Canada Takeovers, Corzine Subpoena, Basel Audits: Compliance

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Canada is open to changing its law governing foreign takeovers to provide more “certainty” to companies considering purchases of Canadian firms, Industry Minister Christian Paradis said.

The federal government reviews foreign acquisitions of companies with assets valued at more than C$312 million ($306 million) under the Investment Canada Act, and can reject transactions that don’t provide a “net benefit” to Canada.

Paradis said Dec. 2 in an interview in New York, where he met with U.S. company executives and investors, that the ministry is “always open” to improving the regime.

The remarks came amid calls for changes to Canada’s review process that would make it more transparent. The government last year rejected a proposed $40 billion hostile bid for fertilizer maker Potash Corp. of Saskatchewan Inc. by Australia-based BHP Billiton Ltd.

It was the second time in two years Conservative Prime Minister Stephen Harper’s government blocked a foreign acquisition. In 2008, the government rejected a bid by Minneapolis-based Alliant Techsystems Inc. to acquire the aerospace division of Vancouver-based MacDonald, Dettwiler & Associates Ltd. Canada hadn’t previously rejected a foreign acquisition since the Investment Canada Act took effect in 1985.

Harper told Bloomberg News in a Sept. 21 interview that Canada will “proceed with caution” as it considers allowing more foreign takeovers, wanting to ensure they don’t lead to a loss of head-office jobs or declining industry leadership.

Paradis called the existing system a “solid regime” that has worked well.

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Special Section: EU Debt Crisis

Merkel Heads to Paris as Leaders Seek Debt-Crisis Strategy

European leaders will take another run at fixing the debt crisis this week after the failure of their fourth rescue blueprint sparked intensified concern the 17-nation euro area was on the brink of unraveling.

German Chancellor Angela Merkel and French President Nicolas Sarkozy held talks in Paris today. With a European Union summit in Brussels looming Dec. 9, U.S. Treasury Secretary Timothy Geithner arrives in Frankfurt tomorrow to prod political leaders and the European Central Bank holds a policy meeting Dec. 8.

Safeguarding banks, limiting the damage to Italy and Spain and finding additional rescue funds may hinge on the response to Franco-German demands for closer economic integration and tougher policing of fiscal rules. Markets climbed last week as investors looked toward the latest plan to rescue the euro, betting that a new regime of budget rules at the summit may clear the way for more intervention from the ECB.

The German and French leaders differ on matters such as the role of the ECB and sanctions for euro-area states that violate deficit rules. The two nations are leading the push for closer economic ties among euro nations and locking in tougher enforcement of budget rules to counter the debt crisis.

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Separately, Merkel’s government won’t stand in the way of the Bundesbank helping to fight the debt crisis by means of loans channeled through the International Monetary Fund, a senior Merkel ally said.

Germany is keen for the IMF to adopt a “decisive role” in combating the crisis alongside the European rescue fund, Michael Meister, the parliamentary finance spokesman for Merkel’s Christian Democratic Union, said today in a telephone interview.

The Bundesbank may be prepared to make loans to the IMF to combat the crisis, Die Welt newspaper reported today, citing a November letter from the central bank’s president, Jens Weidmann, to German Deputy Finance Minister Joerg Asmussen. Article 123 of European rules regulating the single currency bans central banks from directly funneling cash to states to plug deficits, Die Welt said.

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Separately, Italian Prime Minister Mario Monti announced 30 billion euros ($40 billion) of austerity and growth measures as he seeks to cut the euro-region’s second-biggest debt and prevent a breakup of the euro.

Monti’s Cabinet in Rome passed the measures a day earlier than planned as the new prime minister rushed to reassure investors he is serious about taming a debt of almost 1.9 trillion euros. The premier will present the package, which includes more than 12 billion euros in spending cuts, to both houses of parliament today.

Papaconstantinou Says Greece, EU Underestimated Crisis

George Papaconstantinou, Greek finance minister from 2009 until June this year, discusses the response by European Union leaders to the sovereign crisis.

Papaconstantinou, now energy minister, spoke with Bloomberg’s Francine Lacqua in London on Dec. 2.

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Fico Says Euro Members Should Listen to Merkel Plan

Slovak opposition leader Robert Fico, who brought the country to the euro region in 2009, talks about the outlook for the currency bloc and German Chancellor Angela Merkel’s call for members to have closer fiscal policies.

Fico, a former prime minister who is vying to return to the job in three months, spoke with Bloomberg’s Radoslav Tomek and James M. Gomez on Dec. 2 in Bratislava.

