S. Korea-Google, German Rescue Decision, Finra: Compliance

Google Inc.’s Seoul office was raided by South Korea’s antitrust regulator as part of a probe into whether the owner of the world’s largest search engine unfairly blocked competitors in the mobile-search market, a person familiar with the investigation said.

The on-site investigation at Google’s office resulted from April complaints filed by NHN Corp. and Daum Communications Corp., South Korea’s two largest Internet search companies, said the person, who declined to be identified because the probe isn’t public. Robin Moroney, a Tokyo-based spokesman for Google, and Kwag Se Boong, a Seoul-based spokesman for the Fair Trade Commission, declined to say whether the raid took place.

South Korea joins the U.S. and some European countries in increasing scrutiny of Google, which owns Android, the most used operating system for smartphones. The company has denied the claims by NHN and Daum, which together control more than 90 percent of South Korean Web queries, that Google blocks carriers and manufacturers from embedding search applications in Android devices.

“We will work with the FTC to address any questions they may have about our business,” Moroney said in an e-mailed statement yesterday. “Android is an open platform. We do not require carriers or manufacturers to include Google Search or Google applications on Android-powered devices.”

Reuters reported on the raid Sept. 6, citing an unidentified person familiar with the matter.

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Compliance Policy

EU Regulators Propose More Oversight of Energy-Supply Deals

European Union regulators proposed greater oversight of energy agreements between member nations and third countries to strengthen the bloc’s negotiating power and ensure adequate supplies.

The European Commission put forward draft legislation that would establish “an information-exchange mechanism” covering intergovernmental energy accords, according to a statement published in Brussels yesterday. In a separate document, the commission also proposed a strategy to strengthen energy relations with EU partners.

The draft decision on an information-exchange mechanism would build on a 2010 law that requires EU governments to notify the commission, the bloc’s regulatory arm, of their natural-gas agreements with countries outside the region and to provide data on gas companies’ contracts with foreign suppliers.

The EU, which relies on imports for half of its fuel, has faced disruptions since 2006 to gas and oil from Russia as a result of Russian price and fee disputes with Ukraine and Belarus, through which the supplies pass. The push for more centralized oversight of energy deals follows new European legislation to break down national barriers in the EU gas and electricity markets.

The draft law must be backed by EU governments and the European Parliament, a process that can take a year or more.

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Consumer Groups May Sue S&P, Moody’s Should They Cut Italy

Two Italian consumer groups said they may sue Standard & Poor’s and Moody’s Investors Service should the rating companies downgrade Italy, saying they aren’t authorized to rule on the country’s creditworthiness.

The ratings companies are already facing legal challenges in Italy as prosecutors in the southern city of Trani are investigating statements by S&P and Moody’s on the country’s creditworthiness. S&P and Moody’s placed Italy’s rating under review for possible downgrade in May and June, respectively.

The consumer groups are challenging whether the S&P and Moody’s have the right to rate Italy, saying they lack a license from the European Securities and Markets Authority, the Adusbef and Federconsumatori consumer groups said yesterday in a joint e-mailed statement. ESMA earlier this year became the European Union’s single regulator of credit-rating companies.

ESMA Chairman Steven Maijoor said U.S. credit-rating companies won’t get a license for the EU unless they abide by the bloc’s rules, Financial Times Deutschland reported on June 23, citing an interview.

UK Bank Panel May Seek Legislation on Unit Fire-Breaks, BBC Says

The Independent Commission on Banking is likely to recommend that the government should create legislation almost immediately requiring banks to ring-fence their retail operations, while the implementation of the requirement may then be phased in over a period of years, the British Broadcasting Corp. reported in a blog on its website, without saying where it got the information.

Compliance Action

Sino-Forest Executives Face ‘Direct Hit’ From OSC in Fraud Probe

Sino-Forest Corp. faces an extended trading ban and new restrictions from a Canadian securities regulator that’s been criticized for being too slow to clamp down on corporate fraud.

The Ontario Securities Commission, which said last month that some officers and directors of the Chinese tree-plantation operator may have acted fraudulently, halted trading of Sino-Forest shares and temporarily banned five executives from buying and selling securities. In a hearing in Toronto that begins at 9:30 a.m., Canada’s main securities watchdog may extend those cease-trade orders in a probe that could lead to fines and the permanent ouster of executives.

The OSC’s actions against Mississauga, Ontario- and Hong Kong-based Sino-Forest contrast with its handling of past cases such as Bre-X Minerals Ltd. and former Hollinger International Inc. Chairman Conrad M. Black, in which it took action only after the U.S. Securities and Exchange Commission stepped in.

