ICE Trust U.S. LLC, the world’s largest clearinghouse for credit-default swaps, withdrew its Nov. 12 application to the U.S. Commodity Futures Trading Commission to be registered as a designated clearing organization.
ICE Trust, owned by Atlanta-based Intercontinental Exchange Inc., said in a Dec. 23 letter to the CFTC that it was withdrawing its application because of “significant changes” proposed to regulations for derivatives clearing organizations, or DCOs. The proposed rules are required by mid-July under the Dodd-Frank financial-regulation law.
Kelly Loeffler, vice president at Intercontinental Exchange Inc., said in an e-mail that the company “anticipates transitioning to a DCO once final policy is completed.”
The CFTC and Securities and Exchange Commission are leading U.S. efforts to write new regulations for the $583 trillion swaps market, after largely unregulated trades complicated efforts to resolve the 2008 credit crisis. The law aims to boost transparency and reduce risk by moving most swaps to central clearinghouses that help guarantee transactions.
ICE Trust is currently regulated by the Federal Reserve and New York State Banking Department.
China to Ease Private-Equity Rules, Securities Says
China will allow foreign private-equity fund managers to convert money raised overseas into yuan and directly invest in the country under a pilot program in Shanghai, the Shanghai Securities News reported yesterday.
The initiative is known as the Qualified Foreign Limited Partner program, the newspaper said. China also has a quota-based system that allows foreign funds to invest in the mainland’s stock markets.
Shanghai received an “in principle” regulatory approval for investments under the new plan where fund managers can now apply for their foreign currencies to be converted to yuan and invest directly in Chinese companies, according to the report, which cited an unnamed person close to the Shanghai government.
State Administration of Foreign Exchange, the nation’s currency regulator, didn’t immediately respond to a faxed query that its press office requested.
China considered allowing foreign investment in yuan- denominated private equity and venture capital funds to help boost local industry. In March, a state council rule simplified the approval process and made it easier for overseas private-equity firms to set up foreign-invested partnerships.
Under current regulations, overseas private-equity funds can’t convert foreign capital invested in a partnership for local investment because of China’s capital controls.
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Obama Budget May Give Corporate Tax Clues, Chamber Counsel Says
Companies will scrutinize President Barack Obama’s 2012 budget proposal for changes that would affect income they earn overseas, the U.S. Chamber of Commerce’s chief tax counsel Caroline Harris said in an interview yesterday on Bloomberg Television.
Obama’s first two budgets proposed limiting companies’ ability to defer taxation on profits earned overseas. The chamber and other business groups opposed those ideas, and Congress didn’t pass most of them.
The president’s new budget plan, to be released in February, will spell out whether the administration will pursue lowering corporate tax rates while eliminating deductions and credits. When Japan lowers its corporate rate as planned next year, the U.S. rate of 39.2 percent, including state and local taxes, will be the industrialized world’s highest levy on business profits.
China’s SAFE Says to Keep Cracking Down on ‘Hot Money’ Flows
China’s State Administration of Foreign Exchange said it will continue to crackdown on cross-border hot money flows, according to a statement posted on the regulator’s website.
The regulator also released a list of cases involving branches of banks that didn’t comply with the nation’s foreign exchange rules. These banks include Industrial and Commercial Bank of China Ltd, China Construction Bank Corp. and Shanghai Pudong Development Bank Co.
Peruvian Congress Approves Capital Gains Tax Law Amendment
Peru’s congress approved an amendment to a capital gains tax law that will clear the way for the integration of the stock exchanges of Peru, Chile and Colombia.
The Permanent Congressional panel approved the modification by 11 votes in favor to 9 against with two abstentions.
Peru’s President Alan Garcia signed a bill Dec. 23 authorizing the integration of the stock exchanges. The three countries plan to establish a common exchange in a bid to increase trading volume and lure more foreign investors. The combined market value of the three bourses is $642 billion compared with Mexico’s $475 billion and Brazil’s $1.43 trillion, according to data compiled by Bloomberg.
Russia Watchdog May Open ‘3rd Wave’ of Oil-Product Price Cases
Russia may open a “third wave” of antitrust cases against oil companies because of increases in prices for diesel and jet fuel, Federal Anti-Monopoly Service Chief Igor Artemyev said yesterday in comments translated via the watchdog’s website.
Gulf Oil Refiners Gain Year-End Tax Advantage With Supply Cuts
Oil refiners, facing potential year-end tax consequences of holding too much crude, this month cut inventories in states along the Gulf of Mexico by the biggest amount in 30 years.
The drop in regional supplies, which has occurred in 27 of the past 29 Decembers, gives companies a tax advantage under federal accounting rules and helps reduce state and local property taxes assessed on their supplies when 2011 starts.
The main force driving the companies to lower inventories in December is the accounting method they use to measure stockpiles, said analysts and lawyers who follow energy markets.
“Last in, first out,” or LIFO, bookkeeping lets refiners deduct the cost of costlier crude they bought most recently and assert for tax purposes that the oil in their tanks was bought earlier at cheaper prices.
The accounting method has been used since the 1930s and is viewed as the most accurate measure of income for financial statements, according to Congress’s Joint Committee on Taxation, a nonpartisan panel, in 2009.
