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GE Muni-Bond Settlement, Austria’s Alizee Bank: Compliance

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Dec. 27 (Bloomberg) -- General Electric Co. agreed to pay $70.4 million to settle a criminal probe and civil claims for conspiring to rig bids on U.S. municipal-bond deals, overcharging state and local governments on investments.

GE Funding Capital Market Services, a former unit, is the fifth company to settle in a more than five-year federal investigation that exposed “widespread corruption” in a segment of the municipal market that deals with the investment of proceeds from bond issues, the SEC said.

The deal entered into by GE Funding will resolve probes by the Justice Department, the Securities and Exchange Commission and the Internal Revenue Service as well as attorneys general in 25 states, the Justice Department said Dec. 23 in a statement.

The settlement will bring to $743 million the amount that banks have paid to end the case, some of which is being returned to localities that were overcharged, the SEC said in a news release. Bank of America Corp., JPMorgan Chase & Co., UBS AG and Wells Fargo & Co. previously settled similar cases.

GE’s settlement stems from an investigation that centered on three now-former employees at a unit the finance division discontinued in April 2010, the Fairfield, Connecticut-based company said in a statement Dec. 23. The conduct took place between 1999 and 2004, GE said.

The settlement won’t have a “material impact” on earnings, according to GE, the world’s biggest maker of jet engines and power-generation equipment.

The Justice Department said it agreed not to prosecute GE Funding because it admitted its illegal conduct, cooperated with the investigation and took steps to address anticompetitive conduct. The department also cited GE Funding’s commitment to make restitution.

For more, click here.

Compliance Policy

FCC Plan to Ease Cross-Ownership Rules Points to Consolidation

The Federal Communications Commission agreed to propose easing limits on one owner holding a television station and newspaper in a top 20 U.S. market.

The FCC plan keeps existing caps on TV and radio station ownership. “The public interest is best served by these modest, incremental changes to our rules,” the agency said in its notice on the proposed rule.

Approval of the FCC action may spur acquisitions, increasing the value of media companies.

The FCC proposal said that some newspaper and broadcast cross-ownership restrictions are needed to preserve a diversity of viewpoints in communities.

The FCC plans to take comments on the proposal, and no date has been set for a vote. Neil Grace, an FCC spokesman, declined to comment.

This is the second proposed change in cross-ownership rules in the past four years.

Consumer groups and members of the media differed over whether changes to the regulations are needed because the rules have become obsolete or the changes would do harm by consolidating media power.

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Hazare’s Fast Prods Lawmakers as Indian Graft Debate Begins

Indian anti-corruption campaigner Anna Hazare began a three-day public fast in Mumbai as parliament debated legislation to curb graft that his group of activists and opposition parties have dismissed as too weak.

The level of support for Hazare’s renewed protest will be monitored by Prime Minister Manmohan Singh’s government as it seeks to win support among lawmakers for one of the most divisive bills of his premiership. About 4,000 people attended the protest today, the NDTV 24x7 news channel reported citing police officials it didn’t name, a smaller crowd than those Hazare’s August hunger strike in New Delhi pulled in.

Hazare told supporters at the rally that the government has “betrayed the people.” His 13-day fast four months ago generated nationwide rallies and forced Singh to abandon plans to push through an earlier draft of the so-called Lokpal bill.

The Congress-led federal government headed by Singh has been damaged by graft scandals including those linked to a 2008 sale of mobile-phone airwaves and the hosting last year of the Commonwealth Games in New Delhi. Protests over corruption on the streets and in parliament derailed Singh’s policy agenda just as India’s $1.7 trillion economy has slowed.

Political parties will scrutinize the bill proposals until Dec. 29 and are seeking changes that will strengthen the proposed corruption ombudsman’s control of the nation’s leading criminal investigation agency and tighten oversight of the junior bureaucrats Indians blame for everyday acts of bribery that blight business and local governance.

Leading politicians from across the political spectrum have criticized Hazare for using undemocratic means to pursue his agenda and challenging the supremacy of parliament.

For more, click here.

