GLOBAL REGULATORY BRIEFINGstatic.reuters.com/resources/media/editorial/20110526/Global Regul… · 26/5/2011 · GLOBAL REGULATORY BRIEFING . MAY 26, 2011 . WEEK IN BRIEF The U.S

GLOBAL REGULATORY BRIEFING MAY 26, 2011

WEEK IN BRIEF The U.S. futures regulator launched one of its biggest crackdowns ever on oil price manipulation, while the European Commission made plans to control a commodity speculation. An EU parliament committee approved legislation to standardize derivatives for central clearing. Asian regulators worried that Dodd-Frank controls on derivatives trading will give Washington more power over Asian banks.

GLOBAL REGULATORY BRIEFING, MAY 26, 2011 2

IN THIS ISSUE IN THIS ISSUE

QUOTES

TOP STORIES U.S. sues big oil traders for 2008 manipulation EU lawmakers back derivatives crackdown Asia regulators fear Dodd-Frank stepping on their turf -ISDA EU's Barnier eyes commodity speculation controls

FINANCIAL SERVICES

REGULATORY REFORM US may be year ahead of EU on swaps -CFTC's Sommers UBS plans to move investment bank overseas –report UK bank commission consulting BoE, FSA on ring-fencing Big U.S. banks face more exposure to state laws U.S. muni board focuses on advisors, posting information India central bank sees limit to non-bank business in holding companies Ex-policy makers concerned over BoE regulation powers Lawmakers urged not to rashly unwind Fannie, Freddie Deutsche Bank exec urges politicians to back off banks Too strict regulation risks flight -Lagarde

ENFORCEMENT Divided U.S. SEC approves whistleblower rule U.S. senator probes SAC Capital trading, presses SEC Russian court upholds Khodorkovsky conviction FINRA fines Credit Suisse, Merrill Lynch $7.5 million over subprime FSA fines repeat offender for share scam, wins first injunction Bank of America $410 million overdraft settlement wins court OK China's Longtop says auditor, CFO quit; SEC probes Ex-fund manager in Galleon case helps with new insider suspects California ethics watchdog probes Calpers on gifts Legal challenge delays UK FSA's probe into Keydata U.S. mortgage servicers get subpoenas NY Fed probing Goldman mortgage servicing unit Goldman still a trophy for crisis investigators NY questions more banks in mortgage probe -source States to ask banks for larger mortgage settlement Finra fines Nuveen over auction-rate securities Egypt prosecutor unfreezes assets of 13 businessmen Online poker "payment processor" admits U.S. charges


New York attorney general expands graft-hunting powers Businessmen jailed for Tanzania central bank fraud HSBC U.S. client to plead guilty to hiding account OECD makes no progress against bribes –Transparency Florida Attorney General investigating 5 prepaid debit card companies RBS to co-operate with UK watchdog over ex-CEO Lloyds' Bank of Scotland arm fined 3.5 million pounds Ex-lawyers, tax firm CEO guilty in tax shelter case Croatian regulator brings charges against MOL Montenegro bank resumes lending after ban ends India Infosys gets subpoena from U.S. court on visas

SUPERVISION US House panel votes for 15 percent cut in US CFTC budget Bank-picked experts take on US foreclosure reviews UK banks fall short of lending goal to small firms SEC seeks to ban felons from private placements Finra CEO to brokerages: Don't skimp on compliance Watchdog: SEC could owe millions over lease deal

ACCOUNTING & FINANCIAL STANDARDS BIS: no going back on Basel bank liquidity rule, but tweaks possible ECB's Mersch warns of Basel III capital-requirement costs Swiss finance minister ok with some delay on bank rules EU finance ministers blast Barnier's bank rule plan –report Moody's may cut UK lenders as regulators get tough

GOVERNANCE Companies try to herd shareholder suits to Delaware

DERIVATIVES Europe property loses carve-out in derivatives bill U.S. House panel votes to delay swaps market rules OTC swaps face legal void as CFTC misses deadline

EXCHANGES & TRADING PRACTICES LSE faces TMX tussle as Maple goes hostile As exchange deals die, signs of thorny new era Brazil clearinghouse tie-up to free $19 billion -paper Austria extends short-selling ban again FINRA's Ketchum sees progress on flash crash prevention

FUNDS MANAGEMENT EU securities watchdog eyes hedge funds Bank of Canada warns pension funds of risky buys India’s stability council to bolster wealth-management oversight

FINANCIAL CRISIS & ECONOMY Signs of division between IMF, Europe over bailouts


EU policy options narrow to avert Greek default S&P warning heralds tough times ahead for Italy Ireland says won't yield on corporate tax Chrysler repays bailout money to U.S. Treasury Stimulus money recipients owe billions in US taxes -GAO Debt clearer to take on up to $2.3 billion sour loans Hartford sells bank unit used for TARP EU regulators clear Greece's ATEbank revamp Egypt forms committee to settle investment deals Independent experts take control of RBS report

CURRENCY SEC deepens probe of forex trading -report Taiwan central bank seeks power to cancel forex broker licences Iceland to hold first auction of currency Thai central bank aims to diversify foreign reserves investment

TRADE & CROSS BORDER Hong Kong working to simplify listing rules for international firms -government official NYSE working with Shanghai on international board, keen to list EU, US step on sanctions on Iran shippers, Venezuela’s PDVSA targeted

STATE ENTERPRISES South Korea may ease rules for Woori stake sale -regulator

COMMODITIES & ENERGY UK lawmakers alert watchdog on LME warehouses US House Democratic staff: focus on oil speculators, not drilling EU finalises "stress tests" for nuclear reactors Japan says power saving to take effect from July 1 New Jersey pulls out of northeast US carbon market -Point Carbon California carbon market put on ice Australia introduces laws for sole petroleum regulator

TELECOMS & MEDIA

TELECOMS India court rejects bail pleas of execs in telecoms case

INTERNET & MASS COMMUNICATIONS Morgan Stanley OKs broker use of social media Twitter says to protect users' right to self-defence US lagging in broadband adoption, speed -FCC report Italian TV shows fined for pro-Berlusconi bias

INTELLECTUAL PROPERTY RIGHTS EU wants ISPs to police copyright breach -document


PEOPLE Battle begins for trio of top regulatory jobs Tempers flare with consumer ally Warren in U.S. hot seat US SEC taps Vanderbilt professor for economic post

COMING UP



QUOTES "We're watching and we'll come and get you."

Bart Chilton, a commissioner for the U.S. Commodity Futures Trading Commission, in a warning to commodity-market manipulators after the commission accused. Parnon Energy and Arcadia Energy of manipulating the oil market to the tune of $50 million.

“This is rubbish. It's entirely normal to operate like this, this is Obama having a go.”

Norwegian billionaire John Fredriksen, who controls Parnon and Arcadia, via Norwegian newspaper Dagens Naeringsliv

"I really worry that with the bank becoming so much more powerful that there is going to be an accountability deficit and we should do all we can to increase the checks and balances."

Sushil Wadhwani, former member of the Bank of England policy committee, on new powers proposed for the bank

"It doesn't appear that Chinese companies have withstood the types of scrutiny by auditors that American companies have faced -- for decades. As these companies get bigger, they get more attention, and inconsistencies, anomalies or things that don't make sense may become more apparent."

Richard Riley, an accounting professor at the West Virginia University College of Business & Economics in Morgantown, West Virginia, on accounting scandal at China’s Longtop Financial Technologies

"They're unpopular. They're big. They're sort of the face of Wall Street. They're very profitable. And there's the perception they did quite well from the financial crisis."

Robert Hillman, a law professor at the University of California, Davis on Goldman Sachs being in the SEC's sights again.

“We are going to make sure you are not having a dominant operator on the market. We will go along the same lines as the Americans … We are going to make proposals for limits."

EU intermal markets commissioner Michel Barnier, discussing plans to limit trading by big investors to control speculation in commodities


TOP STORIES

US | REUTERS, MAY 24-25

U.S. sues big oil traders for 2008 manipulation

U.S. regulators launched one of the biggest ever crackdowns on oil price manipulation, suing two well-known traders and two trading firms owned by Norwegian billionaire John Fredriksen for allegedly making $50 million by squeezing markets in 2008. The Commodity Futures Trading Commission (CFTC) said high-profile traders James Dyer of Oklahoma's Parnon Energy, and Nick Wildgoose of Europe-based Arcadia Energy, amassed large physical positions at a key U.S. trading hub to create the impression of tight supplies that would boost oil prices. Later they dumped the oil back onto the market, causing prices to crash and racking up profits from short positions they had accrued in futures markets, the suit said. Both Parnon and Arcadia are controlled by Fredriksen. The lawsuit says that the CFTC may seek damages of as much as triple the monetary gains derived from the illicit trading violations, among other potential fines and injunctions. If the CFTC won damages of $150 million it would match the second-largest fine in the agency's history. Arcadia Energy rejected the U.S. futures regulator's claims, and said it would fight them in court. Fredriksen said the CFTC accusations were "rubbish" and suggested that U.S. President Barack Obama was trying to score political points. The Obama administration has assured Americans it is trying to curb high U.S. gasoline prices and ensure they aren't being artificially driven up. Fredriksen’s quick rebuttal set up a rare public showdown over trading practices in the opaque physical oil market. Many such past cases have been settled out of court, and regulators have struggled in the past to make manipulation charges stick. But more such cases are likely to be brought and they will have a deterrent effect, said Michael Greenberger, a law professor at the University of Maryland and the CFTC's former director of trading and markets. Learn more

EU | REUTERS, MAY 24

EU lawmakers back derivatives crackdown

A European Union lawmakers' committee approved legislation to standardise derivatives so they can be moved through central clearing houses to reduce risk and improve transparency. The European Parliament's economic and monetary affairs committee meeting voted by 36 to 1 in favour of the proposal, but there remained several hurdles before it could become law. Under the deal brokered by lawmakers, the obligation to move derivates through a central clearing house would apply to much of the $600 trillion derivatives now traded over the counter (OTC), while reporting requirements would be imposed on all derivatives trades, including those on exchanges. Britain, Europe's top derivatives trading centre, wants the law to cover all derivatives, since the rules enshrine a choice of clearing house, a choice the UK says should be extended to those who trade on an exchange, too. EU states have joint say on the draft law, but a final deal looks months away after lawmakers raised the stakes by deciding to hold a full parliament vote in July 2011 before kicking off a second reading and negotiations with EU states. EU Internal Market Commissioner Michel Barnier authored the draft law and he cautioned lawmakers that a second reading would add another six months as a global deadline loomed for countries to adopted derivatives regulation by the end of 2012.

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Learn more

ASIA | REUTERS, MAY 23

Asia regulators fear Dodd-Frank stepping on their turf -ISDA

Asia's financial regulators are growing fearful that tough new rules on derivatives trading in the United States will give America increasing control over Asian banks. At a closed-door meeting of financial regulators in Bangkok, the potential ability of U.S. supervisors to call the shots over the trading books and capital levels of Asian banks emerged as one of their major concerns. Robert Pickel, executive vice chairman of the International Swaps and Derivatives Association, the global trade association for derivative market participants, which hosted the meeting, said there was a worry about the scope of U.S regulation on Asian banks with operations in the US. Up until recently, many Asian regulators and banks had assumed that many of the new derivative trading rules in America would not have a significant impact on them given that few Asian banks have major swap dealing operations in the United States. But under new guidelines coming out from the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission, Asian banks that have a significant exposure to the U.S. swaps markets, potentially as clients of U.S. banks, may be classed as a "major swap market participant". In addition, Asian banks that act as market makers in Asia for U.S. banks may also come under American regulators' jurisdiction. That would mean that Asian banks would have to register with U.S. regulators and be subject to certain capital and margin requirements for trading in over-the-counter derivatives. Keith Noyes, ISDA's regional director for Asia-Pacific, said many Asian banks didn't realize the extent to which they might get caught up by Dodd-Frank. While the rules in the United States are not yet finalised, there is a growing concern that time is running out for Asian regulators to ensure that banks under their jurisdiction do not face a conflicting set of regulation from American supervisors. Noyes said that while the full ex-territorial impact of Dodd-Frank would only become apparent a while down the line, by then it would be too late for Asian regulators to make an impact.


EU's Barnier eyes commodity speculation controls

The European Union's executive will propose powers to cap trading by big investors to control speculation on commodities, the bloc's official in charge of financial reform said. Speaking in the European Parliament, Michel Barnier said he wanted new rules to tackle speculation in derivatives, which has been blamed for the spiralling cost of grain and other commodities. Barnier told lawmakers that the Commission wanted to know "who is doing what, when they are engaged in speculation". Barnier also conceded that price volatility in commodities was not necessarily the result of speculation, but could also be caused by limited supply and natural disasters.

http://bit.ly/kqNC1j�


FINANCIAL SERVICES

REGULATORY REFORM

US / EU | REUTERS, MAY 25

US may be year ahead of EU on swaps -CFTC's Sommers

The United States is far ahead of Europe in bringing the $600 trillion swaps market under regulation, which could drive trading overseas, one of the five commissioners who oversee the U.S. futures markets Representatives subcommittee hearing that there are significant differences in the impact of rules being drafted in the European Union and the United States, the biggest swaps markets. Sommers told reporters the EU may not complete its rules until late 2012 or into 2013. CFTC chairman Gary Gensler wants to adopt financial reform rules by the end of this year, with implementation in following months. With a phased implementation of U.S. rules, the gap could be short, said Bart Chilton, another CFTC commissioner. He said he agreed that regulations needed to be coordinated. Leaders of the Group of 20 large industrialized nations have a goal of regulating over-the-counter derivatives by the end of 2012. In general, they want over-the-counter derivatives to go through clearinghouses and trade on regulated arenas as much as possible, with all deals being reported and larger cash reserves required when swaps are not cleared. Sommers said EU rules may differ from U.S. proposals by exempting pension funds from mandatory clearing and by requiring one quote, rather than five, when a swap is traded. The EU has yet to unveil proposals on issues such as capital and margin requirements for uncleared swaps, she said. Two financial trade groups, the Financial Industry Association and the International Swaps and Derivatives Association, after saying they were concerned by potential differences in U.S. and EU rules, suggested CFTC should allow a new round of comment once its array of rules are final.

