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Pfizer-SEC, Derivatives Pact, Consumer Bureau: Compliance

Pfizer Inc., the world’s biggest drugmaker, agreed to pay $60.2 million to settle foreign bribery cases it brought to U.S. authorities involving alleged payments paid by employees and agents of subsidiaries.

Pfizer entered into two agreements with the Securities and Exchange Commission and the New York-based drugmaker reached a deferred prosecution accord with the Department of Justice, according to filings yesterday in federal court in Washington.

U.S. law enforcement authorities have been probing drugmakers for possibly breaking an overseas anti-bribery law that bars employees or their agents from paying bribes to foreign government officials to obtain or retain business. Yesterday’s settlements stem from payments and gifts Pfizer said its foreign units made to government-employed doctors and workers in eastern Europe, China and the Middle East, according to the filings.

The SEC said the payoffs were made “without the knowledge or approval of officers or employees of Pfizer, but the inaccurate books and records of Pfizer subsidiaries were consolidated in the financial reports of Pfizer.”

Pfizer alerted U.S. authorities in 2004 after probing the claims. More payments were found when the drugmaker bought its Wyeth unit in 2009.

“The actions which led to this resolution were disappointing, but the openness and speed with which Pfizer voluntarily disclosed and addressed them reflects our true culture and the real value we place on integrity and meeting commitments,” Amy Schulman, Pfizer’s general counsel, said in an e-mailed statement. “We expect every colleague across Pfizer to adhere to the highest standards of conduct.”

Prosecutors agreed to defer prosecution and drop the charges after two years if Pfizer continues to cooperate and take remedial steps. The settlements must be approved by a federal judge.

The Pfizer cases are U.S. Securities of Exchange Commission v. Pfizer Inc., 12-cv-01303; U.S. Securities of Exchange Commission v. Wyeth LLC, 12-cv-1304; and U.S. v. Pfizer HCP Corp., 12-cr-00169, U.S. District Court, District of Columbia (Washington).

For more, click here.

Compliance Policy

Halkbank CEO Aslan Says Turkey May Need to Act on Bad Loans

Turkiye Halk Bankasi AS Chief Executive Officer Suleyman Aslan said Turkey’s central bank and regulators may need to act should bad loans in the nation’s financial system worsen.

Halkbank, as the lender is known, is Turkey’s biggest listed state-run bank. Aslan, speaking in a televised interview with the CNBC-e news channel yesterday, didn’t specify what measures he wanted policy makers to take, though he said the central bank’s average lending rate to banks was “rather high.” He also said lenders’ “asset structures are not breaking down” as a result of bad loans.

Turkey’s economic growth is forecast to slow to 2.3 percent this year from 8.5 percent in 2011, the International Money Fund said in April, while central bank data shows non-performing consumer loans rose 4.4 percent in the first six months of 2012 compared with a year earlier, led by unpaid credit-card bills.

Aslan yesterday forecast that the Turkish central bank will ease monetary policy. Turkish banks’ provisions may increase this year because of non-performing loans caused by a slowdown in the economy, Duygun Kutucu, an analyst at EFG Istanbul Securities, said in a telephone interview on July 31

Ecuador Tightens Controls on Transfers to Maintain Liquidity

Ecuador will boost controls on cash transfers by banks in an attempt to maintain liquidity in the South American nation’s financial system, central bank President Pedro Delgado said yesterday.

Banks are keeping some foreign clients’ funds in international accounts to avoid paying a 5 percent capital-export tax for money they need to move outside the country, Delgado said to reporters in Quito. The controls will force banks to increase the amount they bring into the country and raise the amount of tax they pay to export cash, he said.

Faced with falling revenue as oil prices decline and economic growth slows, the government said last month all cash transfers into Ecuador must go through the central bank before reaching their final destination.

Yakuza-Lending Surge Feared in Japan as Eased Law Looms

Victims of loan sharks in Japan and consumer advocacy groups say a possible revision of a law which cracked down on predatory lending may lead to a new surge of suicides and bankruptcies among borrowers.

Lawmakers who say the legislation went too far in cutting credit to small businesses in a stagnant economy want to ease restrictions. That’s sparking debate between the two sides. Bloomberg’s Scilla Alecci reported from Tokyo.

For the video report, click here.

