Footballer’s Ponzi, Swaps Timetable, MIAX: Compliance

Jim Donnan, a Hall of Fame football coach who led teams at the University of Georgia and Marshall University, is facing regulatory claims that he helped run a Ponzi scheme that defrauded former players and fellow coaches.

Donnan, who became a television commentator for ESPN after leaving coaching, and a business partner siphoned more than $8 million while misleading investors in their West Virginia-based business GLC Ltd., the U.S. Securities and Exchange Commission said in a complaint filed in federal court in Atlanta. Donnan, 67, and Gregory Crabtree, 50, paid fraudulent returns from investor funds, the SEC said in the complaint.

Crabtree started GLC with his wife in 2004 and enlisted Donnan to recruit investors for the business, which they said bought liquidated, damaged and returned merchandise from major retailers for resale to discounters, the SEC said. The investment program was a Ponzi scheme, with only $12 million of the $80 million raised used to buy merchandise and much of that left unsold in warehouses, the agency said in its complaint.

Donnan, who is accused of taking $7.4 million for himself, is said to have passed proceeds to two of his adult children and a son-in-law who were named as relief defendants in the complaint, which seeks civil penalties as well as disgorgement of illegal proceeds and interest. The former coach and his wife filed for bankruptcy in Athens, Georgia, in July 2011.

Donnan coached Marshall to the National Collegiate Athletic Association’s Division I-AA championship in 1992 and followed that with multiple bowl-game wins with Georgia before he was fired in 2000.

Edward Tolley, Donnan’s Athens-based lawyer, and Michael Schmidt, a Cincinnati-based lawyer for Crabtree, didn’t return telephone messages seeking comment.

The case is Securities and Exchange Commission v. James M. Donnan, 12-cv-02831, U.S. District Court, Northern District of Georgia (Atlanta).

Compliance Policy

Swap Dealers May Get Until January to Complete CFTC Registration

Goldman Sachs Group Inc., JPMorgan Chase & Co. and other firms may have until January to register swap-dealing units subject to the highest collateral and conduct standards under U.S. efforts to cut risk in the $648 trillion market.

The Commodity Futures Trading Commission set in motion a series of Dodd-Frank Act rules this week when it published a regulation effective Oct. 12 determining when trades will be considered swaps. Under a separate CFTC timetable, dealers may get until at least January to register.

Steven Adamske, the CFTC’s spokesman, declined to comment.

Societe Generale SA, France’s second-largest bank, and lobby groups representing U.S. and international financial institutions have pressed the CFTC to delay registration of swap-dealing units because its Dodd-Frank rulemaking hasn’t been completed. The main U.S. derivatives regulator is taking comments on a proposal for how the rules will apply to foreign-based banks and units of U.S. banks operating overseas.

Bank of America Corp., Citigroup Inc. and JPMorgan have also urged the CFTC to change its guidance.

The agency estimated that 125 firms will register as swap dealers, which will face the highest standards for collateral, capital and conduct when trading with pension funds and cities. Footnotes and details in a CFTC regulation published May 23 laid out a timeline for when and how firms must determine if they meet the swap-dealer definition.

They must begin to aggregate trades starting on Oct. 12, when the swap-definition rule takes effect.

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EU Seeks to Prevent ECB Dominance of European Bank Authority

European Union officials are seeking to prevent the 17 states that share the euro from dominating its forum for resolving disputes among financial regulators, the European Banking Authority, according to two people familiar with the plans.

Euro-area leaders agreed in late June that the Frankfurt-based European Central Bank should oversee lenders in the bloc as part of their efforts to quell the debt crisis. European Commission officials drafting a proposal for a common supervisor are concerned that the central bank’s legal independence may allow it to override decisions taken by the EBA, which co-ordinates the work of supervisors in the EU’s 27 member states.

The commission is also weighing changes to the EBA’s voting rules to prevent euro countries from wielding overwhelming influence at the London-based authority, the people said on condition of anonymity because the preparations are private. The commission intends to unveil legislation on creating the single supervisor around Sept. 11.

The euro area is racing to create a single bank supervisor “involving the ECB” as part of a deal reached at a June 28-29 summit that would allow banks to seek direct aid from the currency union’s bailout funds.

