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Senate Finance Debate, Singapore Rules, Deutsche Bank Searched: Compliance

Senate Republicans abandoned their efforts to block debate over legislation overhauling U.S. financial rules, vowing instead to fight for changes to the bill on issues ranging from consumer protection to derivatives, according to reporting by Bloomberg’s Alison Vekshin and James Rowley.

The Senate today will begin considering amendments to the legislation, which is based on a proposal by President Barack Obama, beginning with the Democrats’ plan to strengthen oversight of the $605 trillion over-the-counter derivatives market.

Alabama Senator Richard Shelby, who negotiated on behalf of Republicans to get a bipartisan deal, said he will propose “a lot of amendments,” including one that would establish a consumer financial protection bureau at the Federal Reserve.

Republicans and Democrats yesterday ended a two-week standoff on the bill, bringing Congress closer to approving the biggest financial-oversight restructuring since the 1930s, two years after a mortgage meltdown shook global markets and hobbled Lehman Brothers Holdings Inc. and other Wall Street firms.

The move came a day after Goldman Sachs Group Inc. executives underwent more than 10 hours of questioning by a congressional panel looking at Wall Street’s role in the financial crisis.

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Compliance Policy

New Zealand to Start New Financial Markets Regulator Next Year New Zealand will create a new financial markets regulator next year to improve monitoring of and enforcement of the nation’s securities laws.

The Financial Markets Authority will be operating early next year and will take over all the work of the Securities Commission, Commerce Minister Simon Power said in a speech late in the day April 27. The new agency will also absorb monitoring roles held by the Ministry of Economic Development and the disciplinary powers of NZX Ltd., operator of the nation’s stock exchange.

The new agency will enforce securities, financial reporting, and company law as they apply to financial services and securities markets, Power said. It will also regulate and oversee trustees, auditors, financial advisers and financial service providers including people who offer investments.

A board will be named shortly to design the structure of the new agency and legislation establishing the authority will be “fast-tracked” through parliament this year, Power said.

Singapore to License Bigger Hedge-Fund Firms Under New Rules

Hedge-fund firms in Singapore that manage more than S$250 million ($183 million) will need to be licensed under regulator proposals to increase oversight of the investment-management industry.

Singapore now has 138 single-strategy hedge-fund managers employing more than 800 professionals from near zero in 1997, according to a survey by the local chapter of the Alternative Investment Management Association.

Hedge-fund managers are currently exempt from holding a capital-markets services license provided they manage funds on behalf of 30 or fewer of what the Monetary Authority of Singapore describes as “qualified” investors. Under the proposals, managers with less than S$250 million won’t need a license, though they will have to maintain a base capital of at least S$250,000.

The review is the most sweeping of the fund-management industry since the city-state introduced incentives to lure alternative asset managers in 2002. Singapore’s hedge-fund industry has grown into Asia’s second biggest behind Hong Kong.

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Swiss to Discourage ‘Excessive’ Bonuses for Bankers

The Swiss government is planning to discourage “excessive” bankers’ bonuses in the wake of the financial crisis and the state’s rescue of UBS AG. The government blames the compensation system for fueling “excessive risk-taking,” according to a statement yesterday on the government Web site.

The measures would include supervision of the salary systems of banks that are using government help as well as limits on the tax breaks lenders can claim on their bonus payments, the government said.

UBS spokesman Serge Steiner said the bank took note of the government’s announcement, declining further comment.

The government also endorsed last week’s report by a group of independent experts who suggested ways of limiting the risk that the country’s biggest banks can pose to the wider economy, including the possible breakup, in an emergency, of Switzerland’s two biggest banks.

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China Will Keep Control of Bocom in Any Fund-Raising Plan

China’s government will maintain control over Bank of Communications Co., part-owned by HSBC Holdings Plc., in the event of any fund raising, the Chinese lender said in a statement to the Hong Kong stock exchange today.

