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Volcker Rule, Madoff Feeders, White Comments: Compliance

Dec. 4 (Bloomberg) -- At least three U.S. regulators will meet on Dec. 10 to adopt the final version of the Volcker rule banning banks from making speculative bets with their own money, according to three people familiar with the planning.

The Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. are scheduling meetings to act on the rule on that date, said the people, who requested anonymity because the schedule hasn’t been announced.

Two other agencies that need to approve the rule -- the Commodity Futures Trading Commission and the Securities and Exchange Commission -- are trying to arrange Dec. 10 votes as well, three other people familiar with that effort said. The agencies aren’t required to approve the rule at the same time.

The agencies’ approval would be the final stage in the process of adopting the Volcker rule, a centerpiece of the 2010 Dodd-Frank Act designed to prevent a repeat of the 2008 global credit crisis. The final version is also expected to extend the rule’s compliance dates.

If the regulators resolve such outstanding issues, such as whether the rule the strong enough, by next week, the rule would be on track to meet a self-imposed year-end deadline. Banks currently have until July 21 to implement the Volcker rule.

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Compliance Policy

Bank Groups Raise Concern About Lack of New FDIC Bank Charters

The Independent Community Bankers of America and the American Association of Bank Directors have expressed concern that the FDIC has approved one new bank charter since 2011, the groups said in a joint letter.

The Federal Deposit Insurance Corp.’s policy on so-called de novo banks, adopted in 2009, makes forming new banks prohibitive, according to the letter. The FDIC should review its policies on such applications, they said in the letter.

“We believe that there are less restrictive policies that will provide comfort to the FDIC and other bank regulators that de novo banks will not become a material risk,” they said in the statement.

Compliance Action

Deutsche Bank Fined for Benchmark Rigging as EU Tops Record

Deutsche Bank AG and Royal Bank of Scotland Group Plc are among six companies fined a record 1.7 billion euros ($2.3 billion) by the European Union for rigging rates linked to Libor.

Deutsche Bank was fined 725 million euros, the biggest penalty in the case. Societe Generale SA was fined 446 million euros, RBS must pay 391 million euros, and JPMorgan Chase & Co. will pay 80 million euros, the EU said in a statement. The combined fines for manipulating the yen London interbank offered rate and Euribor are the largest-ever EU cartel penalties.

While global fines for rate-rigging topped $3.7 billion before today, the cost to banks may climb as they face lawsuits worldwide. An EU accord includes a finding of liability that can be used in civil cases.

Citigroup Inc. has a 70 million-euro penalty and RP Martin Holdings Ltd. was fined 247,000 euros.

UBS AG and Barclays Plc weren’t fined because they were the first to inform the EU of the cartels. UBS avoided a potential 2.5 billion-euro fine and Barclays escaped a 690 million-euro penalty. Citigroup also avoided an extra 55 million-euro fine for blowing the whistle on one part of the cartel, the EU said in the statement.

JPMorgan, HSBC Holdings Plc and Credit Agricole SA pulled out of the Euribor settlement and ICAP Plc withdrew from the Libor negotiations. All four companies continue to face an antitrust investigation, the EU said.

“The settlement relates to past practices of individuals which were in gross violation of Deutsche Bank’s values and beliefs,” Juergen Fitschen and Anshu Jain, co-chief executive officers, said in an e-mailed statement.

Citigroup is “pleased to resolve this matter with the European Commission and to put this investigation behind us,” the New York-based bank said in an e-mailed statement.

Morgan Stanley Queried by SEC Over ‘Multiple’ Accounting Errors

The Securities and Exchange Commission asked Morgan Stanley about “multiple significant deficiencies” in its financial reporting after the firm corrected accounting errors involving loan cash flows, income taxes and derivatives contracts.

Morgan Stanley said that while its Sarbanes-Oxley program identified defects that affected risk assessment and monitoring controls, the “overall design and operation of its control framework” was effective, according to letters between the company and regulator that were released yesterday.

Deficiencies were caught in a “timely manner” and errors weren’t material, the New York-based firm said in the letters.

The SEC said its review was completed in an Oct. 17 letter.

Wesley McDade, a spokesman for Morgan Stanley in New York, declined to comment on the filings.

Commerzbank Raided in German Tax Probe Over Life Insurance

Commerzbank AG offices in Germany were raided by prosecutors investigating whether life insurance policies were used to evade tax.

The lender isn’t a suspect and is cooperating with the authorities, Nils Happich, a spokesman for Commerzbank, said in an e-mailed statement yesterday. Prosecutors in Bochum, Germany, are investigating managers and staff of a non-German life insurance company that they didn’t identify, according to a statement on their website.

The suspects may have “helped German investors to evade tax since 2006 in more than 200 cases,” according to the prosecutors’ statement. “They may have sold life insurance that were veiled asset-management agreements.”

