals, said officials. Under the proposal, a creditor in one EU state would be able to use a single procedure to ask authorities in another country to block the funds in the debtor's bank account. At the moment, a creditor owed money by a person in another country has to pursue the money through that country's legal system -- often a complicated and time-consuming task. Under the Commission's proposal, national systems for blocking funds will remain in force in parallel with the proposed EU system.
CHINA | REUTERS, JULY 27
China's top banking regulator pledged to make it easier for qualified companies to set up a large amount of village banks throughout the country, particularly in the less developed western counties. Since the country launched a pilot programme in 2006, there are now 536 village banks
as of the end of May 2011, with combined loans of 87 billion yuan ($13.5 billion) and deposits of 101 billion yuan, the China Banking Regulatory Commission said. In a statement to explain latest regulatory changes governing the approvals of village banks, the CBRC said: "It will help choose the best founders, reduce the cost of coordination in establishing village banks." Previously, the CBRC controlled the number of new village banks each year while its branches decide the founding firms and other details. Now, the CBRC will pick the founders as well as how many and where they set up the village banks in China.
US | REUTERS, JULY 27
Top former executives of Lehman Brothers Holdings Inc lost their bid to throw out a securities fraud lawsuit seeking to hold them responsible for billions of dollars of investor losses tied to the Wall Street investment bank's 2008 collapse. The decision, in a case first brought three months before Lehman went bankrupt, will allow the lawsuit by investors against former Chief Executive Richard Fuld and four top lieutenants to move forward. These investors were also allowed to press ahead with claims against former independent directors and underwriters, as well as former Lehman auditor Ernst & Young. The lawsuit, led by five retirement funds, seeks class-action status on behalf of other funds, companies and individuals who bought some of the more than $31 billion of equity and debt Lehman sold under a variety of offerings beginning in 2006. U.S. District Judge Lewis Kaplan in Manhattan dismissed some claims, but said the investors sufficiently alleged that Lehman materially misled them about its accounting and ability to manage risk ahead of the Sept. 15, 2008, bankruptcy. The decision comes amid other investigations into Lehman's collapse, although there have been no U.S. prosecutions against top officials over the bankruptcy. In December 2010, the New York attorney general sued Ernst & Young, saying the auditor stood by as Lehman painted a false picture of its health.
US | REUTERS, JULY 22
The bankruptcy trustee for Lehman Brothers Holdings Inc's brokerage arm is appealing a February 2011 decision awarding Barclays PLC about $1.1 billion associated with Barclays' purchase of Lehman's North American unit at the height of the financial crisis. Trustee James Giddens said in a court filing he would appeal to Manhattan federal court the ruling reached by Judge James Peck, the U.S. Bankruptcy Court judge presiding over Lehman's Chapter 11 case. The move comes a week after Barclays appealed other aspects of the same case, much of which went in the trustee's favor. The trustee's appeal centers on $1.1 billion awarded in the same case to Barclays. The money consists of "clearance box" assets, held to facilitate the clearance of securities trading. Giddens said he would have been content to let the matter rest, but filed an appeal because Barclays had already done so.
US | REUTERS, JULY 28
Banks accused of failing to detect Bernard Madoff's fraud won a big court victory as a Manhattan federal judge rejected efforts by the trustee seeking money for Ponzi scheme victims to pursue many of his claims. U.S. District Judge Jed Rakoff said his decision eliminates damage claims totaling $6.6 billion against HSBC Holdings Plc and $2 billion against three dozen defendants, including Italy's UniCredit SpA and Dublin-based Pioneer Alternative Investment Management Ltd. The ruling came the same day the trustee, Irving Picard, announced a more than $1 billion settlement with Tremont Group Holdings Inc, one of the largest "feeders" of customer money to Madoff. Picard said that accord boosted the amount he has recovered for victims so far to $8.6 billion. The trustee had filed roughly 1,050 lawsuits to recover more than $103 billion. In his complaint, Picard accused HSBC, UniCredit and Pioneer of violating a duty to Madoff's customers by failing to detect the Ponzi scheme and ignoring "red flags" of the fraud. But Rakoff said a federal law addressing the liquidation of brokerages "conveys no authority" on a trustee to bring such claims. These claims included aiding and abetting fraud, aiding and abetting a breach of fiduciary duty and unjust enrichment.
US | REUTERS, JULY 27
UBS AG won a U.S. judge's order transferring a $550 million lawsuit by the trustee seeking money for victims of Bernard Madoff's fraud to federal district court from bankruptcy court. U.S. District Judge Colleen McMahon in Manhattan had already agreed to hear issues in a separate $2 billion lawsuit against UBS by the trustee, Irving Picard, turning on whether the Swiss bank knew Madoff was running a criminal enterprise. She said the issue should not be litigated simultaneously in two separate courts, adding that UBS was entitled to a jury trial, which the bankruptcy court could not provide. McMahon also rejected bids by the Luxembourg Investment Fund and Landmark Investment Fund Ireland, together known as the "LIF" funds, for her to hear their challenges to the $550 million case, saying Picard's "garden-variety" claims to "claw back" money are bankruptcy issues that belong in bankruptcy court. Separately, the Government Accountability Office agreed to evaluate whether Picard is treating the Ponzi scheme victims fairly, according to Representative Scott Garrett of New Jersey, who chairs the House Financial Services Subcommittee on Capital Markets and Government- Sponsored Enterprises and requested a probe. The GAO will also examine the U.S. Securities and Exchange Commission's role, and the Securities Investor Protection Corp's oversight in the liquidation of Bernard L. Madoff Investment Securities LLC, Garrett said.
US | REUTERS, JULY 27
The regulator for Fannie Mae and Freddie Mac sued UBS AG to recover more than $900 million of losses after the Swiss bank misled the housing agencies into buying $4.5 billion of risky mortgage debt. The U.S. Federal Housing Finance Agency said it also plans more lawsuits to recover additional losses by Fannie Mae and Freddie Mac from investments in private-label debt. The UBS case is part of a push by Washington to hold banks responsible for the nation's housing problems. It is also the latest effort to prop up the government-sponsored enterprises (GSEs), whose September 2008 federal seizure has so far cost taxpayers more than $135 billion.
According to the complaint, Fannie Mae and Freddie Mac lost more than 20 percent of their investment in over $4.5 billion of residential mortgage-backed securities that the bank sold in 16 securitizations from September 2005 to August 2007. Filed in the U.S. District Court in Manhattan, the complaint also said UBS failed to do adequate due diligence, and hid or misstated the quality of the underlying loans and underwriting, as well as borrowers' ability to make payments.
US | REUTERS, JULY 27
Wells Fargo & Co and the U.S. Department of Justice are negotiating to settle allegations that the bank illegally targeted African-Americans for expensive subprime loans, according to a source familiar with the matter. The source, who declined to be identified because the talks were not public, said the bank was talking with lawyers from the department's civil rights division. The case is separate from other government investigations of banks over mortgages, including a pending joint action by state attorneys general and another section of the Justice Department over foreclosure practices, such as robo-signing of documents for court cases. The talks follow Wells Fargo's agreement earlier in July to pay an $85 million civil penalty to the Federal Reserve Board over allegations that it steered borrowers into costly subprime mortgages and falsified their financial qualifications.
UK | REUTERS, JULY 27
A subsidiary of fallen Wall Street bank Lehman Brothers lost its final battle to overturn a key UK ruling over a swap dispute with Australian creditors in a decision dubbed a "game changer" by lawyers. The UK's Supreme Court unanimously upheld previous UK rulings that creditors should have priority in Lehman Brothers' $2.0 billion plus "Dante" programme of structured finance deals, which one judge described as "of a purgatorial complexity". The closely-watched case, which comes at a time of rising litigation against banks over elaborate financial products sold before the credit crisis, hinges on whether a so-called "flip" clause can be enforced in the event of bankruptcy or default. Flip clauses, which are designed to separate the credit risk of swap counterparties from their investors, reverse the priority of termination payments if the swap provider defaults. Dismissing the Lehman appeal in the A$91.1 million ($99.7 million) case, the Supreme Court said it relied, in part, on the 200-year-old "anti-deprivation rule" that in the event of a bankruptcy, property cannot be taken away from creditors. It was a principle Australian creditors Belmont Park Investors would have relied on before investing, it said. The decision swings the spotlight on a looming transatlantic battle for legal supremacy. The New York Bankruptcy Court in 2010 directly contradicted UK courts by ruling that the flip clause was unenforceable. The documents in this case are subject to English law and English jurisdiction, but one of Belmont's legal advisers, Lawrence Graham, said Lehman had vowed to try and import the U.S. decision via Cross-Border Insolvency Regulations.