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Compliance Policy

EU Commission Seeks to Lift Barriers to Venture-Capital Funds

The European Commission said it will propose measures on Dec. 7 to make it easier for venture capital funds to invest outside their home country.

“Diverging rules and a heavy administrative burden have prevented them from seeking investments beyond their national borders and kept them quite small compared to the U.S.,” the regulator said. “The Commission’s proposal seeks to change this.”

Separately, the Commission said it will on Dec. 20 adopt part of a package of new rules for state aid to so-called services of general economic interest.

Basel Seeks Views on Banks’ Internal Audits After Crisis

The Basel Committee on Banking Supervision on Dec. 2 issued a consultative paper on the internal audit function in banks.

“The guidance reflects developments in supervisory and banking practices and incorporates lessons drawn from the financial crisis,” the committee said on its website.

The proposal is based on principles “that cover supervisory expectations related to the internal audit function” and the “supervisory assessment of that function,” according to the statement on the website.

Comments on the proposal should be submitted before March 2 as directed on the website.

Austria Rejects Euro Bonds Now, Won’t End Crisis, Fekter Says

Austria rejects the introduction of joint euro-region bonds, Finance Minister Maria Fekter said, saying the instrument would not solve the debt crisis and would push up interest payments.

While Fekter said she doesn’t rule out euro bonds completely, she said at a podium discussion in Hamburg that it’s a “question of when” they may be appropriate.

Compliance Action

Corzine Subpoenaed by House Panel for MF Global Hearing

The U.S. House Agriculture Committee voted to subpoena Jon S. Corzine, former chairman and chief executive officer of MF Global Holdings Ltd., for a Dec. 8 hearing on the collapse of the New York-based brokerage.

House lawmakers on the panel voted by voice without opposition on Dec. 2 in Washington to issue the subpoena. MF Global filed for bankruptcy protection on Oct. 31, and the U.S. Commodity Futures Trading Commission, Securities and Exchange Commission and Justice Department are investigating as much as $1.2 billion in missing customer funds.

Steven Goldberg, a New York-based spokesman for Corzine, declined to comment.

Corzine joined MF Global in March 2010 with a plan to remake the company into an investment bank in the image of Goldman Sachs Group Inc., where he had been co-chairman before entering politics. He repeatedly ratcheted up a wager on the debt of countries including Italy and Spain.

The House agriculture panel is the first of three congressional committees seeking Corzine’s testimony at hearings called to review the broker’s bankruptcy.

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Separately, Highridge Futures Fund LP, a customer of the MF Global Inc. brokerage, said its $50 million account with the defunct firm is “missing.”

Trustee James Giddens has “failed and refused” to provide any information about the whereabouts of the account, the fund said in a filing Dec. 2 in U.S. Bankruptcy Court in Manhattan. It asked the judge handling the liquidation case to order Giddens to locate and transfer the account, containing mostly cash and also unsettled commodity positions.

Highridge described itself as a registered commodity pool incorporated in Delaware, with a general partner that is an Illinois company.

Giddens has transferred about 38,000 commodity accounts to other firms, and said he plans to sell 330 securities accounts. Highridge said its fund wasn’t among those transferred.

Kent Jarrell, a Giddens spokesman, said he couldn’t immediately comment on the filing.

The brokerage case is Securities Investor Protection Corp. v. MF Global Inc., 11-02790, U.S. District Court, Southern District of New York (Manhattan). The parent’s bankruptcy case is MF Global Holdings Ltd., 11-bk-15059, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Tocqueville Finance, Fund Manager Fined for Price Manipulation

Tocqueville Finance SA, a Paris-based portfolio management company, and one of its executives were fined by France’s financial markets regulator for manipulating share prices.

Tocqueville and Marc Tournier, a fund manager, bought shares in June 2009 to drive up the price, the Autorite des Marches Financiers said Dec. 2 in an e-mailed statement, without identifying the shares.

Tocqueville was fined 150,000 euros ($201,000) and Tournier 250,000 euros. Both disputed the accusations at an October hearing. The company “will take the time to reflect on the decision and think about a potential appeal,” a spokeswoman, who declined to be identified, said Dec. 2.

Calls to Tournier were referred to the Tocqueville spokeswoman.

U.K. Privacy Agency to Ask Phone Operators Over Carrier IQ Use

The U.K.’s data-protection watchdog will join other European regulators in checking with mobile-phone operators whether they are using Carrier IQ software in a usage-tracking application on handsets.

“We will be contacting mobile-phone operators to establish if the Carrier IQ or similar software is on U.K. customers’ handsets and, if so, what steps are being taken to ensure there are no privacy implications,” Kirsty McCaskill, a spokeswoman for the U.K. Information Commissioner’s Office, said in an e-mailed statement Dec. 2.