SWITZERLAND | REUTERS, MAY 26

UBS plans to move investment bank overseas –report

UBS is planning to relocate its investment bank outside Switzerland, the Wall Street Journal said, to side-step tough new local bank regulations and better deploy its capital. The country's financial watchdog FINMA is pushing UBS, which was one of the biggest casualties of the credit crisis, to set up its risky investment bank as a separate entity outside Switzerland in London, New York or Singapore, the newspaper said. Switzerland plans to force UBS and its closest rival Credit Suisse to build up far bigger capital buffers than their peers abroad, to make sure Switzerland won't need to bail out one of its huge banks again, as it did with UBS during the crisis. Profitably running an investment bank will be hard for UBS given the tough new Swiss capital requirements that analysts say will put it at a disadvantage compared with its overseas rivals. However, the Swiss rules contain a "rebate" that would allow banks to hold less capital if there was less of a direct guarantee from a parent company to subsidiary units abroad.


UBS called the WSJ report unfounded "speculation", but pointed to earlier statements that said it was looking at its "corporate structure in view of developing regulatory requirements, not only in Switzerland but also in the UK, U.S. and elsewhere."

UK | REUTERS, MAY 24

UK bank commission consulting BoE, FSA on ring-fencing

Britain's Independent Commission on Banking (ICB) has consulted the Bank of England and Financial Services Authority over its proposals to ring-fence companies' retail banks from their riskier trading operations. John Vickers, chairman of the Independent Commission on Banking (ICB), told parliament's Treasury Select Committee that the ICB had held meetings with both bodies over its proposals. In April 2011, the ICB proposed in an interim report that Britain's top banks should ring-fence their retail operations from riskier investment banking activities and boost capital levels to protect taxpayers from future crises. The ICB also proposed that part-nationalised bank Lloyds should sell hundreds more branches on top of the 600 already earmarked for sale, but Lloyds warned that this could complicate its asset sale programme. Vickers also said the British taxpayers' implicit subsidy for the country's banking system would be significantly cut in the commission’s proposals, but he said it was unlikely that this subsidy could ever be entirely abolished. He acknowledged that bonuses paid out in Britain's banking sector have been partly financed by the taxpayers' implicit subsidy. He projected that the final report would be published in mid-September and said it would probably spark a “lively debate" in parliament. ICB member Bill Winters discounted speculation that British banks would move overseas as a result of the commission’s proposed reforms.

US | REUTERS, MAY 25

Big U.S. banks face more exposure to state laws

The federal regulator of the largest U.S. banks will have less power to shield these national banks from state consumer financial laws, under a new proposal. The changes to the Office of the Comptroller of the Currency rules are required by the 2010 Dodd-Frank financial oversight law. The OCC proposal lays out details of the process it would undertake when it decides to preempt a state. Critics of the OCC charge that in the run-up to the 2007-2009 financial crisis, the agency was too aggressive in preventing states from enforcing their consumer protection laws on national banks, and took an expansive view of its ability to do so under the National Bank Act. Under the new proposal, the OCC would have to make determinations on a case-by-case basis and must provide substantial evidence of the reason for preempting a state law. The OCC will also consult with the new Consumer Financial Protection Bureau when making such decisions.


U.S. muni board focuses on advisors, posting information

The board that writes the rules for the $2.9 trillion U.S. municipal bond market said it would file a raft of regulations on financial advisors with the federal government in June. The Municipal Securities Rulemaking Board, a self-regulatory organization made up of banks, issuers and advisors that writes the rules the Securities and Exchange Commission enforces, said it would file


rules defining fiduciary responsibilities emphasizing "the duty of loyalty and care," limiting gifts by advisors, and applying a "fair dealing" rule currently used for brokers and dealers to advisors. The board is also looking into the best way to delineate between underwriters and advisors.

INDIA | REUTERS, MAY 23

India central bank sees limit to non-bank business in holding companies

India's central bank said it was necessary to place limits on expansion of non-banking business under the new financial holding company (FHC) structure to ensure that banking continues to be the dominant activity. A working group of the central bank in its recommendations on setting up financial holding companies also said the allocation of equity capital by banking holding company to its non-banking subsidiaries should be capped. The Reserve Bank of India (RBI) has sought feedback on these recommendations by end-June. Learn more


Ex-policy makers concerned over BoE regulation powers

Former Bank of England policy makers have criticised the government's plans to put the central bank fully in charge of financial stability and warned against a lack of accountability. Willem Buiter, who was on the Bank's interest rate setting Monetary Policy Committee from 1997 to 2000, said at a parliament hearing that the reform of the financial stability management was "disastrously misconceived". He said the Bank of England was "greatly overburdened and too powerful in this proposed new construction". Under the proposed plans the Bank will take on far-reaching regulatory responsibilities, becoming Britain's main banking regulator from the end of next year under a sweeping reform of supervision. BoE chairman Mervyn King will chair the Financial Policy Committee (FPC). The main role of the interim FPC is to oversee the BoE's twice-yearly financial stability reports, and to advise the government on what powers its fully fledged successor should be given to forestall financial market excesses. Buiter, who is now chief economist at Citigroup, said the finance ministry should be in charge of financial stability given its role as potential "recapitaliser of last resort" in case of a bank crisis. . Another former BoE policymaker, Kate Barker, also said the Treasury should have greater say in matters of financial stability. Sushil Wadhwani, who was on the BoE's policy committee from 1999 to 2002, highlighted the issue of accountability that came with the Bank's new role, suggesting the supervisory body -- the Bank's Court of Directors -- should be given more powers.


Lawmakers urged not to rashly unwind Fannie, Freddie

A top U.S. regulator urged lawmakers not to rashly unwind Fannie Mae and Freddie Mac, which guarantee three-fourths of all mortgage-backed securities, as part of any effort to spur private investment in the nation's struggling housing market. Acting director Edward DeMarco of the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, urged a congressional panel to give the agency “sufficient flexibility” to safeguard the entities’ assets.

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Republican lawmakers are leading efforts to overhaul the country's housing finance system. Topping their list is eliminating Fannie Mae and Freddie Mac, which were seized by the government in September 2008. The two companies have since been propped up with about $164 billion in taxpayer aid. Republicans in the U.S. House of Representatives have introduced a number of bills to cut government's role in the $10.5 trillion housing finance market. Among measures being contemplated include those that would prevent the creation of Fannie and Freddie replacements should the government and Congress succeed in winding the entities down. One bill caps the amount the government could spend to prop up Fannie Mae and Freddie Mac. Another would force the companies to disclose certain information in response to requests from the media and the public under the Freedom of Information Act. DeMarco said Fannie and Freddie were still private companies operating in conservatorship, and that forcing them to disclose certain information could incur significant operational and compliance costs. The Obama administration, which proposed earlier this year to unwind the mortgage buyers, and other top financial policymakers have warned against removing government support too quickly and damaging the economic recovery. Lawmakers are also mulling plans to reduce the size of mortgages that the government guarantees, upsetting home builders and realtors who argue that doing so would further depress home prices and the housing recovery.

GERMANY | REUTERS, MAY 26

Deutsche Bank exec urges politicians to back off banks

European politicians should back off and give regulators more resources to do their job and help economic recovery, a top Deutsche Bank AG official said. The bank's UK Chief Executive Collin Grassie said the industry is grateful for the help of political leaders during the financial crisis, but “right now we need them a little less.” Grassie told the International Capital Market Association's annual conference that economic recovery and the supply of credit would be encouraged by a less intervention from the governments and a stronger, globally integrated regulatory framework. He said he believe the direction of regulation in the United States and Asia was more “sympathetic” to business than in Europe. Antonio Borges, director of the International Monetary Fund's European department, said stronger centralisation of supervision was needed in Europe for its markets to catch up with the United States in terms of efficiency. Regulators need more resources to do their job and should work much more closely cross-border to supervise international firms, Grassie said.


Too strict regulation risks flight -Lagarde

France's Finance Minister Christine Lagarde is worried that overly strict financial regulations could lead to a flight outside main centres. Lagarde said in an article published in the German newspaper Handelsblatt that she saw a danger that too strict regulation at the centre could lead "to a flight to the borderlands". Considered a frontrunner to replace Dominique Strauss-Kahn as managing director of the International Monetary Fund, Lagarde also said the G20 should conclude basic rules for consumer protection in October and expressed concern that the will to implement G20 decisions was lagging.


ENFORCEMENT


Divided U.S. SEC approves whistleblower rule

A divided U.S. Securities and Exchange Commission approved a new program that would compensate whistleblowers whose tips lead to sanctions of over $1 million. In a 3-2 vote, the SEC backed what has grown to become one of the most contentious provisions required under the Dodd-Frank Wall Street overhaul law. Whistleblowers whose tips lead to cases that result in sanctions exceeding $1 million can be eligible for a reward of between 10 percent to 30 percent of the total amount. Although the rule encourages whistleblowers to first report problems internally, it does not mandate it. Companies from Google Inc to JPMorgan Chase & Co have expressed fears the whistleblower rule could undermine internal compliance programs at public companies. SEC Chairman Mary Schapiro said the final rule struck the correct balance between encouraging whistleblowers to report problems internally when appropriate, while providing the option of heading directly to the SEC. To promote internal reporting, the SEC has added some features to the rule such as making a whistleblower eligible for a reward if he or she reports wrongdoing to the company and the company, in turn, reports it to the SEC. The SEC's two Republican commissioners voted against the rule and raised numerous concerns, from its impact on internal compliance to fears it may inundate the SEC with complaints that do not prove to be fruitful. Learn more


U.S. senator probes SAC Capital trading, presses SEC

A powerful U.S. Republican lawmaker is investigating possible insider trading at leading hedge fund SAC Capital Advisors LLP, and asked the Securities and Exchange Commission to explain how it handled its oversight of the firm. Senator Charles Grassley of Iowa, the top-ranking Republican member of the Senate Judiciary Committee, is reviewing 20 stock trades made by Steven Cohen's nearly $14 billion fund over the last decade. The senator regards the trades as potentially suspicious. Grassley, who has long criticized the SEC for not adequately protecting average American savers, stepped up the pressure on the SEC in a letter sent to Mary Schapiro, the SEC's chair. Grassley has previously asked the Financial Industry Regulatory Authority, Wall Street's self-regulatory body, to tell him about any referrals that the group received about SAC. Now he is asking the SEC to tell him how the agency handled the referrals that it received from FINRA, and whether it ever drafted a “Wells notice” that it was targeting SAC Capital. The SEC has until early June 2011 to respond. Learn more

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RUSSIA | REUTERS, MAY 24

Russian court upholds Khodorkovsky conviction

A Russian appeals court upheld a multi-billion-dollar theft and money laundering conviction against jailed former oil tycoon Mikhail Khodorkovsky and reduced his 14-year prison sentence by one year. The court rejected an appeal by Khodorkovsky, once Russia's richest man, against his Dec. 30 conviction in a trial seen by his supporters as a test of President Dmitry Medvedev's promises to improve the rule of law. Khodorkovsky, 47, and his business partner Platon Lebedev, were initially convicted of fraud and tax evasion in a separate trial in 2005. The Moscow City Court ruling means former Yukos oil company chief Khodorkovsky, who fell foul of the Kremlin during Vladimir Putin's presidency and has been jailed since 2003, will remain in prison well into 2016. Khodorkovsky's lawyer Vadim Klyugvant said they would appeal against the decision "at all Russian and international levels available to us by law," making an apparent reference to the European Court of Human Rights. The United States said the court decision raised serious concerns about the Kremlin's commitment to the rule of law.


FINRA fines Credit Suisse, Merrill Lynch $7.5 million over subprime

A Credit Suisse Group Ltd unit and Bank of America Corp's Merrill Lynch will collectively pay $7.5 million after U.S. brokerage regulators accused them of misrepresenting delinquency data for securitized subprime mortgages. The Financial Industry Regulatory Authority said that Credit Suisse Securities USA will pay a $4.5 million fine, while Merrill Lynch will pay $3 million to settle the matter. Credit Suisse and Merrill Lynch neither admitted nor denied the charges. This marks at least the third time that FINRA has fined a bank for allegedly misrepresenting the delinquency history of subprime securities that helped fuel the financial crisis.


FSA fines repeat offender for share scam, wins first injunction

Britain's financial regulator slapped a 1.09 million pound ($1.76 million) fine on a repeat offender for a share price scam and secured an unprecedented court injuction to prevent him from committing further market abuse. The Financial Services Authority (FSA) said Samuel Kahn co-ordinated a scheme to deliberately inflate the shares of Global Brands Licensing, quoted on the junior PLUS bourse, orchestrating and controlling most of the trades over one month in 2010. Kahn was investigated by the FSA and fined in 2007 for his part in overseas boiler room activities and was bankrupted by the regulator in 2008 after admitting liabilities for claims worth up to 3.7 million pounds from about 800 investors. If caught again, Kahn could now face jail. But there had not been enough evidence for a criminal case against him at this stage, the FSA said. Learn more

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Bank of America $410 million overdraft settlement wins court OK

Bank of America Corp has won tentative approval of a $410 million settlement of lawsuits accusing it of charging excessive overdraft fees to roughly 1 million customers. U.S. District Judge James Lawrence King in Miami granted preliminary approval for the accord and scheduled a Nov. 7 hearing to consider final approval, court records show. Bank of America, the largest U.S. bank by assets, is among more than two dozen U.S., Canadian and European lenders that had been named as defendants in the class-action litigation, which in 2009 consolidated lawsuits filed across the country. JPMorgan Chase & Co, Citigroup Inc and Wells Fargo & Co are among the other defendants. According to a court filing, Bank of America will not oppose a request by the plaintiffs' lawyers for attorneys' fees of up to 30 percent of the settlement fund, net of expenses.

