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Mutual Fund Fees, Helaba Stress Test, CDS Probe: Compliance

The U.S. Securities and Exchange Commission will return to work on mutual-fund fees “with full force” once it gets past the July deadline for many Dodd-Frank Act rules, SEC Commissioner Elisse Walter said.

“Every dollar collected in 12b-1 fees is a dollar deducted from a fund’s return,” Walter said April 29 in a Washington speech, referring to fees mutual funds charge for marketing. The agency will focus attention on the fees again when it clears the bulk of its Dodd-Frank work, she said in the comments delivered at a Mutual Fund Directors Forum conference.

On the day Dodd-Frank was enacted, SEC commissioners voted unanimously on a proposal to increase disclosure and cap fees investors pay over time. Under the measure, a company couldn’t charge more in 12b-1 fees for a class of fund shares that continue to solicit new investors than they charge for classes that don’t.

The SEC is writing as many as 100 rules required by Dodd-Frank, the regulatory overhaul enacted last year. The deadline for completion of many of the rules is July 21.

Compliance Policy

FSB to Publish List of ‘Non-Cooperative’ Financial Regulators

The Financial Stability Board said it plans to publish a list by November of regulators that aren’t meeting its standards for cooperating with watchdogs from other nations.

“The public list will identify non-cooperative jurisdictions,” the FSB said in an e-mailed statement April 29.

The FSB, based in Basel, was founded in 2009. It replaced the Financial Stability Forum, a think tank with no formal role that was created in 1999 after the Asian financial crisis.

ECB to Ask for Loan-by-Loan Information on Commercial ABS

The European Central Bank will ask banks to provide more information about the collateral they give in return for loans.

The Frankfurt-based central bank will require sellers of securitizations pooling small and medium-size company loans and commercial mortgages to provide detailed information on the underlying loans as part of rules to enable the use of the notes as collateral, the ECB said in an e-mailed statement April 29.

The ECB is trying to better monitor the quality of the assets it holds in return for funds it has pumped into the European banking system during the financial crisis. The bank said in December that it intends to introduce loan-by-loan information requirements, starting with retail mortgage-backed securities, with the intention to broaden the stipulation to cover other classes.

Asset-backed securities overtook unsecured bonds as the most common guarantee used by lenders to raise central-bank cash. Banks posted 488 billion euros ($724 billion) of securities backed by consumer and home loans as of Sep. 30, compared with 433 billion euros of senior unsecured bonds, according to the latest data from the ECB.

Compliance Action

Helaba to Pass Stress Test With Capital Changes, State Says

Landesbank Hessen-Thueringen, Germany’s fifth-biggest state-owned lender, can pass European stress tests after the Hesse government agreed to convert investments into core capital, the state finance ministry said.

State funds of 1.92 billion euros ($2.85 billion) at Frankfurt-based Helaba will be contractually changed so that so-called silent participations count as core capital, according to an e-mailed statement from the ministry April 29. The ministry sent a letter with the declaration to German regulator BaFin, which will hand it over to the European Banking Authority, it said.

Helaba’s owners join those of state lender Norddeutsche Landesbank in pledging to strengthen the quality of reserves after the EBA earlier this month said it will use a tougher measure of capital in stress tests on 90 lenders. Both banks, which didn’t need government aid during the financial crisis, were at risk of failing the examinations to be published in June because of their reliance on silent participations -- funds the state-owned banks receive from regional governments and savings banks.

Goldman Sachs, JPMorgan Among 16 Banks Probed by EU Over CDS

Goldman Sachs Group Inc., JPMorgan Chase & Co. and 14 other investment banks face European Union antitrust probes into credit-default swaps for companies and sovereign debt.

The EU is investigating whether 16 banks, including Citigroup Inc. and Deutsche Bank AG, colluded by giving market information to Markit Group Ltd., a data provider majority-owned by Wall Street’s largest banks. It will also examine if nine of the firms struck unfair deals with Intercontinental Exchange Inc.’s European derivatives clearinghouse, shutting out rivals.

Global regulators have sought to toughen regulation of the $583 trillion credit-default swaps market, saying the trades helped fuel the financial crisis. The EU’s probes add to separate investigations in the U.K. and U.S. into whether banks colluded to manipulate the London interbank offered rate.

