Routing Role, FCA Fines, Fed TARP Sanction: Compliance

The U.S. Securities and Exchange Commission is weighing a requirement that brokers tell investors exactly where their stock trades go to be executed, a proposal that may address complaints that the decisions are sometimes made against the clients’ best interests.

The proposal might give investors more insight into whether they are getting the best prices when they buy and sell large numbers of shares, according to three people familiar with the matter.

Brokers entrusted with orders in the U.S. stock market can choose from dozens of exchanges and private venues. Some money managers such as T. Rowe Price Group Inc. have told regulators that incentives offered by exchanges for attracting orders can put a broker’s financial interest at odds with the customer’s.

The SEC faces pressure to overhaul trading after the book, “Flash Boys” by Michael Lewis, a columnist for Bloomberg View, made the claim that high-frequency traders hurt other investors by learning which shares investors plan to buy, purchasing them and selling them back at a higher price. The SEC has said it’s reviewing every aspect of how stocks are traded, and regulators are trying to identify changes that might be implemented quickly, the people said.

Commissioners expect the SEC’s staff to present them potential policy options “in the near term,” Commissioner Luis A. Aguilar said in an interview.

Judith Burns, an SEC spokeswoman, didn’t respond to e-mail and phone messages seeking comment.

Compliance Action

U.K. FCA Misconduct Fines of Individuals Drop 40% in Four Years

The number of fines issued to senior bankers by the U.K.’s financial watchdog has fallen 40 percent since 2010 as the new regulator continues to seek its first “big fry.”

The Financial Conduct Authority handed out 18 fines to finance workers classified as performing a so-called significant influence function in 2013, marking a decline from the 30 it issued in 2010, the law firm Reynolds Porter Chamberlain LLP said in a report.

Individuals are more willing to fight allegations because the fines are larger and careers are at stake, Richard Burger, a partner at RPC, said in an e-mailed statement.

The FCA took over market regulation from the dissolved Financial Services Authority a year ago after it was criticized for failing to target a high-profile banker or trader.

Fed Sanctions Missouri Banker for Misusing TARP Bailout Money

The Federal Reserve prohibited a former Missouri bank chairman from involvement in any bank management after he admitted to using federal bailout money to buy a luxury condominium.

Darryl Layne Woods, former president and chairman of Calvert Financial Corp. of Ashland, Missouri, consented to the sanctions “based on his participation in unsafe and unsound practices, breaches of fiduciary duty and violations of law and regulation” in his use of funds under the Troubled Asset Relief Program, the Fed said April 17 in a statement in Washington.

Woods pleaded guilty in August to misleading federal investigators concerning the TARP money and is serving a two-year probationary term.

Woods “accepts responsibility for his actions,” J.R. Hobbs, his attorney, said in a phone interview.


Goldman Sees ‘Misunderstanding’ in Banks, Commodities Debate

The debate on the involvement of financial holding companies in commodities markets reflects a “misunderstanding” of the role such firms play, Goldman Sachs Group Inc. (GS) told the Federal Reserve last week in a comment letter on proposed rulemaking.

Goldman described what it called benefits from its involvement in physical commodities and merchant banking activities and outlined risk management in the letter.

“Enhanced” risk-management standards could be incorporated in Fed guidance to ensure firms have proper safeguards, the company said.

To contact the reporter on this story: Carla Main in New York at

To contact the editors responsible for this story: Michael Hytha at Charles Carter, Stephen Farr

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