Aug. 25 (Bloomberg) -- The U.S. Securities and Exchange Commission this week will set a time frame for letting American companies drop U.S. accounting rules and start issuing financial statements using international provisions.

SEC commissioners will meet Aug. 27 to vote on a proposed ``roadmap'' for U.S. companies switching to overseas accounting standards, the Washington-based agency said in a statement on its Web site. Under the proposal, the SEC may permit ``early use'' of global rules by a ``limited number'' of U.S. companies, the regulator said.

The SEC needs to mesh its rules with global regulators in response to the rapid growth of overseas markets and increasing demand for cross-border investing, Chairman Christopher Cox has said. Critics such as U.S. Senator Jack Reed, a Rhode Island Democrat who heads a subcommittee overseeing the agency, have questioned whether the SEC is moving too fast and risks outsourcing its oversight to less-aggressive regulators.

Commissioners will vote on whether to seek public comment on the accounting proposal. The ``roadmap'' would require a second vote to become binding.

The SEC last year scrapped a requirement that overseas companies align financial statements with U.S. accounting rules.

At least one study has found companies show higher profits when they follow international standards.

Jack Ciesielski, publisher of The Analyst's Accounting Observer, a Baltimore-based research service, studied 137 companies that reconciled financial results in 2006 under International Financial Reporting Standards, or IFRS, with U.S. generally accepted accounting principles. Ciesielski found that 86 firms recorded higher earnings using IFRS and 47 had greater earnings with GAAP. Four companies reported the same earnings under both systems.

U.S. rules are set by the Norwalk, Connecticut-based Financial Accounting Standards Board. Lynn Turner, a former SEC chief accounting officer, has said a move to international accounting provisions may spell FASB's demise.

Cox, 55, has also tried to boost cooperation between the SEC and overseas regulators. The agency has been pursuing an agreement with Australia that would let that country's brokers sell shares to U.S. customers without SEC oversight. An agreement with Australian regulators will be announced today in Washington, the SEC said.

Merrill Reaches Accord for Buying Back Investors' Auction Debt

The U.S. Securities and Exchange Commission reached an $8.5 billion agreement with Merrill Lynch & Co. to settle allegations the firm misled investors when marketing auction- rate debt.

Merrill will buy back as much as $7 billion in securities from individual investors, small businesses and charities and take steps to cover their losses, the SEC said in a statement Aug. 22. The bank must also use ``best efforts'' to help other businesses and institutional clients unload about $1.5 billion in frozen debt, the agency said.

``Merrill Lynch's conduct harmed tens of thousands of investors who will have the opportunity to get their money back through this agreement,'' the SEC's enforcement chief, Linda Thomsen, said in a statement.

The announcement came a day after New York Attorney General Andrew Cuomo settled similar claims against Merrill, Goldman Sachs Group Inc. and Deutsche Bank AG. That agreement brought to eight the number of firms that settled complaints in the last two weeks they misled investors by fraudulently marketing the long-term securities as easy to buy and sell.

Cuomo said Merrill will pay $125 million in fines and buy back as much as $12 billion in securities. The SEC's $7 billion figure includes redemptions that are expected to cut the amount of debt held by customers.

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D.C. Circuit Upholds SOX's PCAOB, Removes Uncertainty for Now

A federal appeals court upheld the legality of the board created by the Sarbanes-Oxley Act to oversee auditors, affirming the Public Company Accounting Oversight Board as the industry's watchdog.

The U.S. Circuit Court of Appeals for the District of Columbia ruled 2-1 on Aug. 22 in rejecting a challenge by a Las Vegas accounting firm that argued the board's makeup violated the Constitution's separation of powers clause. A lower court judge tossed out the suit last year.

PCAOB members are ``not required to be appointed by the president,'' Judge Judith Rogers, an appointee of President Bill Clinton, wrote in the court's majority opinion.

The board has operated for five years, fining one large accounting firm and releasing six new standards for auditors. The board, a non-profit corporation funded by fees from public companies, has been criticized by investor advocates such as the AFL-CIO for not being aggressive enough in fighting fraud.