The credit-default swap investigations are the first by antitrust regulators in Europe. The U.S. Justice Department last year called for “more stringent” limits on the control banks and swap dealers have over clearinghouses and trading platforms for swaps.

Markit provides derivative and bond data to more than 1,500 customers. It owns the most actively traded credit swap indexes and pricing services in the market.

For more, click here.

Ralcorp Is Latest Stock Halted by Circuit Breakers

Trading in Ralcorp Holdings, Inc., the producer of store brand foods sold under various labels, was halted April 29 by circuit breakers.

The curbs were created after the 20-minute rout on May 6, 2010, erased $862 billion from the value of U.S. shares before prices rebounded. The pause lasts five minutes for Standard & Poor’s 500 Index and Russell 1000 Index companies as well as more than 300 exchange-traded funds when they rise or fall at least 10 percent within five minutes.

New rules proposed by exchanges on April 5, 2011, would shift the market to a limit-up/limit-down system that prevents shares from moving more than a certain amount.

For a list of securities that have been halted by U.S. circuit breakers since they were implemented in June 2010, according to data compiled by Bloomberg, click here.

Spain Increases Fines for Firms Using Irregular Workers

Spain will increase fines for companies hiring workers who aren’t registered with tax authorities starting July 31, Labor Minister Valeriano Gomez told reporters April 29 in Madrid.

Irish Nationwide to Close All 49 Offices in Ireland by May 17

Irish Nationwide Building Society, which is merging with state-owned lender Anglo Irish Bank Corp., will close all of its 49 branches in Ireland by May 17, according to a spokeswoman for the company.

The Dublin-based lender began closing branches on April 14, the spokeswoman said in response to questions. Irish Nationwide sold its 3.6 billion euros ($5.3 billion) of deposits to Irish Life & Permanent Plc in February. More than 200 Irish Nationwide employees that transferred to Irish Life under the accord have applied for voluntary redundancy, a form of dismissal or temporary lay-off with compensation, two people familiar with the situation said on April 17.


Chamber’s Challenge to California Emission Rules Dismissed

A U.S. Chamber of Commerce challenge to California’s rules limiting greenhouse gases was dismissed by a federal appeals court in Washington that said it had no jurisdiction to decide the case.

The chamber claimed in a lawsuit that the Obama administration improperly created a patchwork of auto-emissions standards by allowing California to impose its own rules limiting the carbon-trapping gases. The chamber, joined by the National Automobile Dealers Association, challenged a federal waiver granted to California.

“Because the chamber has not identified a single member who was or would be injured by EPA’s waiver decision, it lacks standing to raise this challenge,” the court found. As a result, the court said it had no jurisdiction to rule. Automakers, which were restricted by the rules, declined to sue, the court said.

The waiver from federal Clean Air Act standards, issued in 2009, covers greenhouse-gas emissions for vehicles made from 2009 through 2016. Thirteen other states and the District of Columbia have agreed to adopt the California standards, according to court papers.

The case is Chamber of Commerce v. U.S. Environmental Protection Agency, 09-01237, U.S. Court of Appeals for the District of Columbia (Washington).


Fed’s Bullard Says Better Data Needed on Communities

St. Louis Fed President James Bullard said the Federal Reserve often needs better information to understand community development and issues affecting low-and moderate-income individuals and communities.

“The appropriate data for a completely convincing analysis is often not available,” Bullard said April 29 to the Fed-sponsored Community Affairs Research Conference in Arlington, Virginia. Researchers need to “be innovative and imaginative in devising methods of gaining knowledge in these areas despite the difficulties involved.”

Each of the 12 regional Fed banks has a division focused on issues faced by low-income and moderate-income areas. This year’s conference is focused on innovative research to improve the central bank’s understanding of these communities.

Buffett Faults Sokol, Takes Blame for Not Pressing on Trades

David Sokol broke Berkshire Hathaway Inc.’s ethics rules by investing in a company as he pushed for its takeover, according to Chairman Warren Buffett, who said he regrets not pressing Sokol earlier for details.

“He violated our insider-trading rules and he violated the principles I lay out every two years to our managers,” the 80-year-old chief executive officer said April 30 at Berkshire’s annual meeting in Omaha, Nebraska.

