U.K. Fee Rules, ‘Betting’ Fund, Iberdrola: Compliance
U.K. financial advisers won’t be able to charge commissions on some products under new rules designed to make the fees paid by consumers more transparent.
Under the Financial Services Authority’s Retail Distribution Review, set to take effect Dec. 31, advisers will charge clients hourly fees for counsel on investments and be subject to tougher standards for training and accreditation.
The FSA said the new rules will reduce mis-selling and build consumer confidence after faith in the industry was shaken by a number of scandals linked to improper sales of some products. U.K. banks are repaying billions of pounds to customers who were wrongly sold payment-protection insurance.
Financial advisers will have to clearly describe their services as independent or restricted, the FSA said.
Independent advisers will be able to consider all types of retail investment products which could meet the customer’s needs and consider items from all firms across the market. A restricted adviser will only be able to recommend certain products, providers, or both, meaning they might only offer items from one company, or just one type of product.
CFPB Boosts Mortgage-Disclosure Asset Threshold to $42 Million
The U.S. Consumer Financial Protection Bureau issued a final rule increasing the asset-size exemption threshold to $42 million for lenders under the Home Mortgage Disclosure Act.
The change means banks, savings associations and credit unions with assets below that limit will be exempt from collecting, reporting and disclosing a broad range of loan data next year, the bureau said in a statement.
China to Loosen Control on M&A, Reorganization, Journal Says
China will relax control over mergers and acquisitions as well as company reorganizations, the China Securities Journal reported, citing Zhuang Xinyi, vice chairman of the China Securities Regulatory Commission.
The Commission will also cancel and reduce approval procedures in order to help increase efficiency in reviewing mergers, acquisitions and reorganizations, according to the China Securities Journal report.
Turkey’s New Capital Markets Law Merges Equity, Gold Exchanges
Turkey’s state-run Anatolia news agency reported details of a new capital markets law, which merges bourses under the Istanbul Stock Exchange and sets out new regulations.
Among the regulatory developments, Borsa Istanbul AS is to be incorporated and replace Istanbul Stock Exchange and Istanbul Gold Exchange. The government will appoint Vahdettin Ertas as the new chairman of the Capital Markets Board to assume the post from Vedat Akgiray. After the registry of Borsa Istanbul’s charter, ISE and Istanbul Gold Exchange will cease to exist as legal entities.
Forty-nine percent of Borsa Istanbul is to be owned by the Treasury, while 51 percent will be registered under its own name, with 4 percent of capital given to current ISE members, 0.3 percent to Istanbul Gold Exchange members and 1 percent to the Capital Markets Association of Turkey.
The new law stipulates that those who provide misleading, false or wrong information, news stories, rumor, commentary or reports to influence prices, values or investor decisions, or those who publish such information, will be punished by between two to five years of imprisonment.
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SEC Approves U.S. Commodity Fund Betting on Demand From Asia
United States Commodity Funds LLC, manager of $3.4 billion in exchange-traded securities, got approval from the U.S. Securities & Exchange Commission to start a fund that will bet on Asia’s demand for raw materials.
The United States Asian Commodities Basket Fund will be listed on NYSE Arca Inc. and own futures in those commodities where China, Japan and India combined account for at least 10 percent of global demand and are likely to be net importers, the SEC said in a notice on its website.
Oil will have the biggest weight in the fund, at 22 percent, according to the filing. China, Japan and India account for 19 percent of global oil demand and 5.9 percent of production, it said. Corn, soybeans, wheat and copper will each account for 10 percent.
Commodity assets under management were $429 billion in October, with exchange-traded products accounting for $213 billion, Barclays Plc said in a Nov. 30 report. ETPs backed by precious metals had $172 billion in assets, while those tracking broad-based indexes had $29 billion, the bank said.
Brent crude oil will have a 20 percent weighting in the fund, according to the filing. Oil on the Dubai Mercantile Exchange will also be used, it said.
Corn, soybeans and wheat futures traded on the Chicago Board of Trade will each account 10 percent of the fund, according to the notice. Copper traded on the Comex in New York will have 10 percent weighting, while gold and silver futures will account for 5 percent each.
The fund will also invest in the London Metal Exchange zinc and nickel contracts, raw sugar traded on ICE Futures U.S., platinum traded on Tokyo Commodity Exchange as well as canola oil, palm oil, gasoil and rubber.
NYSE Arca is the electronic platform of NYSE Euronext. (NYX)
Spain’s Iberdrola, Bolivia to Meet on Seizure of Businesses
Iberdrola SA (IBE) executives and Bolivian officials are likely to meet soon to discuss compensation for Spain’s largest utility after the nationalization of its Bolivian operations, Energy Minister Juan Jose Sosa said.
Bolivian army and police seized buildings occupied by Iberdrola on Dec. 29, hours after President Evo Morales ordered the nationalization of four business units owned by the company. The South American nation may hold talks next week with Iberdrola in Bolivia’s capital of La Paz, Sosa said.
Morales has moved to put the telecommunications, energy and water industries under state control since taking power in 2006. In June, the government nationalized the Colquiri tin and zinc mine owned by Glencore International Plc. (GLEN)
As in past takeovers, Bolivian authorities seized several buildings from the Iberdrola units in La Paz, Argentine CN23 TV showed. Employees didn’t oppose their entrance.
The takeover came seven months after Bolivia expropriated assets of Spain’s Red Electrica Corp. (REE), which is still in the process of being compensated by the government, and follows a series of Spanish company takeovers by Latin American governments.