U.K. Insurers to Discuss Bonuses With Banks, Telegraph Reports

The Association of British Insurers plans to arrange several meetings between the U.K.’s five top banks and investors in January to discuss bonuses and individual compensation, the Telegraph reported.

The Association earlier this month sent a letter to the banks demanding they revise payouts and award smaller bonuses, the newspaper said, without saying where it obtained the information. The banks promised to take shareholders’ concerns into account without providing any detail on how they might do this. The U.K. may by mid-2012 decide on proposals by the Bank of England and Financial Services Authority to give the central bank’s Financial Policy Committee power to restrict bank bonuses and dividends.

Compliance Action

Austria Takes Control of Alizee Bank to Protect Creditors

Austria’s financial regulator took control of Alizee Bank AG, a specialized lender to solar and wind-power projects, by assigning a state supervisor charged with protecting creditors’ interests.

The regulator, FMA, Dec. 22 assigned Dorotea Rebmann as state supervisor to the bank to “safeguard the financial interests of creditors and the assets entrusted to the company,” the agency said in an e-mailed statement Dec. 23. A state supervisor is assigned if “there is a risk to the ability of a credit institution to serve its liabilities to creditors.”

Alizee, based in Vienna, confirmed the appointment in an e-mailed statement, adding that it didn’t mean the bank lacked liquidity. Alizee plans to raise fresh capital soon, it said.

The bank had assets of 41 million euros ($53.5 million) at the end of last year, according to its annual report. Its net loss widened to 2.25 million euros in 2010, from 1.36 million euros a year earlier.

CVC Drops Takeover of ConvergEx Amid Probes by SEC, Justice

ConvergEx Inc., a trading-software company partially owned by Bank of New York Mellon Corp., said its July agreement to be bought by CVC Capital Partners Ltd. was terminated amid regulatory investigations of its Bermuda unit.

The parallel probes by the U.S. Securities and Exchange Commission and the Department of Justice mainly involve certain non-electronic trade-execution practices by the ConvergEx Global Markets unit, which is expected to produce 7 percent of revenue this year, New York-based ConvergEx said Dec. 23 in a statement. The audit and risk committee of the board has hired outside counsel to conduct a review, the company said.

“Since becoming aware of the matters under review, we have taken strong actions to remedy any lapses that have occurred,” Joseph Velli, chief executive officer of ConvergEx, said in the statement. “We are taking additional steps to ensure that we are in full compliance with our own policies and procedures as well as all other regulatory requirements.”

John Nester, a SEC spokesman, and Gina Talamona, a Justice Department spokeswoman, declined to comment on the investigations. Claire Ellis, a spokeswoman for CVC, wasn’t immediately available for comment. Ron Gruendl, a spokesman for New York-based BNY Mellon, declined to comment beyond the statement.

Four Swiss Banks Told to Improve Finances, Le Temps Reports

The Swiss Financial Market Supervisory Authority gave four banks until the end of this month to improve their finances, Le Temps reported, without citing anyone.

The regulator, known as Finma, declined to comment. Finma, which regularly puts the country’s biggest banks, through stress tests, said in July that it has started doing similar exercises for smaller lenders.

Hottinger, one of two banks identified by the Swiss newspaper, hasn’t been approached by Finma about its financial situation, Chief Executive Officer Joerg Auf der Maur said Dec. 23 in a telephone interview from Zurich.

“Our bank is in good financial health and we fulfill all of Finma’s capital requirements,” he said.

Nobody at Faisal Bank in Geneva, the other firm cited by Le Temps, could immediately comment when called by Bloomberg News.

Russian Antitrust Watchdog Fines Rosneft, Bashneft $80 Million

Russia’s antitrust watchdog said it fined OAO Rosneft, the country’s biggest oil producer, and OAO Bashneft, controlled by billionaire Vladimir Evtushenkov’s AFK Sistema, a combined 2.5 billion rubles ($80 million) in a “third wave” of cases into high fuel prices.

Rosneft may have to pay 1.76 billion rubles and Bashneft 778 million rubles for “monopolistically high prices” at the end of 2010 and beginning of this year, the Federal Anti-Monopoly Service said yesterday on its website.

