Sept. 10 (Bloomberg) -- JPMorgan Chase & Co., the bank that incurred a $6.2 billion trading loss last year, will elect Linda B. Bammann and Michael A. Neal to its board and named Lee R. Raymond as lead independent director, giving him more powers.
Raymond, formerly presiding director, will have authority to call meetings at any time, approve agendas and add agenda items, and will guide the board in considering the succession of chief executive officers, New York-based JPMorgan said yesterday in a statement.
Investors in May rejected a proposal to split the chairman and CEO roles, which advisory firms such as Institutional Shareholder Services said would improve oversight. The bank said yesterday that the board will hold executive sessions without company management at every regular board meeting, make members available to meet with major shareholders and won’t rotate the lead independent director position every year.
JPMorgan, the biggest U.S. bank by assets, expects to elect Bammann to the board on Sept. 16 and Neal will join in January after he retires from his current position, according to the statement.
JPMorgan is contending with criminal investigations of its energy-trading and mortgage-backed securities operations. The firm also faces U.S. probes of its anti-money-laundering safeguards, foreclosures, credit-card collections and the London Whale debacle.
The bank has made bolstering regulatory compliance and internal controls its priority this year, Chief Executive Officer Jamie Dimon, has said.
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EU Weighs Scrapping ESMA Oversight of Libor in Benchmark Rules
U.K. regulators would retain a role in the oversight of the London interbank offered rate as the European Union considers backing away from a plan to shift supervision of the tarnished benchmark to an EU agency in Paris.
The European Commission may rewrite draft proposals scheduled to be presented later this month, that would have handed oversight of critical benchmarks including Libor to the Paris-based European Securities and Markets Authority, according to an EU official, who requested anonymity because the talks are private.
Under the alternative plan being considered, the rates would be overseen by a group, or college, of national regulators including the U.K. Financial Conduct Authority, the official said.
Michel Barnier, the EU’s financial services chief, is scheduled to present plans on Sept. 18 for toughening benchmark-setting rules. The FCA is currently responsible for regulation of Libor and how it is administrated. Under the alternative EU plan, ESMA would still have a role as a dispute mediator between the national regulators, the official said. Chris Hamilton, a spokesman for the U.K. authority, declined to comment.
Mexico’s Pena Nieto Seeks Capital Gains, High Earners Taxes
Mexico’s President Enrique Pena Nieto is proposing taxes on capital gains, sugary drinks and the nation’s highest earners in a bid to wean Latin America’s second-largest economy off its dependence on oil revenue.
The bill sent to congress Sept. 8 along with the president’s 2014 budget proposal would place a 10 percent tax on individuals’ profits from stock sales and dividends, raise the maximum personal income tax rate to 32 percent from 30 percent and avoid taxing food and medicine. The measures would help offset a proposed lower tax burden for state-owned oil producer Petroleos Mexicanos, or Pemex, and help pay for universal social security and unemployment insurance.
Ratings companies will probably be disappointed by the decision not to tax food and medicine, while some government bond investors may be hurt as additional debt issuance boosts supply of the securities, said Alonso Cervera, the chief Mexico economist at Credit Suisse Group AG.
The tax bill would increase government revenue, according to the bill.
Pena Nieto has pledged to boost tax collection as part of a series of economic overhauls to speed up growth that’s 40 percent slower than the regional average over the past five years. Income from Pemex crude sales funds about a third of the federal budget.
The reform would end a tax benefit, known as fiscal consolidation, which allows holding companies to postpone paying taxes when their subsidiaries post losses. Companies with the largest deferred tax assets, and thus may be the most affected, are America Movil SAB, Cemex SAB, Arca Continental SAB, Empresas ICA SAB and Grupo Bimbo SAB, JPMorgan Chase & Co. said in a Sept. 6 research note.
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Tin Smelters in Indonesia Pushing for JFX Trade Permits
Smelters and Jakarta Futures Exchange are expected to meet with the Trade Ministry this week to push for permits to trade physical tin contracts, said M.B. Gunawan, director and general manager at PT Stanindo Inti Perkasa, a metals manufacturer.
Smelters stopped operations and won’t resume until the Futures Exchange gets trading permits or the government delays the rule, Gunawan said by phone from Jakarta yesterday.
Miners halted work because they can’t sell ore, he said.