The tax evaded amounted to several hundred million euros, Germany’s Handelsblatt newspaper reported, citing finance industry officials it didn’t identify.


SAC Analyst Recalls Steinberg Unfazed After FBI Hedge Fund Raids

After FBI agents raided hedge funds in November 2010, SAC Capital Advisors LP fund manager Michael Steinberg expressed confidence he wouldn’t be tied to illegal tips, his former analyst testified.

Jon Horvath, the analyst, told the Manhattan federal jury at the fund manager’s insider-trading trial yesterday that Steinberg was identified in a newspaper report as the subject of a federal insider-trading investigation tied to John Kinnucan, an expert-networking consultant.

Kinnucan later appeared on television and declared that Steinberg wasn’t the person who the Federal Bureau of Investigation had asked him to secretly record, Horvath said.

“I’ve been talking to some people and it turns out the further you are from the source, the more difficult it is to connect you to the source,” Horvath said Steinberg told SAC analysts during one conversation about the government probe. “Therefore, in this situation, because I’m so far from the source, I’m OK.”

Steinberg, 41, charged with conspiracy and four counts of securities fraud, is the first of eight current or former SAC employees charged by the U.S. to go to trial. Horvath and five other people in the insider-trading ring have pleaded guilty and are cooperating with the U.S.

SAC, founded and owned by billionaire Steven A. Cohen, agreed to close its investment advisory business as part of a $1.8 billion deal announced Nov. 4 to end a criminal probe and a money-laundering lawsuit filed by the Justice Department. Cohen hasn’t been charged with a crime.

Jonathan Gasthalter, a spokesman for SAC, declined to comment on the trial.

The case is U.S. v. Newman, 12-cr-00121, U.S. District Court, Southern District of New York (Manhattan).

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Madoff Behaved ’Like a Lunatic’ Over Feeder Probe, Jury Told

Bernard Madoff demanded his inner circle rush to re-create years’ worth of fake account documents for a feeder fund that in 1992 attracted unwanted attention from regulators, the con man’s ex-finance chief told a jury.

Madoff began swearing and “throwing himself around the office like a lunatic” after hearing Avellino & Bienes, a Florida investment firm that funneled money to his fraud, was being probed for failing to register its promissory notes as securities, Frank DiPascali, 57, told a jury in Manhattan federal court Dec. 2 at the trial of five former colleagues.

Annette Bongiorno, who ran Madoff’s investment advisory unit and is one of the defendants in the case, created fresh sets of fake stock purchases and randomized trading numbers for the new Avellino & Bienes statements and kept detailed notes of her efforts, said DiPascali, who pleaded guilty to aiding the fraud and is testifying in a bid for a lighter sentence.

DiPascali is the highest-ranking former Madoff executive to testify in the first criminal trial stemming from the Ponzi scheme, which deprived investors of $17 billion in principal.

The U.S. Securities and Exchange Commission started the investigation into Fort Lauderdale, Florida-based Avellino & Bienes, of which Madoff’s father-in-law was a founder, after receiving complaints that it might be a Ponzi scheme.

DiPascali pleaded guilty in August 2009 to 10 counts, including conspiracy, fraud and money laundering. He told U.S. agents that company employees asked him if the business was a “scam” before the world learned the truth, according to interview documents filed in the case.

Madoff, 75, is serving a 150-year sentence in a federal prison in North Carolina.

The case is U.S. v. O’Hara, 10-cr-00228, U.S. District Court, Southern District of New York (Manhattan).

For more, click here.


New Era in Responses to Activist Investing, White Says

U.S. Securities and Exchange Commission Chairman Mary Jo White talked about activist investing, corporate governance, proxy advising firms and industry regulations.

While differences of opinion still exist about shareholder participation in decision-making, most will agree that “the advice on how to respond to shareholder activism today is quite different from 30 years ago or even 10 years ago,” White said.

She spoke at a European Corporate Government Institute conference in Washington.

For the video, click here.

Comings and Goings

Ex-RBS Singapore Trader Tan Drops Wrongful Dismissal Lawsuit

A former Royal Bank of Scotland Group Plc trader in Singapore fired for allegedly rigging the London interbank offered rate discontinued his lawsuit for wrongful dismissal.

No payments were made to Tan Chi Min, the bank’s former head of Asian delta trading, as part of the discontinuance of his action, an RBS spokeswoman said in an e-mailed statement today.

Both RBS and Tan are “satisfied with the outcome,” his lawyer Suresh Nair said.

The case is Tan Chi Min v. Royal Bank of Scotland S939/2011. Singapore High Court.

To contact the reporter on this story: Carla Main in New York at

To contact the editor responsible for this story: Michael Hytha at

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