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Fondiaria Rescue, Ex-Credit Agricole Banker, FSA: Compliance

Unipol Gruppo Finanziario SpA’s planned rescue of Fondiaria-SAI SpA, Italy’s second-biggest insurer, may be delayed after a prosecutor requested the seizure of a 20 percent stake in Fondiaria’s biggest investor.

The request to seize the shares in Premafin Finanziaria SpA was made by Milan prosecutor Luigi Orsi as part of his probe into market manipulation by the company’s founder Salvatore Ligresti, according to court documents obtained by Bloomberg News.

Unipol agreed in January to buy new shares in Ligresti’s Premafin as part of a plan to rescue the unprofitable insurer. The purchase would allow Premafin to participate in the 1.1 billion-euro stock sale announced by Fondiaria on Jan. 30. Unipol wants to carry out a four-way merger to create an insurer to challenge Assicurazioni Generali SpA, Italy’s largest.

Fondiaria said April 19 it backed the merger plan and will continue to pursue a transaction, though it wants Unipol’s terms reviewed. Unipol’s proposal would give it at least a 67 percent stake in Turin, Italy-based Fondiaria.

Ligresti, the 80-year-old patriarch of the family that controls at least 51 percent of Premafin, is under investigation for market manipulation, the documents show. Ligresti allegedly pushed up Premafin’s share price between November 2009 and September 2010 to avoid the renegotiation of loan agreements backed by Premafin shares, according to the documents.

Marco De Luca, Ligresti’s attorney, didn’t respond to two phone calls seeking a comment. A spokeswoman for Premafin and Fondiaria declined to comment on the matter. A Unipol spokesman wouldn’t comment.

Compliance Policy

Bank Bonus Cap Endorsed by EU Lawmakers in Basel-Rule Talks

Bankers may face rules capping their bonuses at no more than their fixed pay after European Parliament lawmakers agreed on the measure as part of negotiations on draft Basel capital rules.

Political groups in the European Union assembly “have an agreement” on the one-to-one ratio between fixed and variable pay, Philippe Lamberts, the lawmaker leading work on the rules in the assembly’s Green group, said in an interview from Strasbourg, France April 20. Talks will continue on additional pay curbs, following a meeting of members of the parliament.

The bonuses cap was suggested April 13 by Othmar Karas, the sponsor of the bill in the parliament, after members of the assembly tabled dozens of amendments on pay. The law, which implements rules published by the Basel Committee on Banking Supervision, must be endorsed by national governments and by the parliament before it can come into effect.

The parliament’s economic and monetary affairs committee postponed an April 25 vote on the legislation to allow more time for the assembly’s members to thrash out further compromises, Lamberts said.

Lamberts said in an interview that the vote is “certain” to be postponed because of open issues.

Separately, the European Parliament postponed plans to vote on bank capital rules to this week, Lamberts said April 20. He is a member of the assembly’s Economic and Monetary Affairs Committee.

For more, click here.

India May Lower Private-Equity Firms’ Taxes, Economic Times Says

India’s finance ministry is considering reducing long-term capital gains tax on unlisted stocks to 10 percent for private-equity firms, the Economic Times said, citing people it didn’t identify.

The proposed changes would put private-equity investors at par with foreign institutional investors.

Separately, the country’s finance ministry has asked the RBI to allow higher investment by individual foreign investors in corporate debt, the Economic Times reported, citing an unidentified finance ministry official.

Compliance Action

SMBC Nikko Ordered by FSA to Improve Business After Breach

SMBC Nikko Securities Inc., a brokerage unit of Japan’s second-biggest bank, was ordered to improve its business by the country’s financial regulator after leaking information ahead of a share sale.

SMBC Nikko must submit a report by May 18 showing who is responsible for the rule breach and how the firm will improve compliance and internal controls, the Financial Services Agency said in a statement in Tokyo April 20.

The Securities and Exchange Surveillance Commission recommended April 13 that the FSA penalize SMBC Nikko after it found 23 sales staff disclosed information to 34 clients before an unidentified company’s announcement of an equity offering.

SMBC Nikko will take proper actions against employees who were involved in the violations, the Tokyo-based firm said in a statement April 20. It will continue to monitor public offerings that the brokerage is leading to ensure information is handled properly, the company said.

The breach may affect business. Japan Housing Finance Agency said on April 17 that it dropped SMBC Nikko as a manager of its bond sale. The agency had hired the company, a unit of Sumitomo Mitsui Financial Group Inc., along with Nomura Holdings Inc. and Goldman Sachs Group Inc.

