MSRB Web ‘Hub’, Italy Short-Sales, Domain Names: Compliance

The Municipal Securities Rulemaking Board published a plan that would enhance its free website to create a “central public dissemination hub” for the $3.7 trillion tax-exempt bond market.

The plan is based on feedback from investors, municipal issuers and regulatory organizations about improving transparency, according to a statement yesterday. The Electronic Municipal Market Access website provides market data and disclosures from borrowers to the public at no cost.

Proposed enhancements include free user accounts, more information, improved search functionality and a new real-time central transparency platform, according to the MSRB.

The MSRB previously announced parts of the plan, according to the release.

The industry regulator will review its long-term plan regularly to “reflect changing market priorities and to ensure the relevancy of its goals,” the MSRB said. Market participants and the public can submit feedback, it said.

Compliance Policy

Italy Has No Plans to Extend Short-Sale Ban, Regulator Says

Italy won’t extend its ban on short selling of financial shares after it expires, said Giuseppe Vegas, chairman of Italian market regulator Consob.

Vegas, who made the remarks at a meeting with reporters at the London Stock Exchange yesterday, was referring to an anticipated expiration date set for today.

France, Belgium, Spain and Italy moved to prohibit short selling of financial shares in August in an effort to stabilize markets after European banks including Societe Generale SA hit their lowest levels since the credit crisis of 2008. France, Belgium and Spain ended their bans last week.

Short-sellers sell borrowed shares with plans to buy them back later at a lower price, a practice politicians and some investors blame for roiling markets. The trade is known as “naked” when sellers haven’t first taken steps to ensure that they can borrow the securities.

Bank Domain Names Open to Misuse, Fraud, European Regulator Says

Plans to grant banks the use of new domain names such as .fin and .bank will make it harder for regulators to stop fraud, Europe’s top banking authority told the group in charge of the Internet’s address system.

The domain names “have a great potential” for “misuse by unscrupulous individuals,” Andrea Enria, chairman of the European Banking Authority, said in a letter to Barbara Clay, vice-president for communications at the Internet Corporation for Assigned Names and Numbers. The plans for the names should be dropped, Enria said in the letter on the agency’s website.

American Express Co., Johnson & Johnson and Coca-Cola Co. are among more than 50 companies that signed a petition in November saying the domain name expansion would increase their costs and confuse consumers. They urged the U.S. Commerce Department to persuade ICANN to suspend the application period for the names, which closes April 12.

The EBA plans to issue an alert “warning consumers of banking services to the risks of these new naming conventions,” the London-based agency said in its opinion on the plans, also sent to ICANN.

CFTC to Consider Post-MF Global Futures-Collateral Safeguards

The U.S. Commodity Futures Trading Commission will hold a roundtable next week to consider steps to safeguard collateral following the collapse of MF Global Holdings Ltd., according to two people briefed on the agenda.

The plan, one of several possible regulatory changes, would mimic new rules completed Jan. 11 for the swaps market, according to the people, who spoke on condition of anonymity because the roundtable agenda isn’t public. The swap plan, approved on a 4-1 vote, is designed to protect clients’ collateral if their broker defaults, while also allowing the customer funds to be pooled before a bankruptcy.

The roundtable will take place on Feb. 29 and March 1, according to one of the people. The event is an early step toward additional rules and regulations that would require an official CFTC proposal and vote by the agency’s five commissioners.

CFTC Chairman Gary Gensler asked the agency’s staff to develop recommendations for new oversight of the industry’s self-regulatory organizations and brokers. The review may include recommendations for changes requiring congressional action, according to a Jan. 26 letter from Jill E. Sommers, a Republican commissioner, to Senator Pat Roberts, a Kansas Republican. Sommers is overseeing the agency’s work on the collapse of MF Global.

Separately, the CFTC completed final Dodd-Frank Act regulations governing recordkeeping and internal compliance standards for swap dealers and other large users of swaps.

The agency’s commissioners voted 3-2 to approve the final rules at a meeting yesterday in Washington.