Two Senators Urge Regulators to Raise Large-Bank Capital Demand

Two Senate Banking Committee lawmakers sent a letter to Federal Reserve Chairman Ben S. Bernanke urging the central bank to require the largest U.S. banks to hold more capital.

Senators David Vitter, a Republican from Louisiana, and Sherrod Brown, a Democrat from Ohio, said regulators should demand higher capital for globally systemically important institutions, or SIFI, and that the current proposed standards are a “baby step in the correct direction.”

“You must have the board revisit the proposed rule to implement Basel III and modify the rule to include a SIFI surcharge significant enough to change the incentives for the largest banks,” the senators wrote in their Aug. 6 letter.

The Basel committee published measures in 2010 to more than triple the core-capital requirements of all internationally active banks. A provisional list of 29 SIFI was produced last year that authorities said should face capital surcharges of as much as 2.5 percent of their risk-weighted assets.

The lenders targeted for these surcharges and for heightened supervision included Deutsche Bank AG, BNP Paribas SA and Goldman Sachs Group Inc.

Vitter and Brown said the Basel rules should move on a sliding scale with higher standards of capital and leverage for the largest and most-complex banks. Bankers have argued that the proposed Basel capital standards are already too high and would restrict their ability to lend and grow.

Japan May Deploy First Hong Kong Inspector as Banks Expand

Japan’s financial watchdog is considering deploying a full-time inspector to Hong Kong for the first time to increase monitoring as the country’s biggest banks expand assets in Asia.

A Financial Services Agency official would take charge of inspecting Hong Kong branch offices of Japanese lenders including Mitsubishi UFJ Financial Group Inc., Hiroshi Okada, a spokesman for the regulator, said by telephone today.

The International Monetary Fund said last week that Japan should deepen cross-border risk monitoring, given the growing overseas operations of the nation’s financial institutions. Scrutiny of banks is mounting worldwide as authorities examine cases ranging from Standard Chartered Plc’s alleged transactions with Iranian banks to Barclays Plc’s interest-rate rigging.

The FSA has full-time inspectors in New York, London and Singapore to examine risks associated with Japanese banks’ global operations.

Hong Kong was a key location when regulators investigated Tokyo-based AIJ Investment Advisors Co. for fraud this year.

Compliance Action

Standard Chartered Falls Most in 24 Years on N.Y. Iran Probe

Standard Chartered Plc fell the most in almost 24 years as an analyst estimated it may face costs of $5.5 billion after being accused of violating U.S. money laundering laws over its dealings with Iranian banks.

Standard Chartered may lose its license to operate in New York after the state’s Department of Financial Services found the bank conducted $250 billion of deals with Iranian banks over seven years and earned hundreds of millions of dollars in fees for handling transactions for institutions subject to U.S. economic sanctions. The London-based lender yesterday denied the allegations, saying it “strongly rejects the position and portrayal of facts” made by the regulator.

The bank may be fined $1.5 billion by U.S. regulators, lose about $1 billion of revenue from its Iranian operation and a further $3 billion in market value if senior managers quit, Cormac Leech, an analyst at London-based Liberum Capital Ltd. who rates the stock a buy, wrote in a note to investors yesterday.

For more, click here, and see Interviews, below.

CFPB Eases Rules on Some International Money Transfers

The Consumer Financial Protection Bureau has updated its international money transfer rule to make the process easier for community banks, credit unions, and financial institutions handling 100 or fewer remittances a year, according to a statement on the consumer bureau’s website.

The rule implements protections provided under the Dodd-Frank law requiring remittance transfer providers to disclose upfront the fees, exchange rate, and the amount to be received. The revised rule also provides consumers with rights when errors or cancellations occur.

The final remittance rule will take effect Feb 7, the consumer bureau said in the statement.

SEC Said to Plan Software, Algorithm Tracking, WSJ Says

The U.S. Securities and Exchange Commission plans to pay more attention to any alterations in software and new trading systems installed at exchanges, the Wall Street Journal reported, citing unidentified people.

The SEC expects to advance rules that will require exchanges and other market platforms to routinely test for software glitches and inform regulators of concerns, the paper reported. In addition, the agency is weighing tighter rules for trading firms such as Knight Capital Inc., including whether senior executives should be required to certify that a company’s technology systems work appropriately.

Knight Capital received $400 million infusion after a software malfunction last week drove the market maker to the brink of bankruptcy.

