A former compliance officer at hedge fund Peconic Partners LLC lost his bid to revive a lawsuit claiming he was fired after confronting his boss about stock trades.
The New York Court of Appeals, the state’s highest court, rejected Joseph Sullivan’s appeal of a lower-court decision dismissing the suit, according to a filing in Manhattan yesterday. State common law generally doesn’t intrude on relationships between employers and employees, the judges said.
Five of seven judges voted to affirm the earlier ruling.
Sullivan said in the complaint that he was fired days after confronting Peconic’s chief executive officer, William Harnisch, over sales of Potash Corp. stock in 2008 in Harnisch’s personal account and those of family members. Sullivan accused Harnisch of “front-running,” or selling securities in anticipation of sales by clients.
Y. David Scharf, Harnisch’s lawyer, said in a statement that Sullivan’s claims were “entirely baseless.”
In a dissenting opinion, Chief Judge Jonathan Lippman said the “majority’s conclusion that an investment adviser like defendant Peconic has every right to fire its compliance officer, simply for doing his job, flies in the face of what we have learned from the Madoff debacle.”
Felber said he would try to encourage New York state legislators to change the law.
The lower-court case is Sullivan v. Harnisch, 08-115092, New York Supreme Court (Manhattan).
EU High-Frequency Trade Curbs May Hurt Markets, Industry Warns
High-frequency traders said that plans by European Union lawmakers to interfere with their strategies and restrict the speed of transactions would raise investor costs and harm financial stability.
FIA European Principal Traders Association, a group that represents high-frequency traders, criticized the plans in an e-mailed statement yesterday.
The European Parliament is seeking to bolster last year’s proposals by Michel Barnier, the EU’s financial services chief, to revamp the region’s market legislation, known as Mifid. The draft rules were proposed by Barnier to plug regulatory gaps exposed by the financial crisis that followed Lehman Brothers Holdings Inc.’s 2008 collapse.
A bid by the assembly to force traders to keep orders in the market for at least half a second before canceling them, and to set EU limits on how many orders a firm may cancel compared to those it completes, would lead to “higher transaction costs for end users” and increase the chance of “extreme price swings,” the FIA said.
Markus Ferber, the lawmaker leading work on the rules in the parliament, has backed calls for traders to face additional fees if they exceed a pre-determined limit for excessive numbers of canceled orders. Arlene McCarthy, a legislator responsible for a related draft law against market abuse, has called for the pre-fee limit to be set at 250 cancellations to one completed order.
Ferber has said that the measures would help to prevent a repeat of the flash crash that rocked markets in May 2010, and curb market volatility.
European Union Regulators to Speed Up Reviews of State Subsidies
European Union regulators said they will speed up reviews of government subsidies to companies as part of an overhaul of state aid rules.
The new rules, which may be implemented next year, should “focus more on cases with the biggest impact” on trade between the 27 countries of the bloc, the EU said in a statement yesterday.
U.S. Millionaires Shunned by Bankers as Tax-Evasion Law Looms
Some of the world’s largest wealth-management firms are turning away business from Americans as Washington readies to phase in a new tax law regarding offshore accounts.
The Foreign Account Tax Compliance Act, known as Fatca, was enacted in 2010 law, and will be phased in starting Jan. 1. The law seeks to prevent tax evasion by Americans with offshore accounts. HSBC Holdings Plc, Deutsche Bank AG, Bank of Singapore Ltd. and DBS Group Holdings Ltd. (DBS) all say they have turned away business.
Financial institutions based outside the U.S. will be required under the new law to obtain and report information about income and interest payments accrued to the accounts of American clients. It means additional compliance costs for banks and fewer investment options and advisers for all U.S. citizens living abroad, which could affect their ability to generate returns.
The almost 400 pages of proposed rules issued by the U.S. Internal Revenue Service in February create “unnecessary burdens and costs,” the Institute of International Bankers and the European Banking Federation said in an April 30 letter to the IRS, one of more than 200 submitted to the agency. The IRS plans to hold a hearing May 15 and could amend how and when some aspects of the rules are implemented. It can’t rescind the law.
The government needs to be tougher on offshore tax crimes than it has been, said U.S. Representative Richard Neal, a Massachusetts Democrat and one of the original sponsors of the legislation.
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Vietnam to Loosen Rules on Stock-Holding Period, Thoi Bao Says
The Vietnam State Securities Commission will, beginning Sept. 4, reduce to two days from three the minimum period buyers must hold shares after purchase, Thoi Bao Kinh Te Vietnam newspaper reported, citing Nguyen Son, head of market development at the commission.
German Energy Agency Would Violate EU Rules, Trader Group Says
Germany’s plan to establish a national agency for power-and gas-market transparency is unnecessary and would violate European Union rules, the European Federation of Energy Traders said.
The proposals would violate the terms of the EU’s Regulation on Energy Market Integrity by duplicating European efforts nationally, EFET said yesterday in an e-mailed statement.
The EU’s rules to limit market abuse in power and gas markets require companies to register with national regulators and report trades to the European Agency for the Cooperation of Energy Regulators in Ljubljana, Slovenia, known as ACER. The regulation came into force on Dec. 28 and further details of how it should be implemented are planned for mid-2012.
