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MF Global Firings, EU Credit Ratings, Olympus: Compliance

MF Global Inc.’s workforce of 1,066 broker-dealer employees was fired as the failed brokerage closes its New York office and liquidates in an attempt to return assets to customers under the guidance of a trustee as the company submits to bankruptcy and regulatory investigations.

The broker-dealer, winding down since Oct. 31, will pay employees through Nov. 15, according to a statement Nov. 11 from the office of the trustee, James Giddens. As many as 200 former employees are being hired to assist in the liquidation of the broker-dealer, Giddens said.

Some employees of MF Global Inc., the broker-dealer unit of bankrupt MF Global Holdings Ltd., learned they were being fired from news reports, a person familiar with the matter said. The press release was distributed to and reported by the news media before all MF Global employees who were losing their jobs were notified, according to the person, who declined to be identified because they aren’t authorized to speak publicly on the firings

Kent Jarrell, a spokesman for Giddens said the trustee’s office was in the process of notifying employees when the release went out.

Tiffany Galvin, a spokeswoman for MF Global, declined to comment on the timing of the trustee’s release.

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Special Section: MF Global

LME Suspends Steel Warrants Held by MF Global Administrator

The London Metal Exchange suspended 274 steel warrants held by the U.K. administrator for MF Global Holdings Ltd.

The U.K. administrator, KPMG, took control of the warrants and “as a result, we had to suspend them,” Chris Evans, an LME spokesman, said by phone Nov. 11. MF Global U.K. Ltd. was stopped from trading on the LME on Oct. 31 after MF Global Holdings filed for bankruptcy protection. The unit is one of 12 category 1 members that gave it the right to trade on the floor.

Steel trading accounted for less than 1 percent of LME futures volume last year after the metal was introduced on the exchange in February 2008.

Warrants are documents entitling holders to take possession of metal at an LME-approved warehouse. The suspended warrants are for steel billet stored by Metro International Trade Services LLC in New Orleans and Chicago, North European Marine Services Ltd. in Rotterdam and Pacorini Metals (Asia) Pte Ltd. in Johor, Malaysia, the LME said in a notice to members Nov. 11.

MF Global Canada Trustee Seeks Client Accounts Transfer

KPMG Inc., the court-appointed trustee in MF Global Canada’s bankruptcy, is seeking permission to transfer customers’ futures, equity and bond accounts to RBC Dominion Securities.

A court hearing on the KPMG motion is scheduled for today in Toronto, the auditor said in a statement. The filing couldn’t immediately be confirmed in court records.

Fleckenstein Says Missing MF Funds May Turn Up

Bill Fleckenstein, president of Fleckenstein Capital Inc., talked about the prospects for accessing frozen MF Global Inc. accounts.

He spoke on Bloomberg Television’s “InBusiness With Margaret Brennan.”

For the video, click here.

Compliance Policy

EU Said to Mull Scaling Back of Credit-Rating Rotation Plans

The European Commission may scale back plans to require periodic changes in the firms that rate a company’s credit on concerns there aren’t enough of them for the proposal to work, said a person familiar with the matter.

The commission, the 27-nation EU’s executive arm, had considered requiring companies to change the ratings firm they use every three years to ensure that assessments remain impartial, with a four-year period before a firm can be rehired. The measure may now be scaled back, including a possible extension of the three-year deadline for companies that hire multiple ratings firms, said the person, who couldn’t be named because the discussions are private.

EU plans to ban mergers between large credit-rating companies may also be abandoned because of legal complications, the person said. The measures were considered as part of proposals to toughen regulation of credit-ratings companies that will be published this week by Michel Barnier, the EU’s financial services chief.

Global equity, bond, currency and commodity markets were roiled last week when Standard & Poor’s sent, and then corrected, an erroneous message to subscribers suggesting France’s top credit rating had been downgraded.

This week’s proposals will include measures to allow investors to sue ratings companies in cases where they have lost money through gross negligence or serious misconduct, Chantal Hughes, a spokeswoman for Barnier, said.

Separately, the EU said French and EU regulators should investigate Standard & Poor’s erroneous message on France, calling it a “very serious incident.” The European Commission, the 27-nation EU’s executive arm, will next week present plans to toughen regulation of credit-ratings companies, Hughes in a statement.

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German Parliament Urges ‘Effective’ Financial Market Regulation

Germany’s lower house of parliament urged Chancellor Angela Merkel’s government to press for more “effective” financial-market regulation, including closer oversight of rating companies such as Standard & Poor’s.