The OSC has been headed since November by Howard Wetston, a former judge in the Federal Court of Canada and ex-chairman of the Ontario Energy Board. One of the regulator’s five priorities for this fiscal year is to “intensify operational, compliance and enforcement efforts,” which include reducing timelines for completing investigations and bringing regulatory proceedings forward.

Wetston, 64, didn’t return telephone calls seeking comment.

Sino-Forest shares have plunged 74 percent since June 1, the day before short seller Carson Block’s Muddy Waters LLC alleged the company overstated its timber holdings. Sino-Forest has denied the allegations.

Carolyn Shaw-Rimmington, an OSC spokeswoman, didn’t return a telephone call seeking comment yesterday on whether the executives will appear at the hearing.

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Impala Fails to Meet Zimbabwe Ownership Laws, Minister Says

Impala Platinum Holdings Ltd.’s Zimbabwean unit, known as Zimplats, has failed to meet new laws on asset ownership and may have its mining license revoked, according to Indigenization Minister Saviour Kasukuwere.

Kasukuwere said yesterday in a telephone interview that the Ministry of Mines will dispatch a letter “very soon” concerning Zimplats. The company’s exploration projects in the country include the Ngezi South and North ventures, Hartley Platinum and the Selous complex.

Zimbabwe, with the world’s second-biggest reserves of platinum and chrome after neighboring South Africa, has demanded all foreign or white-owned companies submit plans to sell 51 percent stakes in local assets for approval. The law, which could see non-compliant businesses lose operating rights, may threaten a recovery from a 10-year recession that ended in 2009.

The minister said he’ll ask the ministry to start the process of revoking Impala’s license, the state-controlled Herald newspaper reported yesterday.

The company is the biggest investor in Zimbabwe’s mining industry and could invest as much as $10 billion more to expand its output, David Brown, chief executive officer of Impala, said in an interview on Aug. 25.

Bob Gilmour, a spokesman for the Johannesburg-based company, declined to comment when contacted yesterday.

Jammin Java, Chaired by Bob Marley’s Son, Faces SEC Probe

Jammin Java Corp., the gourmet coffee company whose chairman, Rohan Marley, is the son of the reggae star Bob Marley, faces a probe by the Securities and Exchange Commission for possible involvement in a so-called pump-and-dump scheme.

The SEC staff is examining whether online newsletters touting Jammin Java stock through blast faxes and investor message boards contained false and misleading information, according to documents filed Sept. 2 in federal court in Oakland, California. The company said in a May SEC filing that no one at Jammin Java authorized or paid for any stock reports, and it “expressly repudiates the promotions.”

The probe was disclosed in a lawsuit by individuals trying to block SEC subpoenas issued in the investigation.

Jammin Java’s share price rose from 17 cents in December to $6.35 on May 12, after which it plunged to less than a $1 a share, the SEC said in the documents.

The jump in the Los Angeles-based coffee wholesaler coincided with the dissemination of newsletters lauding its stock, the SEC said. A formal order of investigation was issued in May directing staff to examine possible securities law violations by Jammin Java, according to the documents said.

Stuart Smith, head of investor relations at Jammin Java, declined to comment yesterday on the SEC documents. He cited a company regulatory filing that had warned investors of “unauthorized stock promotion campaigns.”

John Nester, an SEC spokesman, didn’t answer an e-mail seeking comment after regular business hours yesterday.

The cases are John Doe v. SEC, 11-8028 and 11-8029, U.S. District Court, Northern District of California (Oakland).


German Top Court Clears Nation’s Role in Euro Rescue Packages

Germany’s top court cleared the way for Chancellor Angela Merkel’s coalition to participate in the current euro-area rescue plans, while saying it must seek some additional parliamentary approval for payouts under the funds.

The Federal Constitutional Court in Karlsruhe threw out three suits targeting Germany’s share of the 110 billion-euros ($155 billion) in loans for Greece from euro-region governments and the International Monetary Fund as well as a separate 750 billion-euro rescue fund approved last year in an effort to prevent Greece’s debt crisis from spreading.

The ruling will aid Merkel’s efforts to gain support for participation in a new round of European Financial Stability Facility programs. She pledged last week to consult lawmakers after her Cabinet agreed on a reworked plan that would raise Germany’s share of EFSF loan guarantees to 211 billion euros from a current 123 billion euros.

The court said its ruling yesterday shouldn’t be seen as “blanket” authorization of future rescue packages and the government must seek approval from the parliament’s budget committee for the individual guarantees it assumes in each bailout under the current EFSF.

The court said it rejected the suits because it found that lawmakers kept enough powers to control the government. Also the requirement to have the parliament’s budget committee clear individual guarantees Germany assumes under the current EFSF beefs up that control. Parliament didn’t deplete its right to adopt the budget and control its implementation, thus it didn’t disregard the principle of democracy, according to the court.