US | REUTERS, JULY 28
The former chief executive officer of a New York-based brokerage has agreed to pay $250,000 and cooperate in an ongoing multi-state investigation into bid-rigging on U.S. municipal bond
derivatives, the Connecticut Attorney General said. Connecticut's George Jepsen said Marin Kanefsky, former CEO of Kane Capital Strategies, was the first broker to settle in the investigation that involves 24 states and the District of Columbia. So far, the group has obtained settlements with Bank of America Corp., UBS AG and JP Morgan Chase totaling $250 million. Some of the world's largest banks have been ensnared in a federal probe into allegations their employees decided in advance which investment house would win auctions of guaranteed investment contracts. These are investments cities and counties buy with proceeds from municipal bond sales. The federal investigation by the Justice Department, Internal Revenue Service and Treasury has spanned nearly five years. States are also looking into bid-rigging practices and municipal bond issuers who bought the contracts have sued. The Municipal Securities Rulemaking Board may soon ratchet up oversight of the sale of the derivatives, as well.
US | REUTERS, JULY 27
A FINRA securities industry arbitration panel ordered units of Merrill Lynch to pay $8.1 million in compensatory damages to Staton Family Investments Inc for breach of fiduciary duty. Claimants, Staton Family Investments and Daniel Staton, had accused Merrill Lynch, Pierce, Fenner & Smith, Merrill Lynch Bank USA and Merrill Lynch Bank & Trust Co FSB of securities and common law fraud relating to the alleged illegal seizure and theft of 1,260,000 shares of common stock of Duke Realty Corp from Claimants' accounts. The allegations also include breach of contract and negligence. The claimants had requested compensatory damages amounting to more than $1 billion. The arbitration panel, at the beginning of the hearing, said Daniel Staton's claims had no basis and was dismissed.
US | REUTERS, JULY 26
The former chief executive of the now defunct brokerage Sky Capital LLC was convicted of defrauding investors in what investigators called a $140 million trans-Atlantic boiler room scheme. Ross Mandell, 54, and former Sky broker Adam Harrington, 41, were each convicted by a Manhattan federal jury on all counts including securities fraud, wire fraud and mail fraud, as well as conspiracy to commit each of these offenses. U.S. District Judge Paul Crotty, who presided over the five-week trial, said he will decide later whether to revoke the defendants' bail pending sentencing. Each defendant faces as much as 65 years in prison, plus a fine. A sentencing date has not been set. Prosecutors accused Mandell and Harrington of soliciting investors, mainly in the United States and United Kingdom, through cold calls and high-pressure sales tactics to invest in two Sky entities, promising that their prices would rise "dramatically" because of imminent "liquidity" events, such as initial public offerings or acquisitions. The defendants were accused of diverting investor funds, enriching themselves and paying undisclosed commissions to brokers. The indictment said the men inflated Sky's stock prices through a variety of means, including refusing to let some investors sell their stock. The scheme ran from 1998 to 2006, and involved Sky Capital and its predecessor, Thornwater Co, prosecutors said. Four other defendants had earlier pleaded guilty over the scheme earlier this year. The U.S. Securities and Exchange Commission also filed civil charges in the case.
GERMANY | REUTERS, JULY 22
Helmut Kiener, founder of German hedge fund group K1, was sentenced to 10 years and eight months in prison for scamming investors out of millions of dollars with an elaborate Ponzi scheme. Kiener -- dubbed a German "mini Madoff" by the international press -- had in April 2011 confessed to having set up the con which prosecutors say cost investors 345 million euros ($490 million). The court sentenced Kiener on 86 counts of falsification of documents, and 10 counts of fraud and tax evasion. Kiener was arrested in October 2009 as authorities said Barclays and BNP Paribas may have lost millions of dollars in the case, which spanned the Atlantic and featured lavish personal spending on planes, a helicopter and luxury properties. Kiener duped investors into buying into the funds K1 Global Ltd and K1 Invest Ltd, by pretending the funds were posting significant profits and would continue to do so, even though both of them had posted losses, prosecutors said at the time.
US | REUTERS, JULY 25
STEC Inc said the staff of the U.S. Securities and Exchange Commission were considering recommending that the regulator initiate a civil injunction against the company, its CEO and president, following an ongoing investigation. SEC staff had notified the flash memory storage products maker that they were considering the recommendation for the civil injunction for violations of the antifraud and reporting provisions of the federal security laws, the company said in a filing. STEC disclosed in 2009 that the SEC was conducting a formal investigation involving trading in the company's securities. Before the SEC staff makes its formal recommendation, STEC can submit its reasons on why it believes the civil injunction should not be brought about, the company said, adding it intends to continue to cooperate with the regulator to resolve the staff's concerns.
US | REUTERS, JULY 22
Former SAC Capital Advisors LP portfolio manager Donald Longueuil, who pleaded guilty to insider trading, is not the "greedy yuppie" portrayed by prosecutors, and deserves less time in prison for his "aberrational" conduct than the U.S. government wants, his lawyer said in a court filing. Federal prosecutors sentenced Longueuil to a 46- to 57-month term in prison for sharing insider information on several technology companies from 2006 to 2010. Longueuil and his co-conspirators, Noah Freeman and Samir Barai, agreed to share inside tips on companies, federal prosecutors said. The lawyer, Craig Carpenito, said in a filing in a Manhattan federal court that Longueuil had not traded material nonpublic information in his personal accounts and had not shared any of the insider information with his family or with anyone outside the conspiracy. The lawyer also urged the court to consider similar cases, where defendants have received lower sentences.
US | REUTERS, JULY 25
A former portfolio manager for Moore Capital Management agreed to pay the U.S. futures regulator $1 million to settle charges that he attempted to manipulate prices of palladium and platinum futures contracts on the New York Mercantile Exchange. Christopher Louis Pia attempted to manipulate the settlement prices of palladium and platinum futures contracts from at least November 2007 until May 2008 while working for Moore Capital, the Commodity Futures Trading Commission said. He had engaged in a trading practice known as "banging the close", the CFTC said. The order bans Pia from trading CFTC-regulated products during the closing period of the markets and from trading CFTC-regulated products in platinum and palladium. It also requires him to distribute a copy of the regulator's order to current investors and to current and future employees. The act of "banging the close" occurs when a trader acquires a substantial position leading up to the closing period, and then offsets the position before the end of trading to try to manipulate closing prices. In this case, Pia entered market-on-close buy orders that were executed in the last ten seconds of the closing period for both contracts in an attempt to exert upward pressure on the settlement prices of the futures contracts.
SOUTH KOREA | REUTERS, JULY 28
South Korean regulators said they had sent a warning to the local brokerage operation of UBS for allowing staff of its foreign affilates access to trading information of its customers without the clients' consent. The Financial Supervisory Service said in a report posted on its website that the Swiss bank's local brokerage unit allowed 57 employees of five affiliates, including one based in Hong Kong, real-time access to trading information of its customers based overseas. The alleged conduct, which was carried out without consent from its clients, had been occurring for more than three years since January 2007, the report said. The activity also violated financial regulations, which ban brokers from releasing material information that can affect share prices, to a third party before being distributed to the market, the report said.