Bank Lobby Widened Volcker Rule, Inciting Foreign Outrage

U.S. banks pushed regulators to widen proposed restrictions on trading and hedge-fund ownership by foreign firms, then encouraged governments around the world to complain about the rule’s reach.

The two-pronged lobbying strategy resulted in foreign officials joining U.S. lenders to push back against the Volcker rule, named after former Federal Reserve Chairman Paul A. Volcker and incorporated in the 2010 Dodd-Frank Act.

The Volcker rule seeks to prevent deposit-taking firms from making bets with their own capital or owning hedge funds. Last year, U.S. banks including JPMorgan Chase & Co. and Morgan Stanley lobbied the Fed and other regulators to apply the regulation more broadly to companies based outside the U.S., according to four people with knowledge of the discussions who asked not to be identified because the talks were private.

Banks and their lobbyists later sent position papers to the Washington embassies of foreign governments and met with officials to warn that sovereign-debt prices would suffer if U.S. banks are barred under the Volcker rule from buying other nations’ bonds for their trading accounts, three of the people said. That led to an outpouring of letters from Canadian, Japanese and European Union officials, as well as from dozens of non-U.S. lenders, urging regulators to overhaul the rule.

U.K. and Japanese finance ministers also weighed in yesterday, saying that without an exemption from the rule, their governments’ borrowing costs would rise.

In recent months, as regulators sought comments on a 298-page proposal to implement the Volcker rule, the outcry from banks has swelled. Lobbyists have argued that the plan would reduce trading in bond markets and increase borrowing costs for investors and companies.

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Barnier Bid to Control Bank Capital Rules Said to Face Challenge

At least four nations may challenge European Union plans to limit their power to regulate bank capital as governments seek a compromise on implementing global rules on the reserves lenders must keep to prevent a financial crisis, according to four people with knowledge of the matter.

Officials from the EU’s 27 member states are weighing whether to scrap a proposal from EU Financial Services chief Michel Barnier to make the European Commission responsible for deciding bank capital levels during market turmoil, said the people, who declined to be identified because the talks are private. Nations are also considering widening the range of assets lenders may use to meet liquidity rules, the people said.

Barnier has been criticized by the U.K. and Sweden for seeking to restrain national watchdogs’ freedom to impose tougher capital rules on national banks. Barnier has said that requirements for lenders should be set by the EU, with limited exceptions for national regulators to exceed them to ease credit booms.

Barnier’s text would hand the European Commission power to set “stricter” capital rules for banks in cases where it’s necessary to address “risks which arise from market developments,” according to a copy of the document on the EU’s website. The rules would be temporary, although no time limit is set out in the draft law. The extra requirements could apply across the whole EU or in individual countries.

The commissioner included the curbs in a draft law he presented last year to implement rules agreed on by the Basel Committee on Banking Supervision. Chantal Hughes, Barnier’s spokeswoman, declined to immediately comment.

China CBRC Issues Draft Rules on Lending to ‘Green’ Industries

Chinese banks should boost credit support to low-carbon and “green” industries, according to draft regulations by the China Banking Regulatory Commission distributed at a briefing in Beijing.

Lenders should adopt “differentiated” lending policies to industries with major environmental and social risks, according to the draft rules.

Banks shouldn’t lend to clients that fail environmental and social risk evaluations, and will be allowed to terminate lending in the event of “major” hazards, according to the proposed rules.

Compliance Action

Bats Gets Request From SEC on Exchange Order Types, Strategies

Bats Global Markets Inc., the exchange operator preparing for an initial public offering, got a request from the U.S. Securities and Exchange Commission for information on the types of orders customers use on its venues.

The request from the SEC’s enforcement division, disclosed in a regulatory filing yesterday on the IPO, sought information about how order types have evolved at the third-largest owner of U.S. equity exchanges by volume. Bats said regulators asked for documents “related to the development, modification and use of order types, and our communications with certain market participants,” including some of Bats’ owners.