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Separately, the European Commission will present a report on a possible overhaul of bank-structure rules by the end of next month, a spokesman for the European Union’s Michel Barnier said.

The report is being prepared by an expert group led by the European Central Bank council member Erkki Liikanen.

Barnier spokesman Stefaan de Rynck spoke about the report in Brussels.

Bank Client-Fund Data May Be Open to Regulators After Peregrine

U.S. futures brokerages and their banks would make client-fund data accessible to regulators in the wake of the collapse of Peregrine Financial Group Inc., under a proposal approved by the National Futures Association.

Regulators would have view-only Internet access to information held at a bank or trust, Chicago-based NFA said yesterday after endorsing the plan. The new requirements are subject to approval by the Commodity Futures Trading Commission, the main U.S. regulator of futures and swaps. Regulators currently don’t have direct access to client accounts.

Industry self-regulators would be able to check segregated customer-fund accounts “without asking the firm or the bank, and compare those balances to the firm’s daily segregation report,” NFA President Dan Roth said in a statement.

The NFA, a self-regulatory group, is seeking to bolster industry oversight after Peregrine, a commodity firm, collapsed in July with at least $200 million in client funds missing. MF Global Holdings Ltd. filed the eighth-largest U.S. bankruptcy on Oct. 31 and is being liquidated to pay customers facing a $1.6 billion shortfall.

Compliance Action

Miami Options Exchange Moves Closer to Becoming 11th U.S. Venue

The Miami International Securities Exchange’s planned U.S. options venue will compete for orders by giving priority to market makers that meet certain quoting requirements, according to its application to regulators.

MIAX, as the proposed exchange is called, may become the 11th U.S. venue to trade equity options if the Securities and Exchange Commission approves its application published Aug. 15. The exchange has been planned for several years and its filing, submitted to the SEC in April, provides the first detailed look into its trading plans and rules. The SEC is seeking comment on the exchange as it considers approval.

The surge in electronic trading since 2000 has spurred more competition among older exchanges and startups seeking to draw trades through different pricing and rules for matching orders. MIAX will compete for volume in the growing options market with 10 exchanges, including three run by Nasdaq OMX Group Inc. and two each from NYSE Euronext and CBOE Holdings Inc. in Chicago.

The exchange doesn’t yet have a president and chief executive officer, according to its parent company, Princeton, New Jersey-based Miami International Holdings Inc. Shelly Brown, senior vice president for strategic planning and operations, declined to comment on the exchange’s application.

The electronic exchange’s planned start follows a ninth straight year of record equity options activity in the U.S., with almost 4.6 billion contracts changing hands in 2011, according to Chicago-based OCC.

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Bats Plans Retail Stock Program to Rival NYSE Initiative

Bats Global Markets Inc., the third-largest U.S. stock exchange operator, plans to create a program to draw orders from individuals to one of its two markets.

The company asked the Securities and Exchange Commission for permission to compete with the New York Stock Exchange’s initiative to attract buy and sell requests from smaller investors by offering better prices than are available to other market participants. Nasdaq OMX Group Inc. and Direct Edge Holdings LLC have said they’re also working on plans similar to NYSE’s 12-month pilot program, which began on Aug. 1.

Exchanges are eyeing orders sent to so-called equity wholesalers, a category of market makers that executes orders for individuals supplied by brokers such as TD Ameritrade Holding Corp. and Charles Schwab Corp. Knight Capital Group Inc., Citadel LLC, UBS AG and Citigroup Inc. are the largest wholesalers trading orders away from exchanges at prices that match or improve on the levels offered publicly, a business known as internalization.

The SEC must approve the Aug. 14 filing from Lenexa, Kansas-based Bats before its retail price improvement program can become effective. The initiative allows the exchange’s member firms to supply quotes that are at least 1/10 of 1 cent better than the best price at which other market participants can trade. The orders will not be displayed publicly, as is also the case at NYSE.

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Warsaw Won’t Let High-Frequency Trade Proliferate, Parkiet Says

Warsaw Stock Exchange SA won’t allow a “proliferation” of high-frequency trading on its main market when it introduces a new trading system in November, Chief Executive Officer Ludwik Sobolewski was quoted as saying by Parkiet in an interview.