``The PCAOB is gratified,'' the board said in an e-mailed statement. U.S. Securities and Exchange Commission Chairman Christopher Cox said the decision was ``welcome news for the commission, investors and U.S. capital markets.'' The SEC appoints the board's five members, approves the $144.6 million budget and rules before they take effect.

Beckstead and Watts LLP, criticized by the PCAOB in 2004 for its audits, challenged the board's legality in a 2006 lawsuit that was rejected by a federal judge. During arguments appealing that ruling in April, Judge Brett Kavanaugh questioned the process the law laid out for appointing members. Kavanaugh filed a dissenting opinion.

Beckstead could ask the U.S. Supreme Court to hear the case, or seek a ruling by the full appeals court rather than the three-member panel.

``Courts are loath to strike down an agency created by Congress,'' Donald Langevoort, a law professor at Georgetown University in Washington and a former SEC attorney, said in an interview.

Dennis Beresford, an accounting professor at the University of Georgia and former chairman of the Financial Accounting Standards Board, said the ruling removes ``some uncertainty hanging over the PCAOB, especially because there were predictions the decision would go the other way.''

The PCAOB was established in 2002 under Sarbanes-Oxley, which strengthened regulation of businesses after an accounting fraud triggered the collapse of Enron Corp. Members can be removed only ``for good cause'' by the SEC.

Beckstead said the process to name the board violated the U.S. Constitution, which gives the president the power to make appointments, with Senate consent.

In his dissent, Kavanaugh, nominated by President George W. Bush, said the PCAOB's structure unconstitutionally restricts the president's appointment and removal powers.

As it stands, the PCAOB is a chance to create a ``regulatory model with private sector sensibilities,'' said J. Robert Brown of the University of Denver Sturm College of Law.

``The implications of this case are not so much about the impact on other existing agencies but on the nature of regulation,'' Brown said. ``If the dissent becomes the law, a form of regulation that tries to more closely intersect with the private sector will be eliminated. This would ultimately be detrimental and, frankly, not in the best interests of the private sector.''

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SEC Restates the Obvious in Its Long-Awaited Reg. FD Guidance

The U.S. Securities and Exchange Commission earlier this month issued an interpretive release on the use of company Web sites.

Regulation FD prohibits companies from selectively disclosing material information to analysts, brokers and investment advisers before disseminating it to the public.

The guidance focuses primarily on four issues: when information posted on a Web site is public; liability for postings, including previously posted information, links to third-party information, summaries and interactive content; types of controls and procedures the SEC recommends; and format of content presentation, focusing on readability, not printability.

The interpretive release is the SEC's first guidance on the electronic delivery of disclosure documents since the regulation was first issued in April 2000.

Securities law professor J. Robert Brown of the University of Denver Sturm College of Law said the long-awaited guidance is a ``big disappointment'' as it contains nothing that ``the average securities lawyer doesn't already know.'' He said the SEC missed an opportunity to require company Web sites to contain standard information.

``There is no reason to use an interpretive release to repeat well-known lore, or in this case, to confuse well-known lore,'' said Brown. ``More importantly, it was an opportunity not taken. The release could have taken huge steps in ensuring the use of corporate Web sites and ensuring that shareholders received a predictable and uniform stream of disclosure. Perhaps with regime change after the 2008 elections the agency will revisit the issue.''

Central Bankers, Scholars Diverge on Role of Market Regulation

One year into the financial crisis, central bankers and scholars at the Federal Reserve's annual retreat this weekend couldn't agree on how to prevent a repeat.

Fed Chairman Ben S. Bernanke, European counterpart Jean- Claude Trichet, former officials and economists meeting in Jackson Hole, Wyoming, split over whether central banks should be made responsible for financial stability and how closely to heed the concerns of Wall Street.

``We shouldn't delude ourselves into thinking we are going to build a panic-proof system,'' former Fed Vice Chairman Alan Blinder, who attended the conference, said in an interview with Bloomberg Television. ``But there are choices between less and more panics, more virulent ones, less virulent ones, and that is the way we want to push the system.''