China Commerce Ministry Antitrust Applications Rise 43% on Year

China’s Ministry of Commerce received 194 anti-monopoly applications from January to mid-December, an increase of 43 percent from a year earlier, according to a statement distributed at a briefing in Beijing.

The ministry put 179 of the cases up for review and has finished 160 of them and withdrew five, according to the statement.

The manufacturing industry accounted for 64 percent of the cases reviewed so far, with the information technology sector accounting for 8 percent, according to the statement.

Courts

SEC Backs Lehman Brokerage in $3 Billion Barclays Dispute

The U.S. Securities and Exchange Commission sided with the Lehman Brothers Holdings Inc. brokerage in a $3 billion dispute over assets with Barclays Plc, saying a judge ruled correctly that the U.K. bank’s claim to securities in customer reserve accounts was conditional.

If the SEC prevails, Barclays may lose its claim to as much as $1.3 billion reserved for customers, according to an SEC court filing Dec. 22.

Michael O’Looney, a Barclays spokesman, declined to comment on the SEC filing.

Barclays and Lehman Brothers Inc. both appealed U.S. Bankruptcy Judge James Peck’s ruling that told Barclays to return $2 billion in margin assets to the bankrupt brokerage, and said it had “only a conditional right” to $769 million in the customer reserve account. Brokerage trustee James Giddens is fighting Peck’s order to give the bank at least $1.1 billion, and possibly the $769 million, if it leaves enough in the reserve account to satisfy remaining customer claims.

Both sides were expected to file court papers Dec. 23 in their appeals.

The district court case is Giddens v. Barclays Capital Inc., 11-cv-06052, U.S. District Court, Southern District of New York (Manhattan).

MF Trustee Disputes $700 Million With U.K. Affiliate

The trustee for the MF Global Inc. brokerage said he’s disputing as much as $700 million in customer assets with the administrators of a U.K. affiliate.

Trustee James Giddens, who has said he’s trying to retrieve U.S. commodity customers’ assets from foreign affiliates, told the administrators the funds were held for customers’ foreign trades and should be returned, he said in a statement Dec. 3. The administrators said the assets didn’t fit the classification of segregated funds under U.K. law, he said.

Monica Fiumara, a spokeswoman for KPMG LLP, administrators of MF Global’s U.K. unit, couldn’t be reached for comment.

Giddens’s third transfer of assets to customers of $2.1 billion is underway, he has said. Two previous payouts to commodity customers totaled about $2 billion. The transfers would still leave customers short of about 28 percent of their assets, he has said.

The assets he’s fighting for in the U.K. aren’t part of an estimated shortfall in customer property of at least $1.2 billion, Giddens said in the statement.

The parent company filed for bankruptcy protection on Oct. 31.

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).

Interviews

Stricter EU Deficit Rules Have ‘Deterring Effect,’ Juncker Says

Luxembourg’s Jean-Claude Juncker, who leads the group of euro-area finance ministers, said new stricter deficit rules will have a “deterring effect” on governments drawing up their budget plans.

“The rules have become clearer now in that we decided in our meetings over the last few months that the sanctions for budget sinners will be applied automatically,” Juncker said in an interview with Germany’s RBB Inforadio. “This will have a deterring effect.”

“But it’s not enough to fix new rules,” Juncker said. “What’s needed are very solid budget-consolidation plans, and these are in the process of being implemented, with a delay I have to admit, but they’re in the process of being implemented.”

The debt turmoil is not “a crisis of the euro,” Juncker said. “We have a debt crisis in individual member countries of the euro area,” he said. “We’re tackling this debt crisis almost on a daily basis.”

Henry Says Hedge Funds ‘Likely Destination’ for Traders

Peter Henry, head of senior trader recruiting at Commodity Search Partners, talked about the movement of commodity traders from banks to hedge funds and the impact of financial regulation on compensation and the ability to trade.

Henry spoke with Lisa Murphy on Bloomberg Television’s “Street Smart.”

For more, click here.

To contact the reporter on this story: Carla Main in New Jersey at cmain2@bloomberg.net.

To contact the editor responsible for this report: Michael Hytha at mhytha@bloomberg.net.

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