SEC Says Boston Men Who Fed to Madoff Will Pay $4.8 Million

A Boston hedge-fund manager and his son will pay $4.8 million to settle U.S. regulatory claims that they lured customers with a fabricated track record before investing with other funds, including Bernard L. Madoff’s fraud.

Gabriel Bitran, 66, founded GMB Capital Management LLC in 2005 and with his son Marco Bitran raised more than $500 million over a three-year period, the Securities and Exchange Commission said in an administrative order filed April 20. The two men, who resolved the claims without admitting or denying wrongdoing, also agreed to be barred from the securities industry.

To market their fund, the Bitrans created performance records dating from 1998 that showed annualized returns of as much as 16.2 percent with no down years, the SEC said. They told investors the records were based on actual trading using Gabriel Bitran’s optimal-pricing models when they were actually based on hypothetical historical investments, according to the order.

Customers were misled to believe their money would be invested using the quantitative strategy when in reality certain GMB hedge funds were just investing in other hedge funds, the SEC said. GMB didn’t disclose to clients that they suffered significant losses after their money was invested in frauds including Petters Group and Madoff’s Ponzi scheme, the SEC said.

Nicholas Theodorou, an attorney for Gabriel Bitran at Foley Hoag LLP, and Mark Pearlstein a lawyer for Marco Bitran and GMB at McDermott Will & Emory LLP, said their clients are pleased to have reached a settlement with the SEC and to have put the matter behind them.

Vestia Derivatives Fraud Probe Expanded by Dutch Prosecutor

The Dutch public prosecutor expanded its probe of possible fraud linked to derivatives used by Stichting Vestia Groep after a financial official at the housing organization was arrested last week.

Esther Schreur, a spokeswoman for the prosecutor, said April 20 by telephone that “several other suspects” are in the investigation “besides the two suspects mentioned before.” She declined to specify the exact number of people or their identities.

Vestia is the subject of several probes after it needed 1.6 billion euros ($2.1 billion) of government-guaranteed loans to make payments stemming from margin calls on interest-rate swap contracts with several banks. The organization is also conducting its own forensic investigation, according to spokesman Ronald Florisson.

The prosecutor said on April 14 it was investigating transfers between an intermediary and a financial official at Vestia for possible bribery, tax fraud and money laundering in relation to derivatives used by the housing organization. One of the suspects was arrested on April 13.

None of the other suspects have been arrested, Schreur said.

Hong Kong Regulator Fines Mega Capital Over Listing Failures

Hong Kong’s securities regulator fined Mega Capital (Asia) Co. a record HK$42 million ($5.4 million) for failing to highlight misleading information in the share sale prospectus of Hontex International Holdings Co.

Mega Capital, the sole sponsor in the 2009 listing of Hontex, was also stripped of its corporate finance license, the Securities and Futures Commission said in a statement yesterday. Hontex, a Chinese fabrics maker, was suspended from trading on Hong Kong’s stock exchange in March 2010 after the SFC alleged the company disclosed materially false or misleading information in its prospectus. Mega Capital denies all allegations of wrongdoing, the regulator said.

The punishment comes as auditor disputes and delistings involving Chinese companies trading on foreign exchanges are fueling investor distrust, hurting valuations and damaging the market for new listings.

It’s the first time the SFC has stripped a license from a sponsor and the fine was the highest it had imposed against such a company, SFC spokesman Jonathan Li said. Calls to the Hong Kong office of Mega Capital’s Taiwan-based parent Mega Securities Co. outside office hours weren’t answered.

For more, click here.

Vietnam May Extend Trading Hours, Thoi Bao Kinh Te Saigon Says

Vietnam State Securities Commission is seeking finance ministry approval to amend afternoon trading hours to 1:30 p.m. to 3 p.m. from 1 p.m. to 2:15 p.m., Thoi Bao Kinh Te Saigon online newswire reported, without saying where it got the information.

The regulator also seeking ministry approval to reduce to two days from three days the minimum period buyers must hold shares after purchase.


Fired Credit Agricole Banker Loses Bid to Restore Lost Bonus

A senior investment banker at Credit Agricole SA who claimed he was threatened by a manager and unfairly dismissed, doesn’t deserve any compensation, a London employment tribunal ruled.

Edward Willems, the French lender’s former deputy head of fixed-income markets, sought “millions of pounds” in the suit. He told the tribunal in February he felt “betrayed” when he lost his job after reporting his boss Guy Laffineur’s behavior under rules that protect whistle-blowers from punishment.

