Ireland, Gas Credits, Insider Trading: Compliance

European governments sought to quell the market turmoil menacing the euro, handing Ireland an 85 billion-euro ($113 billion) aid package and diluting proposals to force bondholders to bear some cost of future bailouts.

Ireland said it will pay average interest of 5.8 percent on the loans, which break down into 45 billion euros from European governments, 22.5 billion euros from the IMF and 17.5 billion euros from Ireland’s cash reserves and national pension fund.

“I don’t believe there were any other real options,” Irish Prime Minister Brian Cowen told reporters in Dublin.

A day after more than 50,000 protesters marched through Dublin to denounce Cowen’s budget cuts to stave off financial ruin, the EU gave Ireland an extra year, until 2015, to get its budget deficit to the euro limit of 3 percent of gross domestic product.

Cowen has overseen the collapse of Ireland’s banking system and public finances, leading to recession and unemployment near 14 percent. Cowen’s government is also unraveling. His Green Party last week lost a special election for a vacant parliamentary seat and some of his own colleagues are slamming his leadership.

European finance chiefs ended crisis talks in Brussels yesterday by endorsing a Franco-German compromise on post-2013 rescues that means investors won’t automatically take losses to share the cost with taxpayers as German Chancellor Angela Merkel initially proposed to the consternation of bond traders.

Six months after the Greek rescue exposed flaws in the euro’s makeup and fueled doubts about whether 16 countries belong in the same currency union, policy makers again found themselves meeting on a Sunday racing to calm markets. They convened after a week in which the cost of insuring Portuguese, Irish and Spanish government debt against default rose to a record and the 10-year bond yields of those nations, Italy and Greece averaged more than 7.5 percent, a euro-era record.

Germany, which built the euro on the principle of budgetary rigor, unleashed the latest phase of the crisis by demanding a “permanent” system as of 2013 that would enable fiscally troubled countries to restructure their debts and cut the value of bond holdings.

The new proposal, fast-tracked from a debate set for December, would introduce “collective action clauses” for debt sold as of 2013, enabling fiscally hard-hit governments to renegotiate bond contracts. EU governments aim to enshrine it in the bloc’s treaties by mid-2013 and pair it with a new emergency liquidity fund to replace the one expiring then.

For more, click here.

For a chart detailing the aid to Ireland, click here.

For commentary and video, see Interviews section, below.

Compliance Policy

CO2 Exchanges Ready Contracts as EU Weighs Offset Ban

The European Union proposed a ban from the start of 2013 on tradable credits linked to certain industrial gases, prompting exchanges to begin creating new futures contracts to reflect a change in emissions regulation.

The regulatory arm of the 27-nation EU is taking aim against projects that may create “excessive” profits for investors and undermine the market’s integrity. The EU said Nov. 25 it wants to prohibit United Nations credits related to hydrofluorocarbon-23 and some nitrous oxide credits.

More than 11,000 facilities in the EU system, the world’s largest cap-and-trade program, are allowed to use UN credits as a cheaper way to comply with pollution quotas. Regulators around the world are clamping down on HFC-23, whose warming potential is 11,700 times more powerful than carbon dioxide. Officials at the UN carbon market called for a revision of its procedures.

The commission proposed banning the use in the EU system of UN credits linked to HFC-23 and nitrous oxide from adipic acid production from the Clean Development Mechanism, the world’s second-biggest CO2 market, and the Joint Implementation program.

The ICE Futures Europe exchange, the biggest platform for trading emission rights, said it has the right to determine the type of offset credits that can be used to settle Certified Emission Reductions futures contracts. It will make a further statement on the EU proposal by Dec. 11, ICE said in an e-mailed statement on Nov. 25.

The EU regulator’s operational objective is to restrict the use of credits linked to HFC-23 and adipic acid projects from being used within the bloc’s emissions-trading system “as soon as legally possible,” the commission said.

Germany Backs Bank Levy for $93 Billion Bailout Fund

A levy on German banks to set up a 70 billion-euro ($92.7 billion) fund for future bailouts gained final approval in parliament, as lawmakers rejected a bid to exempt savings banks and cooperative lenders.

The measure, passed by the upper house, or Bundesrat, in Berlin Nov. 26, aims to reduce the risk of taxpayers footing the bill for financial crises. German Finance Minister Wolfgang Schaeuble has said banks will probably contribute between 1 billion euros and 1.2 billion euros a year.