At stake is the shape of financial regulation as governments and legislators draft new laws in response to the crisis, which stemmed from a collapse in U.S. mortgage bonds and has sparked more than $500 billion in losses and writedowns. Too many new rules may hobble financial innovation, while a hands- off approach could create more bubbles after a series of asset- price busts over the past decade.

Bank of Israel Governor Stanley Fischer said in a speech closing the two-day conference in the Teton Mountains that ``it didn't settle a whole lot.''

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Mersch Says ECB to Change Collateral Rules to Avoid Abuses

The European Central Bank will announce changes to the rules governing its money-market auctions in coming weeks to head off the risk of abuse by financial institutions, council member Yves Mersch said.

``At the margins there can still be cases where you see dangers of gaming the system,'' Mersch said in an interview on Aug. 23 in Jackson Hole, Wyoming. ``The Governing Council has been discussing the whole issue'' and has agreed on a ``certain amount'' of refinement to the existing rules, he said.

ECB officials have become increasingly concerned that banks are taking advantage of collateral rules that are broader than those used by the Federal Reserve and the Bank of England. The danger is that banks struggling to sell securities damaged by the credit-market turmoil will dump them on the ECB and become overly reliant on central-bank funds.

Dutch policy maker Nout Wellink said in an interview with the Het Financieele Dagblad newspaper published Aug. 21 that banks shouldn't become too dependent on the ECB for funding.

``It's not a broad-based revolution,'' said Mersch, who is attending a meeting of central bankers and financial officials organized by the Fed. ``We are satisfied with our framework. But since there are always on the margins evolutions, we have to adjust our framework regularly to market practices.''

``The precisions'' planned by the ECB ``concern some instruments,'' Mersch said, declining to elaborate. Unlike the Fed and the Bank of England, the ECB hasn't had to change its operation rules since the credit crisis began.

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Schumer Can't Be Blamed for IndyMac's Failure, Jerry Brown Says

U.S. Senator Charles Schumer's criticism of IndyMac Bancorp Inc. didn't cause its collapse, California Attorney General Jerry Brown told former bank employees who called for an investigation of the New York Democrat.

IndyMac, the failed bank now controlled by federal regulators, was criticized by Schumer, who said lax lending standards left it on the brink of collapse. In the 11 business days after Schumer explained his concerns in a June 26 letter to regulators, depositors withdrew more than $1.3 billion. The run led federal regulators to take control of the Pasadena, California-based bank.

``While we deeply regret the circumstances surrounding IndyMac's failure, we believe that there is insufficient evidence for us to investigate Senator Schumer at this time,'' Brown said in a letter to Jen Seely, a former IndyMac employee from Dublin, California, who along with 50 other former bank workers sent a letter to Brown requesting the investigation.

Seely's letter, distributed by Alexandria, Virginia-based CRC Public Relations, which represents Republican political groups, claimed Schumer's letter violated California law prohibiting rumors about the financial health of banks that may jeopardize their solvency. Schumer sent his letter to the Federal Deposit Insurance Corp. and Office of Thrift Supervision, an agency of the Treasury Department that regulates savings and loans.

Korea Bank Mulls Buying a Stake in Lehman, Boosting Stock

Lehman Brothers Holdings Inc., the fourth-largest U.S. securities firm, rose 5 percent in New York trading after Korea Development Bank said it's ``considering'' an investment in the company.

Lehman climbed 69 cents to $14.41 in New York Stock Exchange composite trading on Aug. 22, after reaching $15.93. Shares of the New York-based firm dropped 78 percent this year, the worst-performer on the 11-company Amex Securities Broker/Dealer Index.

``KDB is considering all kinds of options, including Lehman Brothers,'' a KDB spokesman said, declining to elaborate. A Reuters report last week cited a spokesman saying that the government-controlled bank is ``open to'' possibilities, including a purchase of Lehman.

