Monte Paschi Fresh Plan, Financial Tax, Swedbank: Compliance

Banca Monte dei Paschi di Siena SpA, Italy’s third-biggest bank, ruled out a share sale or a request for state aid to meet capital requirements set by the European Banking Authority.

The bank’s new general manager, Fabrizio Viola, said Jan. 13 at a press conference in Siena that the lender instead plans to sell non-strategic assets and convert hybrid securities, so-called Fresh, to raise capital. The Siena-based bank aims to raise about 1 billion euros ($1.3 billion) by the conversion of Fresh into core capital, he said.

Monte Paschi, which has a capital shortfall of 3.3 billion euros according to the European Banking Authority, is working on a plan to meet requirements that will be approved by the board in a meeting scheduled on Jan. 19 and submitted to the national authorities.

“The bank’s capital shortfall recognized by the EBA is entirely due to our exposure to the Italian sovereign bond,” Viola said. “The bank has good assets and we will work to improve profitability.”

Monte Paschi shares fell as much as 5.9 percent before being suspended in Milan Jan. 13.

Monte Paschi Chairman Giuseppe Mussari, who said he won’t seek reappointment in April, said that the bank will repay 1.9 billion euros of state aid provided in 2009 as soon as the EBA’s requests for an additional buffer are revoked.

Compliance Policy

Danish Backing for EU Financial Tax Is Unlikely, Corydon Signals

Danish Finance Minister Bjarne Corydon signaled the Nordic country is unlikely to back the European Union’s current proposal for a financial transactions tax, arguing such a move would hurt jobs.

Denmark this month took over the rotating EU presidency.

Germany is pushing for an agreement across the EU’s 27 members enabling the introduction of a uniform tax in the region, German Finance Ministry spokesman Martin Kotthaus said Jan. 13. If this goal seems unattainable, the largest euro-area nation will work toward a model that imposes such a levy on countries inside the 17-member currency bloc.

The U.K. last month vetoed a Franco-German drive to impose closer fiscal ties in Europe, arguing the proposed package would place the country’s bank industry at a disadvantage.

Unanimous backing for a financial tax in the EU is unlikely, Corydon said. Denmark would support a financial levy if one could be imposed without hurting jobs, he said.

Denmark isn’t opposed to such a levy on “ideological” grounds, Corydon said. Rather, the country is concerned about potential job losses, he said.

For more, see Interviews section, below.

SEC Weighs Rules on Analysts’ Dealings With Investment Bankers

The U.S. Securities and Exchange Commission may require Wall Street firms to keep a physical separation between their research analysts and investment bankers and ban bankers from influencing which companies the analysts cover.

The agency will review those and other provisions in a 2003 industry settlement with an eye toward applying them “to the entire industry,” according to a Jan. 6 letter from Robert Cook, chief of the SEC’s Division of Trading and Markets, to the Government Accountability Office.

The SEC said it would take that action as a result of a GAO report published Jan. 12, which recommends that the agency look into writing industrywide rules to head off potential conflicts of interest between analysts and investment bankers.

A dozen Wall Street firms including Goldman Sachs Group Inc., JPMorgan Chase & Co., Citigroup Inc. and UBS AG agreed to such provisions in 2003 to settle claims by regulators that their analysts published misleading research in an attempt to win business for the banking side.

The settlement in the U.S. District Court for the Southern District of New York separated analyst and banking departments, overhauled how firms evaluate and pay researchers and gave investors third-party research. The terms include a requirement that compliance chaperones be present at talks between research and investment-banking employees.

Several provisions were later dropped from the settlement after regulators established industrywide rules on the same issues. The result is that practices aren’t uniform throughout the industry, the GAO said.

The GAO report said officials at the Financial Industry Regulatory Authority, the self-regulatory organization that polices broker-dealers under SEC authority, were critical of imposing all the remaining rules in the settlement on the entire industry.

EU Says Data-Protection Reform to Be Published by End of January

European Union plans to overhaul the region’s 16-year-old data-protection rules will be published by the end of the month, an EU spokesman said.

The bill will include stricter sanctions and equip national data-protection authorities with powers to levy fines of as much as 1 million euros ($1.3 million), or 5 percent of a company’s annual sales, according to an early draft of the rules obtained by Bloomberg News last year.

