U.S. regulators approved two sets
of guidelines that banks including Citigroup Inc. (C) and JPMorgan
Chase & Co. (JPM) will have to follow in drafting plans to protect the
broader economy in the event of their own collapse.
The Federal Deposit Insurance Corp. board voted unanimously
yesterday to release a joint final rule laying out what the
largest and most complex financial firms must include in
so-called living wills they’re required to file. The panel also
approved contingency planning guidelines for insured banks.
The Federal Reserve is still required to approve the
living-wills rule before it can become final.
Congress, in the Dodd-Frank Act, expanded regulators’
authority to seize and unwind lenders in response to the market
tumult that followed the September 2008 bankruptcy of Lehman
Brothers Holdings Inc. (LEHMQ) The new rules are designed to eliminate
the need for bailouts by giving the FDIC power to liquidate
large firms whose failure could threaten the financial system.
Banks with at least $50 billion in assets will have to file
plans, as will any firm designated as systemically important by
the Financial Stability Oversight Council.
The final rule changes the filing timeline from an April
draft proposal released by the FDIC and Fed, moving toward a
tiered phase-in based on the total of non-bank assets held by
firms.
The agency also approved unanimously a separate rule
dictating resolution plans for FDIC-insured banks with more than
$50 billion in assets. The rule, which the agency began drafting
before the completion of the Dodd-Frank Act, would apply to 37
banks and thrifts, according to a senior FDIC official. Thirty
four of those firms would be required to file resolution plans
with the Fed because of the size of their parent company.
The rule would have an effective date of Jan. 1, 2012, and
would be subject to a 60-day public comment period.
For more, click here.
Compliance Policy
Ketchum Says Finra ‘Uniquely Positioned’ to Oversee Advisers
The head of Wall Street’s self-funded regulator said the
group would be ready to assume oversight of investment advisers
in addition to broker-dealers if that’s what Congress decides.
Richard Ketchum, chairman and chief executive officer of
the Financial Industry Regulatory Authority, told lawmakers at a
House Financial Services Committee hearing yesterday that his
Washington-based group would create a unit to oversee advisers.
Finra “would establish a separate entity with separate
board and committee governance to oversee any adviser work, and
would plan to hire additional staff with expertise and
leadership in the adviser area,” Ketchum told members of the
House panel’s capital markets subcommittee.
Representative Spencer Bachus, the Alabama Republican who
leads the Financial Services Committee, has drafted a bill that
would put one or more self-regulatory groups in charge of
overseeing retail advisers, under the authority of the
Securities and Exchange Commission. That bill and proposed new
standards for how broker-dealers treat clients were examined by
lawmakers at yesterday’s hearing.
The Dodd-Frank Act, enacted last year, directed the SEC to
look into the practices of financial advisers in response to
high-profile frauds that were exposed in the wake of the 2008
financial crisis. The SEC’s study concluded that the agency
needs to address its inability to inspect a sufficient number of
investment advisers on a regular basis.
The report presented options including using new SEC fees
to pay for an expanded inspections program or moving investment
advisers under a self-regulatory organization.
For more, click here.
High-Frequency Firms May Face Tougher EU Market-Abuse Rules
The European Union is considering listing “specific
examples of strategies using algorithmic trading and high-
frequency trading” that should be banned and punished by
regulators as market manipulation.
The measures to increase investor protection and reduce
volatility are part of plans to clamp down on market abuse in
the region, according to a draft of the proposals obtained by
Bloomberg News.
“There are particular automated strategies that have been
identified by regulators which, if carried out, are likely to
constitute market abuse,” the European Commission document
says. “Further identifying abusive strategies will ensure a
consistent approach in monitoring and enforcement by competent
authorities.”
High-frequency traders have come under increased regulatory
scrutiny following the so-called flash crash in May of last
year, during which the Dow Jones Industrial Average briefly lost
almost 1,000 points.
The EU move follows investigations by U.S. regulators into
the practices of high-frequency traders.
For more, click here.
Compliance Action
Canadian Regulators Question Ads Promoting Stocks
Canadian regulators said the use of mass advertising to
generate interest in securities may not comply with securities
laws and may be misleading.
The regulators in Alberta, Ontario, Quebec, Nova Scotia,
New Brunswick and Northwest Territories issued a notice saying
the ads may not reflect positively on the integrity of issuers
or the Canadian capital markets, according to a statement on the
website of the Ontario Securities Commission.