Bats and exchanges such as Nasdaq Stock Market and NYSE Arca offer multiple order types so traders can tailor transactions based on price moves or other conditions. Some of them give users control over when and how they execute a trade request while others allow firms to keep their place in line for orders or avoid routing to other venues. NYSE Euronext, which owns NYSE Arca, and Nasdaq OMX Group Inc. are in New York.

The SEC asked for information on Lenexa, Kansas-based Bats’s information-technology systems and trading strategies, the filing said. Randy Williams, a spokesman for Bats, declined to comment. John Nester, an SEC spokesman, declined to provide further details.

Bats also said in the filing that its board approved a $100 million dividend for current shareholders the day before the IPO. Bats operates two U.S. equities markets, an options exchange and two European trading venues and is owned by a group of brokers including Morgan Stanley and Citigroup Inc. in New York and Chicago-based Getco LLC.

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Japan Financial Watchdog Orders AIJ to Halt Asset Business

Japan’s financial regulator ordered AIJ Investment Advisors Co. to halt its business after finding the asset manager’s clients funds of about 183.2 billion yen ($2.3 billion) may be “adversely affected” and started a probe into the 263 asset managers operating in the nation.

The regulator is still investigating the firm and can’t comment on losses. The suspension, which began yesterday, will last until March 23, the regulator said.

AIJ, a Tokyo-based asset-management firm, may have lost most of the 200 billion yen it manages for companies’ pension plans, the Nikkei newspaper said, citing unidentified securities investigators. Regulators have been investigating AIJ since the end of January and are unable to explain where some money went, Nikkei reported.

Japanese pension plans have been suffering from two decades of slumping markets and an aging population. Alternative investments were becoming one of the options for the retirement funds, which have traditionally invested mainly in bonds, as ways to maintain steady returns and fund retiree benefits in a country where more than one in five people are over 65.

AIJ, led by Kazuhiko Asakawa, was established in April 1989, and had 120 clients including pension plans with 183.2 billion yen in assets as of the end of 2010, according to a statement from the Financial Services Agency, adding it has 12 employees.

A phone call to AIJ’s main office was answered by an automatic recording which didn’t allow messages to be kept.


Sony, Philips Win Paris Appeal Against 2005 Antitrust Fine

Royal Philips Electronics NV and Sony Corp. won appeals overturning a December 2005 fine by France’s competition regulator for fixing prices in consumer electronics such as televisions, lawyers for Sony said yesterday.

The appeals court threw out evidence from secretly recorded phone calls and found insufficient proof in what remained to uphold the fine, Paris-based law firm Gide Loyrette Nouel said in an e-mailed statement.

The 32 million euros ($42.6 million) paid by the two companies must be returned, the Paris court said. The issue was referred back to the regulator for further inquiry, “if appropriate,” according to the statement.

The French regulator, the Autorite de la Concurrence, declined to comment on the decision in an e-mailed statement.

Hedge Fund 3 Degrees Said to Lose Challenge to Regulator’s Order

3 Degrees Asset Management, asked by Singapore’s central bank to shutter its operations following allegations that founder Moe Ibrahim diverted assets, lost a legal bid to challenge the regulator’s order, according to two people familiar with the decision.

3 Degrees’s application to overturn the decision by the Monetary Authority of Singapore and the finance minister to withdraw its exempt fund manager status was rejected by the Singapore High Court, said the people, who weren’t authorized to speak publicly about the decision. Justice Belinda Ang’s minutes from the Feb. 23 closed hearing aren’t publicly available.

The Monetary Authority probed Singapore-based 3 Degrees after one of its funds sued Indonesian-born Agus Anwar in 2008 to recover at least $40 million of debt. Anwar then claimed that Ibrahim diverted $6.7 million from the fund to 3 Degrees, which is wholly owned by Ibrahim. Withdrawing 3 Degrees’s exempt status would send a “strong message of deterrence’ to others in the industry, the regulator said in court papers.