CHINA | REUTERS, MAY 23

China's Longtop says auditor, CFO quit; SEC probes

The auditor at Longtop Financial Technologies Ltd quit and a U.S. regulator has opened a related probe, deepening concern about possible accounting irregularities at Chinese companies. The resignation of Deloitte Touche Tohmatsu CPA on Sunday, May 22 came three days after Longtop said its chief financial officer offered to resign. According to Longtop, Deloitte said its resignation stemmed in part from "recently identified falsity" in Longtop's financial records, as well as "deliberate interference" by Longtop management in the audit process. Longtop also said Deloitte could no longer rely on its prior audit reports for the company. Separately, Longtop said the U.S. Securities and Exchange Commission has opened an inquiry. It intends to cooperate, and has hired legal counsel and authorized the hiring of forensic accountants to examine matters raised by Deloitte. Longtop said it is also considering whether to accept the May 19 resignation of Derek Palaschuk, its CFO. Learn more


Ex-fund manager in Galleon case helps with new insider suspects

Steven Fortuna, a former S2 Capital LLC hedge fund manager who pleaded guilty in the broad Galleon insider trading case, is helping prosecutors in an investigation of other suspects, a U.S. prosecutor said in court. Fortuna pleaded guilty in Manhattan federal court on Nov. 5, 2009, the same day the government announced a second series of arrests largely based on wiretap evidence in what prosecutors called the biggest probe of insider trading at hedge funds on record. Assistant U.S. Attorney Jonathan Streeter said at a hearing to formalize a change of lawyer by Fortuna that his cooperation was relevant to one of the defendants who pleaded guilty, and that he was still cooperating with prosecutors.

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California ethics watchdog probes Calpers on gifts

A California ethics watchdog agency is investigating the board president, the chief investment officer, and other current and former officials and employees of Calpers, the biggest U.S. public pension fund, over disclosure of gifts. The California Fair Political Practices Commission is looking into whether officials and employees at Calpers failed to properly report gifts they had received or had received gifts whose value exceeded a state limit, Roman Porter, the commission's executive director, told Reuters. Porter declined to provide details on the probe, noting it is open and that Calpers, the California Public Employees' Retirement System, is cooperating with the commission. Among those named in the probe are Calpers board president Rob Feckner, fellow board members George Diehr and J.J. Jelincic and fund Chief Investment Officer Joseph Dear. Also on the list is former Calpers Chief Executive Fred Buenrostro, who has been named in another probe involving placement agents that has dogged Calpers in recent years. He has denied any wrongdoing. The scandal at Calpers involving the agents, who help investment managers sell their services and products, prompted the fund itself in 2009 to begin looking into whether its employees had been properly recording and disclosing any gifts from those seeking business relationships with the fund. Calpers Chief Executive Anne Stausboll said in a statement that the fund's own probe has been looking back several years.


Legal challenge delays UK FSA's probe into Keydata

A legal challenge to Britain's financial regulator is delaying disciplinary investigations into Keydata Investment Services, which collapsed in 2009 and sparked one of Britain's biggest personal investment scandals. The Financial Services Authority (FSA) blamed a judicial review by Stewart Ford, Keydata's multi-millionaire founder, for the delay in concluding probes into both Keydata and Ford that were launched in 2007 and 2008 respectively. Ford, who denies wrongdoing and blames the FSA's actions for losses suffered by thousands of British pensioners when Keydata failed in 2009, was given court permission to pursue the review two weeks ago. The FSA fast-tracked the company into administration two years ago, alleging it was insolvent, after around 30,000 mainly elderly investors had invested more than 450 million pounds ($730 million) in the business. Pensioners saw income payments on nest eggs halt as administrators scrambled to fund the costs of underlying assets -- a portfolio of second-hand U.S. life insurance policies, or so-called death bonds -- and accountants PricewaterhouseCoopers called in fraud officers. But the Serious Fraud Office (SFO) dropped its investigation earlier this month, having failed to unearth enough evidence to prosecute. The Insolvency Service, a UK government agency that investigates insolvent firms, has also decided against pursuing Ford or other Keydata directors. The FSA reiterated on Thursday that its investigation into both Keydata and Ford were at an "advanced stage", but noted they could not be concluded until after the judicial review hearing on July 21 and 22.


U.S. mortgage servicers get subpoenas

Attorneys general in California and Illinois have subpoenaed Lender Processing Services Inc and Nationwide Title Clearing Inc as part of probes into alleged "robosigning" in the mortgage


servicing industry. The state investigations advance efforts by federal agencies underway since 2010. California Attorney General Kamala Harris said in a statement that her office sent a subpoena to LPS. Illinois Attorney General Lisa Madigan said she issued subpoenas to both LPS and Nationwide Title Clearing Inc. The two offices are coordinating their investigations, according to a spokeswoman for Madigan. Robosigning refers to the mass signing of documents by banks or mortgage servicing companies when they try to foreclose on borrowers. Harris and Madigan said the so-called robosigners did not read or understand the documents they signed. LPS was used by many of the largest mortgage lenders and servicers in the country and former LPS employees have testified documents were robosigned, Harris said. The federal Office of the Comptroller of the Currency (OCC) in April announced that it reached a settlement with LPS -- along with other large banks that act as home loan servicers -- for improprieties in handling foreclosures. The settlement called for an internal investigation by LPS, a halt to any improper practices and remediation for any harm caused. LPS agreed to the settlement without admitting any wrongdoing. Other federal agencies, including the Department of Housing and Urban Development, are continuing to investigate loan servicers, including LPS.


NY Fed probing Goldman mortgage servicing unit

The Federal Reserve Bank of New York is investigating whether Goldman Sachs' mortgage servicing arm failed to conduct proper reviews before denying borrowers the option to lower their payments under a government loan modification programme. In its quarterly filing with the SEC earlier this month, Goldman said regulators had sought information on the foreclosure and servicing protocols and activities of its mortgage servicing unit Litton Loan Servicing. "We are in possession of the letter and are conducting an inquiry," A New York Fed spokesperson told Reuters the Fed had a letter from a Litton employee sent to the Fed by the Financial Times. A spokesperson for Goldman Sachs declined to comment when contacted by Reuters. Houston, Texas-based Litton had denied loans modification to borrowers without appropriate review under a "denial sweep" strategy in order to clear a backlog of applications, FT reported. Goldman had said in the filing that is cooperating with the regulators' requests and reviewing Litton's practices, adding that inquiries could result in the "imposition of fines or other regulatory action." Earlier this year, Goldman said it was looking at selling Litton and is reportedly in talks with Ocwen Financial Corp <OCN.N> for the sale.


Goldman still a trophy for crisis investigators

U.S. investigators hunting for culprits in the financial crisis are keeping Goldman Sachs in their crosshairs. The U.S. Securities and Exchange Commission got off an early shot when they settled with Goldman in 2010 for $550 million in the most high-profile enforcement case to emerge from the 2007-2009 financial crisis. Almost a year later, the drumbeat is growing louder for investigators to nail Goldman again, fueled by a Senate report last month. The SEC is under intense pressure along with the Justice Department to hold financial players accountable for the crisis, but the SEC and Justice


Department have so far failed to bring a comparable case against other major financial firms, such as American International Group. Robert Hillman, a law professor at the University of California, Davis, said Goldman may again top investigators' lists because it plays better as a culprit than other financial players. The New York attorney general is also tightening the screws, requesting information from Goldman, Bank of America and Morgan Stanley on their mortgage securitization practices, according to a source familiar with the matter. Goldman itself is bracing for a criminal probe, the Wall Street Journal reported, and it expects subpoenas from the Justice Department could come within days. Goldman declined to comment, as did the Justice Department. Lawyers said the U.S. government has a real chance of finding inconsistencies between Goldman executives' testimony to Congress and their internal documents. The Senate subcommittee report last month said the bank offloaded much of its subprime mortgage exposure to unsuspecting clients in late 2006 and 2007 as the market was starting to tank. In some cases, it refused to end bad trades with customers, even as clients pressed them to. One former federal prosecutor said that the Justice Department might avoid pressing charges against the bank, but instead press lesser charges against Goldman Sachs officials.


NY questions more banks in mortgage probe -source

New York's attorney general is seeking information from JPMorgan Chase & Co, UBS AG, Royal Bank of Scotland Group Plc and Deutsche Bank AG as part of its expanding probe into mortgage operations, according to a person familiar with the matter. Units of bond insurers Ambac Financial Group Inc, MBIA Inc, Syncora Holdings Ltd and Assured Guaranty Ltd have also been subpoenaed by the state's attorney general for information related to claims they paid out on mortgage-related products, according to this source. The office of New York Attorney General Eric Schneiderman is also seeking information about litigation between the bond insurers and banks that packaged mortgage securities, the source said. MBIA spokesman Kevin Brown confirmed the company had received a subpoena, which he said seeks information related to various complaints MBIA has filed against various financial institutions over the quality of mortgage securities MBIA insured. Ashweeta Durani, a spokeswoman for Assured Guaranty, said in a statement the company supports the investigation, but would not confirm whether it had received a subpoena. Other company representatives either declined to comment or did not immediately return requests for comment.


States to ask banks for larger mortgage settlement

U.S. government negotiators were planning to squeeze big banks for a larger settlement over mortgage servicing flaws at a meeting this week in Washington. State attorneys general and federal agencies found an offer of $5 billion from five banks "woefully inadequate," according to a person familiar with the talks. Bank of America, JPMorgan Chase, Citigroup, Wells Fargo and Ally Financial made that offer in early May. The amount was a far cry from the $20 billion the states and federal agencies had been discussing, although not formally proposing. State and federal officials planned to describe to banks the scope of claims they believe could be brought against the lenders, to show why they believe $5 billion is inadequate. The states were to be joined at the table by the departments of Justice and Housing and Urban Development. To help make their case for a larger settlement, the states and federal agencies have pointed to


recent findings by HUD's inspector general, an independent office, that the banks violated the False Claims Act.

US | THOMSON REUTERS ACCELUS, MAY 23

Finra fines Nuveen over auction-rate securities

The U.S. securities industry self-regulatory body Finra fined a Nuveen Investments unit $3 million for creating misleading marketing materials used to sell auction rate preferred securities. The Financial Industry Regulatory Authority said that it found Nuveen's broker-dealer arm violated U.S. securities law and the self-regulator's rules. Without admitting or denying the findings, Nuveen also agreed to be censured, to refinance the securities in question on a best-efforts basis and to give Finra reports on the status of its efforts. Finra noted that the firm has already rectified $14.2 billion of the $15.4 billion in affected securities. The auction rate preferred securities, or ARPSs, were a form of long-term securities with yields that were periodically reset through an auction process. Nuveen's closed-end mutual funds issued the preferred securities to raise money to finance the funds' investments. Like other types of auction-rate securities, the ARPSs failed in mid-February 2008 when the sponsors or their managers stopped supporting the auctions. FINRA enforcement chief Brad Bennett said Nuveen was aware of facts that raised significant red flags about the ability of investors to obtain liquidity for their Nuveen auction rate securities, yet failed to revise their marketing brochures to disclose these risks.

EGYPT | REUTERS, MAY 23

Egypt prosecutor unfreezes assets of 13 businessmen

Egypt's public prosecutor has unfrozen the assets of 13 businessmen on a list of people barred from trading because of graft investigations launched after the fall of Hosni Mubarak, the Cairo stock exchange said. The businessmen include Safwan Thabet, chairman of dairy and juice maker Juhayna Food Industries Co and Ahmed Bahgat, who owns two satellite television channels and a big development in the suburbs of Cairo. Soon after Mubarak was ousted as president in February, Egypt's public prosecutor issued a list of people whose assets, including cash, shares, bonds, real estate and other property, had been frozen pending investigations into corruption.


Online poker "payment processor" admits U.S. charges

An Illinois man admitted in federal court to helping large online poker websites dodge U.S. gambling laws by processing millions of dollars in payments from his home in Costa Rica and lying to banks about the nature of the transactions. So-called "payment processor" Bradley Franzen, 41, pled guilty in New York to criminal charges of conspiracy to commit bank fraud, conspiracy to commit money laundering and being part of operating an illegal gambling business. He faces a possible maximum prison term of 30 years. Franzen was among 11 people whose indictment was announced by federal prosecutors in New York in April 2011 when authorities seized the Internet domain names for Absolute Poker, Full Tilt Poker and PokerStars. Online gambling has been illegal in the United States since 2006. Franzen, who is from Illinois and has a home in Costa Rica, told the court he was contacted by an Internet poker company in 2009. He said he was aware that most U.S. banks did not process


the payments and that he understood that U.S. law prohibited it. He said he processed "millions of dollars" for the poker websites from his residence in Costa Rica. Learn more


New York attorney general expands graft-hunting powers

New York state Attorney General Eric Schneiderman said he had amplified his ability to root out public corruption by joining with the state comptroller, who has separate and broad auditing powers. Schneiderman said his accord with Comptroller Thomas DiNapoli, a fellow Democrat, will enable him to probe and bring charges over "any wrongdoing involving government spending, including member items, contracts and pension fraud." Governor Andrew Cuomo has made ethics reform, including forcing legislators to reveal details about their outside income, a primary focus in the wake of a series of public corruption scandals. Various investigators are examining several state lawmakers' roles and benefits they may have received from projects funded by the state budget.

