Solvency II Accord, Global Data Probe, SAC: Compliance

Europe may be nearing an agreement on rules that aim to make insurance companies safer after 13 years of wrangling between politicians, companies and regulators.

Insurers and European Union officials are working out a compromise on the capital they need to ensure they can make good on long-term products such as annuities, according to Ralph Koijen, professor of Finance at the London Business School, citing recent draft accords he has studied.

Insurers from countries including Germany, the U.K. and France have criticized the so-called Solvency II proposal, saying the rules could make savings products excessively costly as more capital would be required to cover risks for longer-term investments.

Representatives from the European Commission, European Parliament and Council of the European Union are convening for talks that started in Brussels yesterday. Firms including Allianz SE, the continent’s biggest insurer, say the talks could bring an accord for implementing Solvency II.

Insurers are Europe’s biggest institutional investors with 8.4 trillion euros ($11.3 trillion) under management. They lag behind banks in adopting a framework to help them withstand losses in any repeat of the 2008 financial crisis. Aegon NV (AGN), the owner of U.S. insurance firm Transamerica Corp., and reinsurance company Swiss Re (SREN) were among firms that received financial support after the collapse of Lehman Brothers Holdings Inc. and the U.S. bailout of AIG.

Solvency II, intended to harmonize the way firms allocate capital against risk, was scheduled to come into force last year. Its introduction was delayed several times over issues such as calculating capital needed for liabilities for products with long-term guarantees such as annuities and investments such as government bonds. Insurers and regulators now plan to implement the rules on Jan. 1, 2016, with a transitional period, should an agreement be reached in time.

Deals reached in so-called trilogue meetings, such as yesterday’s talks on Solvency II, require approval by parliament and the council, which represents the EU’s 28 member states. Further meetings are often held at short notice before draft agreements are reached.

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Compliance Policy

Global Data Network Probed by EU Regulators Over NSA Reports

European privacy watchdogs started a probe into whether consumers’ personal data on the global Swift money-transfer network can be accessed by the U.S. National Security Agency or other intelligence services.

The Dutch and Belgian data protection authorities are leading the investigation into whether the payment network is safe, Jacob Kohnstamm, the European Union’s top privacy watchdog said yesterday. Swift relays money-transfer orders among more than 10,000 banks and other financial institutions in over 200 countries and territories.

The probe by Kohnstamm and his Belgian counterpart Willem Debeuckelaere follows media reports that foreign intelligence services allegedly had unlawful access to Swift data concerning international bank transfers. Global spy agencies have come under scrutiny in recent months after former U.S. intelligence contractor Edward Snowden revealed the scale of NSA surveillance activities, including allegations it had tapped German Chancellor Angela Merkel’s mobile phone.

Swift last month said it conducted an audit that showed nothing wrong had happened, said Kohnstamm. The European Parliament last month demanded a halt to bank-data transfers to U.S. counter-terrorism investigators because of possible violations of privacy.

Swift said in a statement that there is no evidence that suggests there have been any confidentiality breaches on its network and would cooperate with the probe.

European data protection regulators from the 28-nation EU decided that because Swift is based in Belgium and has an important data processing center in the Netherlands, the respective national privacy regulators should lead the probe, Kohnstamm said.

Compliance Action

U.S. Receives $1.2 Billion From Sales in October of GM Shares

The U.S. Treasury Department said net proceeds of its sales of General Motors Co. shares totaled about $1.2 billion last month as the government winds down its investment in the automaker.

Through the end of October, the U.S. government had recovered $37.2 billion of the $51 billion it spent to bail out and restructure Detroit-based GM (GM), the Treasury said Nov. 12 in a report to Congress. The report doesn’t say how many shares were sold during the month or at what price.

Treasury said in a September report its GM stake had been reduced to 7.3 percent. Following its 2009 bankruptcy, the automaker went public again in 2010, leaving the U.S. Treasury as GM’s largest shareholder. The government began selling down its stake in December, when it said it would sell the rest of its remaining shares within 15 months. The U.S. is the third-largest GM shareholder, according to data compiled by Bloomberg.

The government may complete selling its GM stake before the year is over, Chief Executive Officer Dan Akerson has said.

The government is exiting GM as investor confidence in the company has risen.

Courts

SAC Manager’s Trial to Start Days After Fund’s Guilty Plea

SAC Capital Advisors LP money manager Michael Steinberg lost a bid to delay his insider-trading case, leaving him to face a jury next week in the first of two upcoming trials tied to the hedge fund run by Steven A. Cohen.

