U.S. Markets Open, Libor, Insider Trading, BofA: Compliance
U.S. stock, bond and commodity markets will open as usual today after Manhattan was spared the worst of Hurricane Irene, avoiding the first shutdown due to weather since 1985.
NYSE Euronext, Nasdaq OMX Group, Bats Global Markets and Direct Edge Holdings LLC -- the largest operators of equity exchanges in the world’s biggest capital market -- sent statements saying they plan normal trading sessions today. The Securities Industry and Financial Markets Association recommended no change to bond-market schedules, and CME Group Inc. said the New York Mercantile Exchange will open.
While the public face of U.S. equity trading is the New York Stock Exchange in Manhattan, about 13 percent of the nation’s volume took place on that venue in the past year. Almost all of the rest is handled electronically, with orders matched in data centers in New Jersey and elsewhere.
Irene struck New York City with winds of 65 miles (105 kilometers) an hour, the National Hurricane Center said in a special advisory at 9 a.m. local time. A storm surge of 3.8 feet was reported at New York Harbor and total water levels of almost 8.6 feet, or moderate-stage flooding, were reported at Battery Park City in lower Manhattan before receding, the hurricane center said.
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RBS Received Requests From EU, U.S. Regulators on Libor Rates
Royal Bank of Scotland Group Plc (RBS), Britain’s biggest government-owned lender, received requests for documents from U.S. and European Union regulators investigating whether the London Interbank Offered Rate was manipulated.
The European Commission, the U.S. Commodity Futures Trading Commission and Department of Justice sought “documents and communications related to the process and procedures for setting Libor,” Edinburgh-based RBS said in a regulatory filing Aug. 26.
Regulators in the U.S., EU, U.K. and Japan are examining a possible breach of rules governing Libor, the rate of interest at which banks borrow funds from each other in the London market. Barclays Plc (BARC) and HSBC Holdings Plc (HSBA) have said they received requests for information in the probes. UBS AG (UBSN), Switzerland’s biggest bank, said last month it was granted conditional immunity from some agencies, including the Department of Justice.
“RBS Group is cooperating with these investigations and is keeping relevant regulators informed,” the bank said. “It is not possible to estimate with any certainty what effect these investigations and any related developments may have on RBS.”
Several class-action, or group, lawsuits have been filed in the U.S., alleging banks manipulated the rate and prices of U.S. dollar Libor-based derivatives, UBS said in July.
Libor rates, a benchmark for more than $350 trillion of financial products worldwide, are based on data from banks reflecting how much it would cost them to borrow from each other for various periods of time in currencies including dollars, euros and yen. The rates are compiled daily by Thomson Reuters Corp. for the British Bankers’ Association.
Trading Firm Fails to Block FSA Market Abuse Fine Report
The president of defunct trading firm Swift Trade Inc. failed in a bid to stop the U.K. Financial Services Authority from publishing details of an 8 million-pound ($13 million) market abuse fine.
Judge Wyn Williams refused to block the U.K. financial watchdog from releasing a decision notice about the May 2011 fine, saying it was already public knowledge.
The Toronto-based company, which was dissolved in December, was fined for engaging in “layering” in which multiple buy orders for shares are submitted and withdrawn to manipulate the price of a security, according to the judge.
“It is in the public domain that they were thought to be engaged in the practice of layering, and that was thought to be market abuse,” said Williams Aug. 26. “It is not appropriate to grant the injunction.”
The FSA can now release a detailed report on the fine, which it had planned to do at the end of August, when an earlier injunction won by Swift Trade expired.
Chris Hamilton, an FSA spokesman, declined to comment.
Peter Beck, who was president of Toronto-based Swift Trade until its collapse, argued an FSA announcement would reduce the value of his shares, damage his reputation and breach his human rights, said Philip Engelman, Beck’s lawyer.
Swift Trade and Beck, who was not present at court, were also found to have breached securities laws by the Ontario Securities Commission, providing software and an electronic trading system for around 4,500 unregistered traders in 2008, according to a March report. The firm failed to establish proper controls and supervision, adequately monitor its clients’ trading, and produce accurate trading records, the OSC said.
Ex-Marvell Technology Accountant Ng Released on $50,000 Bond
Former Marvell Technology Group Ltd. (MRVL) accountant Stanley Ng, charged in a nationwide crackdown on insider trading, made an initial court appearance in New York on Aug. 26 and was released on a $50,000 bond.
Ng, 42, didn’t enter a plea Friday at his first federal court appearance in Manhattan. U.S. Magistrate Judge James Francis agreed to release Ng on a bond secured by one financially responsible person and his California home and ordered him to surrender his passport. Both Ng and his lawyer, Silvia Serpe, declined to comment after court.
He was arrested Aug. 10 for allegedly leaking material non- public information to Winifred Jiau, a former consultant with expert-networking firm Primary Global Research LLC. He’s charged with one count of conspiracy to commit securities and wire fraud and faces as long as five years in prison if convicted.
Jiau, 43, was convicted in June of one count each of conspiracy and securities fraud after being caught in Manhattan U.S. Attorney Preet Bharara’s probe of insider trading involving so-called expert networking firms and hedge-fund managers.