Lawmakers called on the government to step up efforts to persuade the world’s 20 biggest economies to monitor so-called shadow banking and to make sure that internationally agreed standards are applied in all countries, according to a resolution passed by the Bundestag in Berlin Nov. 11. Rating companies must become more transparent and need “effective oversight,” the Bundestag said on its website.

The Financial Stability Board in Basel, Switzerland, urged regulators to find ways to rein in banks that seek to shift risks off their balance sheets and minimize the amount of capital they need to hold, in a report published on Oct. 28.

Consob Extends Short-Sale Ban on Financials to Jan. 15

Italy’s securities market watchdog, known as Consob, extended restrictions on short sales of financial shares through Jan. 15.

Disclosure of short sales was extended indefinitely, Consob said in an e-mailed statement Nov. 11.

The restriction, which was scheduled to expired Nov. 11, had been adopted by some European countries in order to stem market volatility.

Europe Should Allow Tougher Bank Capital Rules, Basel Head Says

The European Union should allow individual countries to impose higher capital requirements than those set by the Basel Committee on Banking Supervision, said Stefan Ingves, who heads the international regulator.

The rules set by the committee should be viewed as minimum levels as long as it’s up to individual countries to support struggling banks, Ingves told reporters in Stockholm Nov. 10.

From the Basel Committee’s point of view, the main thing has been setting minimum rules, not making sure it is the same everywhere, Ingves said.

International regulators agreed to an overhaul of bank-capital requirements last year. Those changes, known as Basel III, will more than triple the core reserves that lenders must hold. The European Commission’s argument that curbs should be placed on regulators’ ability to impose tougher capital rules on their banks than those agreed on at EU level has been opposed by the U.K. and Sweden, whose central bank Ingves heads.

The Swedish government will propose capital requirements for its banks by the end of the year, Financial Markets Minister Peter Norman said Nov. 10 in a speech.

Compliance Action

SEC Suspended Employees, Cut Pay Over Missteps Related to Madoff

The U.S. Securities and Exchange Commission disciplined eight employees for missteps related to Bernard Madoff’s Ponzi scheme, with punishments ranging from suspensions to written reprimands, an agency spokesman said.

The sanctions stem from Inspector General H. David Kotz’s 2009 report on the agency’s dealings with Madoff, according to John Nester, an SEC spokesman. Kotz had urged the SEC to act on an “employee-by-employee basis” to prevent a recurrence of mistakes that kept the agency from halting the fraud.

Of the 21 people “whose performance or conduct were called into question” by Kotz, 10 weren’t subject to review because they already left the SEC, Nester said. Of those remaining, nine were recommended for discipline, and one of them left the agency before the matter was resolved, Nester said.

The SEC hired Washington law firm Fortney & Scott LLC to make disciplinary recommendations, with SEC Chairman Mary Schapiro making the final decisions, Nester said. He declined to identify the employees or the offices where they worked.

Japan Regulator, Tokyo Stock Exchange Ally on Olympus Probe

Japan’s Financial Services Agency will team with the Tokyo Stock Exchange to urge Olympus Corp. to disclose facts behind its loss cover-up amid investor concerns over governance in the world’s third-largest stock market.

Olympus has lost more than 500 billion yen ($6.4 billion) of market capitalization since mid-October, when the company ousted President Michael C. Woodford after accusations of fraud. Since Woodford’s whistle blowing, the company has disclosed that three executives helped conceal decades of losses, leading to a sense of mistrust in Japanese corporate governance.

The stock exchange will cooperate and share information with the regulator to grasp the truth and help maintain an orderly market, Kazuhiko Yoshimatsu, a spokesman for the bourse, said separately Nov. 11.

The Tokyo Prosecutor’s Office is investigating Olympus on suspicion the company broke securities law. Financial Services Minister Shozaburo Jimi said in a statement Nov. 11 that measures he plans to take could include investigations and surveillance by the Securities and Exchanges Surveillance Commission, the enforcement arm of the FSA.

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Nokia to Work With Romanian Tax Agency to Solve Asset Seizure

Nokia Oyj said it will work with Romania’s tax authority, which seized the assets of Finnish phone company’s local unit over an unpaid debt of about $10 million, to solve the situation “satisfactorily.”

Nokia, the world’s largest maker of mobile phones by volume, has imported some tax-free components that were resold instead of being used for phone assembly, against Romania’s custom rules, Sorin Blejnar, the head of the tax agency, told reporters in Bucharest Nov. 11.

“We are looking into this matter and engaging with the local authority to ensure it will be resolved satisfactorily,” Nokia said in an e-mailed response to Bloomberg questions.

Nokia said on Sept. 29 it planned to close its factory in Romania starting this year and cut 3,500 jobs as part of a plan to reorganize its business.