TANZANIA | REUTERS, MAY 24

Businessmen jailed for Tanzania central bank fraud

Two businessmen have been jailed for defrauding Tanzania's central bank of over $1 million in the first of a series of cases on scams on the bank that cost the country $87 million in 2005, their lawyer said. Prosecutors in east Africa's second biggest economy are investigating one of the country's biggest corruption scandals comprising of about 20 separate cases of suspected fraud. Tanzanian President Jakaya Kikwete sacked central bank governor Daudi Ballali in 2008 after a special audit into the payments uncovered the massive fraud and graft. A corruption investigation ordered by Kikwete after the audit findings led to a string of prosecutions against high-profile businessmen and central bank officials. Majura Magafu, lawyer for businessmen Farijala Hussein and Rajab Maranda, told Reuters that the businessmen were sentenced to five years in prison each, and intended to issue a notice of appeal against the judgment. They were found guilty of forgery and obtaining money by false pretences among other charges.


HSBC U.S. client to plead guilty to hiding account

A board member for Boston Private Bank and Trust Corp plans to plead guilty of illegally hiding funds at HSBC Bank Bermuda, the latest plea in a crackdown on Americans evading taxes, federal prosecutors said. Michael Schiavo, 53, will plead guilty to one count of failing to report a foreign account after he quietly refiled his tax returns for several years to account for the money he held at the HSBC Holdings Plc unit, according to court records. The Internal Revenue Service has held two programs recently for Americans to come forward to disclose assets they have hidden overseas to evade U.S. taxes and pay any back taxes and associated penalties. Schiavo had as much as $150,000 in the HSBC account, but he did not participate in the IRS amnesty programs, according to the criminal information document filed in U.S. District Court for the District of Massachusetts. Under the plea agreement, he will pay a $76,283 civil penalty. No date has been set yet for his plea or sentencing.

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With business partner Peter Schober, who had an offshore account at UBS AG, Schiavo had his income from an investment directed to his HSBC account, evading some $40,000 in taxes, according to prosecutors. At the time Schiavo failed to report the overseas account, he worked as a partner and chief financial officer of Kodiak Venture Partners, a venture capital firm in Massachusetts. He faces up to five years in prison.

GLOBAL | REUTERS, MAY 24

OECD makes no progress against bribes –Transparency

An international anti-bribery convention is making no progress in encouraging more countries to stop businesses paying bribes abroad because of a lack of political will, according to a new report. The Organisation for Economic Cooperation and Development’s convention to try to stop companies bribing foreign officials by making it a crime dates from 1997 and has been adopted by 38 countries, but the number of states actively enforcing it is static at seven. Transparency International, a Berlin-based non-governmental anti-corruption body, said in its progress report on the OECD convention that there was still only "moderate enforcement" in nine of these countries and "little or no enforcement" in 21. This lack of progress was "disappointing and raises concern that the convention may be losing momentum," Transparency said. It said the main cause was "lack of political commitment" by leaders. Transparency recommended high-level political action led by the OECD, government leaders and CEOs to overcome this. It listed the active enforcers as: Denmark, Italy, Norway, Switzerland, Britain, Germany and the United States, singling out the last two for a higher tally of prosecutions last year.


Florida Attorney General investigating 5 prepaid debit card companies

The Florida Attorney General's office said it was investigating prepaid debit card companies -- First Data Corp, Green Dot Corp, Account Now Inc, NetSpend Corp and Unirush Financial Services LLC -- for possible deceptive and unfair practices. The office’s Economic Crimes Division also issued a series of subpoenas regarding possible hidden fees on prepaid debit cards. The companies that were issued subpoenas must provide the requested information by June 20, a spokesperson for the Florida Attorney General's Office saidl. The subpoenas addressed to Unirush and AccountNow also include a request for documents related to claims that the companies' products can increase a consumer's credit score, the spokesperson said. Learn more


RBS to co-operate with UK watchdog over ex-CEO

Royal Bank of Scotland said it was in discussions with Britain's financial regulator, after a lawmaker raised corporate governance concerns over former chief executive Sir Fred Goodwin. A British court relaxed an order preventing media from reporting that Goodwin had a "sexual relationship", after the politician said the alleged relationship with a senior colleague could have broken rules on corporate governance at the bank. An RBS spokeswoman said the bank was cooperating fully with the FSA.

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Lloyds' Bank of Scotland arm fined 3.5 million pounds

Lloyds' Bank of Scotland division received a 3.5 million pound ($5.67 million) fine from the Financial Services Authority (FSA) regulator for failures in how it handled certain customer complaints. The FSA added it had also secured 17 million pounds in compensation for customers, following complaints about the company's retail investment products. Between July 2007 and October 2009, Bank of Scotland received 2,592 complaints about its sales of the Collective Investment Plan, Personal Investment Plan, Guaranteed Growth Bond, ISA Investor and Guaranteed Investment Plan, the FSA said. The regulator said Bank of Scotland had wrongly rejected a significant number of these complaints.


Ex-lawyers, tax firm CEO guilty in tax shelter case

Former Jenkens & Gilchrist law firm partners Paul Daugerdas and Donna Guerin were convicted along with former BDO Seidman accounting firm chief executive Denis Field of running a tax shelter scheme to fabricate losses for wealthy clients. Daugerdas, 60, of Wilmette, Illinois, was found guilty by a Manhattan federal court jury of 23 counts, including conspiracy, tax evasion and mail fraud. Guerin, 50, of Elmhurst, Illinois, was convicted on 12 counts including conspiracy, tax evasion and mail fraud, and Field, 53, of Naples, Florida, was convicted on 7 counts in the case in which prosecutors said the three made $130 million in illicit profits. One other defendant in the case, former Deutsche Bank Alex. Brown banker David Parse, 49, of Elmhurst, Illinois, was acquitted on the main charges of conspiracy and tax evasion. The jury convicted him of one count of endeavoring to obstruct and impede the U.S. Internal Revenue Service and one count of mail fraud. A fifth defendant, another former Deutsche Bank Alex. Brown banker, Craig Brubaker, 55, of Plano, Texas, was acquitted on all counts.


Croatian regulator brings charges against MOL

Croatian financial market regulator HANFA said it had brought criminal charges against Hungarian energy group MOL for manipulating the market in shares of Croatian energy group INA. The regulator also brought charges against responsible officials in the company to the state attorney's office. Under Croatian law, those responsible could face up to five years' prison for the manipulation, HANFA said. It also added that it had filed criminal charges for a business crime which carried a sentence of up to eight years, without specifying the crime. Earlier in May, HANFA ruled that MOL manipulated the market by sending misleading signals about the acquisition of shares in INA, where MOL is the biggest shareholder. MOL said HANFA's ruling was unfounded and it would fight the ruling with all legal means.


MONTENEGRO | REUTERS, MAY 24

Montenegro bank resumes lending after ban ends

Montenegro's largest domestic bank, Prva Banka, said it resumed full lending operations after the central bank lifted the last of the curbs it imposed in late 2008. Chief Executive Officer Predrag Drecun told a news conference that the bank was operating at full capacity again. When it banned Prva Banka from making new loans in 2008, the central bank cited illiquidity and lax lending restrictions that led to an unacceptably high level of bad loans. It allowed limited lending to resume in February 2011, then in April 2011 decided to lift the remaining curbs, saying Prva Banka had reached "the proper operation parameters".


India Infosys gets subpoena from U.S. court on visas

Indian software services exporter Infosys Technologies said it received a subpoena from a grand jury in a U.S. district court that requires the company to provide certain documents and records related to B1 business visas. B1 business visas allow companies to send their employees to the United States for short-term business purposes. Infosys said it intended to comply with the subpoena and to cooperate with the investigation.

SUPERVISION


US House panel votes for 15 percent cut in US CFTC budget

The U.S. futures regulator would see a 15 percent cut in funding under a bill approved by a House subcommittee despite objections it will prevent regulation of the vast market in over-the-counter derivatives. The Republican-controlled panel approved the bill on a voice vote. The bill, which covers fiscal 2012 funding for the Agriculture Department and related agencies, could be cleared next week by the full Appropriations Committee for a floor vote. The CFTC would get $172 million under the panel-approved bill, a $30 million cut from this fiscal year, which ends Sept. 30. The administration says CFTC needs a hefty increase in staff and equipment so it can regulate swaps, as required by the 2010 financial reform law. U.S. Rep. Sam Farr, the top Democrat on the subcommittee, said he was skeptical the Republican-run House and Democrat-controlled Senate can agree on spending bills. Farr said the result could be another year of stopgap spending bills. Subcommittee chairman Jack Kingston said the $125 billion bill, a $300 million increase from this year, provides enough money for agencies to carry out their core missions. The CFTC has proposed four dozen rules to implement the reform law but says it will miss the initial deadline to put them into effect.



Bank-picked experts take on US foreclosure reviews

U.S. regulators are pinning their hopes on independent consultants picked by large U.S. banks to uncover the true depth of foreclosure misconduct seen at lenders. Regulators are close to signing off on these consultants, which are expected to include Promontory Financial Group, Treliant Risk Advisors and PricewaterhouseCoopers. The consultants are supposed to pick up where bank regulators left off in their review of the largest mortgage servicers, including Bank of America, JP Morgan Chase, Wells Fargo and Citigroup. A government review released in April 2011 found "pervasive" misconduct, including sloppy paper trails and "robosigning" of foreclosure documents, but it only scratched the surface, by some regulators' account. Now the government is relying upon the bank-selected consultants, who must be approved by the regulators, in a review that will help determine the potentially billions of dollars in fines the industry will have to pay. It will also determine which borrowers can receive payments from banks to compensate them for servicers' mistakes. However, some lawmakers and consumers groups doubt this approach. Jack Reed, the Senate Banking Committee's number two Democrat, said the consultants have a natural incentive for a soft touch. The Office of the Comptroller of the Currency, the Federal Reserve and the Office of Thrift Supervision required the independent reviews when they settled in April with 14 mortgage servicers. The OCC said the independent review process has safeguards to ensure it is thorough and credible. The regulators must approve the consultants doing the review as well as the plan they create for conducting the investigation.


UK banks fall short of lending goal to small firms

Britain's banks fell short of targets agreed with the government for lending to small firms in the first three months of 2011, although they remained on track to hit their overall goals. Prime Minister David Cameron said the banks looked willing to fulfill their pledge after he indicated in mid-May that they may face further taxes and levies should they fail to meet their commitment to provide enough loans to the economy – a warning he reiterated. The banks involved in the deal -- called "Project Merlin" -- said smaller firms' demand for credit remained muted due to the economy's sluggish recovery. But business associations said lending conditions were too tough. The banks' gross lending facilities amounted to 47.3 billion pounds ($76.6 billion) in the first three months under the "Project Merlin" agreement, data published on the Bank of England's website showed. This was roughly in line with the 47.5 billion pounds which the banks need to provide on average per quarter to meet their obligations under a deal made with the government in February 2011. However, lending facilities to small- and medium-sized businesses came in at 16.8 billion pounds -- around 2 billion pounds short of the target. Cameron said he believed the banks did want to achieve their lending goals.


SEC seeks to ban felons from private placements

Convicted felons and other "bad actors" would be banned from soliciting investors for some private placements under a new rule proposed by the U.S. Securities and Exchange Commission.


The proposal, which will be put out for public comment, was approved in a 3-2 vote. It would implement a provision in the Dodd-Frank Wall Street overhaul law designed to protect investors by banning felons from qualifying for an exemption that lets them avoid registering securities in private offerings. Among the kinds of things that could prohibit bad actors from offering private placements would be criminal convictions, court injunctions and restraining orders, among other things. Learn more


Finra CEO to brokerages: Don't skimp on compliance

One of the brokerage industry's top cops warned Wall Street that concerns about sagging profit margins should not lead to cuts in spending for compliance technology and staff. Financial Industry Regulatory Authority Chief Executive Richard Ketchum told an audience of Wall Street executives at FINRA's annual conference that he expects their firms to make investments needed to meet the new requirements and many that are pending. This was an implementation challenge that had to be addressed, Ketchum said. "This is not the time to reduce your commitment to compliance investment." Ketchum took pains to applaud improvements made by broker-dealers, including more careful background checks on prospective new brokers, taking greater care in managing credit risk and keeping leverage levels down. Still, many areas of concern remain, said Ketchum. Many stem from the sales of structured products -- from reverse convertibles to principle protected notes -- that are assembled by banks and sold to fulfill a range of market bets. Brokers must "truly understand the products they sell," Ketchum said. "Brokers can't rely on firm approval alone to satisfy their suitability obligations." Ketchum also reiterated his concern about exchange-traded notes and funds -- structured products available to retail investors -- with more than 8,000 of these products sold last year. He observed these funds let any investor speculate on complex strategies or employ leverage.


