Shortening 13F Period, RBS-Libor, S&P Suit: Compliance
Institutional investors should be required to publicly disclose equity holdings within two days after the quarter ends, instead of 45 days, NYSE Euronext said in a petition to U.S. regulators.
A shortened time frame will help investors and public companies receive timely information and technological advances make it possible, NYSE and corporate governance and investor relations groups wrote in a letter dated Feb. 1 to the U.S. Securities and Exchange Commission. The rule applies to pension funds, investment advisers and other investors with at least $100 million that currently must file a 13-F form.
Investors would benefit from seeing holdings sooner and companies would be better able to identify shareholders and communicate with them, according to the letter.
The petition was written by NYSE, the Society of Corporate Secretaries and Governance Professionals and the National Investor Relations Institute.
While institutions owned the majority of the U.S. shares outstanding in 2009, the delay means that individuals and public companies will get “little meaningful information” from the 13F filings, the letter said. The 45-day period has been in existence for more than three decades, the groups said.
John Nester, an SEC spokesman, said the commission would seek public comment on the petition. The agency isn’t required to respond to petitions for rulemaking or take action on them, although they are studied by the SEC staff.
Special Section: S&P Ratings Suit
Bernanke Revealed Market Sham in Lost Ratings Confidence Warning
Senior Federal Reserve officials including Chairman Ben S. Bernanke warned in August 2007 that investor confidence in credit rating companies was fading, risking greater instability in financial markets.
The 2007 transcripts of the Federal Open Market Committee, released last month, open a window onto how Fed officials viewed ratings companies during the end of the period that is the focus of a U.S. Justice Department lawsuit against McGraw-Hill Cos. and its Standard & Poor’s unit.
The Justice Department filed a civil complaint Feb. 4 in Los Angeles accusing McGraw-Hill and S&P of three types of fraud, the first federal case against a ratings company for grades related to the credit crisis.
Bernanke and his FOMC colleagues met on Aug. 7, 2007, after a steady deterioration in financial market stability. The Bear Stearns Cos. liquidation and other market disruptions took place the prior month.
In June 2007, William C. Dudley, then the head of the markets desk of the Federal Reserve Bank of New York, warned of the risk to broader financial markets from flawed credit ratings. His remarks sparked an FOMC discussion on the risk to the economy from declining confidence in ratings companies.
S&P issued credit ratings on more than $2.8 trillion of residential mortgage-backed securities and about $1.2 trillion of collateralized-debt obligations from September 2004 through October 2007, according to the Justice Department complaint.
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Levitt Says McGraw-Hill ‘Foolish’ to Not Settle S&P Lawsuit
The U.S. government will prevail in its lawsuit accusing McGraw-Hill Cos. and its Standard & Poor’s unit of fraud, former Securities and Exchange Commission Chairman Arthur Levitt said.
“The government is going to win,” Levitt said in an interview yesterday with Tom Keene on Bloomberg Radio. “McGraw- Hill was foolish not to have made a settlement.”
Levitt said any settlement, while “substantial,” will “come south” of the $5 billion that the U.S. is seeking. The penalties are based on losses suffered by federally insured financial institutions, according to acting U.S. Associate Attorney General Tony West. The department considered that number “fairly conservative,” West said.
McGraw-Hill had been in “extensive discussions” with the government over the accusations for at least four months, Floyd Abrams, a lawyer representing the company, said yesterday. Settlement talks broke down after the government sought a fine of more than $1 billion and an admission of wrongdoing from S&P, the New York Times reported.
Edward Sweeney, a spokesman for New York-based McGraw-Hill, declined to comment on Levitt’s predictions.
Levitt is a board member of Bloomberg LP.
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Burns Says Government Needs ‘Smoking Gun’ in S&P Suit
Douglas Burns, a former federal prosecutor, talked about the U.S. lawsuit accusing McGraw-Hill Cos. and its Standard & Poor’s unit of fraud.
He spoke with Stephanie Ruhle on Bloomberg Television’s “Market Makers.” They were joined by William Cohan, author of “Money and Power: How Goldman Sachs Came to Rule the World.” (Cohan is a Bloomberg View columnist. The opinions expressed are his own.)
For the Burns video, click here.
