Australia Trading Rules, Brazilian Oil, PwC: Compliance

The Australian Securities and Investments Commission is proposing new rules to regulate automated stock trading that will require traders to have stringent controls on their platforms.

Electronic trading platforms have come under scrutiny this month after a trading error at Knight Capital Group Inc. drove the market maker to the verge of bankruptcy, according to a statement by Belinda Gibson, deputy chairman of ASIC.

Traditional exchanges worldwide are losing market share to alternative operators. Trades on dark pools, where the size of orders and identity of the parties are hidden, are reported to exchanges after they have taken place. ASX Ltd. lost its monopoly as Australia’s only public, or lit, bourse in October last year with the entry of Nomura Holdings Inc.’s Chi-X Australia Pty.

Block trades and dark pools, off-exchange venues that don’t display prices, accounted for an average 25 percent of Australian share transactions this year and as much as 43 percent on one day in June, ASX, operator of the country’s largest bourse, said on Aug. 6.

“Automated trading is the evolution of broking and trading practices using computer technology,” the Australian Financial Markets Association, an industry group representing leading brokers, banks and fund managers, said in a statement. “In order for Australia’s markets to maintain relevance and compatibility with international markets, it is essential that the local markets keep pace with the latest developments. It is important that risks that accompany it are managed prudently.”

For more on ASIC, see Compliance Action, below.

Compliance Policy

Brazil Oil Regulator Studies 17 Local Content Waiver Requests

Brazil’s oil regulator is studying requests from about five oil operators to reduce local content requirements at 17 contracts in the country, Marcelo Mafra, the head of local content rules at the agency, said in an interview in Rio de Janeiro yesterday.

Companies are able to obtain waivers from local content rules if they can prove they can’t find the goods and services locally or if prices are out of line with international standards, he said. Mafra declined to name the companies seeking the waivers.

Spain to Change Law on Preferred Shares, Confidencial Says

Spain will change rules governing the sale by banks of preferred shares on Aug. 24, El Confidencial reported, without saying where it got the information.

New issues will have to have an institutional tranche of about 40 percent. At least 20 institutional clients will have to subscribe.

Minimum investment will be set at 100,000 euros ($123,300), the online newspaper said.

Libor Failures Neuter BBA as Lobby May Lose Oversight of Rate

Regulators and lawmakers in the U.K. are weighing whether to strip the British Bankers’ Association of its role overseeing the setting of Libor, the world’s most important benchmark interest rate, in the wake of the Libor-rigging scandal.

U.S. Treasury Secretary Timothy Geithner and the Bank of England have both faulted the lobbying group for failing to fix Libor in 2008 when the Bank for International Settlements first raised concern that the benchmark was being manipulated.

Libor is the latest of a series of scandals to hit Europe’s biggest financial center this year: regulators have forced banks to compensate customers improperly sold insurance on loans, and are probing the mis-selling of derivatives to consumers. HSBC Holdings Plc and Standard Chartered Plc, two of the country’s five biggest lenders, are being accused by U.S. regulators of flouting anti-money laundering regulations.

The BBA represents more than 200 banks and lobbies policy makers and regulators on behalf of the industry.

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Australian Regulator Will Oversee Crowdfunding as SEC Mulls Move

Australia’s main securities regulator will oversee entrepreneurs looking to raise money from so-called crowdfunding websites like Kickstarter and Indiegogo, and require some to publish financial documents.

Projects offering financial rewards to investors would be regulated in a similar way to companies issuing shares, the Australian Securities and Investments Commission said in a statement on its website today. Failure to comply can result in fines of as much as A$22,000 ($23,000) and five years imprisonment if the agency concludes the fundraiser was operating a managed investment, ASIC said. Only crowdfunding sites based in Australia will be affected by the rules.

Individuals contributed about $123 million through crowdfunding globally last year, a 284 percent increase from 2010, according to Daily Crowdsource, a San Diego-based provider of industry news and research. The mechanism allows startup companies to use social-networking platforms such as Facebook Inc. and Twitter Inc. to raise capital.