AT&T Says It’s ‘Troubled’ by FCC Bid to Control Airwaves Auction

AT&T Inc.’s top Washington executive said he’s “troubled” that Federal Communications Commission Chairman Julius Genachowski wants his agency to keep its power to set terms for auctions to free airwaves for smartphones.

Genachowski’s stance may risk killing legislation to sell rights to unused television airwaves, said Jim Cicconi, AT&T’s senior executive vice president-external affairs, on a company blog Jan. 13.

The TV airwaves auctions, a proposal of the Obama administration requiring congressional approval, are designed to help alleviate shortages of frequencies under growing demand from smartphones and tablet computers.

Cicconi said the FCC should be a “neutral arbiter.”

Genachowski said in a Jan. 11 speech that proposals before Congress would bar the FCC from allocating airwaves to some innovative uses, and prevent the agency from exercising its traditional prerogative to set terms for auction participation.

Neil Grace, an FCC spokesman, didn’t immediately comment.

Public Companies Should Outline Euro Risk in Reports, FRC Says

Directors of listed companies should describe the effect of volatile currency markets and government budget cuts on their international business in investor reports, a U.K. accounting regulator said.

Reports should also review the implications of “one or more euro area countries being forced to exit the euro area,” the Financial Reporting Council said in an e-mailed statement.

Greece and its creditors are yet to agree on the details of a debt reduction package, more than two months after the nation agreed to cut public spending in return for a 50 percent write-off on the face value of its debt. The U.K.’s bank regulator, the Financial Services Authority, last year told lenders to prepare contingency plans for the possibility of a country leaving the single European currency.

“Directors of companies in the U.K. are trying to assess the risks to their companies’ business models in difficult and rapidly changing economic conditions,” Stephen Haddrill, chief executive officer of the FRC, said in the statement today.

New Court at The Hague to Arbitrate in Global Financial Disputes

Financial firms and investors in complex cross-country disputes can turn to a new tribunal in The Hague, the latest of six international courts in the Netherlands.

“National courts and ad hoc arbitration until now haven’t succeeded in unambiguous, authoritative jurisprudence,” Jeffrey Golden, chairman of the management board for the new Panel of Recognized International Market Experts in Finance, said in a statement. The arbitration and mediation service, known as Prime Finance, opened yesterday.

The credit crunch and the collapse of Lehman Brothers Holdings Inc. led to an increase in lawsuits between banks and other financial institutions. Regulators are concerned that national courts lack the time and expertise to properly adjudicate the disputes.

“This court can be used by large financial institutions, such as banks and large asset managers, and eventually also by states that have a dispute with financial institutions,” Bernard Verbunt, a lawyer at Simmons & Simmons in Amsterdam who specializes in banking and financial services disputes, said by telephone.

The tribunal, at the Peace Palace in The Hague, can call upon almost 100 experts to arbitrate or mediate in cases involving derivatives and structured financial products.

The panel was set up by the World Legal Forum following a meeting of lawyers, financial experts, regulators and central bank representatives from the U.S., Europe, and Asia in 2010.

Compliance Action

Swedbank Writes Down Latvian Assets as Capital Rules Tightened

Swedbank AB, the largest bank in the Baltic region, plans to write off 1.91 billion kronor ($276 million) from its Latvian business as stricter capital rules in Sweden force the lender to hold more equity.

Chief Executive Officer Michael Wolf said Jan. 13 in a statement that the bank’s write down of goodwill has “no impact on our view of Swedbank’s operations in Lativia, which is one of the bank’s four home markets.”

Sweden’s financial regulator and the central bank in November told lenders to target higher capital buffers than elsewhere to protect taxpayers against the risk of losses. Finance Minister Anders Borg has argued tougher regulatory controls are needed in part after Swedish banks suffered losses in the Baltics when the former Soviet region’s housing boom turned to bust in 2009.

Swedbank’s goodwill for Latvia will be reduced to 1.96 billion kronor from 3.87 billion kronor as of the end of last year, the bank said. Its capital position and cash flow generation won’t be affected by the move, it said.

For more, click here.