Buffett’s remarks April 30 contrast with his comments March 30 when he announced that Sokol, 54, was leaving and praised him for “extraordinary” contributions to Berkshire. The company’s audit committee said April 26 that Sokol misled Buffett and violated the firm’s rules through his trades in Lubrizol Corp., which Buffett agreed on March 14 to buy for about $9 billion.

Sokol bought about $10 million of Lubrizol Corp. shares in January while representing Berkshire in discussions about buying the lubricant maker. Buffett said previously that Sokol had made a “passing remark” about a personal investment in the company, and the committee said in a report that the billionaire chairman was unaware of the timing of Sokol’s trades or that he was working with Citigroup Inc. bankers to deal with Lubrizol.

“I made a big mistake by not saying, ‘well, when did you buy it?’” Buffett told shareholders April 30.

For more, click here.

For an interview of Buffett by Bloomberg’s Betty Liu, click here.

For comments by Buffett on possible CEO roster for Berkshire, click here.

Comings and Goings

Schapiro Aide Said to Be Leaving SEC for PwC Accounting Firm

Kayla J. Gillan, a senior adviser to U.S. Securities and Exchange Commission Chairman Mary Schapiro, is resigning to take a job at PricewaterhouseCoopers LLP, according to people familiar with the matter.

Gillan will be a principal in a new group at the firm focusing on regulations affecting auditing firms, according to one of the people, who spoke on condition of anonymity because the move hasn’t been announced.

Gillan was hired to be Schapiro’s deputy chief of staff in 2009 as an advocate of the investor community. The SEC had noted then that Gillan had experience regulating auditors as one of the founding members of the Public Company Accounting Oversight Board, the industry’s U.S. watchdog.

She becomes the first former PCAOB member to later work for one of the so-called Big Four accounting firms that she once regulated. Congress established the PCAOB, a nonprofit corporation funded by fees on public companies and reporting to the SEC, to oversee auditing firms.

Gillan didn’t respond to an e-mail seeking comment. Steven G. Silber, a PricewaterhouseCoopers spokesman, declined to comment.

Credit Suisse Picks New Leaders for Washington Lobbying Office

Credit Suisse Group AG has shuffled the ranks in its Washington office, putting Joseph Seidel in charge of its lobbying operations in the U.S. capital, according to an internal memo.

Seidel takes sole responsibility for public policy in the Americas region after serving as co-head since 2009 with longtime chief lobbyist Mary Whalen. She has become a senior adviser, according to the e-mailed memo. Seidel, a Republican, joined the bank in 2001; previously he was general counsel of what is now the House Financial Services Committee.

Michael Williams, a former executive at the Bond Market Association and special assistant to President Bill Clinton, was promoted to deputy head of public policy, according to the memo.

Credit Suisse, Switzerland’s second largest bank, has been active in lobbying on derivatives, the Volcker rule ban on proprietary trading and other issues arising from the Dodd-Frank Act. The Zurich-based lender is also working to narrow requirements firms face under the Foreign Account Tax Compliance Act, a law designed to stop U.S. citizens from hiding money overseas. The company spent $2.7 million on lobbying last year.

Draghi Wins Bild’s Backing, Clearing Hurdle to ECB Post

Bank of Italy Governor Mario Draghi’s campaign to become European Central Bank head picked up speed with an endorsement by a top-selling German tabloid that has close ties to Chancellor Angela Merkel’s government.

Bild-Zeitung published a photomontage of Draghi wearing a Prussian spiked helmet April 29, saying the race for the ECB presidency “is decided,” and Draghi is German-enough for Merkel to support him.

Backing by Germany’s most-read newspaper, which last year lampooned the idea of an Italian managing Europe’s money and channeled public outrage over aiding debt-laden Greece, will help prepare grass-roots opinion for a southern European atop the 17-nation central bank, said Hans-Juergen Hoffmann, head of the Psephos polling company.

Merkel’s spokesman, Steffen Seibert, said April 29 there’s “no new development,” responding to a question about the Bild report. The government will announce whom it supports “in a timely fashion” before a European Union summit meeting in June, he told reporters in Berlin.

For more, click here.

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