The market for crowdfunding has opened up in the U.S. after the April 5 passage of a law that will allow entrepreneurs to sell as much as $1 million in securities through social networking sites. Startups in Australia would be required to publish a product-disclosure statement, similar to that provided for issues of new shares on the Australian Securities Exchange, if they were considered to be offering financial rewards, ASIC said.

Australian-based websites that offer a venue for crowdfunding online without disclosure statements will also face fines of as much as A$11,000 and as many as two years’ imprisonment, ASIC said.

Compliance Action

PwC Investigated by U.K. Accounting Board Over RSM Tenon Audits

PricewaterhouseCoopers LLP is being investigated by the U.K. Accountancy & Actuarial Discipline Board for possible rule violations during its audits of RSM Tenon Group Plc.

PwC, along with “certain members of the Institute of Chartered Accountants in England and Wales,” is being investigated for audits carried out for RSM Tenon, a corporate finance advisory firm, for the years ending in June 2010 and 2011, the London-based accounting regulator said in an e-mailed statement.

The investigation will cover “the preparation, approval and review of financial information in connection with the admission of RSM Tenon Group Plc to the main market of the London Stock Exchange and the acquisition of RSM Bentley Jennison,” the AADB said.

RSM Tenon said it found “significant errors” in its 2010 earnings in a statement earlier this year and reduced its pretax profit by 12.1 million pounds ($19 million). The AADB fined PwC a record 1.4 million pounds in January for failures concerning reports on client-money accounts at JPMorgan Chase & Co.’s London securities unit.

“We will be cooperating fully with the AADB investigation,” PwC said in an e-mailed statement. “We will be vigorously defending our audits and other work carried out for the RSM Tenon Group.”

Jackie McColl, spokeswoman for RSM Tenon, didn’t immediately respond to a voice mail seeking comment.

Separately, a proposal by the U.K.’s Financial Reporting Council to increase fines levied on accounting firms for misconduct is under attack from a group of accounting firms known as the Big Four, the London-based Times reported.

Deloitte, Ernst & Young, KPMG and PwC face paying tens of millions of pounds in fines for mistakes in supervising companies’ accounts. The size of fines is to be fixed in accordance with the auditors’ revenues under the proposal, the newspaper reported. The proposal is unfair, disproportionate and potentially damaging, the Big Four said, according to the Times.

Sacombank Securities Being Probed for Stock Manipulation

Sacombank Securities Joint-Stock Co. is being investigated by Vietnamese police over allegations that it manipulated stock prices, according to a company statement.

Hanoi city police are probing claims Sacombank Securities intentionally published incorrect information or concealed the truth regarding stock-trading activities, the company said in a filing posted on the Ho Chi Minh City Stock Exchange’s website on Aug. 10. Ho Truc Lam, a Sacombank Securities spokeswoman, declined to comment by phone yesterday.

Sacombank Securities allegedly “manipulated its stock prices in multiple instances,” Bach Thanh Dinh, Hanoi’s deputy police chief, said by phone yesterday. He declined to give more information while the investigation was proceeding.

The company, the Ho Chi Minh City exchange’s third-largest brokerage at the end of 2011, was placed under scrutiny on July 23 and trading of its stock was limited to the last 15 minutes of daily trading, the bourse said in a statement on its website July 19. The move came after the company posted a 1.4 trillion dong ($67 million) loss that exceeded its equity as of March 31, according to the bourse’s statement.

“We will work with the police to get more information on the investigation and take suitable action,” Vu Bang, chairman of the State Securities Commission, said by phone yesterday. The commission regulates the country’s stock market.

The Ho Chi Minh City bourse won’t take more action until it discusses the investigation with the SSC and Hanoi police, according to Le Hai Tra, the exchange’s deputy chief executive officer.

SEC Demands $16 Million in Fraud Case of Former Soyo CFO

Nancy Shao Wen Chu, former chief financial officer of Soyo Group Inc., was ordered to pay $15.6 million to resolve securities fraud charges, according to the U.S. Securities and Exchange Commission.