Iberdrola was notified by Bolivia that the government has nationalized its electricity holdings in the South American country, according to spokesman Jose Luis Gonzalez Besada. The units include two electricity distributors, a service company and an investment firm tied to the power business, said a Bolivian government official in a telephone interview from La Paz. He asked not to be identified as he isn’t an authorized spokesman.
Iberdrola should receive compensation after an independent review of its assets within the next six months, Morales said in a television broadcast.
At least 15 companies have been nationalized in Bolivia since 2006.
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Sharma Signals India to Approve Ikea as Nation Seeks Investment
India is poised to approve furniture retailer Ikea’s application to open stores as the nation seeks to lure more investment, Commerce Minister Anand Sharma said.
Ikea’s proposal to invest as much as 42 billion rupees ($773 million) in outlets selling items ranging from sofas and cutlery to hot dogs is awaiting a fresh approval from officials. Prime Minister Manmohan Singh’s government in January 2012 allowed full foreign ownership of stores selling a single brand.
Ikea spokeswoman Ylva Magnusson said by telephone today that the company expects to hear about the application by Jan. 7 and declined to comment further.
India’s ruling coalition in September permitted overseas retailers such as Wal-Mart Stores Inc. to set up multibrand supermarkets, part of a package of policy changes to spur growth. That step cost Singh his majority in parliament after some lawmakers said family-run stores will have to close.
Sharma said retail liberalization is now “cast in stone.”
India’s Foreign Investment Promotion Board first approved Ikea’s application on Dec. 21, and it is being reconsidered.
The administration opened other industries, such as aviation, to overseas investors in September, as well as curbing fuel subsidies to pare a budget deficit that has increased the odds of a credit-rating downgrade to so-called junk status.
Foreign direct investment into India fell 42 percent to $14.8 billion in the seven months through October compared with a year earlier.
Portugal to Inject $1.5 Billion Into Banif
Portugal’s Finance Ministry agreed to participate in the recapitalization of Banco Internacional do Funchal SA, the ministry said in a statement.
The Portuguese state will subscribe 700 million euros ($928 million) of special stock and 400 million euros of capital instruments that Banif will issue by the end of January, according to the Finance Ministry. Banif’s Core Tier 1 will rise to more than 10 percent, the ministry said. Special shares will give the state the right to a “priority dividend.”
The Banif recapitalization is subject to European Commission approval and a restructuring plan for the lender will be presented in next few months, the ministry said.
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Exchange Regulation Needs Review After Facebook, Mathisson Says
The botched initial offering of Facebook Inc. (FB) is the catalyst that should lead to U.S. exchanges being stripped of self-regulatory powers and their related benefits, a Credit Suisse Group AG (CS) executive said.
Nasdaq Stock Market’s claim of immunity from liability for $500 million in brokerage losses stemming from technology problems on May 18 exposes a conflict between the historical, quasi-governmental role of exchanges and their status as profit- seeking public companies, Dan Mathisson, head of U.S. equity trading at Credit Suisse (CSGN), told U.S. senators in Washington last week. Those tensions can’t be managed fairly and should spur a regulatory overhaul of the securities market, he said.
Legislation that created the Securities and Exchange Commission in 1934 also deemed the main venues self-regulatory organizations, or SROs, overseeing their member firms and trading. Critics say the Facebook mishap shows how changes in the structure of markets have made old regulations obsolete and created an uneven playing field where exchanges are governed by one set of rules and their competitors another.
“We recommend that the SRO status of the exchanges be examined,” Mathisson said at a Senate banking subcommittee meeting Dec. 18. The Facebook trading breakdown highlighted a “peculiar quirk of the U.S. market structure -- that exchanges do not have material liability for their failures. It is time for policy makers to correct this mistake,” he said.
Exchanges have absolute immunity for actions taken as part of their regulatory duties. The doctrine arose when exchanges were not-for-profit organizations owned by their member firms. The shield protects them from lawsuits related to the exercise of powers delegated by the SEC and prevents financial losses that could jeopardize institutions seen as vital to the U.S. economy.
“The concept of being an SRO is historically based on the idea of having obligations to the market and getting certain benefits” for living up to them, Joe Mecane, head of U.S. equities at NYSE Euronext, said at the hearings. The responsibilities include providing open and fair access to all investors, publishing rules and fees, and overseeing trading, while the economic advantages include immunity “when performing certain of their regulatory functions” and revenue from the sale of quotation and transaction data, he said.
SEC Commissioner Daniel Gallagher said in October that Congress should modernize laws built around the SRO framework.
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Comings and Goings
Baer Confirmed as U.S. Justice Department Antitrust Chief
William Baer, a Washington antitrust lawyer and former Federal Trade Commission official, was confirmed to head the U.S. Justice Department’s antitrust division.
Baer’s nomination as assistant attorney general, which had been stalled in Congress for most of the past year, was confirmed Dec. 31 by a Senate vote of 64-26.
Baer, a partner at Arnold & Porter LLP, 62, will become the first fully confirmed head of the antitrust division since former chief Christine Varney left in August 2011. Since then, the division has been run by acting chiefs.
Baer, named one of the “Decade’s Most Influential Lawyers” by the National Law Journal in 2010, is a former director of the Federal Trade Commission’s competition bureau and has represented corporate clients including General Electric Company Co. (GE), Intel Corp. (INTC) and Cisco Systems Inc. (CSCO) in private practice.
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