Lehman, the largest underwriter of mortgage bonds before the subprime market collapsed, lost the confidence of investors in the past year as it struggled to pare debt holdings. The bank has reported writedowns and credit losses of $8.2 billion in the past 12 months, according to data compiled by Bloomberg.

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Freddie, Fannie Decline Diminishes Prospects of New Investors

The cost to Freddie Mac and Fannie Mae of raising capital is getting more prohibitive by the day, making it likely that the government will have to inject cash into the largest U.S. mortgage finance companies.

Declines in the common stocks of the government-chartered companies accelerated last week to more than 90 percent for the year and yields on their preferred shares more than doubled on speculation Treasury Secretary Henry Paulson may need to bail them out, reducing or wiping out the value of the securities.

As long as a rescue is likely, investors will be reluctant to take part in any offering, said Richard Hofmann, an analyst at CreditSights Inc., a bond research firm in New York.

``The stocks' freefall becomes sort of a self-fulfilling prophecy if it goes far enough, and we're getting pretty close to far enough,'' Hofmann said.

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Paulson Might Weigh Whom to Hurt in Any Fannie, Freddie Rescue

Treasury Secretary Henry Paulson's response to the sinking fortunes of Fannie Mae and Freddie Mac might boil down to picking which investors get hurt and by how much.

At stake if Paulson does intervene: the fate of worldwide bondholders of $5.2 trillion of agency and mortgage-backed debt and scores of large banks, insurers and pension funds that own the firms' common and preferred shares.

Paulson's choices probably include buying Fannie's and Freddie's bonds, a special class of preferred shares or preferred shares convertible into common stock, analysts and investors said. The terms and conditions of any purchases would put the government ahead of other creditors and stockholders, while ensuring that bondholders are protected, they said.

``He's had zero clarity on this whole issue, and until the market knows where Hank's going to be in the capitalization structure, then it gets worse not better,'' said Paul McCulley, a fund manager at Pacific Investment Management Co., which has the world's largest bond fund.

``The presumption'' is that holders of the government- chartered companies' subordinated bonds ``will be covered,'' McCulley said in an interview on Bloomberg Television from Jackson Hole, Wyoming. Common shareholders would be wiped out, he predicted.

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Courts

UBS AG, Vestra Settle Lawsuit Over Ex-Wealth Management Staff

UBS AG, the world's biggest manager of money for affluent clients, settled a lawsuit with ex-employees accused of soliciting London staff and customers for a rival start-up, Vestra Wealth LLP.

``A settlement has now been reached,'' UBS and Vestra said in a joint, e-mailed statement. ``Due to the confidential nature of this agreement we are unable to comment any further.''

UBS lost at least 75 staff in wealth management to Vestra between May and late July, UBS lawyer Alistair McGregor said at hearing earlier this month. UBS argued that the suit protected ``legitimate business interests.''

Charles Bear and William Dawson, the lawyers for Vestra, weren't in the office and didn't immediately return phone messages on Aug. 22.

The case is UBS Wealth Management v. Vestra Wealth, Case No. HQ08X02801, High Court of Justice, Queen's Bench Division.

Wal-Mart Settles Dispute With Ex-Executive Who Admitted Theft

Wal-Mart Stores Inc. said it will settle a compensation dispute for $6.75 million with a former vice chairman who once admitted to stealing money from the company and spending it on dog care and a truck upgrade.

The company initially agreed to a $17 million retirement package for Vice Chairman Thomas M. Coughlin, a friend of the Wal-Mart's late founder, Sam Walton, and then asked a court three years ago to cancel the accord, according to a statement the company filed Aug. 21 with the U.S. Securities and Exchange Commission. A trial was scheduled to begin last week in Arkansas state court, said Daphne Moore, a Wal-Mart spokeswoman.

``We are satisfied that the settlement is fair to both parties and are ready to put this one behind us,'' she said in a phone interview.

Coughlin in February was sentenced to 27 months home detention after pleading guilty to five counts of wire fraud and one count of failing to report income from the fraud on his 2000 tax return. He previously paid $411,218 in restitution and a $50,000 fine.

