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U.S. Highway Safety, EU Parliament, SAC Probe: Compliance

The National Highway Traffic Safety Administration, the U.S. agency that issues rules intended to protect passengers when crashes happen, for the next two years will focus its automobile-safety work on preventing accidents, the agency’s chief said.

The regulator, which in January issued a rule intended to prevent passengers from being ejected in a crash, will examine blood-alcohol content detection systems and technology enabling vehicle-to-vehicle communications, NHTSA Administrator David Strickland said yesterday at an auto-safety conference in Washington.

The agency is developing guidelines for in-vehicle communications systems, which include Ford Motor Co.’s Sync and General Motors Co.’s OnStar, Strickland said. The agency also plans rules to standardize keyless ignition systems and to require event data recorders, he said.

Compliance Policy

Gensler Says Commodity Prices Show Need for Swaps Rules

Rising market prices underscore the need for Dodd-Frank Act derivatives rules to curb speculation in commodities such as oil, gold and natural gas, Commodity Futures Trading Commission Chairman Gary Gensler told lawmakers.

Gensler made the written response to a letter from 17 senators seeking a CFTC plan for curbing crude-oil speculation. Gensler’s letter said he was writing on behalf of Commissioners Michael V. Dunn and Scott O’Malia.

Regulators and lawmakers have attempted to rein in speculation since 2008 amid concern that investors contributed to oil’s rise to a record $147.27 a barrel. The CFTC has proposed so-called position limits in agricultural, metals and energy derivatives, under rulemaking authority granted by Dodd-Frank, the regulatory overhaul enacted last year.

The CFTC has “ample basis” to proceed with limits on speculation in fuel commodities, starting with crude oil, the 17 senators wrote in their letter to Gensler.

The agency’s proposal, approved on Jan. 13, prompted about 12,000 comment letters from supporters including Delta Air Lines Inc. and opponents such as Barclays Capital and Cargill Inc.

Nord Pool, Regulators Form Joint Council for Power Regulation

Nord Pool Spot AS, which runs electricity markets in the Nordic area, formed a joint council with energy regulators in the region to exchange market information and discuss regulatory issues.

Norway, Sweden, Denmark, Finland and Estonia are represented on the council and Antti Paananen, director general of the Finnish Energy Market Authority, was elected chairman, the Oslo-based exchange said yesterday on its website.

U.K. Treasury Panel Sets Terms of Reference for FSA/RBS Probe

The U.K. House of Commons Treasury Committee announced the terms of reference for the independent review of the Financial Services Authority’s report into the failure of Royal Bank of Scotland Group Plc.

The reviewers will “report on the extent to which the FSA report is a fair and balanced summary of the evidence gathered by the FSA and PricewaterhouseCoopers during their review of the failure of RBS, and whether it fairly reflects the findings of the FSA’s investigation,” the committee said in an e-mailed statement today.

The independent review will also “report on whether the FSA’s report is a fair and balanced summary of the Authority’s own analysis of its regulatory and supervisory activities in the run up to the failure of RBS.”

International Accounting Board Needs Funding, SEC Head Says

Reliable funding for the International Accounting Standards Board is a “challenge,” and the U.S. Securities and Exchange Commission is trying to help, SEC Chairman Mary Schapiro said.

The board responsible for setting international accounting standards, and for negotiations to converge standards with U.S. accounting practices, “lacks an independent and assured source of funding,” Schapiro said in remarks prepared for a Washington meeting of the Financial Accounting Foundation, which oversees the U.S. Financial Accounting Standards Board.

The London-based IASB is funded by donations given to the International Financial Reporting Standards foundation. Without financial independence, the organization could suffer interference during times of crisis, said Schapiro, whose agency oversees U.S. accounting and auditing standards regulators.

Special Section: European Parliament Developments

Parliament to Consider Basel III, Bank Deposits, OTC Trades

The European Commission will present a draft law by the end of July to implement Basel III bank capital and liquidity rules in the European Union, said Michel Barnier, the region’s financial services commissioner.

The draft will take into account “the unique qualities of Europe’s banking system,” Barnier said.

Barnier was speaking to lawmakers in the European Parliament’s economic and monetary affairs committee. He repeated that the commission also intends to propose “additional measures” on bankers’ pay.

Separately, banks will have to guarantee that deposits of 100,000 euros ($141,000) or less will be fully refunded if the lender fails, under draft plans approved by lawmakers at the European Parliament yesterday.

The assembly’s economic and monetary affairs committee also said that bank-account holders should get their money back within five working days. The guarantees would be funded by the banks themselves.

