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RBS Pay, Newedge USA Fined, Hildebrand Quits: Compliance

Pay and bonus levels at state-controlled Royal Bank of Scotland Group Plc will reflect performance, Prime Minister David Cameron’s spokesman said.

The prime minister yesterday criticized bosses who take high pay when their company’s share price hasn’t risen. His spokesman, Steve Field, refused to comment yesterday on whether RBS Chief Executive Officer Stephen Hester is entitled to a bonus, given that the company’s share price has fallen by almost half over the past year.

Field said the issue of pay at RBS is being handled by U.K. Financial Investments Ltd., or UKFI, the government’s arm’s-length manager of its bank holdings, which does not get involved in “individual decisions at RBS.”

“No decision has been taken on any of these things,” Field said.

Hester was paid 3.27 million pounds ($5.05 million) in salary, bonus and benefits for 2010, while Finance Director Bruce Van Saun was paid 2.3 million pounds. Hester could be paid 4.2 million pounds in shares if he meets targets set in an incentive plan by next year. Under the same plan, Van Saun could be paid 2.5 million pounds, according to RBS’s annual report.

The Financial Times reported yesterday that John Hourican, CEO of RBS’s investment bank, stands to receive a special bonus of more than 4 million pounds in April, under an agreement made in 2009. The Unite union, which represents the bank’s junior staff, described that as “astonishing.”

Compliance Policy

Duplicate Telephone Subsidies for Poor Targeted by FCC Proposal

Federal Communications Commission Chairman Julius Genachowski proposed measures to keep companies from billing the government for providing duplicate subsidized telephones to poor homes.

Genachowski made the remarks at a speech in Washington yesterday. Proposed rules, to be sent to fellow commissioners yesterday, include creating a national database listing households eligible for the subsidy, Genachowski said. The changes require a majority vote from the agency.

The FCC said in March that “in many cases multiple” wireless companies seek reimbursement for service to the same residence. The program that provides the payments climbed to $1.3 billion in 2010 from $667 million in 2000, according to the agency.

Recent increases stem mainly from the addition of prepaid wireless service from America Movil SAB’s TracFone, a marketer of subsidized SafeLink phones, according to a November report from the Government Accountability Office, the investigative arm of Congress.

The low-income assistance is part of an $8 billion program that pays providers to extend service to rural areas, schools and libraries. The program operates under a 1996 law designed to make quality telecommunications service available to all, according to the FCC.

The fund’s growth has led federal officials to increase fees that consumers pay to support it.

Ethics Code Requires Economics Authors Disclose Financial Ties

The American Economic Association, the world’s largest organization for economists, has said authors submitting papers to its publications must disclose any potential conflicts of interest. The Nashville, Tennessee-based organization also urged its 18,000 members, about half of whom work in academia, and other economists to apply the standard to all media.

Criticism of the profession came to the fore after the 2010 release of “Inside Job,” an Academy Award-winning documentary about the financial crisis that features economists being interviewed about their links to the financial industry.

The AEA guidelines, adopted by the group’s executive committee on Jan. 5, state that authors must disclose the source of funding, if any, for their research, and whether they have received financial support from an interested party totaling at least $10,000 during the past three years.

Periodicals published by the AEA include the American Economic Review, the Journal of Economic Literature and the Journal of Economic Perspectives.

Some economists criticized the profession for taking so long to implement any guidelines.

Italy and Greece Weigh Reform in Tax Regime, Enforcement

Italian authorities will intensify their efforts to combat tax evasion by provoking a “healthy fear” among those dodging payments, the head of the country’s tax agency said.

Attilio Befera, head of the tax-collection agency, made the remarks yesterday on “Mattino Cinque,” a news program on Mediaset SpA’s Canale 5.

Italy has 40 million taxpayers “and the tax authorities have just 32,000 employees, so we need to provoke a healthy fear,” among evaders, Berfera said.

Italian efforts to combat tax evasion brought in about 11 billion euros last year, Befera said yesterday.

Separately, Greece is considering whether to replace a temporary special property tax and current real-estate levies with a single tax, Naftemporiki said, without citing anyone.