Smelters met last week. Most are not interested in joining the Indonesia Commodity and Derivatives Exchange, Gunawan said. They prefer the Futures Exchange because they can show their brand and interact directly with buyers, he said. The Futures Exchange will display smelters’ brands on the trading system, according to Gunawan.
CFTC Mulls Possible Registration of High-Speed System Companies
The Commodity Futures Trading Commission seeks public comment on the possibility of a registration requirement for companies operating automated trading systems and not already registered with the agency, Commissioner Scott O’Malia said.
The CFTC issued a concept release yesterday outlining ideas related to oversight of high-speed trading. The release cites the definition of “floor broker” as a potential basis for a registration requirement, O’Malia said in the statement.
He also said the overarching question on high-speed trading is whether “there is a need for regulatory action with regard to any of the measures currently in the market.”
Electronic trading makes up more than 91 percent of the futures market. The swaps market is also “moving toward electronic trading,” CFTC Chairman Gary Gensler said in statement.
In April, the CFTC pledged to publish ideas for boosting oversight of high-frequency trading
FDIC to Sell $2.42 Billion of Citigroup Debt to End Rescue Stake
The Federal Deposit Insurance Corp. is selling $2.42 billion of bonds issued by Citigroup Inc. in a transaction that will eliminate U.S. government holdings in the bank linked to the 2008 financial crisis.
Citigroup exchanged the subordinated notes due 2025 and 2043 to the FDIC for other securities used to pay the government for $301 billion of asset guarantees, the New York-based bank said yesterday in a regulatory filing. Citigroup won’t receive any proceeds from the resale to the public.
The offering is the latest step to end taxpayer support for Citigroup, which took more bailout assistance than any other U.S. lender.
“When the transaction concludes, no U.S. government entity will continue to hold any securities in Citi issued as a result of the financial crisis,” Mark Costiglio, a spokesman for the lender, said by e-mail. The government’s investment realized a return of “more than $13 billion,” he said.
Citigroup issued a combined $7.06 billion in preferred shares to the FDIC and the Treasury as consideration for the loss-sharing protection, provided to help shore up investor confidence in the bank during the worst financial crisis since the Great Depression. The Treasury said in February that it expected to receive $894 million in proceeds from a similar offering.
David Barr, a spokesman at the FDIC, declined to comment on the transaction.
Hewlett-Packard Says Polish Regulators Join Bribery Probe
Hewlett-Packard Co. said the Polish Anti-Corruption Bureau joined an investigation by U.S. regulators into potential violations of the Foreign Corrupt Practices Act by the computer maker.
The probe, along with the U.S. Department of Justice and U.S. Securities and Exchange Commission, centers on an employee of Hewlett-Packard’s Polska unit and “public sector transactions in Poland,” according to a regulatory filing yesterday.
The agencies are also investigating “public-sector transactions” in Russia, Mexico and other countries that weren’t named, according to the filing. The Foreign Corrupt Practices Act, or FCPA, makes it illegal for U.S. business people to bribe foreign officials.
Deloitte Fined Record 14 Million Pounds Over MG Rover Conflicts
Deloitte LLP was fined 14 million pounds ($21.9 million) by a U.K. accounting regulator for failing to properly manage conflicts of interests when advising the now-defunct British carmaker MG Rover Group Ltd.
The punishment is the largest fine issued by the Financial Reporting Council, surpassing the 1.4 million penalty levied against PricewaterhouseCoopers LLP in 2012, a spokesman said. Maghsoud Einollahi, a former partner at Deloitte, was fined 250,000 pounds and banned from the accounting profession for three years.
MG Rover collapsed in 2005 after China’s Shanghai Automotive Industry Corp. pulled out of talks to invest in the business. The company fired 6,000 workers and shut its factory in Longbridge, England. Deloitte and Einollahi advised a group of MG Rover directors known as the Phoenix Four while it audited MG Rover, the ruling said.
Deloitte said the regulator didn’t criticize the quality of the work it performed more than 10 years ago and it will review the ramifications of the ruling.
The accounting firm didn’t provide contact details for Einollahi, who has now retired, and a phone number couldn’t be located on the Internet.
The FRC is an investigative and disciplinary body overseeing the U.K. accounting industry.