The bank last week received regulatory approval to raise as much as 42 billion yuan in a rights offer. HSBC holds 18.6 percent of the Shanghai-based bank.

Bocom, as the lender is known, said it aims to keep its capital adequacy ratio above 12 percent between 2010 and 2014 and maintain a core capital adequacy ratio of 8 percent.

Separately, China’s government pledged to strengthen economic reform this year, including changes to the resources tax system and the restructuring of monopoly industries such as the postal service.

The State Council, or cabinet, also aims to improve the enterprise income tax and consumption tax systems, according to a statement posted on the official government Web site today after a meeting chaired by Premier Wen Jiabao yesterday.

The pricing system for resources including water, power, fuel and natural gas will also be changed and the government will gradually start charging for sewage, rubbish and medical waste treatment, according to the statement.

Power, railway and salt management will also be included in reform proposals for monopoly industries, the State Council said.

Compliance Action

Deutsche Bank, RWE Searched in German Probe of CO2 Tax

German prosecutors searched Deutsche Bank AG and RWE AG in a raid on 230 offices and homes nationwide to investigate 180 million euros ($238 million) of tax evasion linked to emissions trading.

The Frankfurt Chief Prosecutor is investigating allegations that firms may have evaded value added tax when trading emission rights, Guenter Wittig, the prosecutor’s spokesman, said yesterday in a statement.

The Frankfurt Chief Prosecutor’s Office said it targeted 150 suspects at 50 companies and has frozen assets. Deutsche Bank, Germany’s largest bank, and RWE, the country’s second- biggest utility, said they are cooperating with the probe.

RWE AG’s Supply & Trading offices were searched by police, RWE spokesman Michael Rosen said yesterday. The investigation concerns one company that had business relations with RWE Supply & Trading in 2009, according to Rosen. The company is not under suspicion, he said.

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Goldman Sachs Said to Meet U.K. FSA Today Over Investigation

Goldman Sachs Group Inc. will meet regulators from the U.K. Financial Services Authority today to discuss how the agency’s probe into the bank will progress, a person familiar with the investigation said.

It will be the first time Goldman Sachs and the agency have met to discuss the timetable of the probe, the person said, on condition of anonymity because the inquiry is confidential.

The firm has denied wrongdoing.

The FSA said earlier this month that it was investigating Goldman Sachs’ London office after the U.S. Securities and Exchange Commission filed a lawsuit over the New York-based bank’s marketing of a collateralized debt obligation.

A spokeswoman for Goldman Sachs in London wasn’t immediately available to comment. Chris Hamilton, a spokesman for the FSA, declined to comment.

In another U.S. development concerning Goldman Sachs, the bank is in settlement talks with hedge fund Basis Yield Alpha Fund, which went bankrupt after investing $100 million in the Timberwolf mortgage-backed security sold by Goldman, the Financial Times reported, citing unidentified people familiar with the matter.

Timberwolf dropped in value after it was introduced in 2007, the newspaper said.

In Europe, the Autorite des Marches Financiers, France’s financial-markets regulator, found no evidence that local fund- management companies bought Goldman Sachs Group Inc. products currently under investigation in the U.S. and U.K., according to an e-mailed statement from the AMF today.

The regulator began reviewing whether French investors had exposure to a Goldman Sachs-marketed CDO, known as Abacus 2007- AC1, tied to subprime mortgages after U.S. regulators sued the bank for fraud.

In addition, Germany’s BaFin regulator said it will seek information from the SEC about the case.

A spokeswoman for the AMF didn’t immediately return calls seeking comment.

Separately, Goldman Sachs may soon settle the fraud case brought against the bank by the Securities and Exchange Commission in a bid to end the legal battle, the New York Post reported, citing unidentified people familiar with the matter.

The firm is keen to avoid more negative publicity created by the release of additional e-mail and records from the firm, the newspaper said.

A Goldman spokesman declined to comment, the Post added.