Watchdog: SEC could owe millions over lease deal

The U.S. Securities and Exchange Commission faces a $94 million claim after it backed out of a bungled deal to lease office space in Washington, D.C. SEC Inspector General David Kotz said in a report. The report said that the SEC made numerous mistakes in securing roughly 900,000 square feet of space in the newly renovated "Constitution Center" building on 7th St SW. The SEC signed the 10-year, $556.8 million lease last year after it anticipated it would need room for more employees to implement the Dodd-Frank financial oversight law. The agency was later forced to renege on the deal after Congress did not provide the expected funding. Roughly 600,000 square feet will now be used by other federal regulators, but the SEC has been unable to sublease the remaining space. In his report, Kotz depicts SEC staff as desperately rushing to secure the rental space at Constitution Center, an opulent 10-story building. SEC Chairman Mary Schapiro preferred to obtain office space closer to the SEC headquarters, Kotz said in his report. But agency staff convinced her the SEC urgently needed to sign a lease to accommodate the new employees and that the SEC had no other options. Kotz said the SEC's Office of Administrative Services conducted a "deeply flawed and unsound analysis," including a 300 percent expansion projection over 10 years. Kotz said the agency may have violated numerous rules and regulations governing the procurement and budgeting process,

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including a failure to have a competitive process, a lack of review, and even the backdating of key documents.

ACCOUNTING & FINANCIAL STANDARDS

GLOBAL: | REUTERS, MAY 26

BIS: no going back on Basel bank liquidity rule, but tweaks possible

New rules forcing banks to hold more cash to ride out short-term shocks may be tweaked but not scrapped, Jaime Caruana, general manager of the Bank for International Settlements (BIS), said. The Basel III accord will phase in the first set of global minimum bank liquidity standards over several years from 2013. Banks say it will crimp lending by putting huge financing burdens on the sector as the rules are in addition to the higher capital standards in Basel III. Although the regulations was hard to forsee, and policymakers would need time to “calibrate the standards appropriately,” they will definitely come into effect," Caruana told the International Capital Market Association annual conference.


ECB's Mersch warns of Basel III capital-requirement costs

New and tougher banking rules to be implemented in the coming years could lead to higher financing costs and hurt economic growth, European Central Bank Governing Council member Yves Mersch said. He told the Belgian-Luxembourg business club of Switzerland that the increased capital requirement "may come at high cost" and that too much capital could lead to "huge swathes of the banking business becoming unprofitable". This might cause higher borrowing costs, which could affect economic growth negatively, Mersch said. He also said the guarantees governments have given to banks bear risks and that regulators' definition of liquidity was too highly concentrated on government bonds, which can lead to some market segments of sovereign bonds drying up.

SWITZERLAND | REUTERS, MAY 21

Swiss finance minister ok with some delay on bank rules

Switzerland's finance minster said she can accept some delay on enacting tough new capital rules for big Swiss banks. Eveline Widmer-Schlumpf told the Neue Zuercher Zeitung in an interview that she could accept a delay until next year in working out the differences between versions of the standards legislation once they are approved by the two houses of parliament. Parliament is set to debate a bill requiring UBS and Credit Suisse to hold a Tier 1 capital ratio of at least 10 percent, versus the 7 percent minimum set under Basel III. The government has said it hopes the plan can go into effect in early 2012 after parliament's upper house votes on it this summer and the lower house in the fall.


But UBS and the powerful right-wing Swiss People's Party (SVP) have said the plan could crimp banks' competitiveness, and concerns have also been raised the government was pushing through the measure at too hectic a pace. Widmer-Schlmpf added that initially only the parent companies, as systemically important, would be held to the strictest capital standards.


EU finance ministers blast Barnier's bank rule plan –report

Seven European Union finance ministers have written to the EU executive saying its plan for implementing Basel III capital and liquidity rules for banks were too soft, a German newspaper reported. Ministers, including those from Britain, Spain and Sweden, also said the European Commission's proposal for a binding, unified set of rules crimped an individual country's ability to demand higher capital quotas from banks, the Financial Times Deutschland reported, citing the letter. The proposal also curtailed national financial watchdogs' ability to take account of differences in banking systems. The plans as they now stand would "damage European financial stability and the EU's credibility in this area," the paper quoted the letter as saying.


Moody's may cut UK lenders as regulators get tough

Credit rating agency Moody's may downgrade 14 British lenders, including Lloyds and Royal Bank of Scotland, because regulators appear less willing to bail out banks in the future. Lenders which face rating cuts by Moody's also include Santander's British operations, National Australia Bank's Clydesdale arm, Bank of Ireland UK, and Nationwide Building Society, the agency said. Analysts said the move had been widely expected while Moody's said its decision did not indicate a weakening in either government finances or the banks. Elisabeth Rudman, a Moody's Senior Credit Officer and lead analyst for a number of British banks, said the reassessment was not driven by either a deterioration in the financial strength of the banking system or that of the government, but had been initiated in response to ongoing guidance from UK authorities that banks that fail in the future should not expect capital injections from the public purse. Moody's said Co-Operative Bank and the Coventry, Newcastle, Norwich & Peterborough, Nottingham, Principality, Skipton, West Bromwich and Yorkshire building societies were also at risk of downgrades that would push up their cost of borrowing. Among listed banks, the rating agency kept a "negative" outlook on HSBC's ratings and cut guidance for future Barclays ratings moves to "negative" from "stable".

GOVERNANCE


Companies try to herd shareholder suits to Delaware

A surge of shareholder lawsuits challenging corporate deals in multiple state and federal courts may get reined in significantly as companies push to revise their charters.


Companies including Berkshire Hathaway Inc and newly public social networking site LinkedIn Corp already have adopted rules to force deal challenges into one court, with many pushing for Delaware as the sole venue. The business community has an unlikely ally in its fight to rein in the litigation: some top plaintiffs' lawyers who also think the lawsuits are getting out of hand. Such lawsuits often argue that boards and management are too quick to strike deals that set them up for handsome payouts but shortchange shareholders. Companies often settle these cases, viewing them as nuisance lawsuits. The number of companies with exclusive forum provisions has jumped since March 2010, when Delaware Chancery Judge Travis Laster suggested in a legal opinion that if directors and stockholders want a particular court then companies should try to put the provision in their charters. However, there is disagreement over which solution is best. In one of the first shareholder votes on an "exclusive forum" proposal to govern where lawsuits can be brought, stockholders at Allstate Corp shot it down.

DERIVATIVES


Europe property loses carve-out in derivatives bill

Europe's property industry has failed to secure an exemption from EU plans to require central clearing for derivatives such as interest rate swaps, a key tool the sector uses to manage exposure to debt. The sector had been lobbying the European Union for exemption from the proposed European Market Infrastructure Regulation (EMIR), arguing that the requirement to use central clearing houses, which would require them to find collateral, would damage the industry. But the EU parliament's economic and monetary affairs committee rejected the last-minute bid to add part of an earlier proposed amendment from UK Conservative member of the European parliament Kay Swinburne to protect the real estate sector. Swinburne's amendment had been seeking an exemption from the proposed rules, which foresee a broad definition about what constitutes a "financial counterparty", including funds holding real estate directly and some private companies.


U.S. House panel votes to delay swaps market rules

U.S. regulation of the swaps market, a $600 trillion behemoth that is now largely unpoliced, would be delayed until September 2012 under a Republican bill approved by a House of Representatives committee. However, the measure is not expected to become law. Democrats in control of the Senate oppose it, as does the White House, but it shows the persistent clout of Wall Street in Congress almost three years after the worst of the financial crisis. The Republican-controlled U.S. House Financial Services Committee voted 30-24 to postpone the Dodd-Frank swaps rules until late 2012, amid calls from the financial industry for delay. The rules are mostly on track to take effect in 2011. The postponement is part of a broad effort by Republicans to undermine Dodd-Frank by delaying its implementation and cutting funding for the agencies doing the implementing. Democratic Representative Barney Frank, co-author of the sprawling Dodd-Frank reforms, said


that the GOP measure was not a bill to give the regulators more time but a bill to prevent them from acting. "People on Wall Street don't like these restrictions", he said. A key U.S. Senate Democrat told Reuters he saw no need to postpone the new rules. Reed said in an interview after a Senate subcommittee hearing he chaired with swaps market official officials that there was a need to move with the SEC and CFTC to respond to the industry. He also said the officials, which represented clearing platforms, end-users and others in the market for swaps and over-the-counter derivatives, had not asked to stop or delay the new regulations. Instead, they wanted to move deliberately and in appropriate sequence.


OTC swaps face legal void as CFTC misses deadline

Billions of dollars in derivatives will be headed into legal limbo if U.S. regulators don't create a short-term fix to the market chaos that could be unleashed by missing a July 2011 financial reform deadline. The Commodity Futures Trading Commission, in the midst of writing dozens of new rules, has said it will miss the July 16 deadline for implementing rules that give it oversight of the $600-trillion global over-the-counter derivatives market. As a result, many of those contracts may lose the legal protection afforded them by a clause in the Commodity Futures Modernization Act of 2000, which created a framework that stated they were not illegal off-exchange futures. The impact of that legal void may be limited if market participants believe regulators will either set up a short-term bridging measure or simply opt not to enforce the rule; but without greater certainty, compliance officers face some sleepless nights. Facing a gap between the protection regime under the current commodities act and the new rules from Dodd-Frank, market players are scratching their heads and fearing a worst-case scenario involving invalidated contracts, dried-up liquidity, and an exodus to offshore trading. As the July deadline gets closer, Republican CFTC commissioner Jill Sommers is pushing regulators to provide guidance for traders outlining what they plan to do. She said the market would not have certainty without some type of guidance from the regulators.

EXCHANGES & TRADING PRACTICES

CANADA / UK | REUTERS , MAY 20-25

LSE faces TMX tussle as Maple goes hostile

Toronto Stock Exchange operator TMX Group rejected a C$3.6 billion ($3.7 billion) takeover bid from the Maple Group of Canadian banks and pension funds and said it would proceed with a shareholder meeting and vote on its proposed tie-up with the London Stock Exchange. Maple Group responded by taking its higher bid directly to TMX shareholders, as the battle grew increasingly bitter. Maple, whose group includes some of TMX's top customers, said it was forced to circumvent the board


after TMX and the LSE said shareholders would vote on the agreed $3 billion all-paper LSE deal on June 30. Maple hopes to galvanize simmering nationalistic opposition to a foreign takeover of Canada's main exchange and use its Canadian credentials to soothe political worries about foreign takeovers. But some experts say watchdogs may baulk at allowing four of the largest Canadian trading firms to take control of the flagship bourse because of vested interests. LSE Chief Executive Xavier Rolet said Maple’s bid failed to address questions about its funding and regulatory issues. An LSE-TMX combination would form a transatlantic entity for trading stocks, derivatives and other financial assets..

GLOBAL | REUTERS, MAY 19-24

As exchange deals die, signs of thorny new era

The world's exchanges are encountering surprisingly tough, and sometimes fatal, resistance as they attempt to merge. If the deals continue to die, such a precedent would hurt exchange shares, muddle their corporate strategies, and at least temporarily halt a long march toward an integrated global marketplace, experts and analysts said. In the past two months, Nasdaq OMX Group, IntercontinentalExchange Inc and Singapore Exchange Ltd have had multibillion-dollar takeover dreams dashed by either antitrust regulators or nationalism in the target country. Germany's Deutsche Boerse AG and London Stock Exchange Group Plc also face obstacles to sealing their own trans-Atlantic deals for the New York Stock Exchange and Toronto Stock Exchange parents, respectively. Fearing a monopoly on listings and trading data, the U.S. Justice Department rebuffed Nasdaq and ICE only six weeks after they bid for NYSE. Australia, meanwhile, rejected Singapore Exchange's offer for its ASX Ltd market on national interest grounds, highlighting, some say, a new premium on owning capital markets after the jarring financial crisis. In an attempt to stem the cross-border merger wave with an appeal to nationalism, Canadian banks and funds launched a "Maple Group" counterbid to keep Toronto Stock Exchange parent TMX in Canadian hands, compounding resistance from some of the country's politicians. But TMX rejected that offer, leaving Maple Group to pursue a hostile bid. Deutsche Boerse probably has a better shot at consummating its trans-Atlantic merger, given the impassive response in Washington to foreigners owning the Big Board. Yet in Brussels, Deutsche Boerse and NYSE Euronext will need to convince antitrust regulators to accept a virtual monopoly in European exchange-based derivatives trading. As in Canada, large broker-dealers could well stall consolidation plans in Europe, by lobbying regulators and pressing the exchanges for assurances that trading and data fees will not rise if Deutsche Boerse and NYSE Euronext are indeed able to form the world's largest operator.

BRAZIL | REUTERS, MAY 24

Brazil clearinghouse tie-up to free $19 billion -paper

Brazilian exchange operator BM&FBovespa plans to combine four separate clearinghouses into one, which should help free 30 billion reais ($19 billion) of cash trapped as collateral, newspaper Valor Economico said. BM&FBovespa has separate clearinghouses for stocks, derivatives, foreign exchange and government bonds. Investors must place separate guarantees with the clearinghouse attached to market in which they plan to trade, the newspaper said. BM&FBovespa's decision should help the company cut trading and custody costs, Valor noted. The move may be completed by early next year, Valor said, citing Luis Antonio Barron Guerra Vicente, head of risk management at BM&FBovespa. Brazilian securities regulators as well as independent risk analysts are reviewing the plan, Valor reported.


AUSTRIA | REUTERS, MAY 24

Austria extends short-selling ban again

Austrian financial market watchdog FMA said it was extending a ban on naked short-selling of financial companies' shares until the end of November 2011. The ban, which has been in place since shortly after the Lehman collapse in 2008, applies to naked short-selling of shares in banks Erste Group and Raiffeisen Bank International, as well as in insurers Vienna Insurance Group and Uniqa. It has been extended in three and six-month periods since 2008.