US | REUTERS, JULY 27
London law firm Harbottle & Lewis, known for representing beleaguered celebrities whose private lives have been splashed across the tabloids, is now being blamed by News Corp for not uncovering widespread hacking at the media company's News of the World. News Corp claims that it hired Harbottle to conduct such an investigation, but the law firm counters that the characterization is just wrong. The upshot: Harbottle is being probed by a committee of the House of Commons for why it was hired by News Corp and what it uncovered in the process. The relationship between Harbottle and News Corp dates at least back to 2007, when News International, a subsidiary of News Corp, brought in Harbottle as the company was facing a wrongful termination claim by News of the World editor Clive Goodman. News Corp maintains it retained the firm to conduct an independent investigation. The company says that it wanted Harbottle to review emails that News International itself already had reviewed after Goodman left. News Corp said that it relied on Harbottle's conclusion that hacking at News of the World was not widespread and had been limited to one reporter. When New Corp executive James Murdoch appeared before the House of Commons on July 19, he testified that Harbottle failed to uncover
illegal hacking. After News Corp waived attorney-client privilege, the law firm is now free to speak with officials about why it was hired and what it uncovered. A spokesman for Harbottle said that the News Corp's description of what the law firm was hired to do was "erroneous."
SWITZERLAND | REUTERS, JULY 26
Swiss bank UBS is talking to regulators about issuing alternatives to contingent convertibles, or CoCos, given their concerns that these relatively untested instruments can dilute equity. UBS Chief Financial officer Tom Naratil told Reuters that he shared the scepticism of UBS Chief Executive Oswald Gruebel about CoCo bonds, which have been touted by the Swiss government as a useful new issue to help the industry meet tough post-crisis capital rules. He said there were other forms of loss-absorbing capital that are non-dilutive that could be used subject to regulatory approval, adding that UBS was in the "very early stages" of discussions with regulators. Naratil also said UBS wanted to meet tough new Swiss capital rules -- expected to be approved by parliament in coming months -- as quickly as possible and reiterated that the bank's primary means of building up capital was by retaining earnings.
SWITZERLAND | REUTERS, JULY 28
Swiss bank Credit Suisse still sees a strong market developing for contingent convertible bonds (CoCos) after banking regulators ruled they don't count towards the extra core capital big banks must carry. "There will end up being a robust market," Credit Suisse Chief Executive Brady Dougan told an analyst results presentation. He said it was a "good capital instrument for the industry" and hoped it had increased acceptability. The Financial Stability Board decided earlier in July that only top quality capital would be acceptable for a "surcharge" on the world's top banks, dashing the hopes of lenders wanting to use lower-quality hybrid debt or CoCos. However, Switzerland has drawn up its own, stricter capital rules and has kept CoCos as an option. Dougan said while the FSB had backed away from CoCos, it had not ruled them out as a supplement and said he expected a number of banks and national regulators would decide to use the relatively untested instruments.
AUSTRALIA | THOMSON REUTERS ACCELUS, JULY 26
Macquarie Group could be included as one of 28 systemically important global banks that will have to hold additional capital of between 1 and 1.5 per cent when the so-called "G-SIB" rules take effect, a leading rating agency has warned. A report issued by Moody's listed Macquarie bank in 21st place in a list of global banks that would pose the greatest systemic risk in the event of a collapse. The report said Macquarie had been given a score of 11 on a global scale of
interconnectedness, complexity and size. The list was topped by Deutsche Bank, with a score of 23.3. In terms of its level of systemic risk, Macquarie was grouped together with banks such as Unicredit, Royal Bank of Canada, Mizuho Financial and Santander. Moody's said it had selected a sample of 28 banks based on the size of their capital markets activities, given that the Basel Committee's methodology places a significant weight on intra-financial activities. The Moody's analysis ranked the 28 banks on three main metrics: reliance on wholesale funding, which indicates interconnectedness; the holdings of illiquid level 3 financial intermediary trading assets (as a portion of total assets), which indicates complexity; and overall size, based on total assets as a portion of the combined total assets in the sample.
UK | REUTERS, JULY 25
Banks that want to swap assets with insurers to boost liquidity will have to let regulators know in advance so risks can be properly assessed, Britain's Financial Services Authority proposed. Banks have been entering "liquidity swap" agreements with insurers whereby they tap huge pools of easily tradable assets so that lenders can meet tougher liquidity demands from supervisors. Typically UK government bonds or gilts held by insurers are temporarily swapped for asset- backed securities at banks for a fee. But the FSA is worried this could lead to too much interdependence building up and become a channel for risks to spread throughout the wider financial system if things go wrong. The volume of such liquidity swaps is presently low, but there is evidence of significant demand, the FSA said.
US | REUTERS, JULY 27
The Federal Reserve ordered the Royal Bank of Scotland Group to develop a plan for improving oversight of its U.S. operations and tightening its risk-management practices. RBS has 60 days to submit a written plan showing how it will "strengthen board and senior management oversight of the corporate governance, management, risk management and operations" of the bank, the Fed said.
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EU | REUTERS, JULY 28
Banks in the European Union should spell out clearly their exposures to sovereign debt in their upcoming quarterly earnings reports, the bloc's markets watchdog said. The European Securities and Markets Authority (ESMA) said it had increased coordination of monitoring activities among national supervisors in response to increased market interest in sovereign debt. The regulator stressed the need for enhanced transparency in European listed issuers' interim and annual financial statements using International Financial Reporting Standards. It underlined that an appropriate application of relevant IFRS was essential "in order to ensure adequate disclosures by listed companies of their exposures to sovereign debt and related instruments".
The ESMA statement was welcomed by some accounting industry officials who noted it lists the different accounting rules banks should comply with in their filings, making it harder for lenders to fudge the issue.
CHINA | REUTERS, JULY 27
China may refrain from raising banks' reserve requirement ratios (RRR) this month and in August as capital inflows lose steam alongside a decline in the amount of maturing bills and repos, the China Securities Journal reported. The People's Bank of China has set a pace of raising the RRR once per month this year, but the newspaper said in a front-page commentary that the pattern is set to change as the chances of an increase in July diminish. The possibility of using the tool of bank reserve requirement ratio in August is also relatively small, it said. The newspaper does not represent the view of the central bank and has a mixed record in predicting past policy moves.
SOUTH KOREA | REUTERS, JULY 25
South Korea is to carry out a stress test on banks in August to examine their ability to secure foreign exchange funding during a financial emergency, a financial authority source said. The Financial Supervisory Service regularly inspects banks' overall operations but the authorities plan to carry out an extraordinary stress test on their foreign-exchange funding capabilities next month, the source said. The source, who could not be named because he was not authorised to comment publicly, said the government would not announce the results of the test.
TAIWAN | REUTERS, JULY 28
Taiwan's investment regulator laid out its clearest guidelines yet for private equity investors, saying it does not welcome deals that involve management buyouts, taking targets private or making quick profits. Taiwan's regulators have come under criticism from some in the private equity industry over inconsistent rules and a perception of bias, views that intensified after the blocking of the KKR-backed $1.6 billion management buyout of electronics component firm Yageo in June 2011. Investment Commission chief Fan Liang-tung acknowledged some of that criticism in an interview with Reuters and said the commission really wanted investments that help Taiwanese companies improve their business long term. "I have to admit our regulations are not very clear," he said, but added that as long as PE funds "play by our game rules, we have no reasons not to welcome them." The American Chamber of Commerce in Taiwan recently called Taiwan's regulatory environment "inconsistent", while consulting firm McKinsey said in a March report on private equity in Asia that "the story in Taiwan is one of navigating a regulatory labyrinth." Fan said the criticism following the KKR deal rejection was "groundless."
UK | REUTERS, JULY 28
The British insurance industry plans to set up a national register listing the names of known insurance fraudsters after a record number of bogus or exaggerated claims were detected in 2010. Insurers uncovered 133,000 fraudulent claims worth 919 million pounds ($1.5 billion) in 2010, a 9 percent increase on the previous year, the Association of British Insurers said. British insurers say they have been hit particularly hard by a rise in frivolous or fraudulent claims for injuries supposedly sustained in motor accidents, which they blame on the influence of "no win, no fee" lawyers. The ABI said the register will be up and running in early 2012, and will complement the work of a new police unit, funded by the industry, which will focus entirely on preventing insurance fraud.
US | REUTERS, JULY 22
U.S. regulators closed three banks on July 22, bringing the total number of foreclosures this year to 58. Two of the shuttered banks were in Florida and the third was in Colorado, the Federal Deposit Insurance Corp reported. In Florida, American Momentum Bank, in Tampa, acquired the banking operations including all deposits of Southshore Community Bank in Apollo Beach and LandMark Bank of Florida, in Sarasota. Bank of Choice in Greeley, Colorado, was closed by the Colorado Division of Banking, which appointed the FDIC as receiver. FDIC entered into a purchase and assumption agreement with Bank Midwest, National Association, of Kansas City, Missouri, to assume all deposits of Bank of Choice.