Ibrahim and Ronald Falls Jr., the hedge fund’s general counsel, didn’t respond to three e-mails seeking comment. They weren’t available for comment, according to a woman who answered a call to 3 Degrees’s office and gave her name only as Alicia. A spokesman for Singapore’s central bank, didn’t respond to two e-mails and three calls requesting comment.

3 Degrees, which focuses on distressed debt and managed about $215 million as of Oct. 5, denied the allegations in its lawsuit. The withdrawal of the fund’s status was put on hold, pending the outcome of yesterday’s court hearing.

The case is 3 Degrees Asset Management Pte v Attorney General and Monetary Authority of Singapore OS874/2011 in the Singapore High Court.


Gerard Says Obama Tax Plan Picks ‘Winners and Losers’

Jack Gerard, chief executive officer of the American Petroleum Institute, talked about the potential impact of President Barack Obama’s proposed corporate tax changes on the oil industry.

Gerard spoke with Erik Schatzker on Bloomberg Television’s ‘‘InsideTrack.”

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Flaherty Says Hopes for Reasonable Solution on Volcker Rule

Canadian Finance Minister Jim Flaherty said he’s hopeful his government will reach a solution with the U.S. on proposed U.S. regulations to prevent banks from trading with their own money.

Flaherty said he will discuss the so-called Volcker rule with U.S. Treasury Secretary Timothy Geithner this weekend at a meeting of G-20 finance ministers in Mexico City. Flaherty has warned the measure would restrict liquidity in Canadian government debt markets.

Flaherty made the remarks at a news conference yesterday in Toronto.

Barnier Says Volcker Rule Should Focus on Banks’ U.S. Acts

Michel Barnier, the European Union’s financial services chief, said a proposed U.S. ban on proprietary trading is too far-reaching and its implementation must be coordinated globally.

The so-called Volcker rule, named for former Federal Reserve Chairman Paul Volcker, was included in the Dodd-Frank Act to restrict risky trading at banks that operate with federal guarantees. Central bankers and regulators from around the world have voiced concern that the rule, which would apply to the U.S. operations of foreign banks, may also extend to firms’ operations outside of the country.

“It is not acceptable that U.S. rules have such a wide effect on other nations and foreign capital markets without any international coordination,” Barnier said yesterday in a speech at a conference in Washington. “National rules can have serious effects abroad. That is why I’m concerned about your proposed implementation” of the Volcker rule.

In scores of comment letters filed Feb. 13, the world’s largest banks demanded changes to the proposed ban on proprietary trading. They said the Volcker rule, which is scheduled to take effect in July, would increase risk, raise investor costs, hurt U.S. competitiveness and be vulnerable to legal challenge. G-20 leaders haven’t endorsed the rule, which exempts U.S. government debt but not non-U.S. government bonds.

Comings and Goings

Wynn Macau to Meet to Discuss Removal of Okada From Board

Wynn Macau Ltd. will hold an emergency meeting of its board to discuss removing Japanese billionaire Kazuo Okada after parent Wynn Resort Ltd. accused him of illegal payments to Philippine gambling regulators.

Allan Zeman, vice chairman of the unit, said that while the time hasn’t been confirmed, the company is considering an emergency meeting in Macau. He is waiting to hear from the lawyers, he said.

Wynn Resorts Chairman and Chief Executive Steve Wynn will convene an emergency meeting with Wynn Macau directors today, Reuters reported yesterday, citing people it didn’t identify. Okada, the 69-year-old chairman of Universal Entertainment Corp., has denied Wynn’s allegation he violated U.S. laws by making payments to members of the Philippine Amusement and Gaming Corp.

Universal Entertainment owned 20 percent of Wynn Resorts through a U.S.-based unit and is building a $2.3 billion gambling resort in Manila.

The Las Vegas-based casino operator on Feb. 19 said it redeemed the Universal unit’s stake for about 30 percent less than the market price and asked Okada to quit the board over the alleged payments.

Universal reiterated Feb. 22 it will take legal action against Wynn’s moves, which it called “outrageous.” Nobuyuki Horiuchi, a spokesman for Tokyo-based Universal, declined to comment on the planned emergency meeting in Macau.

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