Hungary Faces Choice Between IMF and Default, Ex-Premier Says

Hungary must choose between backtracking on economic policy as part of an International Monetary Fund loan with “strict oversight” or defaulting on its debt, former premier Gordon Bajnai said.

Prime Minister Viktor Orban Jan. 8 abandoned previous objections to an IMF bailout, indicating his government was open to “any kind” of credit line to prop up financing. The European Union and the IMF last month suspended aid talks after Orban pressed ahead with legislation that the central bank said violates its independence.

The acceptance of a standby IMF loan may restore economic-policy credibility in the medium-term, Bajnai said.

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India Said to Ratify Policy on 100% FDI in Single-Brand Retail

India ’s government will soon ratify a November cabinet decision to allow foreign companies to fully control retail chains that sell a single brand of products, two officials with direct knowledge of the matter said, asking not to be identified before a public announcement.

Compliance Action

Newedge USA Fined $700,000 by CFTC for Trading Record Errors

Newedge USA LLC, the broker with the most U.S. segregated customer funds, will pay $700,000 to resolve regulatory claims that the firm submitted flawed trader reports and violated an earlier order to improve accuracy.

Newedge turned in large-trader reports with eight types of errors from March through July of last year including overstatements and understatements of positions and open interest, the Commodity Futures Trading Commission said in an order released in Washington yesterday. The regulator also found that the brokerage, a unit of Paris-based Newedge Group SA, failed to comply with a Feb. 7 order to improve its reporting.

The enforcement action “should send a message to the industry” about adhering to prior commission orders, CFTC Enforcement Director David Meister said in a statement. Newedge’s reporting “has greatly improved” since July, the CFTC said.

The company, which didn’t admit or deny the allegations, regrets that “certain reports required corrections” during the firm’s re-engineering efforts, Kevin Russell, a spokesman for Newedge, said in an e-mail statement. The company “has elected to settle with the CFTC because of these lapses,” Russell said.

Newedge ranked first among futures brokers with $20.8 billion in U.S. customers’ segregated funds on Oct. 31, according to CFTC data.

Hungary’s Malev Airline Ordered by EU to Repay State Support

Malev Zrt., Hungary’s unprofitable state-owned airline, was ordered by the European Union to repay loans and guarantees to the crisis-hit nation’s government.

The European Commission said Hungary gave Malev financial help from 2007 to 2010 when the company wouldn’t have got financing on similar terms “nor possibly any financing at all” from any private investor “given its consistently difficult financial situation.”

Malev may have to pay back “tens of billions of forint” because of the EU probe, Tamas Fellegi, who was then development minister, said on Dec. 5. Hungary’s government “respects” the commission’s decision and wants to ensure Malev’s continued operation, the development ministry said in an e-mailed statement yesterday. The cabinet will discuss the EU repayment decision on Jan. 16.

Hungary is seeking a buyer for Malev and is in “advanced” talks with possible investors in the airline, which is still relying on government aid.

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Philippines to Probe PLDT’s Tender Offer for Digital, World Says

Philippine regulators will probe Philippine Long Distance Telephone Co.’s tender offer for shares of Digital Telecommunications Philippines Inc., BusinessWorld reported yesterday, citing a Jan. 5 notice by the U.S. Securities and Exchange Commission.

MF Global U.K. Administrators Threaten Client Money Lawsuits

Administrators at MF Global Holdings Ltd.’s U.K. unit said they have threatened to sue large financial institutions who were unwilling to release money they held for the failed broker’s clients.

Some companies “have a number of positions across the group and they are generally hesitant” to hand over unsegregated funds worth a total of more than 1 billion pounds ($1.5 billion), Richard Heis, the lead administrator at KPMG LLP, told MF Global clients and creditors at a meeting in London today.

JPMorgan Chase & Co., Bank of New York Mellon Corp., Citigroup Inc. and LCH.Clearnet Group Ltd. were among the depository institutions holding cash and assets for MF Global customers, according to documents released by KPMG.

MF Global Holdings Ltd., based in New York, was the fifth-largest financial company to file for bankruptcy when it sought protection on Oct. 31 after making losing bets on European sovereign debt. KPMG was appointed to supervise the special administration of the broker’s London unit.

Spokesmen for JP Morgan, Citigroup, LCH and BNY Mellon declined to comment.

