Traders are standing by Platts, the company that provides benchmark prices for much of the world’s energy products, amid a European probe into market manipulation.
A total of 34 out of 55 traders, brokers and analysts surveyed by Bloomberg News May 15, or 62 percent, said the pricing system run by Platts, the energy news and data unit of McGraw Hill Financial Inc., is still the best way to determine prices in the $3.4 trillion-a-year market for crude and refined products. Royal Dutch Shell Plc (RDSA), BP Plc (BP/) and Statoil ASA (STL) said they’re also being investigated by the European Commission following raids in three countries May 14 while Neste Oil Oyj (NES1V) said yesterday it was asked to provide information.
As much as 80 percent of all crude and oil-product deals are linked to reference prices including those published by Platts, according to estimates by Total SA (FP), Europe’s third-biggest producer. The European investigation marks the third time global pricing benchmarks have drawn regulators’ scrutiny in the past year following inquiries into bank manipulation of the London interbank offered rate, or Libor, and ISDAFix, the benchmark for the $379 trillion swaps market.
European regulators didn’t name the subjects of their probe and haven’t specified the markets they are investigating or the methods in question. “Companies may have colluded in reporting distorted prices to a Price Reporting Agency to manipulate the published prices for a number of oil and biofuel products,” according to a May 14 statement by the EC.
Kathleen Tanzy, a Houston-based spokeswoman for Platts, said on May 13 that the EC had undertaken a review at its office in London in relation to its price assessment process. In a submission to a 2012 report by the International Organization of Security Commissions on oil pricing regulation, the company said external controls over its activities would be an “unacceptable intrusion” on its rights as a publisher.
Bloomberg LP, the parent of Bloomberg News, competes with Platts and other companies in providing energy markets news and information.
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SEC’s White Rebuffs Call to Forswear Political Spending Rule
Securities and Exchange Commission Chairman Mary Jo White rebuffed calls by House Republicans to forswear a rule that would force public companies to disclose political spending, saying she won’t “prejudge the issue.”
Responding to lawmakers who pressed her on the matter at a Financial Services subcommittee oversight hearing yesterday, White said the SEC’s staff is reviewing a 2011 petition for such a rule signed by a group of prominent law professors.
She said no one is currently working on a proposal.
The agency’s rulemaking agenda indicates it is studying whether to propose a rule. Republicans urged White to swear off any action on the issue, calling it a partisan undertaking that would hurt the SEC’s credibility as a regulator.
Debate over corporate political spending gained attention after the U.S. Supreme Court ruled in a 2010 case known as Citizens United that companies and unions could spend unlimited money on election ads. More than 500,000 comments have been filed in response to the petition, which is supported by the Council of Institutional Investors and the American Federation of State, County and Municipal Employees.
The U.S. Chamber of Commerce and other large business groups oppose the call for a rule.
Rulemaking on the issue has been criticized as tied to partisan political agendas and a distraction from SEC mandates of protecting investors, maintaining efficient markets, and facilitating capital formation.
Separately, White told the panel that any proposed changes relating to money market mutual funds would “seek to preserve the many benefits of money market funds for investors and the short-term funding markets,” according to remarks prepared for the hearing.
The rule simultaneously would seek to reduce money-market funds’ “susceptibility to runs, improving their ability to manage and mitigate potential contagion from high levels of redemptions, and increasing the transparency of their risks,” she said.
Last month, White said the SEC is the best regulatory agency to handle the money market rule changes.
BlackRock Develops Alternatives to Money Funds as Rules Loom
BlackRock Inc. (BLK) and Western Asset Management Co. are offering a new twist on traditional money-market funds as regulators are set to impose sweeping changes on the $2.58 trillion industry.
BlackRock, the world’s biggest money manager, and Legg Mason Inc. (LM)’s Western Asset unit have started bond funds designed to work much like money funds, with a difference. The new “ultra-short” funds have share prices that fluctuate along with the value of their holdings, rather than a fixed net asset value, or NAV, a distinguishing feature of money funds. They also have shorter maturities than similar ultra-short bond funds that ran into trouble when credit markets froze in 2008.