“We seized the assets as a precautionary measure to prevent Nokia from selling them before they pay their debt to the state,” Blejnar said the asset seizure was a “precautionary measure” and standard procedure that “won’t affect the activity of the factory.”

Sino-Forest Confirms Probe by Royal Canadian Mounted Police

Sino-Forest Corp., the Chinese timber company whose shares were suspended in Toronto in August amid allegations of fraud, confirmed that it’s being investigated by the Royal Canadian Mounted Police.

The company is cooperating with probes by the Ontario Securities Commission and the RCMP, Mississauga, Ontario- and Hong Kong-based Sino-Forest said Nov. 11 in an e-mailed statement.

“We cannot comment on the RCMP investigation, but Sino-Forest’s Independent Committee is in the latter stages of its own extensive examination” of allegations made by Muddy Waters LLC, Sino-Forest said, referring to the report by the research firm. The company said it will respond fully by the year-end.

Carolyn Shaw-Rimmington, a spokeswoman for OSC, said in an e-mail Nov. 10 that the commission has referred the matter to the RCMP and the commission’s investigation is ongoing.

The RCMP doesn’t confirm or deny investigations, Sergeant Greg Cox, a spokesman for the force, said by telephone Nov. 11. He declined to comment further.

Former UBS Wealth-Management Head Faces $159,000 FSA Fine

The Financial Services Authority intends to fine UBS AG executive John Pottage 100,000 pounds ($159,000) for failing to prevent unauthorized trades at the bank’s wealth-management unit in London, lawyers for the U.K.’s finance regulator said.

Pottage worked to improve systems and controls in the wealth-management unit when he started as its chief executive officer in September 2006 and doesn’t deserve a fine, his lawyer, Guy Philipps, said today. Pottage, whom UBS moved to Zurich amid the regulator’s probe, is challenging the fine at a London court hearing.

The FSA alleged the executive “should have acted ‘sooner than he did’ to instigate a much wider investigation into whether there might be other weaknesses in controls,” Philipps said. “Mr. Pottage strongly denies that charge. He is supported in that denial by UBS, of which he remains a senior executive.”

The FSA fined the Swiss lender 8 million pounds in 2009 for not preventing its international wealth-management employees from making as many as 50 unauthorized trades a day with funds from at least 39 customer accounts.

The bank, which is an interested party in the case, not a defendant, said in an e-mailed statement that it “does not believe this disciplinary action is justified.”

Courts/Administrative Tribunals

Imperial Tobacco Says U.K. Regulator Must Drop Price-Fixing Case

Britain’s antitrust regulator must scrap its price-fixing trial over U.K. cigarette sales after being forced to abandon several claims in the seven-year-old case, Imperial Tobacco Group Plc told a tribunal Nov. 11.

Mark Howard, a lawyer for the company, told the Competition Appeal Tribunal in London that the Office of Fair Trading’s case had been “destroyed.” The court had asked the regulator to explain how it will continue fighting appeals of fines against Imperial Tobacco, Wal-Mart Stores Inc. and 10 other manufacturers and retailers.

The OFT fined the group a total of 225 million pounds ($359.3 million) last year over claims tobacco companies and retailers colluded to fix prices on cigarettes and other tobacco products from 2001 to 2003, stemming from evidence given by whistle-blower J Sainsbury Plc, the U.K.’s third-largest supermarket chain.

OFT spokeswoman Kasia Reardon declined to comment.

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Khuzami Says Seeking Admissions of Guilt Would Slow Probes

The U.S. Securities and Exchange Commission’s enforcement chief said letting defendants settle cases without admitting wrongdoing helps maximize the agency’s ability to investigate fraud with limited resources.

“If you can reach a settlement that gets you most or all of what you think you can get” in litigation, “then you’ve fulfilled your mission to investors whose cases might not get investigated, or might not get investigated sooner, if you insist on admissions,” Robert Khuzami said Nov. 11 at a securities law conference in New York.

Khuzami’s comments come amid scrutiny of SEC settlements including U.S. District Judge Jed Rakoff’s questioning of the agency’s policy of letting subjects of investigations resolve claims without admitting or denying misdeeds. Rakoff is reviewing a proposed $285 million settlement with Citigroup Inc., which the SEC accused of misleading investors in a collateralized debt obligation.

“No one disagrees with the sort of abstract notion that you’d like to have admissions in your cases in the same way you’d like to have a lot of things,” including the resources to interview every witness in a case, Khuzami said. “In deciding amongst competing considerations, one has to make choices between competing demands.”

For more, click here.

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