‘Alpine’ Taxes, Muni Crack-Down, TARP, Spain: Compliance

About 2,400 people with bank accounts in Liechtenstein have agreed to disclose unpaid tax owed to the U.K., the revenue and customs office said.

Mostly wealthy individuals with accounts in the Alpine nation have so far paid 363 million pounds ($564 million) following the introduction of a disclosure facility that aims to raise as much as 3 billion pounds by 2016, the revenue office said. Both nations were expected to sign a double taxation agreement yesterday.

The clampdown comes amid a request for information from the U.S., which is targeting lawyers, accountants, financial advisers, asset managers and those responsible for professional asset protection.

Under pressure from the U.S., Germany and France, Liechtenstein said in March 2009 that it would conform with tax standards set out by the Organisation for Economic Cooperation and Development to avoid being blacklisted as a tax haven.

Compliance Policy

Municipal-Bond Regulators Crack Down on Disclosure Enforcement

Municipal-bond regulators are checking to ensure that securities underwriters comply with obligations requiring issuers to meet disclosure obligations, officials said at a government-finance conference.

The U.S. Securities and Exchange Commission and Financial Industry Regulatory Authority in the past two weeks began asking underwriters in the $3.7 trillion market to review whether municipalities provided required disclosures when selling bonds, according to Leslie Norwood, vice president of the Securities Industry and Financial Markets Association.

The SEC has made clear that disclosure must improve in the municipal-bond market, where issuers sometimes produce financial reports late, provide incomplete information or don’t make it available at all. In March, regulators said they would begin checking on whether dealers have been making sure their clients comply, Norwood said.

Under securities law, municipal borrowers don’t have to provide financial and other information, yet their underwriter banks are required to put language in bond documents that forces the issuers to meet disclosure guidelines.

Some dealers didn’t maintain and didn’t require issuers to maintain adequate written evidence that they complied with disclosure obligations, according to the March alert sent by the SEC. Failure to comply with due diligence on its obligation can lead to violations of anti-fraud provisions of securities laws and other SEC and Municipal Securities Rulemaking Board rules, the alert said.

Spanish Banks May Be Offered EFSF Bonds, European Official Says

The euro region’s temporary bailout fund may help Spanish banks by giving them bonds that could be used as collateral, a step used to help Greek lenders since April, a European official said.

Should Spain request help from the European Financial Stability Facility, the fund could potentially transfer new bonds to the country’s FROB rescue program, said the official, who spoke on terms of anonymity because an application has yet to be made. The program would then transfer the bonds to Spanish banks in exchange for shares, while FROB would remain liable for the debt. Greek banks have used the debt as collateral that can be deposited at the European Central Bank to raise cash.

The move would allow the Spanish government to channel aid directly to its bank rescue facility without drawing on market issuance to recapitalize the lenders, said the official.

German Chancellor Angela Merkel’s government said yesterday that Spain’s bailout program should draw from the ESM, which offers preferred seniority in insolvency proceedings and is prefinanced through its own cash reserves.

EU Criticized With U.S. for Bank Rules Weaker Than Basel III

The U.S., European Union and Japan may fail to fully implement bank-capital rules drawn up to prevent a repeat of the 2008 financial crisis, global watchdogs warned.

International teams of regulators have found weaknesses in the nations’ implementing measures for the so-called Basel III standards, the Basel Committee on Banking Supervision said yesterday in a statement on its website.

Preliminary assessments of the EU, the U.S. and Japan “have identified areas of divergence” with the Basel accord, the group said. There are “key areas where domestic implementation may be weaker than the globally agreed standards.”

Nations face a January 2013 deadline set by the Basel committee for implementing the new rules, which more than triple the core capital that lenders must have to stave off insolvency, and require banks to build up buffers of easy-to-sell assets. The measures were published by the group in 2010.

Yesterday’s report sets out preliminary findings by the review teams, which plan further “on site” visits by the end of July, the group said.

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Compliance Action

Treasury Begins Auction of Preferred Stock in Seven TARP Banks

The U.S. Treasury Department announced the beginning of public offerings to sell preferred stock from seven banks in the Troubled Asset Relief Program.