House Panel to Examine Conflict Case of Ex-Sec Lawyer Becker
A U.S. House panel will examine whether the former general
counsel of the U.S. Securities and Exchange Commission had a
conflict of interest because of his family’s investment in the
Bernard Madoff Ponzi scheme.
Subcommittees of the House Financial Services Committee
will hold a joint hearing on Sept. 23 to look into David
Becker’s actions while at the agency, according to a press
release yesterday. Becker and his brothers had received a Madoff
investment in the form of an inheritance and were sued by the
bankruptcy court’s trustee to recover what he called fictitious
profits.
At the SEC, Becker worked on legal issues relating to the
recovery of Madoff investors’ assets.
Courts
Former SAC Capital Portfolio Manager Settles With SEC
Donald Longueuil, a former junior portfolio manager at SAC
Capital Advisors LP, agreed to settle a civil suit filed by the
U.S. Securities and Exchange Commission.
Longueuil was sentenced to 30 months in prison in July
after pleading guilty to criminal charges of conspiracy and
securities fraud in a case that also included former SAC
portfolio manager Noah Freeman, Samir Barai, founder of Barai
Capital Management, and Jason Pflaum, an analyst who worked for
Barai.
All four men pleaded guilty in a U.S. investigation
targeting insider trading at hedge funds. The settlement, filed
in U.S. District Court in Manhattan yesterday, says that
Longueuil is cooperating with the SEC’s investigation.
Longueuil agreed to pay the SEC $353,000 in the settlement.
The agreement gives him credit for the larger amount,
$1.25 million, that he is required to forfeit to the government
as part of the criminal conviction.
The case is Securities and Exchange Commission v. Longoria,
11-CV-753, U.S. District Court, Southern District of New York
(Manhattan).
Interviews/Speeches
U.K. Banks Welcome to Relocate in Hong Kong, Says Donald Tsang
Hong Kong would “absolutely” welcome London-based banks
HSBC Holdings Plc (HSBA) and Standard Chartered Plc (STAN) if they decided to
move headquarters to the former British territory, according to
Chief Executive Donald Tsang.
“If HSBC or Standard Chartered were to change headquarters
it would not undermine their business at all,” Tsang said in an
interview yesterday. “They already have a healthy line of
business in Asia.”
Tsang, who is in London to promote Hong Kong as a financial
center to British business leaders, said that it was ultimately
a decision for the banks and he didn’t “want to encourage a
move that would impair relations” with trading partners
including London and New York.
HSBC and Standard Chartered are among lenders required to
comply with new British rules under plans published on Sept. 12
by the Independent Commission on Banking. China last month
unveiled a package of measures to bolster Hong Kong’s role as a
financial hub and to aid an economy that shrank in the second
quarter for the first time since 2009.
Tsang was scheduled to meet Chancellor of the Exchequer
George Osborne yesterday.
For more, click here.
Miller Sees ‘A Lot of Holes’ in European Bank System
Paul Miller, managing director at FBR Capital Markets
Corp., talked about the outlook for the global banking system
and investor sentiment.
Miller, who spoke with Betty Liu, Jon Erlichman and Dominic
Chu on Bloomberg Television’s “In the Loop,” said “policy
makers have learned lessons” about liquidity since 2008 that
would help maintain trust among banks in the event of European
country defaults.
For the video, click here.
Comings and Goings
Colombia Oil Regulator Zamora Resigns After Spurring Output
Colombian oil regulator Armando Zamora, who drew
international investment to the Andean nation by auctioning oil
rights to investors including Brazilian billionaire Eike
Batista, has resigned after eight years.
Zamora will return to “professional and academic
activities” after heading the National Hydrocarbons Agency, he
said in a letter to President Juan Manuel Santos distributed
yesterday by the agency. The agency didn’t name a replacement.
Zamora oversaw auctions of oil blocks that helped make
Colombia the third-largest producer of crude in South America
after Brazil and Venezuela. The government last year auctioned
blocks to companies including Batista’s OGX Petroleo & Gas
Participacoes SA and South Korea’s SK Energy Co. in a bid to
spur more than $1 billion in spending over three years.
Under Zamora, the government signed contracts with
companies for as much as $4 billion in investment in oil
exploration and production, according to his letter yesterday.
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