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SEC Filings, Commentary, Company News

Federal-Mogul Lures UBS to Join Icahn Bet on Auto-Parts Maker

Federal-Mogul Corp., the auto-parts maker controlled by billionaire Carl Icahn, is luring investors led by UBS AG and TIAA-CREF who anticipate a rebound after this year's slump.

Investors may figure that the market is unfairly punishing the Southfield, Michigan-based company for its association with carmakers, said George Putnam, publisher of the Turnaround Letter and fund manager of Boston-based New Generation Advisers Inc. The stock has lost almost half its value in 2008.

The partsmaker gets more than a third of its revenue and most of its profit from selling replacement items such as Champion spark plugs, making it less vulnerable than competitors to slumping auto sales. Sixty percent of the supplier's business is outside the U.S., exposing it to faster-growing economies. No more than 6 percent of revenue comes from any one customer, according to a company filing.

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Thornburg CEO Searches for New Business Model After Home Crisis

Thornburg Mortgage Inc. co-founder Larry Goldstone, who spent more than four months securing enough shareholder support to keep his company alive, now has to find a new business model.

Goldstone's Santa Fe, New Mexico-based company, which specializes in ``jumbo'' loans for expensive homes, won approval this month for a bailout that resulted in losses of up to 80 percent for preferred investors. In rebuilding the business, he needs to develop a way to finance the company that doesn't rely so much on private lenders after margin calls ate through cash and left the firm on the brink of bankruptcy.

``Maybe the only place for mortgage lending to be done is under the protection of the U.S. government,'' said Goldstone, 53, in an interview on July 3. ``I think that's a crying shame.''

Thornburg, which could have reported second-quarter results as early as Aug. 22, thrived for 14 years by providing mortgages of more than $417,000 to borrowers with high credit scores and investing in top-rated mortgage-backed securities. From 2000 through 2006, profit rose 10-fold and the stock tripled, compared with the 54 percent gain for the Standard & Poor's 500 Financials Index.

Unlike Countrywide Financial Corp. and Washington Mutual Inc., Thornburg never made a subprime loan.

Comings and Goings

Credit Suisse Appoints Ex-UBS Executive Meister as Swiss Chief

Credit Suisse Group AG, the second-biggest Swiss bank, said it appointed former UBS AG executive Hans-Ulrich Meister as chief executive officer for Switzerland, replacing Ulrich Koerner, who is leaving.

Meister, who was head of business banking at rival UBS until last year, will report to Credit Suisse CEO Brady Dougan and Walter Berchtold, head of private banking, the Zurich-based bank said Aug. 22 in an e-mailed statement. Meister will join on Sept. 1 and be a member of Credit Suisse's executive board.

UBS Names Willi Chief Communication Officer, Hill Changes Role

UBS AG, Switzerland's biggest bank, appointed Michael Willi as chief communication officer, succeeding Tom Hill, who is taking over responsibilities for group strategic advisory and financial communications.

Willi, who began working at Swiss Bank Corp. in 1992, has most recently headed corporate communications management out of New York, the Zurich-based company said Aug. 22 in an e-mailed statement. He will report to Chief Executive Officer Marcel Rohner and be responsible for communications management, media relations, internal communications and brand management, the bank said.

Hill will report to the bank's chief financial officer as the financial communications function is being moved, UBS said.

Apollo's Harris Moves to London as Firm Seeks European Deals

Joshua Harris, co-founder and president of Apollo Global Management LLC, is moving to London from New York as the private-equity firm seeks to increase European leveraged buyouts and distressed investments.

Harris will work from the company's office in the Mayfair district, while Marc Rowan, an Apollo co-founder who has been based in the British capital for about two years, will return to New York. Apollo spokeswoman Anna Cordasco confirmed the moves.

The company said Aug. 13 it had teamed up with Lazard Ltd., the investment bank run by Bruce Wasserstein, to pursue transactions in Europe. In addition to taking companies private, Apollo is seeking to buy distressed debt, or loans trading at below 90 cents on the dollar and bonds below 70 cents.