US | REUTERS, JULY 25
Once thought inevitable, a decisive move by the United States to one-world accounting is now in serious doubt. Blame delays, shifting timelines, or huge debt and high unemployment problems in the United States' own back yard, but the idea of a massive change in companies' accounting framework is not the crowd-pleaser it once was. At issue are U.S. generally accepted accounting principles in use since the 1930s, known as GAAP, and whether to phase them out in favor of international financial reporting standards, known as IFRS and set by the London-based International Accounting Standards Board. In theory, switching to international standards would make it easier for investors to compare U.S. businesses to others around the globe, reducing companies' cost of capital. Big multinational firms like Ford and IBM, which use IFRS for their businesses overseas, would no longer have to keep separate books to report in the United States. But the stakes go beyond individual standards. A bigger debate is whether the United States, or any country, should cede control over standard-setting and join a regime with no workable plan yet for uniform global enforcement.
U.S. rule-makers have been working since 2002 to bring the country's standards more into line with international rules. Now that the two regimes are closer, the U.S. Securities and Exchange Commission has said it will decide by the end of the year whether to switch to IFRS. A wholesale switch looks increasingly unlikely. In a staff paper in May 2011, the SEC noted that very few countries adopted IFRS automatically without the right to approve the standards first, sometimes tailoring them to their own needs. The SEC also has voiced concerns about costs to small companies that have no overseas operations and would benefit little from global rules. Some are questioning whether the payoff is worth the effort if all the United States did was to adopt its own version of IFRS, noting that less than 16 percent of the world's markets use a pure version of IFRS as published by IASB.
UK | REUTERS, JULY 26
The International Accounting Standards Board (IASB), aiming to become the truly global benchmark for financial reporting, kicked off a public consultation as Europe calls for a pause in its rulemaking. The setter of rules used in over 100 countries was asking for views on future priorities, having spent the past five years trying to forge a common set of global rules with its U.S. FASB counterpart. The United States decides later this year whether to adopt IASB rules that have been converged with its own. The consultation is part of wider efforts to render what is effectively a global lawmaking body more publicly accountable. It won't be plain sailing, however, and will require all the political skills that IASB Chairman Hans Hoogervorst, a former Dutch finance minister can muster. The European Union, whose early adoption of IASB rules lent them critical mass to attract more users, wants a pause because of so many changes due to convergence taking effect from 2013, creating costs for 8,000 listed companies in the region.
US | REUTERS, JULY 26
Accounting debacles at U.S.-listed Chinese companies have prompted a surge of securities fraud lawsuits, but investors might have trouble recouping their losses even if they win. More than one-fourth of the 94 U.S. securities fraud lawsuits seeking class-action status and filed from January to June 2011 related to so-called Chinese reverse mergers, according to a study released by the Stanford Law School Securities Class Action Clearinghouse and Cornerstone Research in Boston. According to the Stanford study, 24 securities fraud class-action lawsuits targeted Chinese reverse mergers in the first half of the year, compared with nine for all of 2010. But Joseph Grundfest, a Stanford law professor and former SEC commissioner, said investors might have trouble recovering losses, citing the "very little" historic success in enforcing federal court judgments to recover assets of Chinese citizens living in China. Grundfest said investors might still have recourse against the auditors of Chinese companies or other intermediaries, but it still could be an uphill fight.
UK | REUTERS, JULY 26
Britain's company auditors should question management more closely about how their revenue forecasts stand up against a backdrop of poor economic conditions and weak markets, the
industry's watchdog said. Paul George, director of auditing at the Professional Oversight Board (POB), said the POB had found "too many audits that require significant improvement". Scepticism was a key factor in those audits that did need an improvement, he said. The POB's annual survey of audits found that the UK operations of the "Big Four" -- KPMG, PwC, Deloitte and Ernst & Young -- along with two smaller firms Grant Thornton and BDO, all failed to be sceptical enough. PwC was told to pay more attention to how impairment of goodwill is calculated, while Ernst & Young should make sure there is enough evidence to back growth rates. Grant Thornton, KPMG, BDO and Deloitte were told to apply appropriate challenges to company bosses. Companies have gone through a period of weak growth and this means that future projections need to be scaled back in line with current performance, said George.
DUBAI | REUTERS, JULY 28
The United Arab Emirates is reorganizing its audit bureau, state news agency WAM reported, extending its powers to include fighting corruption in the entities it controls. The audit bureau is the supreme organ of financial control and accountability in the country, WAM said, and will have corporate, financial and administrative autonomy. The chairman of the audit bureau's board will be appointed by federal decree and will be a minister.
US | REUTERS, JULY 22
A U.S. appeals court has rejected a new Securities and Exchange Commission rule intended to make it easier for shareholders to nominate directors to corporate boards. In a major blow to the SEC, the U.S. Court of Appeals for the District of Columbia Circuit said the SEC's rule was "arbitrary and capricious" and that the agency had failed to properly weigh the economic consequences. The ruling marks the first successful legal challenge to a provision in the 2010 Dodd-Frank financial overhaul law. The SEC rule, which had been put on hold pending the outcome of this case, would have required companies to include a shareholder candidate on corporate ballots known as proxies -- provided that the nominating shareholders held at least 3 percent of the voting power in the corporate stock for three years. SEC Chairman Mary Schapiro had pushed for a rule on proxy access, saying the rule would give long-term shareholders greater voice by making it easier for them to nominate directors to the boards of the companies they own. The U.S. Chamber of Commerce and the Business Roundtable, which filed the lawsuit challenging the rule, feared it would give minority shareholders too much power and could have cost companies millions of dollars in contested board elections. Although the court threw out the rule, the SEC could try to revive it. To do so, the agency would have to start the rule-writing process from scratch or appeal the decision. It could ask for a re- hearing from the three-judge panel or the entire D.C. Circuit, or appeal directly to the U.S. Supreme Court.
EU | REUTERS, JULY 28
Hedge funds, private equity houses and asset managers who thought they had escaped the European clampdown on pay inflicted on their banking peers are now facing the same restrictions, consultancy PwC said. After largely escaping controls put in place by Britain's Financial Services Authority and European regulators on pay, managers now face rules on how and when bonuses are paid and more pay disclosure, according to the latest consultation paper on the Alternative Investment Fund Managers Directive (AIFMD), PwC said. The AIFMD paper, published last week, targets asset managers, extending the reach of regulations made in Europe's Capital Requirements Directive, which referred only to "financial institutions" and which many managers thought they could avoid, said Tim Wright, reward director at PwC. He added the rules would mean sweeping changes to the pay policies and practices of many asset management firms. Under earlier rules from the FSA, many asset managers fell into the most leniently treated group, while most private equity houses were exempt. Most managers will now ultimately face much tougher rules, PwC said. The new measures in the AIFMD -- a controversial piece of legislation that raised hackles when first proposed in the wake of the credit crisis -- require firms to pay at least half of bonuses in stock and defer between 40 and 60 percent of variable pay for around three to five years. Firms will also have to disclose total pay for a financial year and a breakdown for key staff.
EU | REUTERS, JULY 24
Banks in Europe will be required to disclose more information on the number of their employees earning one million euros ($1.4 million) or over under European Commission proposals, the Financial Times reported. It said the commission proposed that national authorities should collect data on the number of individuals per bank who are paid at least one million euros, and the make up of those sums in terms of salary, bonus, long-term awards and pension. The information would be given to the European Banking Authority to be published on an aggregate country basis, in a common format for all 27 member states of the European Union.
ASIA | REUTERS, JULY 25
Asian countries may struggle to implement rules on derivative clearing and trade data warehouses by the deadline set by the world's top 20 economies (G20), according to the International Swaps and Derivatives Association (ISDA). Asian members of the G20 have committed to establish central clearing services for over-the-counter (OTC) derivatives and systems to store trading data by the end of 2012. However there is a growing recognition among financial supervisors that meeting that deadline is going to be tough given the slow progress made on the issue by the European Union and U.S., ISDA said after hosting a closed door meeting of Asian regulators in Hong Kong late last week.