HSBC Must Pay About $62 Million Over Improper Sales to Elderly

HSBC Holdings Plc was fined a record amount by the U.K. finance regulator for advising elderly people to buy products to fund their nursing-home care costs that matured after some of the customers were expected to be dead.

With the fine and customer-compensation penalty, the U.K.- based bank must pay about 39.8 million pounds ($62.2 million), the Financial Services Authority said in a statement today. The 10.5 million-pound fine is the regulator’s largest-ever retail penalty and the bank estimated it would have to pay about 29.3 million pounds to compensate customers, the FSA said.

The HSBC unit made “unsuitable sales” to about 87 percent of its customers for these types of investments during a five-year period until 2010, the regulator said.

HSBC Chief Executive Officer Brian Robertson said in a statement he is “profoundly sorry” that the unit “failed to give suitable financial advice to some of their customers.”

The bank reported the advice to the FSA and closed the unit to new business on July 1, Robertson said.

HSBC received the FSA’s standard 30 percent discount on the fine for settling early in the probe.


CFTC Position Limits Challenged in Court by Wall Street Groups

Two Wall Street groups sued to overturn a U.S. Commodity Futures Trading Commission rule that limits commodity speculation, one of the financial industry’s highest-profile efforts to weaken last year’s Dodd-Frank law.

The International Swaps and Derivatives Association Inc. and Securities Industry and Financial Markets Association filed lawsuits in two federal courts in Washington Dec. 2, arguing that the CFTC used a flawed analysis of Dodd-Frank when it decided to impose the restrictions. The associations also said the CFTC failed to properly weigh the rule’s costs and benefits.

The position-limits rule, which would cap the number of derivatives contracts a single firm can hold in commodities markets, was one of the most contentious provisions to arise from the 2010 regulatory overhaul. The CFTC approved it in a 3-2 party-line vote Oct. 18.

Commodity speculation has been the focus of numerous congressional hearings since 2008. The groups filed cases in both U.S. District Court and the U.S. Court of Appeals in Washington. Only one is expected to go forward.

The lower court case, 1:11-cv-02146, is International Swaps and Derivatives Association v. Commodity Futures Trading Commission, U.S. District Court, District of Columbia (Washington). The appeals court case, 11-01491, is International Swaps and Derivatives Association v. CFTC, U.S. Court of Appeals for the District of Columbia (Washington).

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Merkel Says Crisis Is Like ‘Marathon,’ Urges Use of EFSF

German Chancellor Angela Merkel likened solving Europe’s debt crisis to a marathon, shunning investor calls for quick action while pushing for stricter budget enforcement and overhauling the region’s governance.

Addressing lawmakers in Berlin Dec. 2 before a Dec. 9 summit of European leaders, Merkel rejected joint euro-area bonds or trying to make the European Central Bank the lender of last resort as quick fixes. The ECB’s role is different from that of the Federal Reserve or the Bank of England, she said.

Merkel also said euro region governments “should do with the EFSF what’s possible” and not talk down the capacity of the European Financial Stability Facility to help solve the sovereign debt crisis. She made her comments in a speech to the lower house of parliament.

The EFSF is Europe’s future permanent rescue facility.

Austrian Finance Minister Maria Fekter addressed the role of the EFSF at a podium discussion on Dec. 2 in Hamburg. France and Germany are at loggerheads over the role of private investors in the EFSF, she said.

“France strictly rules out private investors playing a role, while Germany is digging in its heels for such a role to be played,” Fekter said.

Comings and Goings

JPMorgan Follows UBS Cutting Carbon Jobs as Permits Plunge

Investment banks are cutting traders and analysts in climate-related businesses as a slump in shares and carbon emission permits coincides with a deadlock in international climate talks.

Odin Knudsen, JPMorgan Chase & Co.’s managing director for environmental markets, left his post in New York by mutual accord after his team was shrunk, while UBS Securities LLC fired Vice Chairman Jon Anda and his Climate Policy Group co-workers, Anda and Knudsen said in interviews.

Ben Lynch left his London job as a renewables equity analyst for Commerzbank AG, and his workload has been taken on by his former colleague on the renewables team, said Claire Tappenden, a company spokeswoman. The departures have been taking place since September.

The biggest banks, trying to recover from trading losses and a clampdown on investing their own money, are clipping resources from emissions-related businesses as United Nations talks have failed for years to extend Kyoto Protocol greenhouse-gas curbs beyond their expiration in 2012. The International Emissions Trading Association, the main carbon-market trade group, has seen its membership slide about 6 percent this year.

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