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U.A.E. Bourse, Google Tax Bill, N.Y. Fed Shuffle: Compliance

The United Arab Emirates’ three stock exchanges should merge to help boost trading volumes and improve visibility for foreign investors, a majority of investment professionals holding the CFA charter said.

Ninety-three percent of about 200 respondents in a survey of CFA charterholders from nine Middle East countries support the merger of the U.A.E.’s three bourses into a national exchange, according to a survey released by the local CFA association at a conference in Dubai yesterday. More than 90 percent of the respondents said this will result in greater volumes and liquidity in the market, while more than half said it will improve visibility for foreign investors, the survey said.

The results were part of the first Middle East market sentiment survey conducted by CFA Emirates, an association of investment professionals who hold the Chartered Financial Analyst designation. The designation is awarded by the not-for-profit CFA Institute, based in Charlottesville, Virginia.

The U.A.E., the second-biggest Arab economy, is home to the Abu Dhabi Securities Exchange, the Dubai Financial Market and Nasdaq Dubai.

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Compliance Policy

Push to Rewrite Parts of Dodd-Frank Gains Momentum in Congress

As financial regulators are writing hundreds of rules to implement the Dodd-Frank Act, Democratic and Republican lawmakers are joining forces to blunt its impact on companies that may include debit-card issuers and credit raters.

A sweeping rewrite -- or the all-out repeal urged by some Republicans -- is unlikely as long as Democrats remain in charge of both the Senate and the White House, lawmakers say. At the same time, Democratic support is building to amend the law in some key areas.

Senator Richard Shelby of Alabama, senior Republican on the Banking Committee, who has led several requests to regulators to slow the pace of rulemaking, said implementation of the law would be “very, very expensive,” absent legislative action.

Legislation that would delay a Federal Reserve proposal to cap debit-card “swipe” fees may be first on the list, propelled by lobbying from banks. An effort to change the leadership structure of the nascent Consumer Financial Protection Bureau also may be gaining strength; House Republicans say some moderate Senate Democrats may support it.

Lawmakers are also exploring ways to lessen the impact of new derivatives rules on companies that hedge business risk, and may revise sections of the law on credit-rating services and executive pay.

Senator Jon Tester, a Montana Democrat, is the chief sponsor of a bill that would delay implementation of the rule for two years to study its impact. Shelly Moore Capito, a West Virginia Republican, has introduced a similar measure in the House. Tester said in an interview that he had been lobbying his colleagues with some success.

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EU Debt Crisis Summit Fails to Comfort Investors: Euro Credit

Europe’s efforts to tackle its sovereign debt crisis aren’t persuading money managers to buy bonds from the region’s most indebted nations.

Work thrashing out a solution to the region’s credit woes is due to culminate at a March 24-25 summit of European leaders. A sluggish growth outlook, unsustainable debt levels and a lack of clarity about what happens once aid measures expire in mid-2013 are keeping investors, including Pacific Investment Management Co., which runs the world’s biggest bond fund, out of the market even as euro-area officials construct a comprehensive debt-support package to revive confidence.

Finance ministers announced steps yesterday to fight the debt crisis, running into European Central Bank criticism for doing too little to prevent budget shocks from threatening the euro. The policy makers settled on how to enable a permanent rescue fund to lend 500 billion euros ($627 billion) as of 2013, while remaining divided over how to get the current stopgap fund up to its full capacity of 440 billion euros.

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Life Insurer Lobby Met Fed to Discuss Dodd-Frank Capital Rules

Federal Reserve Board staff met with the American Council of Life Insurers as the trade group pushes its proposal to exclude the industry from new capital requirements designed for U.S. banks.

ACLI representatives led by Senior Vice President Julie Spiezio met with Fed staff earlier this month to discuss “the challenges of applying a bank-centric capital framework” on insurance companies through the Dodd-Frank law that overhauled the financial industry last year, the central bank said in a statement on its website. The law subjects insurers to greater federal scrutiny.