Asian economies have much smaller derivative markets than those in America and Europe, so regulators have been waiting for changes in those regions to be decided before finalising their own arrangements. But Keith Noyes, ISDA's Asia Pacific regional director, told Reuters that if they wait for that moment, "it may be impossible for them to meet the deadline to set up appropriate CCP (central counter-party clearing) or trade repository infrastructure". ISDA's executive vice chairman Robert Pickel added that regulators in Asia are now also taking more steps to examine new rules in the U.S. and Europe which may give western regulators more control over Asian banks. Supervisors in the region have been growing increasingly concerned that U.S. regulators in particular may be able to call the shots over the trading books and capital levels of Asian banks with American operations.
EU | REUTERS, JULY 22
The European Union's markets watchdog warned it may ban the sale of some exchange- traded-funds (ETFs) to small investors because they are risky and hard to understand. The EU watchdog published a consultation paper on how to better contain risks in a sector which has seen explosive growth in the past decade and could hit the $2 trillion level by next year globally. The European Securities and Markets Authority (ESMA) said current safeguards on selling ETFs within the EU's mutual funds framework, known as UCITS, were insufficient as the more complex types of products pose possible risks to the wider financial system to undermine financial stability. ESMA said the emphasis is on giving investors more information about the products they are buying. ESMA concerns over so-called synthetic ETFs are shared by the Financial Stability Board, a regulatory task force set up by the G20 economies, and the Bank of England's Financial Policy Committee.
HONG KONG | REUTERS, JULY 26
Hong Kong Exchanges and Clearing Ltd, the world's biggest exchange operator, said it will continue to display the names and trading volumes of those using its platform, amid calls for the system to be changed. Many retail brokers depend on such information before executing trades and the exchange will only change the system after further consultation with market participants, HKEx Chief Executive Charles Li said. The exchange operator recognised that displaying the names of securities firms performing each trade was something the market in Hong Kong had grown used to, Li wrote in a statement posted on the exchange's website. About 40 securities companies are identified whenever they perform a trade on the HKEx's platform, and there have been calls in the Chinese territory for this system to be changed, as this allows firms to know what trades their rivals are doing. The exchange is also looking for ways to narrow the so-called "bid-ask spread", which refers to the difference between the asking and bid prices. The spread is currently wider in Hong Kong than in other developed markets in the United States and Europe, Li said, which may lead to a number of failed transactions.
Hong Kong must also realign its trading hours and practices to that of China, whose two exchanges in Shanghai and Shenzhen have daily turnover that are 6 times higher than that in the former British colony, Li added.
US | REUTERS, JULY 26
Most U.S. clearinghouses are so far not spooked enough by the looming possibility of a U.S. government default to change their policies for accepting Treasuries as collateral to back trades. The Depository Trust & Clearing Corporation, IntercontinentalExchange Inc, and OCC will continue to accept Treasuries on the same terms that they do today, interviews show. That's despite the specter of a U.S. default or credit downgrade as lawmakers continued to battle over debt plans ahead of an Aug. 2 deadline for raising the nation's $14.3 trillion borrowing cap. The three clearinghouses, which handle everything from Treasuries to oil futures to stock options, say their collateral standards already give them a big enough cushion to handle any potential market swings from a default. The only major clearinghouse so far to have taken any action is CME Group Inc, which said it would no longer accept short-term Treasury bills on the same terms as cash. CME will impose a half-a-percentage point discount on any such bills.
SINGAPORE | REUTERS, JULY 22
Singapore Exchange said it is proposing a new algorithm to calculate the way trading orders are matched during opening and closing periods and during adjustment phases. The exchange said its proposed algorithm will compute a price that is a better reflection of the market as it will allow for an improved calculation of the levels of demand and supply in the market. SGX is proposing to implement the algorithm within its new trading engine Reach during the second half of 2011.
US | REUTERS, JULY 22
The New York Stock Exchange said it has started delisting proceedings against Chinese software company Longtop Financial Technologies Ltd saying the company does not meet listing standards. The NYSE, which had halted trading in the company's securities on May 17, continues to maintain a halt on trading of Longtop shares. On May 23, Longtop's auditor quit and a U.S. regulator opened a related probe, deepening concern about possible accounting irregularities at the Chinese company. In recent months, shares of several U.S.-listed Chinese companies, including Longtop and Sino-Forest, have been hammered after research firms and short sellers such as Citron and Muddy Waters issued reports making allegations of potential accounting frauds.
US | REUTERS, JULY 26
Billionaire investor George Soros, whose stock-picking career has spanned nearly four decades, said he will manage money only for himself as new regulations threaten to crimp the hedge fund industry he made famous. The octogenarian fund manager told investors that he will return roughly $1 billion to outside investors and turn Soros Fund Management into a family office. In a letter to investors, Soros' two sons cited impending industry regulation as a reason for returning the money the fund still oversaw for outsiders, which is a relatively small percentage of the roughly $25 billion Soros oversees. Under the Dodd-Frank Act, hedge funds will be forced to register with financial regulators, giving the Securities and Exchange Commission fresh insight into exactly how these generally secretive portfolios make money. But family offices are treated more leniently under the new regulations. Soros, who will soon be 81, joins a growing list of wealthy and well-established fund managers to reconfigure the business. Carl Icahn another long-time fund manager recently also returned money to outsiders.
US | REUTERS, JULY 27
Prominent Republican Senator Richard Shelby accused billionaire investor George Soros of hypocrisy for evading new hedge fund regulations he once publicly backed. Soros had earlier said he would return money to outsider investors and only manage his own family's funds to escape the Securities and Exchange Commission's new hedge fund adviser registration rules. By giving back investors' money -- which is a small slice of the roughly $25 billion Soros oversees -- Soros is taking advantage of an exemption in a recently approved SEC rule required by the Dodd-Frank Act. The exemption allows family offices not only to avoid the registration requirements, but also to dodge a greater disclosure burden that requires big fund managers to turn over confidential data to help the SEC police systemic risk.
UK | REUTERS, JULY 25
Britain's 4 trillion pounds ($6.5 trillion) asset management industry has warned a lack of clarity on tax and regulation is endangering the UK's position as a global financial hub, tempting funds to consider setting up elsewhere. Just one in seven respondents to a survey conducted by fund management lobby group the Investment Management Association (IMA), said Britain was a better place in which to do business compared with a year ago. The IMA warned rival European fund management centres such as Dublin and Luxembourg have momentum that is "difficult to reverse" and benefit from perceptions that funds in the UK could incur higher taxes. The report quoted one respondent calling for greater clarity from the UK government on its plans for the industry. Industry concern is mounting despite signs of ongoing recovery since the financial crisis that has seen assets under management rise on account of strengthening markets and greater willingness to invest.
US | REUTERS, JULY 28
Chief executives from the nation's largest financial firms pressured the White House and Congress to reach a deal on the debt ceiling and deficit reduction, saying the consequences of inaction "would be very grave." JPMorgan's Jamie Dimon, Goldman Sachs' Lloyd Blankfein and Bank of America's Brian Moynihan, among others, said in a letter that an agreement needs to be reached this week.
US | REUTERS, JULY 26
Investors have long complained about cash sitting idle on bank balance sheets, but recently these cash cushions have become a lot more valuable. As the U.S. lumbers toward Aug. 2 without an agreement to raise the debt ceiling -- and the threat of a U.S. downgrade or default looms -- banks with strong cash reserves are looking increasingly judicious. Market experts say a downgrade or default would trigger higher margin calls across Wall Street on trillions of dollars' worth of transactions. This week, CME Group Inc became the first major clearinghouse to raise collateral requirements for trades backed by Treasury bills. The industry has been moving into shorter-term investments that can be turned into cash immediately, even if interest margins suffer from weak yields. Banks have also been reducing exposure to debt backed by U.S. agencies, such as Fannie Mae and Freddie Mac. Such bonds are also at risk of a downgrade if the U.S. government's rating is lowered and are viewed as less safe than Treasury bills. Earlier in July, the biggest U.S. banks revealed hundreds of billions of dollars' worth of liquidity sitting on their balance sheets when discussing second-quarter earnings results. During conference calls, executives were grilled by analysts about their apparent cash-hoarding.