Lenders such as Deutsche Bank AG and Commerzbank AG say the bank levy and other post-crisis measures by Chancellor Angela Merkel’s government risk hurting German banks’ international competitiveness. The Association of German Banks, which represents major commercial lenders, called this week for savings banks and cooperative lenders to contribute to the fund.

Germany pressed on with plans for a national bank levy after failing to convince fellow Group of 20 countries at a June summit in Toronto to back a global tax.

The law, which sets a target of 70 billion for the fund, takes effect Dec. 31. It also creates the possibility of steering lenders through future crises with an “orderly” insolvency and the creation of a bad bank. The lower house passed the bill on Oct. 28.

EU Said to Seek Liquidity Exams in Bank Stress Tests

The European Commission is pushing to include tests on bank liquidity in next year’s round of European Union stress tests in the wake of Ireland’s financial turmoil, according to two people familiar with the discussions.

The possible changes follow concerns that the last tests, made public in July, didn’t show that banks could withstand funding crises, said the people, who declined to be identified because the talks are private.

This year’s Europe-wide stress tests focused on the levels of capital banks had to absorb losses and didn’t measure the risks posed by a lack of liquidity. Regulators will gather data for the tests at the start of next year, under the guidance of the European Banking Authority, the European Central Bank and the commission, the 27-nation EU’s executive arm.

During preparations for this year’s EU stress tests, some nations indicated that it would be difficult to compare banks’ liquidity, said one of the people familiar with the discussions.

For more, click here.

Brazil Regulator Tightens Acquisition Requirements

Brazil’s securities regulator tightened regulations for takeovers of listed companies by increasing disclosure requirements and limiting block trades after the tender offer is announced, according to an e-mailed statement.

The new rules will give shareholders more options in deciding whether to accept or reject acquisition proposals, Pinto said. One of the most important changes will be giving shareholders 30 extra days after the deal is announced to decide whether to sell shares to the acquirer at the takeover price, he said. It also gives options to shareholders to accept a deal under certain conditions, according to Marcos Barbosa Pinto, a director at the regulator known as CVM.

Novartis, Teva May Get Sales Boost From New EU Rules (Update2)

Europe’s drug regulator set out guidelines for copying some of the most expensive biotechnology medicines, giving companies such as Novartis AG and Teva Pharmaceutical Industries Ltd. access to a $36.4 billion market.

The European Medicines Agency’s draft regulation, posted on the agency’s website Nov. 26, aims to clarify how drugmakers can copy and sell so-called monoclonal antibodies after they lose patent protection. The document is open to public comments until May 31, the London-based agency said.

Three important monoclonal antibody treatments are slated to lose patent protection by 2015: Roche Holding AG’s Herceptin for cancer, Biogen Idec Inc. and Elan Corp.’s multiple sclerosis drug Tysabri and Remicade for rheumatoid arthritis, sold by Johnson & Johnson and Merck & Co. Together, the medicines had sales of more than $10 billion last year.

The guidelines released Nov. 26 establish the kinds of tests and studies needed to show the copy is similar to the branded drug. Companies will have to submit their products to human trials.

Compliance Action

Ex-Blue Index Directors Charged With Insider Trading

Two former Blue Index Ltd. directors and a trader at the London derivatives broker were charged with insider dealing by the U.K. Financial Services Authority over claims they traded before seven merger announcements.

Blue Index’s co-owners, James Paul Sanders and James Swallow, and senior trader Christopher Hossain, were among five people charged at a London police station, the FSA said in a Nov. 25 statement. Former employee Adam Buck and Sanders’s wife, Miranda Sanders, were also charged in the case. All five were charged with seven counts of insider trading.

Blue Index, founded in 2001, was a privately owned securities and derivates brokerage based in London’s financial district that sold contracts-for-difference.

A contract-for-difference is a financial instrument that allows investors to bet on shares or other securities without owning them. Blue Index was shut down after arrests were made in the investigation in May 2009, the FSA said.

The Sanders “completely deny each and every one of the allegations and have explained at length to the FSA why they make those denials,” said their lawyer, Kevin Robinson at the law firm Irwin Mitchell LLP.

David Corker, a lawyer for Swallow, and Jill Lorimer, Hossain’s attorney, declined to comment.

Katie Wheatley, a lawyer for Buck at Bindmans LLP, said he “looks forward to clearing his name in court.”

Bank of India Reviewing Loan to Firms Named in Probe

Bank of India, a state-run lender, began reviewing loans to companies named by federal investigators in a bribery and improper credit disbursal probe, Chairman and Managing Director Alok Kumar Misra said.