``Smart money is value shopping,'' said Randy Schwimmer, senior managing director of New York-based Churchill Financial Group LLC, which provides financing for private-equity deals.

Apollo plans to list shares on the New York Stock Exchange later this year after selling a stake through a private exchange in 2007.

International Compliance

Germans Favor Obama; McCain Will Target Biden on Iraq War

Germans overwhelmingly back Democratic presidential candidate Barack Obama over Republican contender John McCain, a poll showed, though a majority said the U.S. election outcome won't affect relations with Europe.

Seventy-four percent of Germans say they would prefer Obama as president, with only 11 percent supporting McCain, according to the Forsa survey for N-TV and Die Welt newspaper. Among Germans under 30 years old, 84 percent said they back the Democratic senator from Illinois.

Obama boosted his popularity in Germany last month when he delivered a speech in Berlin's central Tiergarten park that drew some 200,000 people. Germans also favor positions held by Obama such as his opposition to the Iraq war, combating global warming and greater engagement with European allies.

Democrats open their four-day national convention in Denver today leading up to Obama's formal nomination Aug. 28. Obama on Aug. 23 chose as his running mate Delaware Senator Joseph Biden, a Democratic expert in foreign policy.

Separately, McCain plans to use Biden's positions on the Iraq War and the North American Free Trade Agreement against Obama, the Washington Post reported, citing McCain spokesman Tucker Bounds.

Unlike McCain, Biden initially supported the war, the Post said. Biden also voted for NAFTA, which McCain will use to try to draw a wedge between the Democratic nominee and his running mate, the newspaper said.

Nigerian Exchange CEO Probed Over Alleged Obama Event, AFP Says

Nigerian Stock Exchange Chief Executive Officer Ndi Okereke-Onyiuke is being investigated after holding a fund- raising event linked to U.S. presidential candidate Barack Obama, Agence France-Presse reported.

U.S. electoral laws forbid donations from foreigners to electoral campaigns.

Officers from Nigeria's Economic Financial Crimes Commission interviewed Okereke-Onyiuke on Aug. 20 and Aug. 21 about a dinner she hosted where $80,000 was raised, the news service said, citing Femi Babafemi, spokesman for the commission. Obama's campaign team disassociated itself from the event, AFP said.

Okereke-Onyiuke said the dinner, dubbed ``Africans for Obama 2008,'' wasn't linked to the Obama Campaign group in the U.S., AFP said. The event was designed to ``sensitize and mobilize Africans worldwide and other eligible U.S. citizens to register and vote,'' AFP cited Okereke-Onyiuke as saying.

ANZ Bank Fires Workers Following Opes Probe of Broker Collapse

Australia & New Zealand Banking Group Ltd. fired workers and said it will cut its equity lending business after an internal investigation into the bank's role in the collapse of stockbroker Opes Prime Group Ltd.

Two workers will leave following breaches of the bank's code of conduct, and another six managers and executives will depart, Melbourne-based ANZ said in a statement to the exchange. ANZ, the nation's fourth-biggest bank, was the lead banker to Opes.

``Getting involved in the margin-lending game probably cost ANZ more headaches than generated revenue,'' said Jason Teh, who helps manage the equivalent of $5.7 billion, including ANZ, at Investors Mutual Ltd. in Sydney. ``It was all part of the excesses of the bull market, and now it's time for the banks to reassess their risks and become more conservative.''

Alstom Raided in Swiss Probe Into Contract Bribery, Corruption

Alstom SA had offices of a Swiss unit raided as an investigation into alleged corruption and contract bribes at the French power-plant maker widens.

One person, ``strongly'' suspected of abusing duties, has been arrested, Switzerland's attorney general said in a statement. The probe is centered on a former executive of Alstom Prom AG in Baden, as well as other currently unknown persons. Alstom spokesman Patrick Bessy confirmed the raids and said a retiree has been questioned.

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To contact the reporter on this story: Lisa Brennan in New York at lbrennan1@bloomberg.net.

Last Updated: August 25, 2008 08:41 EDT