For more on Knight, see Interviews, below.


Morgan Stanley Derivative Accord Wins Approval in First Case

Morgan Stanley won approval of a $4.8 million accord with the U.S. over claims it helped manipulate electricity prices, in what the Justice Department called its first effort to get disgorgement from a financial firm that used derivatives to aid anticompetitive behavior.

U.S. District Judge William Pauley in Manhattan turned aside complaints from not-for-profits AARP and New York Public Service Commission that under the agreement Morgan Stanley didn’t have to admit wrongdoing and didn’t pay enough. Pauley, citing the Justice Department, said the case marks the first time the government filed an antitrust suit against a financial firm involving derivative agreements.

Pauley wrote that deference to the government’s decision to settle was appropriate, despite the “relatively mild sanction,” because of the “novelty of the government’s theory.”

“An admission of liability is not a prerequisite for judicial approval of an agency settlement,” Pauley said, citing a recent ruling by a federal appeals court in a case involving Citigroup Inc.

Mary Claire Delaney, a spokeswoman for Morgan Stanley, declined to comment on the judge’s approval of the settlement.

The case is U.S. v. Morgan Stanley, 11-6875, U.S. District Court, Southern District of New York (Manhattan).

Telkom South Africa Is Fined $55 Million in Antitrust Action

Telkom SA Ltd. was fined 449 million rand ($55 million) for abusing its dominance in South African telecommunications between 1999 and 2004, less than the 3.25 billion rand the Competition Commission had sought.

The Competition Tribunal “concluded that Telkom leveraged its upstream monopoly in the facilities market to advantage its own subsidiary in the competitive value added network market,” the Pretoria-based tribunal said in an e-mailed statement yesterday.

Telkom is studying the judgment and its implications, it said in a statement yesterday.

The Competition Commission investigated Africa’s largest fixed-line phone operator and asked the tribunal to impose a fine of 3.25 billion rand at hearings that lasted until early this year. The commission’s probe followed five separate complaints of anti-competitive behavior lodged by Internet service providers between 2005 and 2007.

Telkom, based in Pretoria, must pay half the penalty within six months and the balance within the following 12 months, the tribunal said.


Bernanke Says Regulatory Overhauls Will Help Avoid More Crises

Federal Reserve Chairman Ben S. Bernanke said new regulatory structures such as the Dodd-Frank Act and the Basel accords are important in helping to prevent another crisis because they give regulators a more holistic view of the financial system.

Regulators want to “take steps to provide a warning” of an approaching crisis, Bernanke said at the Fed in Washington yesterday at a town hall meeting with teachers. The overhauls also aim “to make the system itself as resilient as possible” in a shock, while new international capital standards give banks more of a cushion against “significant losses,” he said.

“Greater capital, stronger rules on derivatives trading, more liquidity” will make the system stronger, Bernanke said.

For the video, click here.

Wheeler Says StanChart Probe May Carry Political Motive

Christopher Wheeler, a banking analyst at Mediobanca SpA, talked about the accusation Standard Chartered Plc violated U.S. money laundering laws over its dealings with Iranian banks.

He spoke with Manus Cranny on Bloomberg Television’s “Last Word.”

For the video, click here.

Knight Has to Give Investors ‘Post-Mortem,’ Kaplan Says

Jay Kaplan, a portfolio manager at Royce & Associates LLC, talked about the Knight Capital Group Inc.’s weekend rescue and the impact on shareholders.

Kaplan spoke with Erik Schatzker and Stephanie Ruhle on Bloomberg Television’s “Market Makers.”

For the video, click here.

Separately, the U.S. Securities and Exchange Commission should examine whether an emphasis on trading speed is threatening the stock market, said Stifel Financial Corp. Chief Executive Officer Ronald Kruszewski.

He made the remarks in an interview yesterday on Bloomberg Television’s “Market Makers.”

“These systems need to work 100 percent of the time. Speed is not everything here.”

Stifel Financial, a St. Louis-based brokerage, was one of six investors that agreed to buy $400 million of convertible preferred securities in Knight Capital Aug. 7. Knight Capital, led by Chairman and CEO Thomas Joyce, lost $440 million after a computer malfunction last week caused the Jersey City, New Jersey-based company to take on trading positions it didn’t want.

For more, click here.

For a video report, click here.

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