Authorities Nov. 24 arrested Ramachandran R. Nair, chief executive officer of LIC Housing Finance Ltd., Rajesh Sharma, chairman of Mumbai-based securities firm Money Matters Financial Services Ltd. and executives at Bank of India and two other lenders. The Central Bureau of Investigation accused Sharma of conspiring with Nair to bribe state-run lenders’ executives in exchange for loans for clients and confidential information.

Indian federal investigators are investigating 16 billion rupees ($349 million) of loans extended by Life Insurance Corp. of India and LIC Housing Finance, said a finance ministry official who declined to be identified.

R.N. Tayal, a manager at Bank of India, Maninder Singh Johar, a part-time director at Central Bank of India, Venkoba Gujjal, deputy general manager, Punjab National Bank, Sanjay Sharma and Suresh Gattani of Money Matters and Naresh Chopra, secretary investment at Life Insurance Corp. were the others arrested by the CBI.

Bank of India and other state-run banks were asked by Finance Minister Pranab Mukherjee to check their “exposures” to the companies. The probe may slow lending growth at state-run banks, which account for 77 percent of credit in Asia’s second- fastest growing major economy.

For more, click here and here.

FrontPoint Clients Seek $3 Billion Amid Insider Probe

FrontPoint Partners LLC got withdrawal requests from investors of about $3 billion for the end of the year after a manager of its health-care funds allegedly received insider information.

Clients pulled money after a portfolio manager at the firm allegedly received tips about the results of Human Genome Sciences Inc. trials for the drug Albuferon, according to a person briefed on matter. Yves Benhamou, a French doctor and former adviser to Rockville, Maryland-based Human Genome, was charged Nov. 2 by prosecutors in the office of Manhattan U.S. Attorney Preet Bharara with insider trading and conspiracy. He was granted $3 million bail by a New York judge on Nov. 17.

The Greenwich, Connecticut-based firm had $7.5 billion under management at the beginning of November.

FrontPoint said on Nov. 2 it is “cooperating fully” with federal authorities. Chip Skowron, the co-portfolio manager of the firm’s health-care funds who allegedly received the tips from Benhamou, was placed on leave pending the outcome of the probe, FrontPoint said.

The firm and Skowron haven’t been accused of wrongdoing. Steve Bruce, a spokesman for FrontPoint, declined to comment.

Courts

Former PM Group Manager Convicted in FSA Insider Trading Case

A former PM Group Plc manager was convicted of insider trading by a London jury on charges he sold shares of the company before it announced that orders had fallen.

Neil Rollins, 46, was convicted Nov. 26 on five counts of insider dealing and four counts of money laundering in a case filed by the U.K. Financial Services Authority.

Rollins is the sixth person found guilty by a jury of insider trading and the first convicted of money laundering in an FSA case.

“This is a solid victory for the FSA, but it’s not a big fish, like a FTSE 100 chief executive,” said Ian Mason, a partner at Baker & McKenzie LLP in London.

The FSA, which has targeted insider trading after winning its first conviction in 2008, will keep its enforcement unit after it is restructured into two new regulators by 2012. The U.K. Treasury reversed plans for an economic crime agency to prosecute insider trading and market abuse, allowing it to be handled by the industry-funded regulator instead.

Interviews

Politicians, Economists, Others Comment on Irish Bailout

Leaders from the worlds of finance, politics and labor including Michael Noonan, finance spokesman for Irish opposition party Fine Gael, Gerry Adams, leader of Sinn Fein, Jack O’Connor, head of Irish union SIPTU, and economists Julian Callow and Alan McQuaid, commented about Ireland’s 85 billion- euro ($113 billion) emergency-aid package from the European Union and the International Monetary Fund. The three-year package, aimed at propping up the country’s battered banking industry and to help service its sovereign debts, will require Ireland to repay the money at an average interest rate of 5.8 percent.

To read the comments, click here.

Fine Gael’s Hayes Says Irish Pensions Must Be Protected

Brian Hayes, a spokesman for Ireland’s Fine Gael opposition party, talks about the bailout of the country’s banks and prospects for preserving the nation’s pension fund.

He speaks with Andrea Catherwood on Bloomberg Television’s “The Pulse.”

For the video, click here.

To contact the reporter on this story: Michael Bathon in Wilmington, Delaware, at mbathon@bloomberg.net.

To contact the editor responsible for this report: David E. Rovella at drovella@bloomberg.net.

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.