UK | REUTERS, JULY 28
Tens of thousands of European bankers are losing their jobs in a deep trading slump that has been compounded by regulatory curbs on excessive risk -- and many more will be out of work before Christmas. As Switzerland's Credit Suisse, which weathered the financial crisis better than most peers, announced 2,000 job cuts, some financial recruiters forecast thousands more job losses by March 2012. Changes in pay structures -- with banks ramping up fixed salaries to compensate for pressure to cut bonuses -- have given them less flexibility when hard times bite. The regulatory crackdown is also prompting banks to streamline and exit businesses. After grim second quarter trading, the current quarter is being warily watched for signs of recovery, and recent guidance has not been promising, with some recruiters forecasting more cuts before Christmas.
US | REUTERS, JULY 27
A downgrade of U.S. debt could raise borrowing costs for investors in the repo market, although the impact would be "manageable" in the short term, a top U.S. banking regulator told lawmakers. Dave Wilson, the senior deputy comptroller at the Office of the Comptroller of the Currency, was testifying to a House Financial Services panel hearing probing broad regulatory concerns about the credit rating industry and their threat to downgrade their rating of U.S. debt. Wilson told lawmakers that if the rating is cut, "there would be an adjustment of the margin required" for the repo market, making it harder for investors to borrow as much as they can now. However, Wilson also sought to assure lawmakers that a downgrade from an AAA rating to AA is still "manageable in the short term" because an AA rating still indicates a "very high quality" of securities.
AUSTRALIA | REUTERS, JULY 25
Australian banks have little exposure to sovereign debt in countries with the biggest debt problems, while a strengthened funding base makes them more resilient to any global credit shocks, a top central banker said. Speaking to a property conference, Reserve Bank of Australia (RBA) Assistant Governor Malcolm Edey said the more cautious attitude to borrowing shown by Australian households and businesses would ultimately be good for financial stability. Edey said that domestic banks had largely come through the global financial crisis in good shape. Profits had recovered and while arrears rates had crept up in some areas, "asset quality generally remains good." While there were concerns about sovereign debt problems in Europe and elsewhere, Edey noted Australian banks had only limited direct exposures to sovereign debt in the countries regarded as being most at risk.
SWITZERLAND | REUTERS, JULY 25
The United States should not expect Switzerland to deliver thousands of Credit Suisse client names, even though it wants to settle a tax row, the head of the Swiss-American Chamber of Commerce said. Martin Naville said the Swiss parliament would not agree again to bend strict bank secrecy laws as it did last year by allowing UBS to hand over the details of around 4,450 clients to help avoid U.S. criminal charges. He said parliament would not do the same thing again. "They are unbelievably fed up," Naville told Reuters. Several leading Swiss politicians said at the weekend that parliament would not support a similar deal for Credit Suisse after only reluctantly agreeing the UBS treaty last year. Naville said a ruling earlier in July by the top Swiss court that the country had been right to appeal to emergency powers to hand over UBS client data to avoid the bank's collapse should not be taken as a licence to do the same for Credit Suisse. Since settling with UBS, the U.S. authorities have been investigating other Swiss banks. Switzerland has been trying to reach a deal to get the investigation dropped in return for the
banks paying a fine and handing over client names. But the United States has ratcheted up the pressure in recent weeks by telling Credit Suisse it is a target of its investigation and indicting eight executives who either worked for Switzerland's second-biggest bank or had links to it.
GREECE | REUTERS, JULY 25
Greece is considering imposing a 10-15 percent tax on bank deposits abroad when the interest earned is not declared back home, a finance ministry official said. However, no decision has been taken yet, said a finance ministry official who declined to be named. "It will affect those for whom we can prove that they have not declared the income (earned on the deposits)." Conservative daily Kathimerini said in a report published on its website that the country was looking at taxing undeclared foreign bank deposits of over 150,000 euros with a 10-15 percent tax, starting retroactively from 2009. Asked about the report, the official said: "These ideas are on the table."
US | REUTERS, JULY 28
CME Group Inc is evaluating whether to move some operations to other states from Chicago to reduce its taxes, but it has not decided on an exact timeline, CEO Craig Donohue said. "Our tax situation is untenable," Donohue told Reuters, noting that CME is taxed more heavily than any of its global competitors. The company is talking with at least three states -- Texas, Florida and Tennessee -- about relocating some of its business to take advantage of lower tax rates there, Donohue said. CME has been based in Chicago since the founding of its oldest market, the Chicago Board of Trade, in 1848. CME has no specific time frame for moving, Donohue said, and does not plan to shut its Chicago-based trading floor. But he said the possibility of moving other operations is real.
PHILIPPINES | REUTERS, JULY 26
The Philippines' main tax agency issued rules on taxation of real estate investment trusts (REITs), including a 12 percent value added tax (VAT) on transfer of assets, a thorny issues for the proponents of the investment vehicle. REIT proponents had opposed the VAT on transfer of assets on concerns it may lessen interest in investment trusts. The Bureau of Internal Revenue (BIR) also set a 30 percent income tax rate on REITs under its implementing rules, awaited by property companies seeking to set up investments trusts after Congress passed the REIT law in 2009. The Securities and Exchange Commission requires a 40 percent minimum public ownership for REITs during the first two years from listing, which shall be increased to 67 percent by the third year. The BIR rules state that REITs could avail of tax incentives if they maintain public ownership of at least 67 percent and allocate to shareholders at least 90 percent of their distributable income.
CZECH REPUBLIC | REUTERS, JULY 27
The Czech government coalition wants to cancel a 15 percent dividend tax from 2013 as part of a tax overhaul, going beyond an earlier proposal of introducing a rebate, the finance ministry said. The ministry said eliminating the tax or providing a rebate for it would have the same budget impact. The tax brings in around 9 billion Czech crowns ($537.6 million) in revenue each year, it said.
HONG KONG | REUTERS, JULY 28
Banks with offshore yuan business in Hong Kong can use their trades in the forwards market to keep the yuan on their books within guidelines, the territory's central bank said. The Hong Kong Monetary Authority said in a statement posted on its website that banks' net open position limit for the yuan stood unchanged at 10 percent. However, the HKMA provided banks ways to exclude excess yuan on their books by reclassifying the positions using existing Qualified Foreign Institutional Investors rules, renminbi bond market-making activities and through the offshore yuan forwards market.
BRAZIL | REUTERS, JULY 27
Brazil unveiled a potentially steep tax on foreign exchange derivatives in its latest bid to curb a currency rally that is hampering local industry. The measure imposes a 1 percent tax on trading in currency derivatives that result in a net bet the real will firm, allowing for an up to 25 percent levy in the future. The currency has surged more than 8 percent in 2011, adding to a 4.6 percent gain in 2010. Finance Minister Guido Mantega said that if the current tax did not have the desired effect, the government would be willing to raise the levy. Mantega was quick to stress that defensive currency hedging would not be hurt by the measure, and the head of the central bank said Brazil will still welcome foreign inflows.
CHINA | REUTERS, JULY 28
China will press ahead with diversification of its $3.2 trillion foreign exchange reserves, and does not pursue large-scale currency holdings, the State Administration of Foreign Exchange said. The foreign exchange regulator also pledged to widen the channel for capital outflows and take gradual steps to make the yuan convertible on the capital account.
JAPAN | REUTERS, JULY 27
Japanese authorities know there is not much they can do to turn a broad weak-dollar tide, and so will judge any intervention a success if it keeps speculative action from driving up the yen too far and too fast. That is why they may consider a repeat of the solo intervention from September 2010, which they believe helped stem excessive yen rises driven by factors beyond Japan's control. But Tokyo's goal will be not just preventing rapid moves. Japanese policymakers, alarmed at the yen's persistent rise, see solo action as an increasingly viable option, although markets are sceptical of how much lasting effect any such move would have on the yen. Japanese policymakers do not hide their discomfort over the fact the yen is sought as a "safe haven" when the country itself is struggling to recover from the post-quake slump. Just like last September, the yen is driven by developments in the United States and Europe. Back then, it was anticipated further aggressive Fed easing and euro zone's debt woes. This time it is a stand-off in Washington over raising the U.S. debt limit and Europe's debt crisis again. Finance Minister Yoshihiko Noda has repeatedly warned that Tokyo will take "decisive action" when necessary. That is the strongest warning used to signal Tokyo's readiness to step into the market and was frequently used by the premier and finance minister leading up to last year's intervention. The immediate priority for the Finance Ministry, in charge of Japan's currency policy, is to prevent speculators from using the U.S. debt crisis as an excuse to bet on yen appreciation and trigger excessive market volatility. But keeping speculators at bay is not the only goal in the longer term, as yen rises -- even at a slow pace -- would add to a list of headaches the March quake created for companies operating in Japan, such as fears of prolonged power shortages.