The German law would establish a Market Transparency Agency as a department of the Federal Cartel Office to monitor wholesale gas and electricity trading. EFET says the agency wouldn’t lead to lower energy prices, as the government expects.
Financial Firms Push Agencies for Swap Rules to Spur Competition
Bank of New York Mellon Corp., Citadel LLC and Getco LLC are pushing U.S. regulators to impose Dodd-Frank Act swap-clearing requirements before next year to help boost competition in the $708 trillion global swaps market.
The Clearing Coalition, a group of 13 firms including proprietary traders, asset managers and hedge funds, urged the Securities and Exchange Commission and Commodity Futures Trading Commission yesterday to move promptly to complete the rules, warning that delay will leave markets vulnerable, damage U.S. competitiveness and stunt prospects for economic growth.
Dodd-Frank, the regulatory overhaul enacted in response to the 2008 credit crisis, calls for the SEC and CFTC to complete rules that will have most swaps guaranteed by clearinghouses that stand between buyers and sellers.
Wall Street banks currently dominate dealing of swaps and other derivatives. JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC), Citigroup Inc., Morgan Stanley and Goldman Sachs Group Inc. (GS) controlled 95 percent of cash and derivatives trading for U.S. bank holding companies as of Dec. 31, according to the Office of the Comptroller of the Currency.
The CFTC is preparing to complete the last of a series of rules governing the process, and Gary Gensler, the agency’s chairman, has said he wants clearing to start before year-end.
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‘Leprechaun’ Producer Agrees to Settle SEC Insider-Trading Case
A Hollywood movie producer and five others will pay almost $2 million to settle U.S. regulatory claims that they profited by trading shares of a company using inside information he obtained while serving as a board member.
Mohammed Mark Amin, his brother, cousin and three other friends and business partners made more than $618,000 on shares of DuPont Fabros Technology Inc. (DFT) after he learned that the firm was negotiating loans related to expanding business, the U.S. Securities and Exchange Commission said yesterday in a statement.
Amin, who is credited as a producer for more than 75 Hollywood films including “Frida,” “Eve’s Bayou” and four “Leprechaun” movies, learned of the loans while serving on the DuPont Fabros board in 2008, the SEC said.
“Mark Amin disregarded his board responsibilities and betrayed shareholders at DuPont Fabros in favor of giving his circle of relatives and friends an inside scoop,” John McCoy, associate director of the SEC’s Los Angeles office, said in a statement.
A telephone call to Carl Moor, an attorney for Amin, wasn’t immediately returned.
Austria Wants to Rule on Hutchison-Orange Accord Instead of EU
Austria’s competition authority will ask to investigate the merger of Hutchison Whampoa Ltd. (13)’s domestic unit with Orange Austria.
The watchdog will ask the European Commission, which has authority over the merger, to transfer the case, Veronika Haubner, a spokeswoman for the regulator, said by phone from Vienna yesterday. The planned merger “only affects Austria,” Haubner said.
Hutchison, the telecommunications company owned by Hong Kong billionaire Li Ka-shing, yesterday submitted the deal to European Union regulatory authorities and said it planned to submit a separate request to the Austrian watchdog “in a few weeks.”
The EU yesterday set an initial June 15 deadline to rule on the deal. It can extend that deadline by 10 working days if the Austrian regulator asks to take over the deal.
The Austrian watchdog and the European Commission created a working group on the merger after it was announced in February and have met repeatedly to “be on the same page,” Haubner said. A next meeting is scheduled for this week, she said.
Deutsche Telekom Gets EU Antitrust Complaint on Slovak Unit
Deutsche Telekom AG (DTE) and its unit Slovak Telekom AS were sent an antitrust complaint by European Union regulators over claims that the subsidiary abused its market power to thwart broadband competitors.
Slovak Telekom may have refused to give rivals access to its Internet networks and may have charged “unfair wholesale prices,” preventing competitors from providing retail broadband services at a profit, the European Commission said in an e-mailed statement yesterday.
The commission, the EU’s antitrust authority, said in the statement that Deutsche Telekom, which owns 51 percent of the Slovakian operator, “may be held liable for the conduct because of the nature and degree of its links with its subsidiary,” the commission said.
“Slovak Telekom strongly disagrees with the commission’s preliminary findings” and is “confident it will prove that it will prove that it did not infringe” antitrust rules, said Martin Vidan, a spokesman for the Bratislava, Slovakia-based operator. Its access conditions are “fair and non-discriminatory,” the company said.
The companies have three months to reply to the EU’s complaint and may seek an oral hearing to defend themselves. Companies can appeal decisions at the EU courts in Luxembourg.
“We see no basis for holding Deutsche Telekom liable for the alleged contravention of antitrust law by Slovak Telekom,” said Sylvia Braunle, a spokeswoman for the German company.
Wells Fargo Says DOJ May Seek Penalties in Fair-Lending Case
Wells Fargo & Co. (WFC), the largest U.S. mortgage lender, said federal prosecutors may seek damages and penalties after investigating whether it violated anti-discrimination laws while financing homeowners.