The committee was voting on proposals made by the European Commission in July to bolster deposit guarantee programs in the 27-nation EU. The region’s governments and the full Parliament must approve the final version of the measures before they can come into force.

In another development, the European Union moved closer to adopting measures to force some trading of over-the-counter derivatives through clearinghouses in a bid to safeguard financial markets.

Lawmakers in a European Parliament committee approved proposals to empower the European Securities and Markets Authority to decide on types of derivatives that should be centrally cleared. Traders that flout the rules face penalties including fines.

OTC derivatives lack transparency and “can make it difficult to identify the nature and level of risks” that banks and other companies are taking, the lawmakers said in a report approved by the Economic and Monetary Affairs Committee.

Regulators from the Group of 20 countries have sought to toughen rules on OTC derivatives such as credit-default swaps after the failure in September 2008 of Lehman Brothers Holdings Inc. and the rescue of American International Group Inc., two of the largest CDS traders. The G-20 said trades should pass through clearinghouses and be logged in trade repositories.

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Compliance Action

FSA Gets Permanent Market Abuse Ban, Levies $1.77 Million Fine

The U.K. finance regulator won a permanent court order preventing a man from committing market abuse for the first time and fined him 1.09 million pounds ($1.77 million) for inflating the price of Global Brands Licensing Plc.

Samuel Nathan Kahn, whose Chesteroak Ltd. and Bingen Investments Ltd. were put into liquidation by the Financial Services Authority in 2008 after they found that they helped boiler rooms defraud as many as 800 investors, inflated the price of GBL last year, the regulator said in a statement yesterday.

At a court hearing last week, FSA lawyer Andrew George told Judge Guy Newey that Kahn didn’t oppose the injunction barring him from committing market abuse. Kahn wasn’t at the hearing, nor was a lawyer for him.

He received the regulator’s standard 30 percent discount on the fine for cooperating.

Senate’s Grassley Seeks SEC Report on SAC Capital Referrals

U.S. Senator Chuck Grassley asked the U.S. Securities and Exchange Commission for information relating to its stock-trading inquiry into hedge-fund firm SAC Capital Advisors LP.

In a letter sent yesterday, Grassley, the senior Republican on the Judiciary Committee, asked SEC chairman Mary Schapiro to explain how the regulator has handled allegations of suspicious trading. Grassley’s office has said he has received about 20 examples from the Financial Industry Regulatory Authority of possible insider trading involving SAC Capital.

His letter asks the SEC how it resolved the referrals, how the number of referrals compares to similar firms, and whether the agency drafted a related Wells notice -- a formal notification from the SEC that the agency is considering a lawsuit.

The Iowa senator had asked Finra last month to provide information on the “potential scope of suspicious trading activity” at the firm founded by billionaire Steven A. Cohen. SAC Capital, which has about $13 billion under management, has come under scrutiny in an insider-trading probe that has included hedge funds, corporate executives and so-called expert networking firms.

Jonathan Gasthalter, a spokesman for SAC, didn’t immediately return a phone call seeking comment.

Polish Phone Regulator Awards TPSA 67 Million-Zloty Subsidy

Poland’s telecommunications regulator awarded Telekomunikacja Polska SA, the country’s largest phone company, 67 million zloty ($23.9 million) as a subsidy for providing so-called common services, which include installing public phone booths, the watchdog said on its website yesterday.

The company, known as TPSA, had sought 803.7 million zloty.

Lloyds to Pay $33 Million for Rejecting Customer Complaints

Lloyds Banking Group Plc’s Bank of Scotland unit must pay 20.5 million pounds ($33.3 million) for rejecting complaints over retail investment products without taking customers’ circumstances into account.

The bank was fined 3.5 million pounds by Britain’s Financial Services Authority for mishandling complaints, and agreed to pay 17 million pounds in compensation to customers, the regulator said in a statement today.

Bank of Scotland “wrongly rejected a significant number” of the 2,592 complaints it received between July 2007 and October 2009, the FSA said. The agency found the bank didn’t fairly assess whether the investments were suitable for the customers who complained, and didn’t analyze the complaints it received as a way to improve its business.

The fine is the second resulting from the FSA’s probe of financial firms’ complaint handling, the regulator said. In January, the FSA fined Royal Bank of Scotland Group Plc and its National Westminster Bank unit a total of 2.8 million pounds for delays responding to customers, failing to address their concerns, and not giving bank staff adequate training.