Lower-house lawmakers plan to hold a first reading of a new EFSF bill today before it goes to a final vote on Sept. 29.

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Goldman Sachs’s Pay Plan Hurts Shareholders, Lawyer Contends

Goldman Sachs Group Inc.’s compensation plan, which almost doubled top executive Lloyd Blankfein’s pay last year, unfairly rewards the investment bank’s employees at shareholders’ expense, a lawyer for investors said.

Goldman Sachs, the fifth-biggest U.S. bank by assets, has lost $50 billion in market value since 1999 while the company has paid out billions in compensation to the firm’s 31,000 employees, including Blankfein, its chairman and chief executive officer, John Harnes, an attorney for investors who have sued over the pay plan, argued yesterday.

Goldman Sachs, based in New York, “is being run for the benefit of employees rather than shareholders,” Harness told Delaware Chancery Court Judge Sam Glasscock III. The judge heard arguments on whether shareholders’ suits seeking to recoup executive compensation should be thrown out and said he’d rule later.

The firm, which set a Wall Street pay record in 2007, was pilloried by politicians and labor unions for its compensation practices after getting taxpayer aid during the financial crisis. In July, Goldman Sachs officials set aside $8.44 billion for the company’s compensation pool in the first six months of this year, according to its website. That was 9 percent less than in the same period in 2010 as revenue tumbled 11 percent.

Blankfein and other firm executives agreed to forgo cash bonuses in 2009 and take restricted stock grants as compensation to mute criticism of the firm’s pay practices.

Gregory Varallo, Goldman Sachs’s lawyer, argued that investors haven’t provided any evidence that directors engaged in wrongdoing by creating the pay plan or encouraged excessive risk-taking by the firm’s traders and bankers.

The case is In re the Goldman Sachs Group Inc. Shareholder Litigation, 5215, Delaware Chancery Court (Wilmington).


U.S. Pursuing Antitrust Pact With India, American Official Says

The U.S. is working on an agreement with India to improve international antitrust enforcement as it has with China and Russia, the top Justice Department antitrust official said.

Officials will create a memorandum of understanding allowing the U.S. and India to share information and expertise on anti-competitive practices, Sharis Pozen, acting chief of the Justice Department’s antitrust division, said yesterday in a speech in New York.

Pozen made the remarks at a conference at Fordham Law School.

Trade between the countries more than doubled to $37 billion from 2003 to 2009, according to U.S. Commerce Department data. In the first eight months of 2010, total trade topped $32 billion.

The U.S. will act vigorously against anti-competitive practices in the current economic climate, focusing on industries that affect consumers, such as health care and financial services, Pozen said.

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MF Global’s Maughan Says Basel III Is ‘Crippling’

Simon Maughan, head of sales and distribution at MF Global Ltd. in London, said the liquidity provisions of proposed Basel III rules are “crippling” for banks in Europe. Maughan talked with Bloomberg’s Tom Keene on Bloomberg Radio’s “Bloomberg Surveillance.” They were joined by Michael Holland of Holland and Co.

For the audio, click here.

Cameron Says U.K. Must Act to Overhaul Bank Regulation

U.K. Prime Minister David Cameron talked about banking regulation, policing and National Health Service treatment waiting lists.

He spoke during his weekly question and answer session with lawmakers in the House of Commons in London.

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Comings and Goings

Finra Chief Counsel Riefberg Joins Fried, Frank Law Firm

Former Finra Chief Counsel Linda Riefberg joined law firm Fried, Frank, Harris, Shriver & Jacobson LLP’s enforcement and investigations practice in New York.

Riefberg, 52, oversaw a broad range of investigations and disciplinary actions while at the Financial Industry Regulatory Authority’s department of enforcement. She was a lawyer in the enforcement division of the New York Stock Exchange, which merged in 2007 with the National Association of Securities Dealers to form Finra, the law firm said yesterday in a statement.

Finra is the largest independent securities regulator in the U.S, according to its website.

Dubai Names Saeb Eigner Chairman of DIFC Business Park Regulator

Dubai appointed Saeb Eigner as the chairman of the Dubai Financial Services Authority, the regulator of the Dubai International Financial Center tax-free business park, to replace Abdullah Mohamed Saleh.

Eigner was appointed deputy chairman of DFSA’s board after Saleh was named governor of the DIFC in July, according to a statement on DFSA’s website. Eigner is the founder and chairman of Lonworld, a private finance, property and investment group, as well as a governor of the London Business School and was previously a senior manager at ANZ Grindlays Bank Plc in London.

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