Chi Mei Executive Agrees to Jail Sentence, Fine, U.S. Says

A Chi Mei Optoelectronics Corp. sales executive who was charged in the U.S. with participating in a conspiracy to fix prices of display panels used in TVs and computers agreed to a prison sentence of about nine months and fine of $25,000, prosecutors said in court filings yesterday.

RBS Says Action Against Goldman on Abacus ‘Premature’

Royal Bank of Scotland Group Plc Chairman Philip Hampton said it would be “premature” for the bank to take legal action against Goldman Sachs Group Inc. over collateralized debt obligations called Abacus.

RBS is reviewing the Securities & Exchange Commission’s case, he said.

Prime Minister Gordon Brown said on April 19 that legal action against Goldman Sachs was possible. Three days earlier, after the SEC filed a suit against the New York-based bank, citing fraud and misrepresentation in the marketing of a collateralized debt obligation called Abacus 2007-AC1.

RBS unwound a position in Abacus bought by its ABN Amro unit by paying Goldman $840.9 million, the SEC said.

Courts

Memphis-Area Man Indicted Over Wheat Futures Chicago Trades

MF Global Inc. former trader Evan Brent Dooley was indicted in Chicago yesterday on 16 counts of wire fraud and two of violating the federal Commodity Exchange Act’s limit on speculative positions. The charges relate to unauthorized wheat futures trades, which cost the company $141 million in losses, prosecutors said.

Dooley, 42, of Olive Branch, Mississippi, was a broker at the Memphis office of MF Global. He made the trades on two nights in January and February 2008, executing them through the Chicago Board of Trade, prosecutors said.

Dooley’s lawyer, identified by prosecutors as Keri Ambrosio of Chicago, didn’t immediately reply to a voice-mail message seeking comment.

The case is U.S. v. Dooley, 1:10-cr-00335, U.S. District Court, Northern District of Illinois (Chicago).

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Ex-AKO Hedge-Fund Trader Charged With Insider Trading

A former hedge-fund trader at AKO Capital LLP was charged by the U.K. financial regulator with insider trading in transactions involving 22 different shares.

Anjam Ahmad, 38, was charged with one count of conspiracy to commit insider dealing relating to trades between June and August 2009, the Financial Services Authority said in a statement yesterday. Ahmad was at AKO Capital until September 2009, according to the FSA’s register.

The FSA is trying to stamp out insider trading after criticism from lawmakers that it wasn’t doing enough to prevent the crime. Opposition Conservatives have threatened to disband the agency should they win next week’s election.

Robert Brown, Ahmad’s lawyer at London-based Corker Binning, declined to comment. Ahmad faces a maximum of seven years in jail if found guilty.

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BA, Virgin Atlantic Weren’t in a Cartel, Defense Lawyer Says

British Airways Plc didn’t always tell Virgin Atlantic Airways Ltd. before raising fuel surcharges during a period of record oil prices, a defense lawyer said at a criminal price- fixing trial in London.

BA’s eight-pound increase ($12.15) on June 23, 2005, wasn’t discussed with Virgin and is proof the carriers had neither a consensus on prices nor a commitment to a cartel, lawyer Clare Montgomery told a jury yesterday in Southwark Crown Court. Virgin later decided on its own to match the increase, she said.

Three former BA executives and one current manager face claims by the U.K.’s antitrust regulator that they schemed with Virgin from July 2004 through April 2006 to keep surcharges as high as possible without losing customers. The U.K. criminalized antitrust violations in 2002.

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Rorech Had Right to Give Information to Swap Buyer, Lawyer Says

Jon-Paul Rorech, a Deutsche Bank AG salesman, didn’t break the law by giving information on a bond sale to a hedge-fund manager because he was allowed to share what he knew with customers, said Richard Strassberg, a defense lawyer, at the close of U.S. regulators’ first trial alleging insider-trading of credit-default swaps.

The U.S. Securities and Exchange Commission accuses Rorech, 39, of illegally feeding the information to Renato Negrin, 46, a former Millennium Partners LP portfolio manager, according to the civil complaint filed in May.