The firms are preparing for what could be a seismic reallocation of assets by institutional investors and corporate treasurers if regulators overhaul money funds for a second time in three years in a bid to make them safer after the 2008 collapse of the Reserve Primary Fund. The U.S. Securities and Exchange Commission plans to order a floating NAV on institutional prime money-market funds, or those that invest in corporate debt, overriding opposition from the industry.
Mary Athridge, a spokeswoman for Baltimore-based Legg Mason, declined to comment on the Western Asset Ultra Short Obligations Fund, which the firm filed to register on May 8.
The new ultra-short fund is “clearly” not a money-market fund, though at first glance it may “look similar” to one, said Richard Hoerner, head of New York-based BlackRock’s global cash-management business.
BlackRock opened the BlackRock Ultra-Short Obligations Fund (BBUSX) in November and it has about $25 million of assets.
Federal regulators have been searching for ways to prevent a replay of September 2008. In 2010, the SEC tightened rules on credit quality, shortened the maximum average maturity for funds and introduced minimum liquidity levels. The agency considered it an initial step toward making money funds more stable. The industry fought back against proposals and sought to limit the scope of changes. The SEC is now planning a narrower proposal.
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Ex-AMD Workers at Nvidia Barred From Revealing Trade Secrets
Advanced Micro Devices Inc. (AMD) won a court order barring ex-employees who went to competing chipmaker Nvidia Corp. (NVDA) from disclosing trade secrets or soliciting former colleagues to join them.
U.S. District Judge Timothy Hillman said in his order that AMD may win its lawsuit claiming misappropriation of confidential information, according to a filing May 15 in Boston.
AMD, based in Sunnyvale, California, accused ex-employees of taking sensitive company documents when they went to work for Nvidia. The former employees transferred more than 100,000 electronic files pertaining to AMD’s graphics-processor business in the days before their departure, AMD said in its complaint filed in January. The employees also allegedly recruited other AMD workers to leave the company.
The order, called a preliminary injunction, replaces a temporary restraining order granted after the suit was filed.
Nvidia, based in Santa Clara, California, isn’t a defendant in the suit.
The case is Advanced Micro Devices v. Feldstein, 13-cv-40007, U.S. District Court, District of Massachusetts (Boston).
Goldman Sachs Tax Deal Didn’t Break U.K. Law, Judge Rules
Goldman Sachs Group Inc. (GS)’s deal with the U.K. government that may have saved the investment bank as much as 20 million pounds ($30.6 million) on its taxes didn’t break any laws, a judge ruled.
Her Majesty’s Revenue & Customs’s decision to reduce the New York-based bank’s tax bill was properly conducted, a judge in London ruled yesterday. Still, Judge Andrew Nicol criticized tax officials who considered the potential embarrassment to Chancellor of the Exchequer George Osborne if a deal with Goldman Sachs wasn’t completed.
The U.K. government has pledged to clamp down on tax-avoidance schemes following widespread media and public anger caused by corporation tax structures in the country. Lawmakers said in a report last month that increased transparency about companies’ tax affairs would build pressure on multinational businesses to “pay a fair share.”
UK Uncut Legal Action, an advocacy group that lobbies for alternatives to government spending cuts, said HMRC reached the agreement with Goldman Sachs on the day Osborne announced a bankers’ code to counter tax avoidance. An HMRC executive said in an e-mail cited by UK Uncut that he was concerned the bank might drop out of the code if the deal was scuttled.
“Obviously while we are deeply disappointed that this deal has not been declared unlawful, the judge’s ruling that top HMRC officials played politics with major tax deals to protect Osborne’s reputation is a major victory in exposing the truth behind these secret deals,” Anna Walker, campaigns director of UK Uncut Legal Action, said in an e-mailed statement.
Goldman Sachs wasn’t involved in the litigation. Fiona Laffan, a London-based spokeswoman for Goldman Sachs, declined to comment.
The case is a judicial review, a legal mechanism that examines the decision-making process of public bodies. While an authority may be ordered to reconsider an action, it may be allowed to draw the same conclusion provided all procedures are correctly followed.
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