The case is U.S. v. Ng, 11-02096, U.S. District Court, Southern District of New York (Manhattan).
FCC Restarts 180-Day Clock on Review of AT&T Bid for T-Mobile
The Federal Communications Commission on Aug. 26 restarted its informal clock for reviewing AT&T Inc. (T)’s proposed purchase of T-Mobile USA Inc. after receiving new evidence from AT&T about the deal’s public benefits.
The FCC’s 180-day timeline for examining the $39 billion transaction was halted on July 20 after AT&T announced that it intended to submit new economic models of the deal’s impact on consumers and competition. AT&T submitted the new data July 25.
The review clock resumed on Friday, after agency officials and third parties had the chance to examine AT&T’s new assessments, Rick Kaplan, chief of the FCC’s wireless bureau, wrote in a letter to lawyers representing AT&T. The letter was posted Friday on the FCC’s website.
“The engineering and economic models we have provided the Commission confirm the extensive capacity gains and corresponding consumer benefits that the combination of AT&T’s and T-Mobile’s complementary assets will produce,” Bob Quinn, senior vice president of AT&T’s federal regulatory division, said in an e-mail.
If completed, the merger proposed March 20 would combine the second- and fourth-largest carriers to create a new market leader, ahead of current No. 1 Verizon Wireless. The FCC and the Justice Department are vetting the deal in a review that AT&T officials estimate will last until early 2012.
Sprint Nextel Corp. (S), the nation’s third-largest wireless provider, urged U.S. regulators during an Aug. 16 meeting to ignore AT&T’s new filings. Sprint opposes the merger, saying it would damage competition.
The FCC has no further comment beyond its letter, Neil Grace, a spokesman for the commission, said in an interview.
IRS Extends Offshore Disclosure Deadline to Sept. 9, Cites Storm
The Internal Revenue Service extended the deadline for U.S. taxpayers to declare their offshore accounts until Sept. 9, citing the potential impact of Hurricane Irene, the agency announced on Aug. 26.
The deadline was Aug. 31.
Romania’s Right to Trade Carbon Emission Surplus Was Suspended
Romania’s right to trade its surplus of carbon emission certificates was suspended by the Kyoto Protocol Committee after the country broke the reporting rules on emissions, the Environment Ministry said in an e-mailed statement.
Romania is working on preparing a new reporting system on carbon emissions and plans to solve the problems in the “shortest period of time,” so it can be able to ask for a restarting of the trading, according to the statement, which was released yesterday in Bucharest.
Impala Says Zimbabwe Law Blocks $10 Billion Investment
Impala Platinum Holdings Ltd. (IMP), the world’s second-largest producer of the metal, may invest as much as $10 billion in Zimbabwe to expand production if the government backs down on a demand that its business there be controlled by black citizens of the country.
Zimbabwe, which has the world’s largest platinum reserves after South Africa, passed a law earlier this year to force foreign companies to cede at least 51 percent of their local assets to black Zimbabweans. Anglo American Platinum Ltd., the world’s largest platinum producer, and Aquarius Platinum Ltd. (AQP), also mine the metal in the southern African country.
“It would run into the billions of dollars, probably between $5 and $10 billion,” Chief Executive Officer David Brown said in an interview in Johannesburg Aug. 25, where the company is based. “Fifty-one percent equity just does not work.”
Impala first invested in Zimbabwe in 2001 when it bought 30 percent of Zimbabwe Platinum Mines Ltd. for the equivalent of $47 million and later took control of the company. It is now the biggest investor in Zimbabwean mining, with the country in the third year of recovery from a decade-long recession sparked by the seizure of white-owned commercial farms for redistribution to black subsistence farmers.
The unit, now known as Zimplats Holdings Ltd. (ZIM), produced 182,100 ounces of platinum in the year to June 30 and is in the midst of a $460 million expansion of its Ngezi mine, southwest of the capital Harare to boost output to 270,000 ounces in 2014, according to a company statement.
“It’s a huge disappointment that we find ourselves in this position - we’ve been a model investor in this country,” Brown said in the interview. Impala believes “an appropriate level of ownership will be the final result” of talks with the government, Brown told investors. The ownership rule could “retard” investment in mining and other industries at a time when it’s needed, he said.
Mines Minister Obert Mpofu said he could not comment yet because he had not heard about the possible investment, when Bloomberg News reached him by phone in Harare. Calls to Indigenization Minister Saviour Kasukuwere’s office in the city weren’t answered.
China Widens Reserve Ratio to Limit Inflation, Analysts Say
China broadened the base of reserves it requires commercial lenders to deposit with the central bank to control liquidity and limit inflation, economists said.
Reserve requirements are being extended to customers’ margin deposits, a move that may drain 900 billion yuan ($140 billion) from the banking system over six months, Bank of America Merrill Lynch economist Lu Ting said in an e-mailed note on Aug. 26. Mizuho Securities Asia Ltd. cited similar information. A central bank press official declined to comment.