The Treasury said in a statement it would conduct auctions on Ameris Bancorp of Moultrie, Georgia; Farmers Capital Bank Corp. of Frankfort, Kentucky; First Capital Bancorp Inc. of Glen Allen, Virginia; First Defiance Financial Corp. of Defiance, Ohio; LNB Bancorp Inc. of Lorain, Ohio; Taylor Capital Group, Inc. of Rosemont, Illinois; and United Bancorp Inc. of Ann Arbor, Michigan.

The stock offerings were scheduled to begin yesterday at 8:30 a.m. and are expected close tomorrow, the Treasury said.

Bankers Cite ‘Confusion’ Over Federal Reserve Stress Test

A group of U.S. bankers that advises the Federal Reserve urged supervisors last month to reduce the “uncertainty and confusion” posed by the most recent test of banks’ ability to weather financial turmoil.

Members of the Federal Advisory Council said the uncertainty was generated by the “significant differences” between the analysis used by the Fed in its stress-test models and those used by participating banks, said the memo describing the May 11 meeting released today by the Fed.

“Those disparities place bank boards in a highly vulnerable position,” the memo said. “Board members are literally compelled to ‘fly blind,’ in effect guessing about high-stakes capital distribution decisions that can tip the balance between the success of passing” the stress test and “the market punishment associated with failure.”

Tension between banks and regulators has grown as agencies begin to implement new rules under the Dodd-Frank Act requiring banks to raise capital, curtail risk and rein in compensation. The Fed in March completed its most recent stress test, which it calls the Comprehensive Capital Analysis and Review, and published its own test results for the 19 largest U.S. financial institutions.

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Nomura Faces Regulatory Action on Insider Information Leaks

Nomura Holdings Inc. may face “severe action” by Japanese regulators after employees of the country’s biggest securities firm leaked insider information, Financial Services Minister Tadahiro Matsushita said.

Matsushita made the remarks at a news conference today in Tokyo. He didn’t elaborate on the types of action the Financial Services Agency may take, saying it depends on the outcome of the investigation.

Nomura said last week that employees gave non-public information used for insider trading in 2010, acknowledging for the first time their role in cases being examined by regulators. The Securities Exchange and Surveillance Commission, the FSA’s watchdog arm, has since March recommended penalizing the companies that profited from the tips while stopping short of punishing the underwriters who provided them.

The investigation centers on trading of shares of Japanese companies before they announced equity offerings in 2010. Employees at Nomura, a manager of stock sales by Mizuho Financial Group Inc., Inpex Corp. and Tokyo Electric Power Co., provided information on the stock sales.

Nomura repeated its regret over the leaks today. “We continue to cooperate fully in the ongoing inspection by the commission,” the Tokyo-based bank said in a statement.

Merrill Singapore Unit Pays S$27,000 Monetary Authority Penalty

Bank of America Corp.’s Merrill Lynch unit in Singapore paid a penalty of S$27,000 ($21,034 dollars) after 90 representatives conducted fund management activities before their names were entered in a public register, the Monetary Authority of Singapore said in a statement on its website dated yesterday.

The offenses occurred between November 2010 and August 2011, according to the authority.

Merrill Lynch has put policies in place to prevent a recurrence.


Defunct Swift Trade Appeals $12 Million FSA Market-Abuse Penalty

Defunct trading firm Swift Trade Inc. appealed a decision by the U.K. Financial Services Authority to fine it 8 million pounds ($12.4 million) for market abuse.

The company, which was dissolved in December 2010, appealed the penalty at a London tribunal yesterday and said that the fine was “entirely disproportionate” to its activities.

Lawyers for Toronto-based Swift Trade said in written arguments said the penalty was “fundamentally flawed from the outset” because the “market-abuse legislation does not apply at all to ‘synthetic product trading.’”

Swift Trade was fined for engaging in “layering,” in which multiple buy orders for shares are submitted and withdrawn to manipulate the price of a security, according to the judge.

The Ontario Securities Commission also found that Swift Trade breached securities laws by providing software and an electronic trading system for around 4,500 unregistered traders in 2008, according to a 2011 report.

Amgen Gets High Court Review of Class-Action Stock Fraud Suit

The U.S. Supreme Court will decide whether investors must prove that misinformation from Amgen Inc. propped up its stock price before they can pursue a class-action stock-fraud suit against the world’s largest biotechnology company.