FINRA's Ketchum sees progress on flash crash prevention

A year after the "flash crash" that undermined stock market confidence and nearly three years from the depths of the financial crisis, a Wall Street watchdog is counseling confidence. Richard Ketchum, chief executive of the Financial Industry Regulatory Authority, said on the sidelines of the group's annual conference that investors should feel better about risks of extreme volatility than they did a year ago. The issues are complex, he added, because of the wide array of electronic trading venues and their interactions with listed markets. "We're all going to have to learn how to regulate with them," he said.

FUNDS MANAGEMENT


EU securities watchdog eyes hedge funds

Investors need more information on hedge fund risks the EU's new securities watchdog said. Steven Maijoor, chairman of the European Securities and Markets Authority (ESMA) told the annual Capital Market Association conference that investors need information to better assess the risk profile of a hedge fund, but fund managers should also not face undue costs. ESMA will launch a public consultation in July as part of its efforts to flesh out new EU curbs on hedge funds, private equity groups and other alternative investment funds. The EU is also approving rules that will require all derivatives trades to be reported. Maijoor said new trade repositories could be used for dealers to report trades to regulators to avoid duplication, but trade repositories were not a “holy grail” for transparency and further measures were needed to identify who is behind each trade. ESMA will also be publishing in July how it may further regulate what policymakers see as emerging risks in exchange-traded funds (ETFs).

CANADA | REUTERS, MAY 19

Bank of Canada warns pension funds of risky buys

The Bank of Canada warned that Canadian pension funds and insurance companies could be tempted to invest in risky assets in order to fulfill expectations of obtaining decent returns.


Timothy Lane, deputy governor at the central bank, said institutional investors are often expected or required to deliver a target rate of return. In an environment where interest rates are still at extraordinarily low levels following the global financial crisis, the only way to achieve certain targets is by taking on extra risk, which can be rewarded by higher yields, Lane said in a speech to pension professionals in Vancouver. Lane said new risks to the financial system were emerging as a result of a two-speed global economic recovery in which emerging markets are growing robustly and starting to raise interest rates to cool their economies, while growth in advanced economies remains sluggish and rates still very low. In addition, sovereign debt problems could indirectly threaten Canadian banks even though direct exposure to peripheral European countries is small. Debt problems elsewhere could hit Canada through higher funding costs and a decline in asset price valuations, he said.


India’s stability council to bolster wealth-management oversight

India's central bank said the subcommittee of the interagency Financial Stability Development Council (FSDC) has agreed to strengthen regulatory framework for wealth management activities in its second meeting. The subcommittee of financial regulators has also agreed to formalise an institutional mechanism for supervision of financial conglomerates and to put in place a robust reporting platform for over-the-counter derivatives market, the Reserve Bank of India said in a statement. Learn more

FINANCIAL CRISIS & ECONOMY


Signs of division between IMF, Europe over bailouts

The International Monetary Fund pressed Europe for stronger steps to tackle the region's debt crisis, saying countries needed access to more funding to stay afloat. But in a statement suggesting divisions between policymakers over how to handle the crisis, a European Central Bank official said it was mainly up to Greece to rescue itself -- and that Athens could be cut off from aid if it did not act. Ajai Chopra, head of the IMF mission in Ireland, said the European Union needed to adopt a more comprehensive and consistent approach to the crisis and urgently strengthen its bailout fund, the European Financial Stability Facility. He said in a conference call dealing with Ireland's progress under its 85 billion euro bailout from the EU and the IMF that the countries could not do it alone and that putting a disproportionate burden of the cost of adjustment on a country may not be economically or politically feasible. But ECB policymaker Jens Weidmann, the new head of Germany's central bank, struck a very different tone. He warned Greece, which in 2010 signed up to a 110 billion euro bailout, that it could be left out in the cold if, as EU officials fear, it fails to meet targets for reforming its finances. The IMF, EU governments and the ECB appear to be divided over some important aspects of bailouts. For example, Chopra said that Irish banks needed to have more confidence in the availability of medium-term funding from the ECB. Chopra said all euro zone countries needed to accelerate "repair and reform" of their financial sectors through rigorous tests of banks' health. He

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also signalled IMF disapproval at French demands that Ireland raise its low rate of corporation tax in exchange for a cut in the cost of its European bailout loans. Norway also announced that it had suspended payment of a $42 million grant to Greece because Athens did not fulfill commitments and may have broken rules related to the aid. The suspended grant, part of an aid programme to reduce social and economic inequalities in central and southern Europe, is not related to the EU-IMF bailout of Greece. Norway, which is not a member of the EU, said it had asked Greek authorities to document how aid funds had been spent.


EU policy options narrow to avert Greek default

Europe's policy options to manage Greece's debt crisis are narrowing fast with the European Central Bank and credit ratings agencies warning against even a voluntary debt restructuring and Athens highlighting the risk of an imminent default unless it gets more EU money. Moody's became the latest ratings agency to warn of a chain reaction of severe consequences for the 17-nation euro area if Greece were allowed to default in June 2011, when it faces a 13.4 billion euro funding crunch. Greece launched a stalled privatisation programme and promised tougher austerity measures and tax hikes this week to meet EU and IMF conditions for the release of a 12 billion euro loan tranche in June, crucial to keep Athens afloat. First in line in the government's 50 billion euro privatisations programme will be divestments in Hellenic Postbank and the country's two biggest ports, a government official said. A second round of privatisations is expected to include Public Power Corp., OTE Telecom, utility Athens Water, gas company DEPA and gaming group OPAP. Moody's chief credit officer for EMEA, Alastair Wilson, told Reuters that a Greek default would be highly destabilizing. Other stressed euro zone sovereigns, led by Portugal and Ireland, could be downgraded from investment grade to junk as a result, he said. The ECB and ratings agencies have told politicians that options they are exploring to lengthen the maturities on privately held Greek debt would be interpreted as a default-like "credit event", triggering further downgrades and disqualifying Greek bonds as collateral. A Greek default could take many forms, including changes in the terms and conditions or a selective reprofiling, Moody's said, adding it would consider all of these as distressed debt exchanges. Finance Minister George Papaconstantinou said the International Monetary Fund would not release its share of the June aid payment unless the EU undertakes to cover Athens' 2012 funding needs. Sources told Reuters that euro zone governments are considering a plan to prevent a Greek default under which private investors would be asked to maintain their exposure to its debt and Athens would get a new aid package..

ITALY | REUTERS, MAY 22

S&P warning heralds tough times ahead for Italy

Standard & Poor's surprising decision to revise downward its outlook for Italy could mark the start of increased market scrutiny on the euro zone's third-largest economy, which faces tough challenges that it is probably unable to meet. Italy has escaped the brunt of the euro zone debt crisis that has engulfed Greece, Ireland and Portugal, due largely to a prudent fiscal policy and low levels of private debt. But if markets begin to focus more on the country's poor growth record, weak reform prospects and the grim


implications for reducing its mountain of public debt, then Italian bond yields will rise and its situation could become untenable. Those were the weaknesses cited by S&P when it announced on Saturday, May 21 that it was revising its rating outlook for Italy to "negative" from "stable," while maintaining its A+ rating. S&P's move would not precipitate any immediate debt crisis for Italy, analysts said, but with euro zone developments so unpredictable it does make the country more vulnerable. Analysts said yields on Italian government bonds would probably widen initially, and while this may prove short-lived, increased scrutiny on Italy's economic performance would be a more threatening problem in the medium term.

IRELAND | REUTERS, MAY 26

Ireland says won't yield on corporate tax

Ireland will not raise its ultra-low corporate tax rate despite pressure from France and Germany, even if that means paying higher interest rates on EU bailout loans, Finance Minister Michael Noonan said. Noonan told reporters after talks with his French counterpart, Christine Lagarde, on the sidelines of an OECD meeting in Paris, that Ireland was prepared to “pay the price” for refusing to yield on the issue.. Noonan's comments came a day after Ireland's Deputy Prime Minister Eamon Gilmore told Reuters Insider TV his country was "having difficulty" in talks with the European Union and International Monetary Fund about the cost of its 85 billion euro ($119 billion) financial aid package. Asked if he was making headway with France on the issue, Noonan acknowledged that the two sides "certainly didn't agree on anything" and declined to forecast when Dublin might receive any reduction, already granted to Greece, in the average 5.8 percent rate on its rescue loans. France contends that the 12.5 percent Irish corporate tax rate constitutes "fiscal dumping", luring foreign investment to Ireland and away from continental European partners. If Dublin wants EU help to reduce its borrowing costs, it should make big business share more of the burden, French officials say. Noonan, who recently said all three euro zone countries that got bailouts needed cheaper aid to recover, said Ireland wants a deal on its own interest rate rather than trying to peg its borrowing costs to those paid by Greece or Portugal.


Chrysler repays bailout money to U.S. Treasury

The U.S. Treasury department said that automaker Chrysler Group LLC has repaid $5.1 billion in bailout loans and ended its ability to draw a remaining $2.1 billion. The government committed a total $12.5 billion to Chrysler under the Troubled Asset Relief Program, or TARP, and the company has now returned more than $10.6 billion of that in principal, interest and canceled commitments. The Treasury said in a news release that it was unlikely to fully recover its remaining outstanding investment of $1.9 billion in Chrysler.


Stimulus money recipients owe billions in US taxes -GAO

Contractors and businesses that received money through the 2009 federal economic stimulus plan owe billions in unpaid taxes to the U.S. government, a federal auditor said. The Government


Accountability Office said that as of Sept. 30, 2010, the total bill for unpaid taxes, including interest and penalties, was $330 billion. By law the federal government can make grants to entities that owe taxes, so some of the outstanding bills were racked up before the stimulus plan was passed. In April 2011, the office reported that as of Sept. 30, 2009, 3,700 contract and grant recipients owed $750 million in unpaid taxes. That represented nearly 5 percent of the 80,000 funding recipients. The $819 billion stimulus plan, a combination of spending and tax measures intended to jolt the U.S. economy out of the longest and deepest downturn since World War Two, appropriated $275 billion for grants, contracts and loans. As of March 25, about $191 billion had been paid out, the GAO said. The GAO said it had uncovered 15 cases in which recipients had not sent withheld payroll taxes to the Internal Revenue Service, a violation that totaled $40 million. In one example, a nonprofit organization did not give the IRS payroll taxes from the middle to late 2000s and defaulted on agreements to pay the money in installments. Finally, the IRS filed tax liens against the organization to collect the more than $2 million it owed.

SOUTH KOREA | REUTERS, MAY20- 25

Debt clearer to take on up to $2.3 billion sour loans

South Korea's financial sector regulator said that the country's new debt clearer for soured real estate project-financing could purchase up to 2.5 trillion won ($2.3 billion) worth of loans in total, including buying 1 trillion won worth of loans in June 2011. Seven local lenders and a private bad bank United Asset Management Corp (UAMCO) will help raise capital for the debt clearer, Financial Services Commission said in a statement. Earlier, the South Korean Financial Supervisory Service (FSS) said that 18 domestic banks held 6.7 trillion Korean won ($6.16 billion) in distressed real-estate project financing loans at end-March, up from 6.4 trillion won at the end of December 2010. The amount of bad property loans grew as some builders had filed for bankruptcy protection, according to FSS. The regulator added that it would advise lenders to transfer bad real estate project-financing loans to the new debt-clearing bank.


Hartford sells bank unit used for TARP

Hartford Financial Services Inc said it would sell a small Florida bank that it used to receive U.S. government bailout funds at the height of the financial crisis. Hartford is selling Federal Trust Corp to CenterState Banks Inc and will record a charge of $70 million in the second quarter due to the deal, Hartford said. The charge will include losses on some Federal Trust assets and liabilities that will not be sold to CenterState. Connecticut-based Hartford bought the Florida thrift in 2008 at the height of the financial crisis for $10 million in cash as part of a deal that allowed the insurer to qualify for the Troubled Asset Relief Program. Hartford received $3.4 billion in government aid through TARP, which it repaid in 2010.


EU regulators clear Greece's ATEbank revamp

Greek state-run ATEbank won EU regulatory approval for millions of euros in state aid after it agreed to cut at least a quarter of its assets and adhere to sound market practices. ATEbank, a


state vehicle targeting farmers and the only Greek lender to fail EU-wide bank stress tests last year, found itself in difficulty due mainly to poor asset quality and traditionally low pre-impairment profitability. The European Commission said ATEbank's revamp plan will restore its long-term viability. Under the restructuring, the Greek government took up 1.14 billion euros of the bank's 1.26 billion euro share capital increase announced in April 2011. The bank will gradually reduce its total assets by at least 25 percent in 2013 and cut its operating costs by a quarter.

EGYPT | REUTERS, MAY 22

Egypt forms committee to settle investment deals

Egypt is to set up a committee to settle problems surrounding investment contracts, the cabinet said. Prime Minister Essam Sharaf ordered the move after a string of legal challenges to sales of state land to real estate developers that have shaken confidence in Egypt's once booming property sector. The lawsuits began in 2010 when a court ruled that a sale of state land to Talaat Moustafa Group, the country's biggest developer, was illegal. The case, which sparked a series of similar legal challenges, revolves around whether the government should have respected a 1998 law stipulating all state land sales must take place after competitive bidding. Egypt's general prosecutor has referred two former housing ministers to trial for their role in several controversial deals with real estate firms. Land was withdrawn from at least three firms.