China has already raised reserve ratios to a record 21.5 percent for the biggest banks to counter the fastest inflation since 2008. London-based Capital Economics Ltd. said that the reported move may mean no further increases this year, after previously anticipating another 1 percentage point gain by the end of December.
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Investors Seek to Move Venue of BofA Mortgage-Bond Accord
An investor group challenging Bank of America Corp. (BAC)’s proposed $8.5 billion mortgage-bond settlement is seeking to move the case to federal court from state court.
Walnut Place LLC and related entities that would be bound by the proposed deal filed a notice of removal of the case to U.S. District Court in Manhattan. The case was first filed in state court, where a judge is scheduled to consider approving the agreement in November.
A change in venue that extends how long the case takes may mean a longer period of concern among Bank of America shareholders about whether the settlement’s costs will increase. It may also give bondholders seeking a large payout more time to organize their efforts and strengthen their objections, according to Bill Frey, head of investment and brokerage firm Greenwich Financial Services LLC in Greenwich, Connecticut, who advises mortgage-securities investors.
Under the proposed settlement, Bank of America would pay $8.5 billion to resolve claims from investors in Countrywide Financial mortgage bonds. It was negotiated with a group of institutional investors and would apply to investors outside that group.
Bank of New York Mellon Corp., the trustee for the mortgage-securitization trusts covered by the settlement, will seek to move the case back to state court, Kevin Heine, a bank spokesman said.
“This tactical maneuvering at the deadline for objections has no impact on the underlying merits of the agreement,” Bank of America spokesman Lawrence Grayson said in an e-mailed statement.
David Grais, a lawyer for Walnut Place, couldn’t immediately be reached for comment.
The case is In the matter of the application of The Bank of New York Mellon, 651786/2011, New York state Supreme Court, New York County (Manhattan).
Morgan Stanley (MS) Must Face Claims Over Mortgages, Court Says
Morgan Stanley must face a mortgage-servicing company’s claims that it violated an agreement to repurchase faulty home loans, a court ruled.
Central Mortgage Co. can move forward with a lawsuit accusing New York-based Morgan Stanley of reneging on a contract requiring the securities firm to repurchase mortgages that hadn’t been properly screened before being sold to Fannie Mae and Freddie Mac, the Delaware Supreme Court concluded. The ruling reversed a lower-court judge’s decision to throw out the suit.
Central Mortgage’s allegations that a Morgan Stanley unit didn’t live up to its agreement satisfied “the minimal standards required at this early stage of the litigation,” Chief Justice Myron Steele said Aug. 18 in a 21-page decision.
The decision is part of a round of litigation among lenders, mortgage servicers and investors over the handling of flawed home loans that have contributed to the decline in the U.S. real estate market over the past three years.
Bank of America Corp., the biggest U.S. bank, has offered to pay $8.5 billion to settle bondholders’ claims over soured mortgages overseen by the lender. Some state attorneys general have objected to the accord, saying it doesn’t provide enough for investors.
Sandra Hernandez, a Morgan Stanley spokeswoman, couldn’t immediately comment on the court decision on Friday.
The case is Central Mortgage Co. v. Morgan Stanley Mortgage Capital Holdings LLC, 595-2010, Delaware Supreme Court (Dover).
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Court Affirms Dismissal of Interpharm’s Wells Fargo Lawsuit
A federal appeals court in New York affirmed the dismissal of a lawsuit against Wells Fargo & Co. (WFC) by the former generic- drugmaker Interpharm Inc. over claims the bank used restrictive credit agreements and exorbitant fees to force the company into an unprofitable sale.
Interpharm, which sold most of its assets in June 2008, sued Wells Fargo in December 2008, saying it lost about $40 million of value when the San Francisco-based company reduced its credit limit based on allegedly erroneous income projections.
The U.S. Court of Appeals in New York, in an opinion dated Aug. 26, affirmed U.S. District Judge Richard J. Holwell’s decision to dismiss the case in May, saying that Wells Fargo wasn’t obligated to extend any further credit to Interpharm after the drugmaker defaulted on a credit agreement.
“To the extent it agreed to do so in a series of forbearance agreements imposing stricter conditions and costs on Interpharm, these demands by a lender otherwise under no obligation to continue extending credit cannot constitute the ‘wrongful threat’ required to establish economic duress under New York law,” Circuit Judge Reena Raggi said in the opinion. “Nor can a wrongful threat be based on Wells Fargo’s exercise of discretion specifically conferred by the Credit Agreement.”
The case is Interpharm Inc. v. Wells Fargo Bank NA, 08- cv-11365, U.S. District Court, Southern District of New York (Manhattan). The appeal is Interpharm Inc. v. Wells Fargo Bank NA, 10-1801-cv, U.S. Court of Appeals for the Second Circuit (New York).
Comings and Goings
Russia Central Banker Melikyan to Step Down Sept. 9, RIA Says
Georgy Melikyan, a central bank first deputy chairman responsible for banking oversight, has had his request to step down accepted and will leave his post on Sept. 9, RIA-Novosti reported, citing a source it didn’t identify at the regulator.
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