The exchange plans to start NYSE Euronext’s Universal Trading Platform on Nov. 2 and expects to attract new investors, among them exchange-traded products, Sobolewski said, according to the newspaper. Changes in the schedule “are possible” due to technology risks, Parkiet quoted Sobolewski as saying.

High-frequency trading now plays a “negligible” role on the Warsaw bourse, Sobolewski said, according to Parkiet.

JPMorgan, RBS Said Among Banks to Get N.Y. Libor Subpoenas

JPMorgan Chase & Co. and Barclays Plc are among seven banks subpoenaed in New York and Connecticut’s investigation into alleged manipulation of Libor, according to a person familiar with the matter and company filings.

Subpoenas were sent in recent weeks to Deutsche Bank AG, Royal Bank of Scotland Group Plc and HSBC Holdings Plc in addition to JPMorgan and Barclays, the person said Aug. 15. Citigroup Inc. and UBS AG received subpoenas earlier this year as part of the investigation.

New York Attorney General Eric Schneiderman and Connecticut Attorney General George Jepsen are jointly investigating alleged manipulation of the London interbank offered rate by lenders. RBS, UBS, Lloyds Banking Group Plc and Deutsche Bank are among the lenders that regulators in Europe, Asia and the U.S. are investigating. The U.S. is conducting a criminal investigation.

Confidence in Libor, a benchmark for financial products valued at $360 trillion worldwide, has been dented by Barclays’ admission that it submitted false London and euro interbank offered rates. Robert Diamond resigned as Barclays’ chief executive office after the bank was fined 290 million pounds ($456 million).

The investigation by Schneiderman and Jepsen could broaden to include additional banks, said the person. Jennifer Givner, a spokeswoman for Schneiderman, and Jaclyn Falkowski, a spokeswoman for Jepsen, declined to comment on the subpoenas.

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Watchdog Probes Possible Wendel Insider Trading, Le Point Says

The French market watchdog is investigating possible insider trading relating to Wendel SA, France’s largest publicly traded investment firm, Le Point reported, without saying where it got its information.

Autorite des Marches Financiers is looking into the increase in Wendel’s share price that followed the company’s announcement in November that it had entered exclusive talks to sell Deutsch Group SAS to TE Connectivity Ltd., the magazine said on its website yesterday.

Barbara Frugier, a spokeswoman for AMF, and Christine Anglade Pirzadeh, a spokeswoman for Wendel, declined to comment.

Russian Banker’s Money-Laundering Case Risks Worse U.K. Ties

Russia and the U.K. risk further souring ties as authorities are set to clash over potential money-laundering and bribery charges against a former Russian official at a London-based international lender.

Elena Kotova, 57, Russia’s former top representative at the European Bank for Reconstruction and Development, is sought by the U.K. for allegedly conducting a money-laundering operation in both Britain and the U.S. over several years, according to a person familiar with the British investigation, who declined to be identified because the probe is under way. Kotova, who denies any wrongdoing, says she’s unable to leave Russia because of a criminal inquiry by local authorities.

Relations worsened to a post-Cold War low after the 2006 assassination of dissident ex-KGB agent Alexander Litvinenko in London. In the Kotova case, the U.K. refused entry to Russian detectives for more than a year. The Russian investigation may end up shielding Kotova rather than leading to a trial, said Mark Galeotti, a professor at New York University.

The City of London Police said Aug. 15 that it is working with the Crown Prosecution Service, which is responsible for filing charges. Russia is preparing to send detectives to the U.K. to interview current and ex-managers at the EBRD, according to the Interior Ministry in Moscow.

Kotova says she faces potential U.K. charges along with five other Russians who worked with her at the EBRD.

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Levitt Says Libor Is ‘Dead,’ New Measurement Is Needed

Arthur Levitt, former chairman of the U.S. Securities and Exchange Commission and a Bloomberg LP board member, discussed the investigation into alleged manipulation of Libor.

He spoke with Francine Lacqua on Bloomberg Television’s “City Central.”

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