“We have fallen short of the high standards of service our customers should be able to expect of us and we apologize,” said Ray Milne, the risk director at Bank of Scotland. “We are in the process of contacting affected customers and will pay compensation where it is due.”

Bank of Scotland said in an e-mailed statement that it cooperated with the FSA probe and accepts the findings.

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UBS Banker Poteroba’s Friend Koval Sentenced to 26 Months

Alexei Koval, who admitted that he conspired with former UBS AG investment banker Igor Poteroba to make $1.4 million in a four-year insider-trading scheme, was sentenced to 26 months in prison.

Koval, 37, who worked at Northern Trust as a pricing manager before his arrest in March 2010, was sentenced yesterday in Manhattan federal court after pleading guilty in January to conspiracy and securities fraud.

Poteroba, who was an investment banker in the health-care group at UBS Securities LLC before his arrest, was sentenced to 22 months behind bars in March after pleading guilty to insider trading. He admitted that he tipped friends to potential mergers. Poteroba, 37, is at the same detention center as Koval, according to records of the U.S. Bureau of Prisons.

Koval said in his guilty plea that he paid for tips.

The case is U.S. v. Koval, 10-CR-443, U.S. District Court, Southern District of New York (Manhattan).

For more, click here.


Finra’s Ketchum Says Structured Products ‘Areas of Concern’

Structured products are “areas of concern” for the Financial Industry Regulatory Authority, said Richard Ketchum, head of Wall Street’s self-funded regulator.

Brokers who sell structured products, which are securities created by banks that package debt with derivatives as customized investment bets, must “truly understand the products they sell,” Ketchum said yesterday at the regulator’s annual conference in Washington. Sales of structured products rose 46 percent last year to a record $49.5 billion, according to data compiled by Bloomberg.

“Brokers can’t rely on firm approval alone to satisfy their suitability obligations,” said Ketchum, Finra’s chairman and chief executive officer. “This is particularly important with the proliferation of increasingly complex financial products, and at a time when certain investors are tempted to chase yield in today’s lower interest rate environment.”

Broker-dealers regulated by Finra are currently required to offer products to clients that are “suitable” to their needs. A Securities and Exchange Commission study mandated by the Dodd-Frank Act recommended broker-dealers instead be subject to a fiduciary standard as rigorous as that which requires investment advisers to act in clients’ “best interests.”

Banking Commission Says U.K. Gave Pledge on Independence

John Vickers, chairman of the U.K.’s Independent Commission on Banking, said the commission had no part in the so-called Project Merlin talks with banks and received “instant and unequivocal” assurances from the government that its independence wouldn’t be compromised.

“We were absolutely not part of the Merlin discussions, which were between the government on the one hand and the banks on the other,” Vickers told a House of Commons committee during a three-hour hearing in London yesterday. “The government gave us in absolutely clear terms assurances that there would be no compromises of any kind.”

Vickers didn’t directly respond to a parliamentarian’s suggestion that the government assurance followed a threat by the ICB to resign. The government had offered to water down the commission’s recommendations in return for a cut in bonuses, the Evening Standard reported in March.

Royal Bank of Scotland Group Plc, Lloyds Banking Group Plc, Barclays Plc and HSBC Holdings Plc agreed in February to pay lower bonuses to U.K. staff and boost business lending under the Project Merlin agreement with the government. The ICB’s interim report last month recommended that the U.K.’s biggest banks boost capital, implement plans for an orderly bankruptcy and erect fire breaks around consumer units to boost financial-system stability.

The panel has spoken to the Bank of England and the Financial Services Authority about its plans, Vickers said, and will meet the main banks again next month.

Juncker Says Soft Restructuring Alone Won’t Solve Greek Crisis

Luxembourg’s Jean-Claude Juncker, who leads the group of euro-area finance ministers, said a soft restructuring of Greek debt wouldn’t be sufficient to solve Greece’s financial problems.

“I want savings, structural reforms and privatization,” Juncker said today in an interview on RTL Luxembourg radio. “And then in the framework of a possible additional program for Greece one can also speak about a reprofiling and a soft restructuring. First the measures, then the consequences, not the other way around. And it’s not an alternative to more practical measures.”

Comings and Goings

Bafin’s Roeseler May Land Job as Top Bank Regulator, FTD Says

Bafin unit head Raimund Roeseler is likely to take over as Germany’s top banking regulator at the agency, Financial Times Deutschland reported, citing unidentified government people.

Roeseler, who currently heads the regulator’s general policy unit, is likely to be named as successor to Sabine Lautenschlaeger, Bafin’s executive director for banking supervision, within days, the newspaper said.

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