Chu was accused by the SEC of inflating reported revenue at Soyo, a now-defunct Ontario, California-based electronics distributor, by booking more than $47 million in fictitious sales in 2007 and 2008. Statements in the filings misled investors, bankers and auditors, the agency said yesterday in a statement. Eric Jon Strasser, a consultant the agency said was involved in two fraudulent Soyo SEC filings, was ordered to pay $260,000.

Soyo filed for Chapter 7 bankruptcy in 2009.

The SEC said neither Chu nor Strasser responded to the initial complaint. Telephone listings under Chu’s name in Ontario and for an Eric J. Strasser in Chino Hills, California, were no longer in service.

ASIC Lists Investigation Targets, Sees Increase, AFR Says

The Australian Securities & Investments Commission is concerned about a “significant jump” in cases of insider trading in the six months to June 2012, the Australian Financial Review reported.

The corporate regulator conducted preliminary inquiries into 114 suspect share trades between January and June 2012, the Review said. Thirty-six of the cases are now being investigated by ASIC’s enforcement team, compared with 23 such cases during the previous six months, according to the Review.

Siemens Faces Probe Into Possible Extortion, FT Deutschland Says

Siemens AG may face a criminal probe of allegations that management board member Brigitte Ederer extorted the mayor of the French city of Lille in an attempt to win an order, Financial Times Deutschland reported.

Lille prosecutors are reviewing the issue to decide whether to open an inquiry, the newspaper reported, citing the investigators. Mayor Martine Aubry told the municipal parliament in June that Ederer had sent an e-mail threatening cuts at Siemens’s French unit should the company fail to win an order valued at 266 million euros ($327 million) for a driverless subway system in the city, according to FTD.

Siemens lost the contract to Alstom SA, a French competitor, according to FT Deutschland. Ederer, who is head of human resources at Siemens, has been questioned by the authorities, the newspaper said.

Siemens doesn’t comment on pending proceedings, company spokesman Alexander Becker said. Siemens, based in Munich, is Europe’s largest engineering company.


Standard Chartered Wants to Save Face After Lying, Barofsky Says

Neil Barofsky, a former federal prosecutor who oversaw the Troubled Asset Relief Program, said regulators had uncovered a pattern of dishonesty at Standard Chartered Plc, the bank accused of breaching money-laundering rules.

There was “a pattern of lying and deceiving the state regulator,” Barofsky, who resigned as special inspector general of TARP in 2011, said in an interview on “Bloomberg Surveillance” with Tom Keene. The bank’s defiant response was to protect its image, he said.

“It’s a PR move,” said Barofsky, now an adjunct professor at the New York University School of Law. “They are going all out to do something to protect their reputation.”

Benjamin Lawsky, New York’s banking superintendent, this month alleged that London-based Standard Chartered flouted U.S. banking laws by helping launder about $250 billion in Iranian funds. The bank’s chief executive officer, Peter Sands, said he rejected Lawsky’s version of events.

For the video, click here.

Separately, Standard Chartered got approval from Turkey’s antitrust board to buy Credit Agricole SA’s Turkish unit.

The company was allowed to buy the whole of Credit Agricole Yatirim Bankasi Turk AS from its Montrouge, France-based parent, the Ankara-based regulator said on its website yesterday. It didn’t disclose the value of the transaction.

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Comings and Goings

Clegg Said to Have Role in Picking King Successor as BOE Chief

Deputy Prime Minister Nick Clegg will have a say in the appointment of the next Bank of England governor, boosting the chances of candidates who take a tough line on banks such as Financial Services Authority Chairman Adair Turner and the former civil-service chief, Gus O’Donnell.

The involvement of the Liberal Democrat leader stems from the 2010 coalition agreement with Prime Minister David Cameron’s Conservatives, according to two officials with knowledge of the process. A Liberal Democrat official who asked not to be identified because the discussions have yet to begin said the party sees the appointment as the most significant of any that the government will make.

The decision on who should replace Mervyn King, who is due to retire from his position as Governor in June 2013, is complicated by the fact that Britain has a coalition government for the first time since 1945.

King, 64, is retiring after completing the maximum tenure of two five-year terms.

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