Japan Regulator Investigates Deutsche Bank, Reuters Reports
A Japanese regulator is examining if Deutsche Bank AG provided entertainment that could be deemed excessive to pension fund executives, Reuters reported, citing unidentified people familiar with the matter.
The Securities and Exchange Surveillance Commission found evidence of potential misconduct during a regular audit of Frankfurt-based Deutsche Bank’s Japanese investment-banking arm, the news agency said, citing the people.
Deutsche Bank started an investigation into the matter before the SESC began its audit in May and the regulator may not enforce sanctions, Reuters reported.
The Deutsche Bank inspection is under way and the SESC can’t comment on the issue, an SESC official said yesterday in Tokyo, asking not to be identified because of the watchdog’s policy.
Aston Bridgman, a Tokyo-based spokesman for Deutsche Bank declined to comment when contacted by phone yesterday.
Reserve Primary Fund Settles Shareholder Suit for $54.9 Million
Bruce R. Bent II, president of the $62.5 billion Reserve Primary money-market fund that failed during the financial crisis, agreed to settle a shareholder lawsuit in an accord worth about $54.9 million.
Bent and his father, Bruce R. Bent, are among defendants that agreed to pay $10 million in cash, drop their claim for $42.4 million from a court-established expense fund, and to allow $2.5 million from the expense fund to go to shareholders. None of the defendants admitted wrongdoing as part of the proposed settlement to end a class-action lawsuit led by Third Avenue Institutional International Value Fund LP.
The suit was filed in September 2008, two days after Lehman Brothers Holdings Inc. went bankrupt in the midst of the worst U.S. economic crisis since the Great Depression. The Reserve Primary money-market fund held $785 million in Lehman debt. A run on the fund triggered its failure when it “broke the buck” by failing to maintain a $1-a-share net asset value.
A federal jury found Bruce Bent II negligent on one claim of violating a securities law. His father was absolved of all claims in a suit by the U.S. Securities and Exchange Commission.
The fund’s closing sparked an investor run on similar money funds, contributing to a freeze among global credit markets.
The settlement is subject to court approval.
The case is Reserve Primary Fund Securities & Derivative Class Action Litigation, 08-cv-08060. The SEC case is SEC v. Reserve Management Co., 09-cv-04346, U.S. District Court, Southern District of New York (Manhattan).
Secret Swiss Accounts No Longer Safe Tax Dodge, Prosecutor Says
Taxpayers who still believe they can hide secret Swiss bank accounts from the Internal Revenue Service are “beyond foolish,” the top U.S. tax prosecutor said as a five-year crackdown expands to new offshore havens.
The enforcement drive has forced a “remarkable” change in the ability of the U.S. to find secret accounts in Switzerland, the world’s largest offshore financial center with about $2.2 trillion of assets, said Kathryn Keneally, assistant attorney general in the Justice Department’s tax division.
“If someone had an account in Switzerland, it is beyond foolish to think that that account is going to remain secret,” said Keneally, 55. “In the last five years, we’ve seen a remarkable change in our ability to get information concerning Swiss bank accounts. It’s extraordinary. Switzerland is no longer a good place to hide assets for tax reasons.”
Keneally, in her first interview since taking the job in April 2012, said a new U.S. amnesty program for Swiss banks to disclose how they aided tax evasion puts taxpayers and offshore enablers at risk of prosecution. Since 2009, the U.S. has prosecuted 68 U.S. taxpayers, three Swiss banks, and 30 bankers, lawyers, and advisers. Another 38,000 Americans moved $5.5 billion to the U.S. and avoided prosecution by saying who helped them offshore.
Fourteen firms are under criminal investigation. On Aug. 29, the U.S. announced a program for other Swiss banks to avoid charges. They must pay penalties and disclose their cross-border activities, among other measures. Banks that don’t come forward by the Dec. 31 deadline could face criminal charges, Keneally said.
“We have investigations and activities that will be coming in other parts of the world that I can’t comment on right now,” she said.
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U.S. Economy Needs Foreign Direct Investment, Wolf Says
Robert Wolf, chief executive officer of 32 Advisors LLC and former chairman of UBS AG’s Americas unit, talked about U.S. banking regulation and the market outlook.
Wolf spoke with Tom Keene, Sara Eisen and Scarlet Fu on Bloomberg Television’s “Surveillance.”
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