The ACLI is pressing the Fed to exclude insurers from some bank rules and instead rely on capital-adequacy calculations provided by the industry’s state regulators.

During the March 8 meeting, the ACLI discussed Dodd-Frank’s so-called Volcker Rule, which prohibits banks from betting their capital for their own accounts, and the Collins Amendment, a provision that bars lenders from counting trust-preferred securities as part of their capital cushions, according to the Fed.

U.K. FSA Says CFTC Clearinghouse Proposal May Increase Risk

A U.S. Commodity Futures Trading Commission proposal requiring derivatives clearinghouses to open membership to firms with at least $50 million in capital “could lead to increased risk to the system in the short to medium term,” the U.K.’s Financial Services Authority said.

Alexander Justham, the FSA’s director of markets, wrote urging the U.S. regulator yesterday in a comment letter to set risk-based participation requirements.

The letter was written in response to the CFTC’s proposal, part of the agency’s rulemaking under the Dodd-Frank Act. The regulatory overhaul enacted last year law aims to have most swaps guaranteed by clearinghouses that seek to reduce risk in the financial system by standing between buyers and sellers.

Compliance Action

Google Questioned by SEC Over Earnings in Low-Tax Countries

Google Inc. received questions from the U.S. Securities and Exchange Commission in December about earnings in other countries that may have reduced the company’s tax bill, according to regulatory filings released yesterday.

SEC officials asked Google for “disclosures to explain in greater detail the impact on your effective income tax rates and obligations of having proportionally higher earnings in countries where you have lower statutory tax rates,” according to a Dec. 2 letter.

The company responded to the requests for information, the filings show. The SEC said in a Feb. 3 letter that it had completed its review of Google’s filings, and has “no further comments at this time on the specific issues raised.”

Google, owner of the world’s most-popular search engine, has used a strategy that has gained favor among some U.S. companies to reduce taxes. Google cut income taxes by $3.1 billion over three years by shifting the bulk of foreign profits to Ireland, then the Netherlands and eventually to no-tax Bermuda, according to regulatory filings in the U.S. and abroad.

The tax-cutting strategy, involving a pair of techniques known to lawyers as the “Double Irish” and the “Dutch Sandwich,” helped cut the company’s income-tax rate to 2.4 percent on the profits it attributed to its foreign subsidiaries during the three-year period, filings show.

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Nuclear ‘Stress Test’ Rules Sought by EU at Emergency Meeting

European Union energy ministers will seek agreement on “stress tests” for the region’s nuclear plants at an emergency meeting yesterday called in response to Japan’s atomic accident.

Nuclear power stations owned by companies including Electricite de France SA and Germany’s RWE AG produce a third of the electricity in the EU, which wants to draw up common criteria to gauge the safety of the region’s 143 atomic plants. The risk of a nuclear meltdown in Japan after a March 11 earthquake and tsunami triggered public protests in Europe against atomic power and prompted Germany to order a temporary halt to the country’s seven oldest reactors.

Countries led by Germany are calling for a deeper alignment of Europe’s rules on nuclear safety, which is a shared responsibility between national and EU authorities. German Chancellor Angela Merkel has urged uniform standards across the EU and said she will raise the issue at a March 24-25 meeting of the bloc’s leaders.

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SEC Halts Trading of Chinese Firm Heli Amid Accounting Questions

The U.S. Securities and Exchange Commission halted trading of Guangzhou, China-based Heli Electronics Corp. after faulting the firm for a lack of current and accurate information in its financial statements.

Heli, which distributes electronic products, failed to disclose that its auditor resigned because of accounting irregularities, including discrepancies between the company’s cash-balance records and its bank statements, questions about the existence of some customers and the possibility that records had been falsified, the SEC said yesterday in a statement.

A phone call to Mickey Jiang, who is listed on Heli’s website as the investor relations contact, was answered by a recording. An e-mail to Jiang wasn’t immediately returned.

The trading suspension, which began yesterday at 9:30 a.m. in New York, will remain in effect through April 1.