President Barack Obama proposed eliminating LIFO accounting in the budgets he offered in 2009 and 2010. Companies that use the method lobbied against the change, and repeal stalled in Congress.
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Indonesia Raises Bank Foreign-Currency Reserve Ratios
Indonesia’s central bank ordered lenders to set aside more of their foreign-currency holdings as reserves, seeking to reduce pressure on inflation and the rupiah from capital inflows.
Banks will be required to set aside 5 percent of their total foreign-exchange holdings as reserves as of March 2011, from 1 percent currently, Bank Indonesia Deputy Governor Budi Mulya said at a press briefing in Jakarta today. The reserve requirement will rise to 8 percent effective June, he said.
Indonesia and its peers are grappling with increasing capital inflows as borrowing costs and growth rates that are higher than developed economies boost the appeal of emerging-market assets. The central bank has resisted imposing capital controls or raising its benchmark interest rate from a record-low 6.5 percent, choosing instead to increase bank reserve requirements and encourage investors to keep their money in the country for longer periods.
China Probed 240,000 Official Corruption Cases Over Seven Years
Chinese prosecutors investigated more than 240,000 embezzlement, bribery and other cases involving official corruption from 2003 to 2009, according to a government report released today.
China’s State Council, the country’s cabinet, said in a 39-page report that official corruption has evolved in the more than three decades since
China initiated economic policies opening the country to private enterprise and foreign investment.
Officials recently have been prosecuted for crimes such as aiding “underworld and evil forces” and corruption causing “mass disturbances and major accidents,” the report said. In the 1980s prosecutions focused on corruption that took advantage of a two-tiered price system, and 1990s corruption centered on embezzlement, misappropriation of public funds and “bending the law,” it said.
Today’s report comes after several official graft cases made headlines across the country, including the arrest last year of 1,500 people in connection with bribing police and government officials in central China’s Chongqing Municipality.
Goldman Case Among 10 Most-Read Bloomberg Dockets of 2010
The docket in the enforcement action brought by the U.S. Securities and Exchange Commission against Goldman, Sachs & Co. was among the ten court filings most retrieved from the Bloomberg Law database in 2010.
The interest in the Goldman case and other most-read dockets of 2010, including bankruptcies and shareholder litigations, reflect the ongoing legal fallout from the economic crisis.
In July 2010, the SEC reached an agreement with Goldman to settle securities fraud charges for $550 million. The SEC’s action, filed three months earlier, charged Goldman with failing to disclose that hedge fund Paulson & Co. Inc. had played a significant role in choosing the subprime residential mortgage-backed securities underlying the synthetic collateral debt obligation known as Abacus 2007-AC1. Paulson allegedly shorted the portfolio that it helped to select.
“This year’s most read Bloomberg Law Dockets, coupled with commentary from our legal analysts, provide a fascinating snapshot of the legal challenges businesses are grappling with today,” said Lou Andreozzi, chairman of Bloomberg Law. Such dockets “provide a valuable source of strategic information for legal and business professionals.”
The case is Securities and Exchange Commission v. Goldman, Sachs & Co., 10-cv-03229, U.S. District Court, Southern District of New York (Manhattan).
For-Profit College Students Haunted by Loan Defaults
Students seeking to move up in life by getting a degree from a for-profit college are being trapped in a growing underclass of education debtors. Under U.S. law, their loan obligations can rarely be discharged in bankruptcy, making them more onerous than credit-card debt or subprime mortgages taken out before the housing bubble burst, Bloomberg’s John Hechinger reports.
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Comings and Goings
Hurd Asks to Join Hewlett-Packard Investor Lawsuit
Hewlett-Packard Co.’s former Chief Executive Officer, Mark Hurd, asked a Delaware judge yesterday to allow him to intervene in a shareholder’s lawsuit so he can fight to keep a sealed letter about his departure from HP confidential.
Hurd, currently under investigation by the U.S. Securities and Exchange Commission over his departure in August, told Delaware Chancery Court Judge Donald Parsons Jr. his name should be added to the lawsuit seeking company books and records because the letter from lawyer Gloria Allred is personal and his alone.
The executive resigned as HP’s chairman and CEO on Aug. 6, after a company investigation of a sexual harassment-allegation, according to a statement from Hewlett-Packard. The claimant was later identified by Allred as Jodie Fisher. HP said it didn’t find that Hurd had violated its harassment policy.
Hurd, 53, now works for software maker Oracle Corp. as a co-president.
The case is Ernesto Espinoza v. Hewlett-Packard Co., CA6000, Delaware Chancery Court (Wilmington).
CITIC Group Appoints Chang Zhenming Chairman to Replace Kong
Citic Group, a state-owned investment company, appointed Chang Zhenming its chairman, replacing Kong Dan, according to a statement on its website.
Kong, 63, will step down due to age limits for officials at state-owned companies, Citic Group said. Chang, who has been vice chairman since July 2006, previously served as president of China Construction Bank Corp., where he oversaw the listing of the nation’s second-biggest lender. Citic Group, founded in 1979 to help China attract foreign investment, now has more than 40 subsidiaries including Citic Securities Co., China Citic Bank Corp. and Citic Pacific. The company plans to list in Hong Kong by 2011, the China Business News newspaper reported June 23.
Citic Group recorded revenue of 209 billion yuan ($31.6 billion) in 2009, according to a financial statement posted to its website.