SWITZERLAND | REUTERS, JULY 26
Swiss bank UBS said it had been granted leniency or immunity from potential violations by some authorities, in return for its continuing cooperation in an ongoing LIBOR manipulation probe. The bank declined to specify what information it was providing to the authorities or elaborate on how it was cooperating. U.S. and Japanese regulators were reported earlier this year to be investigating "improper attempts" to manipulate LIBOR rates, particularly between 2006 and 2008. The probe includes all 16 banks, among them Barclays, Bank of America, Citigroup, and Credit Suisse, that help the British Bankers' Association (BBA) set the London Interbank Offered Rate (LIBOR), the benchmark price for interbank borrowing costs. UBS said it had been told that authorities including the U.S. Department of Justice Antitrust Division had granted it conditional leniency or conditional immunity connected to possible violations related to its yen Libor and euro-yen TIBOR (Tokyo Interbank Offered Rate) submissions.
As a result of these conditional grants, the bank would not be subject to prosecutions, fines or other sanctions for antitrust or competition law violations in connection with the matters reported to those authorities, subject to its continuing cooperation, UBS said in its latest financial statement. The agreement with the U.S. Department of Justice could allow UBS to limit its liability in any civil litigation to the actual amount of damages awarded, rather than the punitive level of up to three times the amount, the bank said.
RUSSIA | REUTERS, JULY 28
Russian Prime Minister Vladimir Putin secured assurances from the European Commission that the EU executive backs Russia joining the World Trade Organisation, despite remaining obstacles. During a telephone conversation with Putin, European Commission President Jose Manuel Barroso reiterated the European Commission's support to Russia's accession to the WTO and work would continue to that end, according to a Commission spokesman. Russia, the EU, the United States and the WTO leadership have insisted Russia will join the 153-member club of trading nations by year-end. But Russia's 18-year accession bid is dogged by obstacles including restrictions on investment in its car sector and opposition from neighbouring Georgia, which has threatened to use its veto to block Russia's entry unless a dispute over customs controls is resolved.
INDIA | REUTERS, JULY 22
Indian oil firms have parked some money with the country's central bank to pay for oil supplies from Iran, Oil Secretary G.C. Chaturvedi said, as a payments row has led to Tehran halting August supplies. Since December 2010, India and Iran have struggled to find ways for New Delhi to pay for imports of 400,000 barrels per day, 12 percent of its oil demand, after the Reserve Bank of India halted a clearing mechanism under U.S. pressure.
US | REUTERS, JULY 28
The United States is cooperating with China to repatriate Chinese fugitives facing corruption charges, a senior U.S. official said, a move that could pave the way for the return of hundreds of government officials wanted for graft. U.S. Department of Commerce General Counsel Cameron Kerry said that there was good cooperation between Chinese and U.S. prosecutors "in finding ways to repatriate corrupt officials or ill-gotten assets". He declined to be more specific and said he was not in a position to comment on whether the United States was close to extraditing anyone.
"The United States currently does not have an extradition treaty with China, but there are other mechanisms available to pursue fugitives," Kerry said. As most fugitives from justice entered the U.S. illegally, many could be repatriated or deported through U.S. immigration laws, he said.
UK | REUTERS, JULY 22
Britain's Serious Fraud Office said it recovered over 11 million pounds from privately held UK firm Macmillan Publishers in relation to payments made by its education business in East and West Africa. The UK fraud watchdog said that under a High Court Order Macmillan is required to pay 11.3 million pounds ($18.4 million) to reflect sums it received that were generated through unlawful conduct. The issues "were confined to a limited part of our education business in East and West Africa," said Macmillan's chief executive Annette Thomas in a statement.
US | REUTERS, JULY 27
Diageo Plc, the world's biggest spirits group, agreed to pay more than $16 million to settle U.S. civil regulatory charges that it made improper payments to foreign officials. Regulators had accused the British company of violating the U.S. Foreign Corrupt Practices Act through its subsidiaries to obtain lucrative sales and tax benefits for its Johnnie Walker and Windsor Scotch whiskeys and other brands. Diageo did not admit any wrongdoing in agreeing to the settlement with the U.S. Securities and Exchange Commission. The SEC said that from 2003 to 2009, Diageo paid $2.7 million to foreign officials in India, Thailand, and South Korea through its subsidiaries. The settlement includes $11.3 million in disgorgement of profits, plus $2.1 million in interest and a $3 million penalty.
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INDIA | REUTERS, JULY 28
India's cabinet finished drafting a bill aimed at curbing graft in government, but activists slammed it, saying it was not tough enough to fight widespread corruption which poses a risk to economic growth. The bill seeks to set up an independent ombudsman to investigate charges of corruption against ministers and lawmakers, but does not cover the prime minister, judges and bureaucrats. The bill will need parliamentary approval to become law. It is set to be introduced in parliament in early August, Law Minister Salman Khursheed said. Slamming the bill as too weak because it did not cover the prime minister and judges, Anna Hazare, the social activist whose hunger strike in April 2011 forced the government to begin drafting the bill, said he would begin a second fast against corruption, raising the sceptre of a fresh wave of anti-government protests. The main opposition Bharatiya Janata Party (BJP), which has taken on the government over graft, said it did not "appreciate" the non-inclusion of the prime minister in the bill. Khursheed said bringing a serving prime minister in the ombudsman's remit would affect his ability to work effectively. He added that the law permitted a probe after the prime minister's term had ended.
ITALY | REUTERS, JULY 22
Pier Francesco Guarguaglini, chairman of defence and aerospace group Finmeccanica, has been put under investigation by Rome prosecutors examining allegations of secret slush funds, legal sources said. The investigation, part of a long-running case involving Finmeccanica, centres on allegations that false invoices were created by companies controlled by the group. They are then said to have been used to pay secret commissions. Finmeccanica, Italy's biggest defence and aerospace group, denied the allegations in a statement. Guarguaglini, 74, is being investigated along with about 15 other people, the legal sources said. La Repubblica daily said the alleged slush funds were set up through a company called Selex and were used to pay commissions to former consultant Lorenzo Cola, in connection with the 2008 acquisition of U.S. defence group DRS Technologies. Cola was arrested in 2010 on charges of involvement in money laundering following a probe into Digint, a group 49 percent owned by Finmeccanica.
EU | REUTERS, JULY 28
The head of Belgium's largest telecoms operator, Belgacom, has been indicted on corruption charges related to the sale of a building below the market value and possible kickbacks, prosecutors said. Belgacom, the former state telecoms monopoly, confirmed that Chief Executive Didier Bellens was indicted in June 2011 on charges of "passive private corruption". The company said its interests were protected and that it was willing to cooperate with authorities if required to do so. Bellens, in his capacity as chief executive of Belgacom, may have influenced the sale of a building in Mons, a building belonging to a 100 percent subsidiary of Belgacom, the prosecutor of Mons, Christian Henry, told Belgian radio. He said this sale may have been at a price "greatly inferior to the market value" and suggested Bellens may have received "certain advantages".
US | REUTERS, JULY 27
The U.S. power industry will probably retire up to 20 percent of the country's coal-fired electricity generating capacity this decade, due to proposed federal environmental regulations, consulting firm ICF International said. The firm, which helps utilities meet environmental rules, among other things, said grid operators and regulators in charge of reliability will have to work with environmental regulators to ensure the system remains reliable as 30 to 50 gigawatts of coal-fired generation are shut. ICF said the units would likely retire due to various proposed air emissions rules by the U.S. Environmental Protection Agency (EPA) with implementation deadlines over the next few years. To meet the proposed rules, ICF said many utilities will retire older and smaller coal plants rather than spend millions to retrofit the units. Most retirements will occur in the Midwest and Southeast, which has the largest concentration of coal-fired capacity.