MF Global Holding Ltd.’s U.K. customers demanded their money back at the creditors’ meeting as administrators KPMG LLP said they racked up 17.5 million pounds ($27 million) in fees since the broker’s collapse without returning anything to clients.

Customers asked KPMG, which was appointed to wind up MF Global’s U.K. unit on Oct. 31, why the process was taking so long and what would happen to money that wasn’t in protected, or segregated, accounts. Others expressed surprise when KPMG said clients with unsegregated accounts, which weren’t held separately from the broker’s own money, would be treated as unsecured claims alongside other creditors.

The issue of unsegregated customer funds sparked contention at the first meeting between KPMG and the broker’s U.K. clients and creditors yesterday, unlike in the U.S., where attention is focused on locating some $1.2 billion missing from customer accounts. Bankruptcy trustees for New York-based MF Global Holdings Ltd. have scheduled a creditors meeting for Jan. 26.

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Wall Street Groups Seek Delay of CFTC Position Limits Rule

Two Wall Street groups asked a federal appeals court to delay a U.S. Commodity Futures Trading Commission rule that limits commodity speculation, saying the regulation is already imposing “irreversible harms.”

The International Swaps and Derivatives Association Inc. and Securities Industry and Financial Markets Association filed an emergency request yesterday in Washington urging a three-judge panel to put the rule on hold while the court considers their legal challenge. The groups asked the court to issue a ruling by Jan. 27.

“The rule will force market participants to forgo efficient trading strategies, impair their ability to hedge against risks, and potentially require them to restructure their businesses,” the groups said in the filing. “These costs will mount now absent a stay, and they would be impossible to recoup if the rule is invalidated -- as it likely will be.”

The groups, in one of the financial industry’s highest-profile efforts to weaken last year’s Dodd-Frank law, filed lawsuits challenging the rule in two federal courts in Washington last month.

Steven Adamske, a CFTC spokesman, declined to comment on yesterday’s filing.

The CFTC, on Jan. 4, asked the appeals court to dismiss the challenge claiming it doesn’t have jurisdiction to consider the lawsuit. The agency said that the district court must first consider a challenge to the rule.

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Ex-Refco Lawyer Collins’s Conviction Thrown Out on Appeal

The conviction of Joseph Collins, Refco Inc.’s former outside lawyer, was reversed by an appeals court that found the trial judge improperly instructed a juror outside the presence of his lawyers.

Collins, convicted in 2009 of aiding Refco’s former chief executive officer Phillip Bennett and other executives defraud investors of $2.4 billion, is entitled to a new trial, a three-judge panel of the New York-based federal appeals court said in a ruling yesterday.

During deliberations in the case, jurors told the judge that there had been threats of violence in the jury room.

“After this long fight, we are very gratified by the Court of Appeals’ decision,” William Schwartz, a lawyer for Collins, said in an e-mailed statement. Ellen Davis, a spokeswoman for the U.S. Attorney in Manhattan, declined to comment on the ruling.

Collins was sentenced to seven years in prison.

The case is U.S. v. Collins, 07-cr-1170, U.S. District Court, Southern District of New York (Manhattan).

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Comings and Goings

Hildebrand Quits SNB After Struggle to Restore Credibility

Philipp Hildebrand resigned as head of the Swiss central bank four days after pledging to fight for his job in a furor over his wife’s currency trading.

Swiss National Bank Vice President Thomas Jordan, 48, was appointed interim chairman after the surprise announcement at a news conference in Bern that Hildebrand called yesterday.

Hildebrand, 48, said he came to the conclusion that it is not possible to “deliver definite proof” that his wife requested the currency transaction without his knowledge.

The episode called into question Hildebrand’s credibility as guardian of the Swiss franc, and pressure on him to resign increased following media reports that his family may have profited from inside information.

Economists at VTB Capital and Swissquote Bank SA said his departure will leave investors testing the franc cap.

Hildebrand’s departure from the SNB’s three-member board deprives Switzerland of a policy maker who managed to stem the franc’s rally to records against the dollar and the euro, which had threatened to derail the economy.

Separately, Hildebrand resigned yesterday from his role as vice chairman of the Financial Stability Board.

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