“The Department of Justice has advised Wells Fargo that it believes it can bring claims,” the bank said yesterday in a regulatory filing, without elaborating on potential allegations. “We believe such claims should not be brought and continue seeking to demonstrate to the Department of Justice our compliance with fair-lending laws.”
Wells Fargo has faced government scrutiny of lending and foreclosures in the wake of the housing crisis as it expands a record 34 percent share of the U.S. mortgage market. The firm was negotiating with the Justice Department last year to resolve a probe into whether it directed blacks to subprime loans, a person familiar with the matter said in July. It also faces a U.S. review of whether it neglected bank-owned homes in minority neighborhoods, a person briefed on the case said in April.
Mary Eshet, a spokeswoman for the San Francisco-based company, declined to comment beyond yesterday’s filing. Xochitl Hinojosa, a Justice Department spokeswoman, declined to comment.
The firm settled Federal Reserve claims in July that it steered reliable borrowers into subprime loans and falsified information in mortgage documents.
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BayernLB Deal State-Aid Probe Nearing Conclusion, EU Says
European Union regulators are “at the end” of their investigation into Bayerische Landesbank’s bailout from German authorities, EU Competition Commissioner Joaquin Almunia said in Brussels yesterday.
Almunia said he couldn’t anticipate when he would formally approve aid for the bank.
Ecuador Banks’ $1 Billion Fire Sale Cuts Value as Deadline Looms
Ecuador’s push for banks to sell non-core businesses is creating a $1 billion asset glut as the nation’s biggest financial firms struggle to find buyers before a July deadline.
Banco de la Produccion SA, the country’s third-largest lender with a market value of $185 million, is trying to shed insurance and brokerage assets and will shut its investment business, Chief Executive Officer Abelardo Pachano said. Banco del Pichincha CA, the country’s largest publicly-traded bank valued at $670 million, must sell or close its insurance, brokerage and investment units.
Ecuador’s biggest banks are trading at a discount of more than 50 percent to peers in Colombia and Peru partly because of the drive begun last year by President Rafael Correa, an ally of Venezuela’s Hugo Chavez, to ban banks from operating or holding stakes in other companies. Now, lenders are watching the value of their units erode as rivals vie to complete the sales by the government’s July 12 deadline.
Correa said last year the new rules would prevent unfair lending practices that favor affiliated companies at the expense of rivals.
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ING’s Court Victory on Bailout Terms to Be Challenged by EU
ING Groep NV (INGA)’s court victory over the terms of its state bailout will be challenged by European Union regulators who set the original conditions of the Dutch lender’s rescue.
ING won a case at the EU’s General Court in March that required regulators to re-examine the strings attached to the bank’s rescue by the Dutch government in the wake of the 2008 financial crisis. The court said the commission wrongly considered a revision of repayment terms as 2 billion euros ($2.6 billion) of additional aid to ING on top of 10 billion euros it received in 2008.
Antoine Colombani, a spokesman for the European Commission, said in an e-mail that the commission will appeal the ruling. The commission’s appeal doesn’t remove the court’s requirement for regulators to take a new decision on ING’s restructuring, said Raymond Vermeulen, a spokesman for the lender in Amsterdam.
“ING has begun discussions with the Dutch state and together we will have discussions with the European Commission,” Vermeulen said in a telephone interview.
The EU’s plans to appeal the ruling were reported earlier by Het Financieele Dagblad.
U.K. Court Orders Inside Trader Sidhu to Repay $923,000 Profits
A U.K. court ordered Rupinder Sidhu, a convicted insider trader, to pay 572,000 pounds ($923,000) to the U.K. Financial Services Authority or face an additional five years in prison.
Sidhu, a management consultant, was sentenced to two years in prison in December. He must pay back the profit he made trading on inside information, within 28 days, the FSA said in a statement on its website yesterday.
Sidhu was found guilty Dec. 15 of insider trading by a London court, according to the Financial Services Authority, which was prosecuting the case.
Merrill Lynch $315 Million Settlement Approved by U.S. Judge
Bank of America Corp. won final approval in an order made public yesterday of a $315 million settlement with investors who sued its Merrill Lynch unit claiming they were misled about mortgage-backed securities and lost money on their investments.
Merrill Lynch entered into the settlement in December with a class of investors led by the Public Employees’ Retirement System of Mississippi.
Holders of the asset-backed certificates sued Merrill Lynch starting in December 2008 for alleged “false and misleading” prospectus statements related to the securities. The investors claimed Merrill made false statements about the qualifications of mortgage-loan borrowers, property appraisals and debt-to-income ratios of applicants.
Merrill Lynch, bought by Bank of America in 2009, attributed the investors’ losses in court papers to the economic downturn, housing-price declines and reduced liquidity.
U.S. District Judge Jed Rakoff approved the settlement after holding a fairness hearing in March.
The lead case is Public Employees’ Retirement System of Mississippi v. Merrill Lynch & Co., 08-CV-10841, U.S. District Court, Southern District of New York (Manhattan).
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