Shutting a plant is not as easy as it sounds. It requires an economic decision by the owner, a request to deactivate the plant, analysis by a regulator on that request, possible assignment into so-called reliability must run (RMR) status, possible development of replacement capacity and finally removal of the plant, ICF said. Many plants slated for closure will probably have to delay their decommissioning for years to ensure reliability of the power grid, ICF said, under special RMR rules designed to keep plants running long enough to support reliability concerns.
UK | REUTERS, JULY 26
Companies that own warehouses should engage an independent third-party to verify the effectiveness of information barriers, the London Metal Exchange proposed in a consultation. The exchange invited comments on proposed amendments to its requirements for information barriers between warehouse companies and connected trading companies, saying the consultation would be open until the close of business on September 30, 2011. Traders said the exchange was responding to concerns that information barriers could leak information about metal in warehouses. Several trading companies have bought out warehouse firms, including Goldman Sachs, Trafigura and Glencore.
US | REUTERS, JULY 22
The new head of China's power industry regulator hopes to make advancements on coal and power shortages, the ultra-high voltage (UHV) power line plan and grid access for wind and solar power, changing the image of a toothless electricity watchdog. Wu Xinxiong, appointed as chairman of the State Electricity Regulatory Commission (SERC) in June 2011, told an internal conference that one of his three top priorities was to increase the "initiative, pertinence and foresight" of power industry regulation and supervision. Wu emphasised that his commission would try to open a new chapter in electricity regulation with firmer confidence, more forceful measures and more pragmatic approaches, according to a release posted on SERC's website.
INDIA | REUTERS, JULY 24
India will soon introduce a potentially game-changing independent regulator to watch over environmental clearances for industrial projects, the prime minister said, addressing a key issue dogging the country's economic rise. Prime Minister Manmohan Singh said the government hoped soon to establish an independent regulator, the National Environment Appraisal and Monitoring Authority, saying it could lead to a complete change in the process of granting environmental clearances.
INDIA | REUTERS, JULY 22
India took an important step towards opening up its $450 billion retail sector to foreign players such as U.S.-based Wal-Mart, a move seen aimed at tackling supply bottlenecks and high food price inflation. A majority of members of a committee of top bureaucrats, set up to evaluate opening up the multi-brand retail sector -- or stores which sell more than one brand -- agreed to recommend to the cabinet allowing foreign firms to take a 51 percent stake in such enterprises, sources told Reuters. India currently allows 51 percent foreign investment in single-brand retailers and 100 percent of wholesale operations. The committee's recommendations are not binding, however, first needing approval of the cabinet. A final policy decision also needs to navigate a minefield of political opposition, both inside and outside the ruling coalition. A senior government official present at the meeting said ministries were yet to agree definitively on whether India should allow up to 51 or 49 percent of foreign investment, though the majority agreed to recommend 51 percent.
US | REUTERS, JULY 27
Andrew Auernheimer, accused of hacking into AT&T Inc servers and stealing the personal data of 120,000 Apple Inc iPad users, is in talks to plead guilty after his co-defendant did the same on June 23. Auernheimer was indicted on July 6 by a Newark, New Jersey federal grand jury on one count of conspiracy to gain unauthorized access to computers and one count of identity theft. His co-defendant Daniel Spitler pleaded guilty in June to the same charges. U.S. District Judge Susan Wigenton put Auernheimer's case on hold as plea negotiations were currently in progress. Prosecutors said Auernheimer and Spitler were both affiliated with Goatse Security, a group of "Internet trolls" that tries to disrupt online content and services.
US | REUTERS, JULY 27
The operator of the Nasdaq Stock Market is "under constant attack" from would-be hackers and will spend more on security as a result, its top executive said. Robert Greifeld, chief executive officer of Nasdaq OMX Group, said in an interview that the group was under attack daily and as a result had to be "ever-vigilant against an ever-changing foe". Intruders entered Nasdaq's systems last year, leaving "suspicious files" on the exchange's servers and sparking an investigation involving the FBI. Trading platforms were not compromised, the exchange said, although some Internet-based client applications were vulnerable. Chief Financial Officer Lee Shavel said the environment had changed in the last few months and that the level of attacks across the industry led it to increase the amount of resources spent on protection. "You can throw as much money as you want against something like this," he told Reuters.
UK | REUTERS, JULY 27
A British teenager was arrested on suspicion of being a leader of the computer hacking group that has boasted of breaking into the networks of the CIA, Sony and many other private and
public bodies. British police said the 19-year-old was held at a house in the remote Shetland Islands, off Scotland's northeast coast, and was being taken to a police station in central London. The teenager is thought to be a spokesman for the LulzSec and Anonymous hacking groups and uses the hacker nickname "Topiary," London's Metropolitan Police Service said in a statement. The arrest was part of a "pre-planned, intelligence-led operation," it added. LulzSec has claimed responsibility for cyber-attacks on the U.S. Central Intelligence Agency, multiple Sony Corp websites and the website of Rupert Murdoch's British newspaper group, News International.
UK | REUTERS, JULY 28
Major Hollywood studios won a test case against Britain's largest internet provider in the High Court in their fight against online piracy, the Press Association reported. The judge said he would impose an order to restrict BT customers' access to a site that aggregates pirated material following the legal action taken by the Motion Picture Association of America. The victory is believed to be the first case in the UK in which an internet provider has been forced to block access to a website under the 1988 Copyright, Design and Patents Act. The piracy website Newzbin2 has around 700,000 members who pay to download content from the site, which appears to have a large UK base, asking members to pay in pounds sterling. Around 70 percent of the content available on Newzbin2 is television programmes and films.
CHINA | REUTERS, JULY 25
Chinese officials in Kunming have ordered two fake Apple shops to close, not because of piracy or copyright concerns, but because the stores in the southwestern city did not have an official business permit. Five self-branded "Apple Stores" were found to be selling Apple products without authorisation from the California-based company but only two were told to shut, officials said. An investigation into the stores was apparently sparked by a storm of media attention over an elaborate hoax Apple shop discovered by an American blogger. The order did not apply to that store, which is applying for a reseller licence with Apple, a local government spokesman said. Chang Puyun, spokesman of Kunming government's business bureau, said the stores were not selling fake products. Officials are investigating whether Apple had applied with the Chinese government to have its store design and layout protected by law, Chang added. In addition to protecting trademarks, Chinese law prohibits companies from copying the "look and feel" of other companies' stores, but enforcement is often spotty. In May 2011, China was listed for the seventh year by the U.S. Trade Representative's office as a country with one of the worst records for preventing copyright theft.
US | REUTERS, JULY 26-28
Elizabeth Warren, the law professor who persuaded the Obama administration to create the Consumer Financial Protection Bureau, will step down on Aug. 1 from her role setting up the controversial new regulator, the U.S. Treasury said. Warren will return to Harvard Law School and will be succeeded by a close aide and former banker, Rajeev Date. The agency officially opened its doors for business on July 21 but still does not have a confirmed leader. Earlier in July, President Barack Obama nominated Ohio's former attorney general, Richard Cordray, to be the bureau's first director. The Senate Banking Committee will hold a hearing on Aug. 4 on the nomination of Richard Cordray to lead the new bureau.
DUBAI | REUTERS, JULY 25
Dubai has named a new governor for the Dubai International Financial Centre (DIFC), the state news agency WAM reported, without giving a reason for the change. Abdullah Mohammed Saleh, who has served as chairman of the Dubai Financial Services Authority -- DIFC's regulator -- was appointed as DIFC's governor by the emirate's ruler, Sheikh Mohammed bin Rashid al-Maktoum, the agency reported. Saleh replaces Ahmed Humaid Al Tayer, a prominent figure in Dubai, one of the seven members of the United Arab Emirates.
AUGUST
August 1 - New deadline for comments on credit-risk retention rule proposed by U.S. Federal Reserve and other agencies.
August 7 - CFTC holds rule-making meeting to implement Dodd-Frank measures.
August 8 - Deadline for comments on CFTC's June 7 proposal on adapting regulations for swaps participants
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