The justices yesterday agreed to review an appeal by Amgen in a case alleging the company and its executives misled investors for more than three years about safety questions involving its Aranesp and Epogen anemia drugs.

Amgen says a federal appeals court ruling makes it too easy to mount class-action lawsuits representing thousands of people, pressuring companies to pay settlements for even frivolous allegations rather than risk huge damages in a trial. Amgen’s appeal is backed by the U.S. Chamber of Commerce and the pharmaceutical industry’s trade group.

All sides agree that the investors alleging securities fraud must, at some point, show that misrepresentations by Amgen had an effect on its share price.

The company says judges should resolve disputes about the relevance of misleading information before letting multiple investors band together in a class-action suit.

The justices will hear arguments in the case during the term that begins in October.

The case is Amgen v. Connecticut Retirement Plans and Trust Funds, 11-1085.

Allergan Holders Can Proceed With Botox Suit, Judge Rules

Allergan Inc. investors can seek to hold directors responsible for criminal sanctions and a $600 million penalty that the maker of the wrinkle smoother Botox was ordered to pay for marketing the drug for unapproved uses, a judge ruled.

Two pension funds who contend that Allergan’s board failed to properly oversee executives who marketed Botox for ailments that hadn’t been approved by regulators have amassed enough evidence about the illegal sales effort to proceed with their claims, Delaware Chancery Court Judge Travis Laster concluded yesterday.

The funds’ allegations “support a reasonable inference that the board consciously approved a business plan predicated on violating the federal statutory prohibition against off-label marketing,” Laster said in his 82-page ruling.

Botox, Allergan’s best-selling product, had $1.59 billion in sales last year, about half for cosmetic uses and half for migraine treatment, incontinence and other conditions.

Bonnie Jacobs, a spokeswoman for Allergan, declined to comment on Laster’s ruling. “At this point, we haven’t fully reviewed the ruling,” she said in an e-mailed statement.

Allergan’s marketing efforts have been the focus of scrutiny since 2007.

The case is Louisiana Municipal Police Employees Retirement System and UFCW Local 1776 & Participating Employers Pension Fund v. Pyott, 5795, Delaware Chancery Court (Wilmington).

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Innospec Ex-CEO Jennings Pleads Guilty to U.K. Bribe Charges

Former Innospec Ltd. Chief Executive Officer Paul Jennings pleaded guilty yesterday to trying to bribe Indonesian and Iraqi government officials to win contracts.

Dennis Kerrison, another former CEO at the company, and Miltos Papachristos, the former regional sales director for the Asia-Pacific region at Innospec, both pleaded not guilty to a charge brought by the U.K.’s Serious Fraud Office of attempting to bribe Indonesian officials to win contracts to supply the fuel additive tetraethyl lead. The pleas were entered at a hearing yesterday at a London criminal court and Kerrison and Papachristos will face trial next year.

Kerrison, of Surrey, England, was CEO of the company under its previous name, Octel Corp., according to the SFO. The charges cover a period from 2002 until 2008.

Innospec, a producer of fuel additives and specialty chemicals, agreed to pay more than $40 million in fines after pleading guilty in the U.K. and U.S. in 2010 to paying bribes overseas to secure sales contracts.


Kelleher Focuses on Taxpayer Protection in Bank Rules

Dennis Kelleher, chief executive officer of Better Markets, a nonpartisan markets watchdog organization, talked about the role of financial market regulatory changes in reducing risks to taxpayers.

Kelleher spoke with Betty Liu on Bloomberg Television’s “In the Loop.”

For the video, click here.

Comings and Goings

U.K. Financial Conduct Authority Names Griffith-Jones Chairman

John Griffith-Jones is the non-executive chairman designate of the Financial Conduct Authority, or FCA, the U.K. Treasury said yesterday in a statement on its website.

He will participate in the creation of the new agency, the government said in the statement.

The FCA will be one of two new agencies formed in the U.K. that will replace the Financial Services Authority beginning in 2013.

Griffith-Jones is chairman of KPMG in the U.K., the government said in the statement. He is expected to join the FSA board Sept. 1 as “a non-executive director and Deputy Chair” and participate fully in governance, according to the statement.

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