Ex-SEC Lawyer Barasch Settles Stanford Ethics Dispute With U.S.

Spencer C. Barasch, a former lawyer for the U.S. Securities and Exchange Commission accused of stopping investigations into the business practices of R. Allen Stanford, settled a dispute with Justice Department.

Barasch was identified in a 2010 SEC inspector general’s report as having “quashed” three probes into Stanford’s operations while head of enforcement in the agency’s Fort Worth, Texas, office, and then representing the financier before the SEC in 2006, a year after leaving the commission.

Stanford was indicted in June 2009 by a federal grand jury in Houston on 21 counts including conspiracy to commit mail and wire fraud and obstruction of an SEC investigation. He has pleaded not guilty. The counts have since been reduced to 14. Jury selection in Stanford’s trial is set to start on Jan. 23.

Barasch agreed to pay a $50,000 fine, according to the statement.

Barasch’s lawyer, Paul Coggins, said in an e-mailed statement that his client entered into an accord to avoid the expense and uncertainty of drawn-out litigation.

“At no time has he compromised his honor or ethics and we vigorously dispute any suggestion to the contrary,” Coggins said.

Barasch, who left the SEC in 2005, is now in private practice.

Ex-Syntax-Brillian Officer Chow Ordered to Pay $48.5 Million

Thomas Chow, the former Syntax-Brillian Corp. chief procurement officer, was ordered to pay $48.5 million in a default judgment after he failed to respond to an insider trading lawsuit.

U.S. District Judge Susan Bolton in Phoenix on Jan. 12 entered the default judgment against Chow at the request of the U.S. Securities and Exchange Commission. Chow was ordered to pay $10.4 million in disgorgement, $2.57 million in prejudgment interest, a $4.68 million civil penalty, and a $30.9 million insider trading penalty.

The SEC in August sued Chow and two other former executives at the Tempe, Arizona-based maker of high-definition televisions, including Olevia, that went bankrupt in 2008. The former executives were accused of booking fake sales to artificially inflate the company’s earnings. The two other former executives agreed to settlements with the SEC last year.

“In the period when the price of Syntax’s stock was artificially inflated as a result of the fraudulent scheme, Chow, in possession of material non-public information about the scheme, sold nearly 2 million shares, and reaped illicit proceeds of more than $12.6 million,” SEC lawyers said in the Jan. 10 request for entry of default judgment.

Chow, who was also the founder of and co-owner of a Hong Kong company that created phony purchase orders for Syntax’s televisions, never answered or otherwise responded to the SEC’s allegations, according to the Jan. 10 request.

Helen Wong, a lawyer in Los Angeles listed on the court docket as Chow’s attorney, said in a telephone interview that she no longer represents him and that she didn’t think he was in the U.S.

The case is SEC v. Li, 11-1712, U.S. District Court, District of Arizona (Phoenix.)


Wootton, Silva Discuss Banks, Financial Transaction Tax

Lord Mayor of London David Wootton talked about European banking regulation and proposals for a tax on financial transactions.

He spoke with Maryam Nemazee on Bloomberg Television’s “The Pulse.”

For the Wootton video, click here.

Separately, Ralph Silva, a strategist at Silva Research Network, talked about the U.S. and European banking industries and proposals for a financial transaction tax.

Silva spoke with Louise Beale on Bloomberg Television’s “Last Word.”

For the Silva video, click here. For more, see Compliance Policy section, above.

Barofsky Expects ‘More Clarity’ for U.S. Bank Rules

Neil Barofsky, former special inspector for the U.S. Treasury’s Troubled Asset Relief Program and a Bloomberg Television contributing editor, discussed the outlook for U.S. financial regulations.

He spoke with Erik Schatzker and Stephanie Ruhle on Bloomberg Television’s “InsideTrack.”

For the video, click here.

Comings and Goings

Duke Says She Doesn’t Plan to Leave Fed at Month’s End

Federal Reserve Governor Elizabeth Duke spoke about banking supervision and her term at the central bank.

Duke, who spoke in Santa Barbara, California, said she doesn’t plan to immediately leave the board in Washington when her term ends this month, saying she’s able to stay at the Fed until a successor is appointed.

For the audio, click here.