Separately, Dennis Kelleher, chief executive officer of Better Markets, a nonpartisan reform group, talked about the suit and nature of the allegations, including whether S&P made the ratings in a manner that was “overstated,” according to the allegations in the complaint, to gain market share.
Kelleher talked with Tom Keene, Sara Eisen and Michael McKee on Bloomberg Television’s “Surveillance.”
For the Kelleher video, click here.
Ailing Banks May Escape EU Rules to Impose Outside Managers
Banks may win a partial reprieve from European Union proposals to parachute outside managers into lenders deemed at risk of failure.
Some EU nations are concerned that empowering regulators to send in these so-called special managers could “hasten the decline” of struggling banks, according to a document obtained by Bloomberg News. They prefer to allow this step when a bank is no longer viable, according to the document prepared by Ireland, which holds the EU’s rotating presidency. The Irish document, dated Jan. 11, didn’t identify the countries.
The “special manager” plans are part of a push by Michel Barnier, the EU’s financial services chief, to take taxpayers off the hook for bailing out banks. The new manager would replace the bank’s existing bosses and would normally be in the post for a maximum of one year, according to a copy of the plans on the EU’s website.
EU governments have provided as much as 4.6 trillion euros ($6.2 trillion) of capital injections, guarantees and other support to lenders since 2008.
RBS Fined $612 Million on Libor, Will Seek Clawbacks For Payment
Royal Bank of Scotland Group Plc, fined $612 million for manipulating benchmark interest rates, plans to claw back three- quarters of the money from bonuses and awards already paid to the firm’s employees.
Britain’s biggest publicly owned lender will pay $325 million to the U.S. Commodity Futures Trading Commission, $150 million to the Department of Justice and 87.5 million pounds ($137 million) to the U.K.’s Financial Services Authority, the CFTC said in a statement yesterday. RBS said it will recoup about 300 million pounds from employees.
The bank is seeking to recoup 300 million pounds because it equals the amount that the lender is paying to overseas regulators, Hampton told reporters at a press conference yesterday. “Thousands” of employees, mostly at the investment bank, face having their bonuses cut, while the firm is considering clawing back payments to former directors, Hampton said.
The settlement talks, which were close to completion last month, were prolonged as the Justice Department pressed RBS to plead guilty to criminal charges, two people with knowledge of the discussions said on Jan. 29. RBS also agreed to enter into a deferred prosecution agreement with the Justice Department yesterday, the agency said. In such a deal, the government allows a target to avoid charges by meeting certain conditions - - including the payment of fines or penalties -- and by committing to specific reforms, either under the guidance of a monitor or the creation of an internal compliance panel. If the terms of the agreement are not met, the government can prosecute the case.
More than a dozen RBS traders made hundreds of attempts to manipulate yen and Swiss franc Libor between mid-2006 and 2010 to benefit their trading positions, sometimes colluding with counterparts at other firms, the CFTC said. That continued even after the CFTC commenced its investigation into the wrongdoing.
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Japan to Take Appropriate Action Against RBS, Official Says
Japan’s Financial Services Agency and Securities and Exchange Surveillance Commission are still investigating RBS, an FSA official said.
A few RBS Japan employees are involved in the Libor case, the official said, declining to provide specifics. The official spoke at a news briefing in Tokyo, asking not to be named in accordance with agency policy.
An RBS Japan unit agreed to plead guilty to a criminal charge of wire fraud in the bank’s settlement over allegations it manipulated global interest rates, the U.S. Commodity Futures Trading Commission said yesterday in a statement.
Japan regulators have been reviewing compliance at RBS, including relating to benchmark interest rates. The regulator said in December that it joined a probe into possible rigging of interest rates at RBS, two regulatory officials with knowledge of the matter said at that time.
RBS Trader Helped UBS’s Hayes With Libor Bribes, Regulators Say
A Royal Bank of Scotland Group Plc trader colluded with a counterpart at UBS AG to pay almost 211,000 pounds ($330,000) in bribes to brokers willing to help them manipulate global interest rates, regulators said.
Neil Danziger, a London-based derivatives specialist at RBS, helped Tom Hayes, the former UBS employee at the center of the global investigation into rate-rigging, to bribe at least two brokers into persuading other banks to submit rates in line with their own, according to transcripts released by regulators that didn’t identify the traders by name. Two people with direct knowledge of the talks confirmed the traders’ identities. The regulators didn’t identify the brokers involved.