The SEC set up a task force to look for fraud in overseas companies, specifically from China, with listings on U.S. exchanges, and launched a probe last year asking auditors for information on audit practices of such firms.

China Starts Campaign Against ‘Illegal’ Mappers, Xinhua Reports

China has started a campaign to eliminate “illegal” online mapping services that will involve 13 ministry-level government agencies, Xinhua News Agency said, citing the State Bureau of Surveying and Mapping.

Separately, China’s eastern province of Anhui will close down illegal television stations after a blogger said 600 were operating in the province, the news agency reported, citing Yang Jian, an official at the Anhui Provincial Bureau of Radio, Film and Television.


Fed Will Release Bank Loan Data as Top Court Rejects Appeal

The Federal Reserve will disclose details of emergency loans it made to banks in 2008, after the U.S. Supreme Court rejected an industry appeal that aimed to shield the records from public view.

The justices yesterday left intact a court order that gives the Fed five days to release the records, sought by Bloomberg News’s parent company, Bloomberg LP. The Clearing House Association LLC, a group of the nation’s largest commercial banks, had asked the Supreme Court to intervene.

The records were originally requested under the Freedom of Information Act by a Bloomberg News reporter, the late Mark Pittman.

David Skidmore, a spokesman for the Fed, said the board will comply with the court’s decision.

The order marks the first time a court has forced the Fed to reveal the names of banks that borrowed from its oldest lending program, the 98-year-old discount window. The disclosures, together with details of six bailout programs released by the central bank in December under a congressional mandate, would give taxpayers insight into the Fed’s $3.5 trillion effort to stem the 2008 financial panic.

Under the trial judge’s order, the Fed must reveal 231 pages of documents related to borrowers in April and May 2008, along with loan amounts. News Corp.’s Fox News is pressing a bid for disclosure of similar information.

The Clearing House Association contended that Bloomberg is seeking an unprecedented disclosure that might dissuade banks from accepting emergency loans in the future. In a statement after the decision, the group said it is “disappointed that the court has declined our petitions, which deal with the protection of highly confidential bank information provided to the Federal Reserve.”

The cases are Clearing House Association v. Bloomberg, 10-543, and Clearing House Association v. Fox News Network, 10-660.

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Levitt Say Obama Unlikely to Fight For Warren

Former U.S. Securities and Exchange Commission Chairman Arthur Levitt discussed Elizabeth Warren, special adviser to the secretary of the Treasury for the Consumer Financial Protection Bureau. Levitt says U.S. President Barack Obama is unlikely to spend the political capital necessary to defend Warren from Republican attacks.

Levitt talked with Bloomberg’s Ken Prewitt and Tom Keene on Bloomberg Radio’s “Bloomberg Surveillance.”

For the audio, click here.

Comings and Goings

New York Fed Reorganizes Bank Supervision for Dodd-Frank Mandate

The Federal Reserve Bank of New York, which oversees some of the largest U.S. financial firms, has reorganized its bank supervision group to strengthen its oversight capabilities.

The division has been renamed the Financial Institution Supervision Group, in a nod to the Fed’s expanded authority under the Dodd-Frank Act, according to the New York Fed’s website. The Dodd-Frank Act, signed into law by President Barack Obama in July, gave the Fed authority for overseeing non-bank financial firms deemed “too big to fail” because their collapse might pose a risk to the financial system.

The New York Fed oversees firms in New York such as Goldman Sachs and is slated to gain responsibility for non-bank companies in its district such as Fairfield, Connecticut-based General Electric Co.’s GE Capital unit.

The Fed bank has moved specialists from the supervision group’s risk management function to its relationship management teams, according to two people familiar with the reorganization who declined to be identified because the changes haven’t been made public officially. The relationship management teams are responsible for covering specific institutions, according to the New York Fed’s website.

The risk analysts will relocate from the New York Fed’s downtown Manhattan headquarters to on-site locations at the financial firms, according to the two people familiar with the matter.

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