While Willems was unfairly dismissed in July 2011, it wasn’t because of the dispute with Laffineur, tribunal judge Anthony Snelson said in a written judgment dated March 30. Credit Agricole had decided he “was not the appropriate person to take on the new sales role” and “was too closely associated with the earlier regime,” Snelson said.

Damages for wrongful dismissal are normally capped at about 72,000 pounds ($116,000). In whistle-blower cases, employment tribunals can award unlimited compensation, making it a popular recourse for bankers suing their former employers.

“No compensatory award is appropriate,” Snelson said. “The claimant must be content with a finding that his dismissal was unfair.”

Willems said in a phone interview that he was disappointed with the part of the ruling that applied to compensation only because “unlawful behavior should result in a penalty.”

Credit Agricole spokeswoman Charlotte McMullen declined to comment.

Hedge Fund Founder Kim Gets Five to 15 Years for Scheme

Hedge fund founder Brian Kim was sentenced to a total of five to 15 years in prison after pleading guilty to grand larceny in connection with what prosecutors said was a $6 million Ponzi scheme.

Justice Charles H. Solomon handed down the sentence April 20 in New York State Supreme Court in Manhattan. Kim, founder and operator of the hedge fund Liquid Capital Management LLC, pleaded guilty to nine of 26 counts against him in court on March 16. He faced as long as 25 years in prison for the most serious count.

The judge didn’t impose any fines or restitution.

Kim told the judge that he would seek to repay millions of dollars to his investors after he is released from prison.

Kim was charged in February 2011 with running the scheme for eight years. He told clients they were investing in safe and stable securities while he traded in highly speculative contracts and diverted money to himself, prosecutors said.

“He was never motivated by greed,” Kim’s lawyer, Justin Levine, said prior to the sentencing. “He genuinely wanted to help his investors.”

The state case is People v. Kim, 2011/86, New York State Supreme Court, New York County (Manhattan). The CFTC suit is U.S. Commodity Futures Trading Commission v. Kim, 11-cv-01013, and the federal passport fraud case is U.S. v. Kim, 11-cr-00642, U.S. District Court, Southern District of New York (Manhattan.)

For more, click here.

UBS Executive Cleared of Failing to Prevent Unauthorized Trades

A UBS AG executive was cleared by a tribunal in a case over the U.K. financial regulator’s allegations that he failed to prevent unauthorized trades at the bank’s wealth-management unit in London.

John Pottage, the former chief executive officer of the unit, was cleared by the financial services tribunal in a ruling, UBS said in a statement today.

The Financial Services Authority tried to fine Pottage 100,000 pounds ($160,000), saying he didn’t ensure the division had controls in place to prevent employees from making as many as 50 unauthorized trades a day with funds from at least 39 customer accounts. UBS compensated customers $42 million, and was fined 8 million pounds by the FSA in 2009.

“John Pottage and UBS take note of the decision of the Upper Tribunal,” UBS said in an e-mailed statement. “We are pleased with the outcome and that this matter is now closed.”

The FSA decision to fine Pottage, now a senior executive at the bank’s headquarters in Zurich, wasn’t supported by the evidence, the financial services tribunal ruled. The Financial Times reported the tribunal’s decision earlier.

Comings and Goings

Hong Kong Bourse’s Arculli Steps Down, Urges Vigilance

Hong Kong Exchanges & Clearing Ltd., surpassed by CME Group Inc. as the world’s biggest bourse by market value, will fall behind others if it’s not vigilant, said Ronald Arculli, who steps down as chairman today.

“It doesn’t matter if it’s the Cambodian or the Laotian exchange, somebody could overtake us,” Arculli said in an April 12 interview. “You’ve just got to be totally vigilant all the time and not take life for granted. To be international, you’ve got to work very hard at it, as you’ve got to work very hard at being local as well.”

Board members, half appointed by the government and half elected by shareholders, are scheduled to choose a replacement for Arculli tomorrow after the 73-year-old led efforts to attract international listings. Chow Chung-Kong, the former chief executive officer of subway operator MTR Corp., is the government’s pick, the South China Morning Post said April 11.

The rise of alternative trading venues at the expense of traditional bourses such as the New York and London stock exchanges is “a salutary reminder that we are in a very competitive scenario,” said Arculli, who is also chairman of the World Federation of Exchanges.

For more, click here.

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