The case is Securities and Exchange Commission v. Rorech, 1:09-cv-04329, U.S. District Court, Southern District of New York (Manhattan).

Interviews

Bill Clinton Says He Is ‘Not at All Sure’ Goldman Broke Law

Former President Bill Clinton said he’s skeptical Goldman Sachs Group Inc. broke the law, though the government’s lawsuit against the firm highlights the proliferation of financial transactions with “no underlying merit.” The lack of merit in the transaction is what we need to look at, Clinton said, referring to the April 16 Securities and Exchange Commission suit alleging Goldman Sachs misled investors in a mortgage- linked investment.

He made the remarks yesterday at a conference on the federal budget in Washington.

Weiss Says Goldman Hearing Drives Public Toward Overhaul

Stephen Weiss of Leerink Swann & Co., a health-care bank, and author of “The Billion Dollar Mistake,” talked with Bloomberg’s Betty Liu and Peter Cook about Senate Permanent Subcommittee on Investigations’ April 27 hearing on Goldman Sachs Group Inc.

Weiss also discussed the possibility of new regulations over conflicts of interest at financial institutions and the relationship between Washington lawmakers and Wall Street firms.

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BBVA’s Cano Says Too ‘Chancy’ to Make Any Decision on Goldman

Banco Bilbao Vizcaya Argentaria SA, Spain’s second-biggest bank, said it’s too “chancy” to make any decision on placing restrictions on hiring Goldman Sachs Group Inc. because investigations are still going on.

Angel Cano, president and chief operating officer of the Bilbao, Spain-based bank, made the comments to reporters in Madrid yesterday when asked if it planned to restrict using Goldman Sachs.

Ortel Says Government Is ‘Waging War on Capitalism’

Charles Ortel, managing director of Newport Value Partners, talks with Bloomberg’s Deirdre Bolton and Keith McCullough about the performance of the Senate Permanent Subcommittee on Investigations, which grilled current and former executives of Goldman Sachs Group Inc. yesterday.

Ortel also discusses the performance of the Securities and Exchange Commission and the role of the U.S. public in structuring regulatory policy.

Schwartz, McCaughan Comment on Goldman, Reform, at Conference

The Obama administration’s proposal to bar banks from owning private-equity and hedge funds may ease concerns that Wall Street is working against its customers, said James McCaughan, chief executive officer of Principal Global Investors. Greater transparency is crucial to restoring the confidence of individual investors, he said.

McCaughan made the comments April 27 in an interview at the Milken Institute Global Conference in Beverly Hills, California, where attendees, including financiers, philanthropists and government officials, have debated the merits and parameters of the proposed investment regulation.

Alan Schwartz, former chief executive officer of Bear Stearns Cos. commented at the conference about the financial crisis and Goldman Sachs Group Inc.’s ability to weather criticisms following fraud allegations by U.S. regulators.

Schwartz is now executive chairman of investment firm Guggenheim Partners.

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Schapiro Says Increase in SEC Budget ‘Paying Dividends’

U.S. Securities and Exchange Commission Chairman Mary Schapiro and Commodity Futures Trading Commission Chairman Gary Gensler testified about SEC and CFTC’s budgets.

Schapiro, speaking before a Senate Appropriations Committee in Washington, also discussed the SEC’s lawsuit against Goldman Sachs Group Inc.

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Comings and Goings

BofA Elects Former DuPont Chief Holliday as Chairman

Bank of America Corp.’s board elected former DuPont Co. Chief Executive Officer Charles Holliday as chairman, less than a year after he was appointed a director at the largest U.S. bank.

Holliday, 62, replaces retired college president Walter Massey, 72, the Charlotte, North Carolina-based company said yesterday in a statement. Holliday was among six new directors recruited last year after the bank overhauled its board amid criticism from regulators, investors and Congress over its purchase of Merrill Lynch & Co.

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To contact the reporter on this story: Carla Main in New Jersey at cmain2@bloomberg.net.

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