Independent experts take control of RBS report

Two senior corporate governance experts are free to start a fresh round of interviews to get to the bottom of the costly implosion of Royal Bank of Scotland if not satisfied with the UK regulator's account. A cross-party committee of top politicians said former banker David Walker and lawyer Bill Knight, appointed to oversee the planned public account, might extend the research already undertaken by the Financial Services Authority (FSA). The Treasury Select Committee (TSC) said the FSA, which is funded by the financial industry, would provide the experts with "reasonable resources" to oversee the review. These costs could include legal representation in any proceedings in which Walker and Knight are involved either as defendants or plaintiffs linked to the review of the now 83 percent state-owned RBS. Walker, commissioned two years ago to run an inquiry into bank corporate governance, and Knight, a lawyer who heads corporate reporting standards watchdog the Financial Reporting Council, will provide the TSC with their own report. They will highlight where their work has led to significant alterations in the FSA's own account and also where suggested alterations have been ignored. Their report will be published alongside the FSA's account in a few months, Tyrie has said. But they will not express any legal opinion about the FSA's decision last year not to bring enforcement actions against RBS or its top management, including controversial former chief executive Fred Goodwin, the TSC noted.


CURRENCY


SEC deepens probe of forex trading -report

The Securities and Exchange Commission (SEC) is probing whether two major banks made proper representations to pension-fund clients about how their currency trades would be handled and priced, the Wall Street Journal reported, citing a person familiar with the matter. The Journal said the probe is examining the currency trading activities of the two of the world's largest custody banks, State Street Corp and Bank of New York Mellon, and whether the banks misrepresented how they intended to carry out the foreign exchange trades. Earlier in May, State Street revealed in a quarterly filing it was under investigation by the SEC and also disclosed that two clients began litigation against it seeking unspecified damages, on behalf of all custodial clients that executed foreign exchange transactions through State Street. However, the regulatory authority's investigation of BNY Mellon wasn't previously known.

TAIWAN | REUTERS, MAY 25

Taiwan central bank seeks power to cancel forex broker licences

Taiwan's central bank is proposing to beef up rules regulating forex brokers which will allow it to revoke licenses if they fail to meet "financial policy," in its latest efforts to curb short-term foreign capital inflows. The central bank will cancel the licenses of two forex brokers -- Taipei Foreign Exchange and Cosmos Foreign Exchange International -- if "there are signs of unhealthy operation or failure to comply with monetary policy," the central bank said in a statement. While the central bank, which heavily intervenes in the currency market, did not provide details on the tighter rules, some traders said it could mean the brokers have to comply with the central bank when it intervenes in the market. Currently, the central bank may revoke a forex broker's license if it does not comply with rules such as submitting proper documents and faking trades. The central bank will add the new rules to current regulation once it gets agreement from the Financial Supervisory Commission, the island's top financial regulator.


Iceland to hold first auction of currency

Iceland's central bank is to take a first key step in June 2011 towards easing capital controls by offering to sell euros to foreign investors and buy back 15 billion Iceland crowns ($129 million), the bank said. At the same time, the central bank will also offer to buy back short-term treasury bonds maturing before end-May 2013 to smooth the impact on the bond market of any sales by investors wishing to get out of the crown market, it added in a statement. The bank said offers should be submitted by June 7 and the results of the auction will be published by close of business the same day. The bank also wants to attract crowns held by non-residents into long-term investments in Iceland and into long-term bonds.


THAILAND | REUTERS, MAY 23

Thai central bank aims to diversify foreign reserves investment

Thailand's central bank expects to have a clear idea on how to diversify its foreign reserves investment within a month or two, Governor Prasarn Trairatvoralul said. "There is no clear plan yet," he said, without giving details. The chairman of the central bank's board, Chatu Mongol Sonakul, said over the weekend the Bank of Thailand was considering various options, including setting up a company to invest some of the foreign reserves in equities to achieve higher returns.

TRADE & CROSS BORDER

HONG KONG | REUTERS, MAY 20

Hong Kong working to simplify listing rules for international firms -government official

Hong Kong is working to simplify listing rules for international companies and hopes more transparency and lower costs would attract more IPO deals from global firms, a senior official said. K.C. Chan, Secretary for Financial Services and the Treasury of Hong Kong, told reporters on the sidelines of a conference in Shanghai that he wants the Chinese government to give offshore yuan easier access to its capital markets.


NYSE working with Shanghai on international board, keen to list

The New York Stock Exchange is working with China to launch the country's international board that will allow foreign firms to list on the mainland, in a move seen as a crucial step in developing its capital markets. Chinese officials have yet to provide details of the international board, seen as a centrepiece in Shanghai's attempt to become an international financial centre by 2020, though they have said it could be launched later in 2011. NYSE Euronext Chairman Jan-Michiel Hessels told Reuters on the sidelines of a financial conference in Shanghai that his exchange was working with Chinese authorities on the board and his company would be "strongly interested" in listing on it. Hessels also said the bourse was working with Chinese authorities in helping develop a derivatives market. HSBC, Unilever and Standard Chartered Plc have said they want to list on the international board, which was originally slated to be launched in 2010.

MIDDLE EAST | REUTERS, MAY 24

EU, US step on sanctions on Iran shippers, Venezuela’s PDVSA targeted

The European Union has targeted more Iranian shipping companies as part of moves to tighten sanctions imposed on the Islamic Republic. EU foreign ministers agreed to add more than 100 new entities to a list of companies and people affected by EU sanctions, designed to put economic pressure on Tehran to abandon its atomic programme.


Adding further pressure, the United States announced sanctions on Venezuela's state oil company PDVSA and six other oil and shipping companies for engaging in trade with Iran in violation of a U.S. ban. The EU move, reflecting mounting frustration over a lack of progress in nuclear talks with Tehran, has added a number of holding companies owned or controlled by the Islamic Republic of Iran Shipping Lines (IRISL). The new EU measures have targeted over 30 IRISL holding companies based in Germany, Malta, Hong Kong and the Isle of Man in the UK. All the companies were listed at the same address in each location, the EU's Official Journal showed. Among the shipping companies targeted by the EU were Safiran Payam Darya Shipping Lines, which it said took over IRISL's bulk services and routes and used vessels previously owned by IRISL. Companies covered by the U.S. sanctions included Singapore-based Tanker Pacific and Israel's Ofer Brothers Group, both of which the U.S. State Department said failed to heed information that they were dealing with IRISL. Learn more Learn more

STATE ENTERPRISES

SOUTH KOREA | REUTERS, MAY 25

South Korea may ease rules for Woori stake sale -regulator

South Korea's financial sector regulator plans to amend rules in a bid to bring more potential bidders to the $6 billion sale of a 57 percent stake in Woori Finance Holding Co Ltd, a senior regulatory official said. The authorities were considering revising regulations that require financial holding companies to bid for at least 95 percent of a target holding company to combine their operations, Jeong Eun-bo, a senior official at the Financial Services Commission (FSC), told Reuters. He added, however, that how much the bar would be lowered had not been decided.

COMMODITIES & ENERGY

UK | REUTERS, MAY 23-24

UK lawmakers alert watchdog on LME warehouses

UK anti-competition authorities may probe activity by large traders on the London Metal Exchange that also own warehouses, including investment bank JP Morgan, after UK lawmakers raised concerns. The parliamentary committee on science and technology said in a report it was concerned that the same firms that trade metals were able to hold large amounts of metal stored on the LME, the world's top metals exchange, and alerted competition authorities. Controversy has swirled in recent months after one party gained control of up to 80 percent of lead stocks at the same time as cash premiums for the metal soared. The UK Office of Fair Trading (OFT) said it was considering the report by parliament's Science and Technology Committee that referred to allegations of anti-competitive behaviour.

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The LME denied any improper activity and said robust regulations were already in place regarding warehouses. The report said there were four large companies that own warehouses and named U.S. investment bank JP Morgan, which owns warehousing company Henry Bath. U.S. investment bank Goldman Sachs owns Metro, commodity trader Trafigura owns NEMS, and Glencore, which has just listed in London, owns Pacorini. The report also said the government should probe whether metals markets with high speculation and volatility are an acceptable way to bring strategic commodities to end users. It expressed concerns over reports of hedge funds buying up significant quantities of metals, which may exacerbate price and supply volatility for some metals that are "strategically important" for the economy. Metals that have a vital economic role in Britain, it said, are rare earths, the platinum group and other main group elements such as gold, nickel and strategic metals antimony, cobalt, titanium, gallium, magnesium, indium, germanium, chromium, vanadium and tungsten. Charles Swindon of the Minor Metals Trade Association, told the committee that hedge funds have moved into all commodities, even moving off exchange-traded instruments and into more strategic metals, which are only traded between counterparties. Learn more


US House Democratic staff: focus on oil speculators, not drilling

The Democratic staff of a House of Representatives oversight committee urged members to focus on tempering speculation in oil markets as the most effective way to curb prices, according to a report. The report prepared for the minority Democrats on the House Committee on Oversight and Government Reform said measures such as increasing domestic offshore drilling -- one of a host of recent legislative efforts meant to seek to rein in $4 gasoline prices -- would do little to curtail crude oil. The report said addressing excessive speculation offered "the single most significant opportunity to reduce the price of gas for American consumers". It said excessive speculation in energy markets could be boosting prices by as much as 30 percent.


EU finalises "stress tests" for nuclear reactors

European nuclear watchdogs have agreed details of new safety checks on the region's 143 reactors and said a group would be set up to deal with the risks of a nuclear crisis arising from a terrorist attack. By June 1, 2011, regulators will have to start checking power plants' resilience to earthquakes and tsunamis to avert a crisis like that at Japan's stricken Fukushima plant. The tests, which follow two months of wrangling, will also address resilience to more common threats such as forest fires, transport accidents and the loss of electrical power supplies. EU Energy Commissioner Guenther Oettinger told reporters that human error would also feature as a part of the stress test. Officials say that in Europe the most significant threat to reactors comes from terrorism, but Oettinger said that was best handled by national security agencies.

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JAPAN | REUTERS, MAY 25

Japan says power saving to take effect from July 1

Power saving targets that require major users to cut their power consumption by 15 percent will go into effect from July 1, Chief Cabinet Secretary Yukio Edano told a news conference. The government has already approved a target to cut electricity consumption in the summer by 15 percent in the areas serviced by Tokyo Electric Power Co and Tohoku Electric Power Co, as the quake-hit country scrambles to avoid rolling blackouts that could hobble the economy.

US | POINT CARBON, MAY 26

New Jersey pulls out of northeast US carbon market -Point Carbon

The state of New Jersey will withdraw from the U.S. Regional Greenhouse Gas Initiative (RGGI), after its governor claimed the state does not need to participate in the carbon market in order to cut its emissions. Republican Governor Chris Christie made the announcement to withdraw from the US's only mandatory carbon cap-and-trade scheme at a press conference and said the program was ineffective. New Jersey is the fourth-biggest emitter in the 10-state trading scheme, which only covers emissions from the power sector, and accounted for 14 per cent, or 20 million tonnes, of RGGI's emissions in 2010. By participating in RGGI, New Jersey has raised over $102 million by selling carbon permits. The money was to be spent on energy efficiency and renewable energy programmes. But under Christie, New Jersey diverted nearly 44 per cent of its RGGI proceeds to the state's treasury to plug holes in the budget. New Jersey is not the only state to attempt to withdraw from the scheme after a federal bill that would have launched a nationwide carbon cap-and-trade scheme failed last year. The New Hampshire state House in April passed a bill to pull out of the scheme, but did not secure enough votes in the Senate. In Maine, a similar measure failed to move beyond the committee level in the state legislature.

US | POINT CARBON, MAY 20

California carbon market put on ice

A California judge has suspended the implementation of an emissions cap-and-trade scheme until air regulators can examine alternatives, dealing another setback to an ambitious program that could serve as a model for other states. San Francisco Superior Court Judge Ernest Goldsmith ruled that the California Air Resources Board (ARB) should "take no action" to implement cap-and-trade plans until it analyzes other greenhouse gas reduction policy options. The scheme is designed to help meet aggressive greenhouse gas reduction targets. But in April 2010, Judge Goldsmith said the ARB, which crafted the state's cap-and-trade scheme, failed to adequately study alternatives to creating a carbon market. The ARB said it would appeal the decision. The proposed cap-and-trade program is a central part of the state's AB 32 law, which requires the reduction of greenhouse gas emissions to 1990 levels by 2020 via a mix of measures, including a renewable energy production mandate. California is the last hope of U.S. environmentalists to revive a national climate change agenda. The state plans to set a limit on emissions and let factories and power plants trade rights to pollute. The hope is that the most efficient will profit from their knowledge and new industries will emerge. If it succeeds, cap-and-trade could spread to other states. Similar legislation failed in the U.S. Congress and many hope national leaders would reconsider if California does well.


But the ARB was sued in early 2011 by an environmental justice group called the Association for Irritated Residents, who charge that a greenhouse gas market could cut air quality in some parts of the state while others benefit.

AUSTRALIA | REUTERS, MAY 25

Australia introduces laws for sole petroleum regulator

Australia's government unveiled legislation to set up a single national regulator for offshore petroleum exploration and production, as part of efforts to consolidate regulations on risky and expensive offshore drilling. Resources and Energy Minister Martin Ferguson said the laws, once passed by parliament, would strengthen safety and improve the regulatory framework of the offshore petroleum industry as Australia looks to bolster its energy security. Ferguson announced plans to tighten the approval process for offshore oil and gas exploration in November 2010 after one of the biggest oil spills in the country's history off Western Australia, the Montara spill, which saw 20,000 barrels of oil gush into the Timor Sea over two months. All wells drilled in the past five years would be reviewed, Ferguson said, while industry monitoring would be increased and a sole national regulator established in 2012. Under the new oversight framework, Ferguson said the government had established a National Offshore Petroleum Safety and Environmental Management Authority, or NOPSEMA, as well as a National Offshore Petroleum Titles Administrator. The laws underpinning both were expected to pass parliament after August 2011, he said, with the regulator replacing the country's current National Offshore Petroleum Safety Authority, which a report partly blamed for the Montara spill.