Over the 12 months through August 2009, Danziger entered into at least 30 wash trades with Hayes in order to pay the brokers 211,000 pounds, according to the FSA, which didn’t identify the traders. In five of those trades, the brokerage payment was made by UBS instead of Danziger.
Hayes, who worked at RBS between 2001 and 2003, was arrested in December by the Serious Fraud Office along with two brokers from London-based broker RP Martin Holdings Ltd., which isn’t being investigated by the FSA.
Officials at RBS, RP Martin Holdings, and UBS declined to comment. Hayes’s lawyer, David Williams, didn’t immediately respond to a request for comment. Danziger didn’t respond to an e-mail as well as a request for comment through his lawyer.
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Libor Accords Leave Banks Facing States With ‘Massive’ Claims
A multistate probe of alleged manipulation of interest rates threatens to leave banks liable for billions of dollars in estimated state and local losses from the scandal, even as they settle with national regulators.
New York Attorney General Eric Schneiderman is helping lead a probe into claims that banks rigged global benchmarks for borrowing, adding to investigations by other authorities, including the U.S. Justice Department. Royal Bank of Scotland Group Plc agreed yesterday to pay about $612 million to U.S. and U.K. regulators to resolve their claims.
More than 12 states are participating in the probe, according to a person familiar with the matter who requested anonymity because he isn’t authorized to speak publicly.
States have joined forces as banks reach settlements to resolve liability tied to Libor, or the London interbank offered rate. Barclays Plc in June agreed to pay 290 million pounds ($454 million), and in December, UBS AG agreed to pay 1.4 billion Swiss francs ($1.5 billion).
By acting together, state attorneys general can amass potentially large claims against banks and gain leverage in any settlement negotiations, said Stephen Houck, an attorney at Menaker & Herrmann LLP and a former chief of the New York attorney general’s antitrust bureau. Antitrust law allows states to seek triple damages.
Global authorities have been investigating claims that more than a dozen banks altered submissions used to set benchmarks such as Libor to profit from bets on interest-rate derivatives or make the lenders’ finances appear healthier.
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HSBC Reputation ‘Crushed’ by Mexican Money Laundering, CEO Says
HSBC Holdings Plc’s reputation was “crushed” after it agreed to pay $1.92 billion to settle U.S. probes of money laundering in places such as Mexico, Chief Executive Officer Stuart Gulliver said.
“I’ve been in the firm 33 years and this gives me absolutely no pleasure whatsoever,” he told U.K. lawmakers in London yesterday. “You shouldn’t be under any illusion as to how seriously we take this and how upsetting this whole thing has been. We’ve crushed our reputation with the Mexican events.”
The settlement included a deferred prosecution agreement with the U.S. Department of Justice. The U.K.’s Financial Services Authority said the London-based bank will have to employ an independent monitor to oversee compliance with anti- money laundering requirements.
HSBC’s Mexican branches had become so well-known to drug traffickers as the place to launder proceeds from illicit sales that cartels began using special boxes to speed transactions, U.S. prosecutors have said.
“We bought a bank in Mexico, we bought cheaply because it was in distress,” Gulliver, 53, told the Parliamentary Commission on Banking Standards. “We ourselves were too slow to put in place anti-money-laundering systems that were up to the standards required today.”
FDIC’s Norton Wants to Revise Basel III Leverage for U.S. Banks
U.S. banks should have to meet a stricter leverage ratio than that outlined in the Basel III international agreement, said Jeremiah Norton, a board member of the Federal Deposit Insurance Corp.
The regulatory agencies considering capital rules, including the FDIC, Office of the Comptroller of the Currency and Federal Reserve, should consider minimum leverage ratios based on tangible common equity against bank assets not weighted for risk, Norton said in a speech yesterday in Orlando, Florida. The ratio should be higher than the earlier Basel III proposal for the Tier 1 capital ratio, he said.
“There is growing empirical evidence that a leverage ratio based on total assets is a better predictor of bank distress than a risk-based capital ratio,” as outlined in the Basel proposal, Norton said.
To contact the editor responsible for this report: Michael Hytha at firstname.lastname@example.org.