SAC Capital sought to plead guilty last week in Manhattan federal court after being indicted for securities and wire fraud. A judge declined to immediately accept the plea, saying she wanted to review documents in the case. Steinberg, 41, had argued that publicity surrounding the U.S. probe of SAC, and the record $1.8 billion plea deal, would compromise his right to a fair trial in the same courthouse.

U.S. District Judge Richard Sullivan said in a two-page order yesterday rejecting the request that the case would likely continue to be in the press months from now.

Steinberg’s trial is to be followed in January by that of former SAC fund manager Mathew Martoma, also charged with insider trading.

SAC agreed to shutter its investment advisory business as part of the accord announced Nov. 4 to end both its prosecution and a money-laundering lawsuit filed by the Justice Department.

Cohen, 57, who founded SAC in 1992, wasn’t named as a defendant in the indictment of the Stamford, Connecticut-based hedge fund. He still faces an administrative action filed by the U.S. Securities and Exchange Commission for his alleged failure to supervise the firm’s activities.

Steinberg has pleaded not guilty to conspiracy and securities fraud, and faces as long as 20 years in prison if convicted. Barry Berke, his lawyer, didn’t immediately respond to an e-mail seeking comment on Sullivan’s ruling.

The case is U.S. v. Steinberg, 12-cr-00121, U.S. District Court, Southern District of New York (Manhattan).

Madoff Fudged Taxes With Help From Aide on Trial, Jury Told

Bernard Madoff and his wife chose the exact amount of personal tax they would pay each year with the help of fake documents provided by a top aide on trial over the con man’s $17 billion fraud, a jury was told.

Daniel Bonventre, one of five former Madoff employees on trial in Manhattan, prepared false general ledgers and corporate profit statements to help reach what Madoff called “fudged” numbers for tax filings, David Friehling, Madoff’s accountant for more than 20 years, testified yesterday.

Friehling, 53, said he told Bonventre to “destroy or get rid of” copies of accounting documents that were fabricated to trick auditors because they “had no bearing on the business going on.” Bonventre didn’t object, he said.

Some of the defendants are accused of tax fraud in addition to the securities violations at the heart of the Ponzi scheme.

Friehling pleaded guilty to fraud in November 2009, and agreed to cooperate in a bid for leniency when he’s sentenced.

Bonventre, who oversaw the broker-dealer and proprietary trading operations of Madoff’s company, pleaded not guilty and has denied involvement in the fraud, saying he was duped like thousands of others.

Bonventre’s lawyer, Andrew Frisch, is scheduled to cross-examine Friehling when prosecutors are finished questioning him. Defense lawyers have said the government’s witnesses are willing to lie and implicate others to reduce their own sentences.

The case is U.S. v. O’Hara, 10-cr-00228, U.S. District Court, Southern District of New York (Manhattan).

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Interviews

LSE’s Rolet Expects Exchange Consolidation, Handelsblatt Says

London Stock Exchange Chief Executive Officer Xavier Rolet expects stock exchanges to consolidate, Handelsblatt reported.

There will only be room for “four or five global stock exchanges in the long run,” Rolet said, according to Handelsblatt, which cited an interview with the CEO.

One or two of these global stock exchanges will be in the European Union, Rolet said, the newspaper reported. Clearing houses will become more important, he said. Rolet sees growth potential in this area for the London Stock Exchange, the paper reported, citing the interview.

London Stock Exchange Group Plc (LSE), the operator of Europe’s oldest independent bourse, May 15 reported annual profit that beat estimates as revenue increased.

Comings and Goings

Cameron Arrives in India Set for Lecture on Business Regulation

U.K. Prime Minister David Cameron arrived in New Delhi yesterday for a 23-hour visit with a message for his Indian counterpart, Manmohan Singh, on the need for consistent business regulation.

Cameron, who’s stopping over on the way to the Commonwealth summit in Colombo, Sri Lanka, said India needs to deal fairly with companies if it is to attract investors.

He planned to raise cases like Newbury, England-based Vodafone Group Plc (VOD)’s $2.2 billion tax battle with the Indian government over its 2007 acquisition of Hutchison Whampoa Ltd. (13)’s Indian unit when he met with Singh yesterday. He said the case serves an example of the importance of access to the law and equality in front of the law in fostering “security and inward investment.”

It’s Cameron’s third visit to India since becoming prime minister in 2010. He will meet with business and political leaders, academics and students during the visit to explore ways to boost trade and build on the personal, family and business ties between the two countries.

To contact the reporter on this story: Carla Main in New Jersey at cmain2@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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