TELECOMS & MEDIA

TELECOMS


India court rejects bail pleas of execs in telecoms case

An Indian superior court rejected bail to five company executives charged in a multi-billion dollar telecoms corruption scandal that has rocked political and business establishments in Asia's third-largest economy. Sanjay Chandra, the managing director of Telenor's India partner Unitech; Vinod Goenka, chairman of Etisalat's India partner DB Group; and three executives from Reliance ADA Group have been held in jail since April 20, after a lower court had denied them bail. They are among 14 individuals and three companies charged of rigging a 2007/08 grant of lucrative telecoms licences. The scandal may have cost state coffers as much as $39 billion in lost revenue, a sum equivalent to the country's defence budget. The court said the accused were highly influential persons who could try to influence witnesses, especially those in their companies, if released on bail. Police have already arrested former telecoms minister Andimuthu Raja, a member of government ally DMK party, and Kanimozhi, the lawmaker daughter of the DMK chief, straining ties between Prime Minister Manmohan Singh's Congress party and its second-biggest partner in the ruling coalition. All accused have denied any wrongdoing. The executives can now appeal to the Supreme Court. Separately, Kanimozhi, who was arrested on Friday, May 20, appealed to the Delhi High Court for bail.

INTERNET & MASS COMMUNICATIONS


Morgan Stanley OKs broker use of social media

Wall Street banks clamor to underwrite stock for social media companies like LinkedIn and Twitter, but the online networking sites are largely off limits to the banks' financial advisers. Now, the country's largest retail brokerage, Morgan Stanley Smith Barney, has become the first major wealth manager to allow its brokers partial use of Twitter. And it is the latest wealth adviser to permit the use of LinkedIn, the professional networking site that went public in mid-May. The change will start slowly in June 2011 with a test group of 600 Morgan Stanley Smith Barney advisers, according to an internal memo obtained by Reuters. Within six months, the program will be expanded to the firm's entire force of 17,800 advisers. Morgan Stanley Smith Barney U.S. wealth management boss Andy Saperstein said in the memo that the emergence of social media has changed the way in which people communicate with each other and companies interact with clients.


The Financial Industry Regulatory Authority in 2010 established rules for social media use, but Wall Street has been slow to let brokers participate. To comply with regulatory requirements, Morgan Stanley Smith Barney will install technology to capture and retain all communication on approved social networking sites, according to the memo. Brokers will be allowed to distribute research and content, such as status updates and tweets, but only those approved in advance by the firm. The test group includes Morgan Stanley Smith Barney's elite "Chairman's Club" brokers and about 100 advisers who have been testing use of LinkedIn. A Morgan Stanley spokesman said advisers will be permitted to use interactive features of LinkedIn but will not be allowed to "recommend" themselves or other financial advisers. They also cannot be recommended by others because of regulatory restraints on the use of testimonials.


Twitter says to protect users' right to self-defence

Twitter will seek to notify its users so they can defend themselves before it hands over user information to the authorities, a senior manager said when asked about a privacy dispute in Britain.Tony Wang, general manager of Twitter's European operations. said he could not comment specifically on the cases in Britain, but said: that if the firm was legally required to turn over user information, "to the extent that we can, we want to notify the user involved, let them know and let them exercise their rights under their own jurisdiction". Wang, who was speaking at the e-G8 Internet forum in Paris, said this would take the law enforcement process into the court of law. Super injunctions, issued by English courts, ban media outlets from mentioning not only the details of the case and the identities of those involved but even the existence of the injunction itself. Lawyers representing one of the celebrities named on Twitter, Manchester United footballer Ryan Giggs, have asked U.S.-based Twitter via a London court for information about the users who published his name in tweets. A British politician also identified Giggs in parliament as the soccer star fighting a legal battle to prevent newspapers publishing allegations of an affair. John Hemming, who campaigns for press freedom, used parliamentary privilege, which allows parliamentarians to raise legal issues without fear of prosecution. Hemming said he had acted after lawyers asked for information about Twitter users. He said it was "fundamentally wrong" to have lawyers chasing down ordinary people and threatening them with a jail sentence because they have gossiped about a footballer.


US lagging in broadband adoption, speed -FCC report

The United States continues to lag behind other countries in broadband adoption and download speeds, according to a report released by the Federal Communications Commission. Based on member data from the Organization for Economic Co-operation and Development, the US ranked ninth out of 29 countries for mobile broadband adoption per capita basis, and 12th out of 33 countries for percentage of households with fixed broadband, the FCC said. The United Kingdom, South Korea and Iceland were among countries to top the United States' 63 percent broadband adoption rate. Consumers in some large European and Asian cities reported faster download speeds than consumers in comparable U.S. cities, the report said. For instance, average download speed was found to be 11.7 Mbps in New York with a population of nearly 8.4 million people compared with 35.8 Mbps for the 10 million residents of Seoul, South Korea, the report said.


A separate FCC report found that about 26 million Americans, most of whom live in rural areas, do not have access to broadband. A third of Americans with access do not subscribe to broadband, likely due to high costs, low digital literacy and concerns about privacy, the FCC said.

ITALY | REUTERS, MAY 23

Italian TV shows fined for pro-Berlusconi bias

Italy's communications regulator slapped fines on several television programmes for giving Prime Minister Silvio Berlusconi airtime to rally supporters ahead of a second round of local voting. In a string of interviews on state television channels and his own private ones, Berlusconi tried to galvanise centre-right voters and quash speculation that his government may not last to the end of its term in 2013. Regulator Agcom said it would fine news programmes on the public RAI network as well as Berlusconi's Mediaset channels for airing the interviews without including opposing views, saying they had violated electoral rules. Mediaset said it planned to appeal.

INTELLECTUAL PROPERTY RIGHTS


EU wants ISPs to police copyright breach -document

The European Commission wants internet service providers to help fight online copyright theft "at source", according to a Commission document seen by Reuters, though it does not say what it would expect of them. The EU's executive wants to boost protection of intellectual property rights and believes internet service providers (ISPs) should play a role in policing it, according to a confidential Commission document. The document said that the commission would propose amendments to the (IPR) Enforcement Directive in order to create a framework allowing combating infringements of IPRs via the internet more effectively. It added that these amendments should tackle the infringements at their source and foster cooperation between intermediaries such as internet service providers. Learn more

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PEOPLE


Battle begins for trio of top regulatory jobs

Filling a trio of top jobs opening soon at major global financial regulators will be crucial for maintaining momentum in reforms, official sources and analysts said. The agencies are Financial Stability Board – tasked by the Group of 20 with coordinating regulation globally -- the Basel Committee on Banking Supervision – which wrote the new Basel III – and the committee’s overseer the Group of Governors and Heads of Supervision. As in the past, all three jobs are set to be filled through backroom deals -- but more is at stake this time round. Richard Reid, head of research at the International Centre for Financial Regulation, said the changes were coming as grand regulatory plans are being implemented, a phase when supervisors become vulnerable to "regulatory capture" by the banks. The FSB and Basel face the challenge of keeping up pressure over six years to implement Basel III and resolve key issues such as how much extra capital the biggest banks must hold. The moves are looming because Mario Draghi is considered likely to move on as FSB chairman once he replaces, as expected, Jean-Claude Trichet as president of the European Central Bank this autumn. Trichet, in turn, would also be expected to leave his post as chairman of Group of Governors and Heads of Supervision, which, like the Basel Committee itself, is normally led by a serving central banker. Finally, Nout Wellink’s planned departure as governor of the Dutch Central Bank would also leave an opening for the chairmanship of the Basel Committee. A spokeswoman for the Bank for International Settlements, where the Basel Committee is based, said the process of replacing Wellink has begun and is being led by Trichet. Names of potential candidates being whispered for the top jobs include Adair Turner, chairman of the UK Financial Services Authority. Another is Philipp Hildebrand, chairman of the Swiss National Bank. Germany may want a post after ceding the ECB to Draghi. The selection will also be shaped by who gets the top job at the International Monetary Fund to replace Dominique Strauss-Kahn who has stepped down to fight a sexual assault charge. French Finance Minister Christine Lagarde looks in pole position to continue the long line of European IMF bosses – although emerging economies led by China are pressing for one of their own in the post. If she does go to the IMF, that could strengthen the hand of developing countries when it comes to filling the three regulatory jobs.


Tempers flare with consumer ally Warren in U.S. hot seat

Testimony by White House consumer adviser Elizabeth Warren before a House subcommittee broke down into acrimony when the panel's Republican chairman accused her of lying about the terms of her appearance. Warren testified before a House of Representatives Oversight and Government Reform panel about her efforts to set up the new Consumer Financial Protection Bureau, an agency Republicans and Wall Street do not like and want to gut. The hearing focused on disputes over the scope of the agency's power, but her appearance ended in heated wrangling over how long she would testify. About an hour into the hearing Republicans sought to temporarily adjourn for votes. Warren objected to sticking around for more questions upon their return, saying her afternoon was packed with meetings and that the committee had agreed she would only stay an hour. However, Republican subcommittee Chairman Patrick McHenry said Warren was "making this up".


The hearing focused on Republicans' contention that the new bureau, which will regulate products like credit cards and mortgages, was given too much power. Warren disagreed, saying that there are several checks on the agency, including veto power from the new Financial Stability Oversight Council. After the dust-up, cooler heads prevailed and McHenry allowed Warren to leave and submit written answers.


US SEC taps Vanderbilt professor for economic post

The U.S. Securities and Exchange Commission has tapped Vanderbilt University professor Craig Lewis as its new chief economist and head of the Risk, Strategy and Financial Innovation division. Lewis is currently a visiting scholar at the SEC and will assume his new position next month. He was one of six candidates who interviewed for the job, including other academics and a Goldman Sachs candidate. The position of chief economist is crucial to helping the agency validate the costs and benefits of the roughly 100 new rules it must implement under the Dodd-Frank law overhauling Wall Street. The Risk, Strategy and Financial Innovation division was created in 2009 as a "think tank" for the agency to help improve coordination across divisions, spot emerging trends and promote interdisciplinary analysis. Lewis is a finance professor at Vanderbilt University's Owen Graduate School of Management. He served as a visiting academic fellow at the SEC from January through July of 2010 and returned as a fellow in January of this year where he has continued to work on areas, including over-the-counter derivatives regulation, and helping to identify securities laws violations.


COMING UP *Denotes new entry May 27 – Comments due to U.S. Financial Stability Oversight Council on criteria for designiating systematically important financial institutions May 30 - Deadline for responses to International Organization of Securities Commissions consultation paper on suspension of redemptions for collective investment schemes JUNE *June 1 – U.S. House of Representatives financial services committee hearing on international financial system. Treasury Secretary Timothy Geithner to testify * June 1 – U.S. House financial services committee holds hearing on court-mandated disclosure of data on lending supplied by the Federal Reserve during the financial crisis, and on future disclosures as required by Dodd-Frank Act * June 1 - CSFI think tank holds debate in London on regulation and post-trading architecture (clearing and settlement) with Bank of England Deputy Governor Paul Tucker and panel of industry officials. (Jones) June 1 – European Commission expected to publish review of Markets in Financial Instruments Directive (MiFID) June 2 - Comments due to CFTC on proposed margin requirements for uncleared swaps June 3 – Comments due to CFTC on extended rulemakings under Dodd-Frank and order for final rulemakings under Dodd-Frank *June 3 - Michel Barnier, European Commissioner for Internal Market and Services, speaks before Brookings Institution in Washington on "The Shape of EU Financial Regulation and its Impact on the United States and Europe." *June 3 - CFTC hosts swaps roundtable in Washington June 7 – European Commission expected to propose legislation on corporate governance in financial institutions June 9 – Comments due to CFTC on swap data recordkeeping and reporting requirements June 10 – Comments due on credit-risk retention rule proposed by U.S. Federal Reserve and other agencies. June 16 – Comments due to U.S. Federal Deposit Insurance Corp on retail foreign exchange transactions June 22 - European Commission to publish amendments to capital requirements directives June 24 – Comments due on swaps-market margin and capital requirements as proposed by U.S. Federal Deposit Insurance Corp and other bank regulators


June 24 – European Parliament set to vote on derivatives regulations JULY July - Financial Stability Board to consider initial draft recommendations on regulation of shadow banking system July 5 – Deadline for comments on SEC proposal to remove references to credit ratings under the Exchange Act July 7 – SEC roundtable on incorporating International Financial Reporting Standards *July 11 – Comments due to SEC on investment adviser performance compensation, feasibility study on ratings of structured-finance products *July 11 – Comments due to CFTC on swaps margin requirements July 22 – Comments due on U.S. Federal Reserve proposal on minimum mortgage underwriting standards, including ability-to-pay requirements. (Coming Up calendar includes contributions from CMS Cameron McKenna LLP, via www.complinet.com, a Thomson Reuters company and leading provider of compliance information to the regulated financial services

GLOBAL REGULATORY BRIEFING is produced by Thomson Reuters Accelus (accelus.thomsonreuters.com), using news from Reuters and other Thomson Reuters publications. Editor: Randall Mikkelsen 22 Thomson Place,Boston, MA 02210USA For questions or comments about this report, or to subscribe, email us at: [email protected] Contact: +1 617-856-4402 Follow us on Twitter at: http://twitter.com/reutersregbrief Thomson Reuters: http://thomsonreuters.com For more information about our products: http://thomsonreuters.com/products_services Send us a sales enquiry at: http://reuters.com/salesenquiry © 2011 Thomson Reuters. All rights reserved. This content is the intellectual property of Thomson Reuters. Any copying, distribution or redistribution of this content is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters shall not be liable for any errors or delays in content, or for any actions taken in reliance thereon.

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