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FX Benchmark Overhaul, Data Breaches, Sifma: Compliance

Global regulators published details of their plans to overhaul foreign-exchange benchmarks in response to allegations that traders colluded to manipulate rates in the $5.3 trillion-a-day currency market.

The Financial Stability Board proposed changes to the way the WM/Reuters rates are calculated, including extending the length of the one-minute windows on which the benchmark is based, and making firms set up systems to address potential conflicts of interest with their clients. The Basel-based FSB set an Aug. 12 deadline for comments on the plan.

At least a dozen regulators on three continents are investigating whether traders in the world’s largest financial market colluded with counterparts at other firms to manipulate benchmarks such as WM/Reuters rates, which are used by money managers and pension funds to determine what they pay for foreign currency. More than 20 traders have been fired or suspended across the industry.

The FSB, led by Mark Carney, governor of the Bank of England, is also analyzing whether there’s a need for “alternative benchmark calculations” prepared over longer time periods of as much as 24 hours, according to a statement posted yesterday on the group’s website.

The FSB consists of regulators and central bankers from around the world that seek to agree on global financial rules. The board set up a task force on financial benchmarks after attempts to manipulate the London interbank offered rate. It said in February that it would extend this work into currency-market benchmarks.

The proposals are among 15 recommendations put forward by the group to transform rate-setting and bolster safeguards against manipulation.

Compliance Action

Data Breaches Cost N.Y. Companies $1.37 Billion, Report Says

Security breaches exposing consumers’ personal information are becoming larger and more frequent in New York, costing businesses more than $1.37 billion last year, the state attorney general’s office said.

Data breaches in the state more than tripled from 2006 to 2013, resulting in the exposure of 22.8 million personal records, according to a report released yesterday by New York Attorney General Eric Schneiderman. Almost 5,000 breaches were reported to the office by businesses, nonprofits and government entities during that time, with hacking attacks causing the worst damage.

Target Corp., the Minneapolis-based retailer, was the victim of a breach last year that allowed hackers to gain access to payment data for 40 million of its customers’ debit and credit cards. LivingSocial Inc., the daily coupon website based in Washington, said last year that more than 50 million customers may have been affected by a cyber-attack.

The cost to businesses in New York was based on research estimating the price of each personal record compromised at $188, according to the attorney general’s report.

Schneiderman said that “engaging industry stakeholders and security experts, as well as lawmakers” could help provide tools for better protecting data.

Danish FSA to Investigate Banks’ New Loans, Borsen Says

The Danish Financial Supervisory Authority will start investigating new loans by banks this autumn, the Borsen newspaper reported, citing the regulator’s director general, Ulrik Noedgaard.

Denmark’s banks have shifted their focus to boost volume, offering more new loans as the financial crisis fades, Noedgaard told the newspaper.


Madoff Sons Deleted E-Mail, Hindered SEC Probe, Trustee Says

Bernard Madoff’s sons deleted e-mails to obstruct a 2005 U.S. Securities and Exchange Commission investigation that could have exposed their father’s $17.5 billion Ponzi scheme, the trustee unwinding his company said.

The trustee said Andrew Madoff and Mark Madoff labeled printouts of some e-mails as “trash” before deleting them from a server during an SEC probe into Madoff’s investment advisory business, according to an amended complaint filed yesterday in U.S. Bankruptcy Court in Manhattan.

Thousands of investors lost a total of $17.5 billion in principal when the fraud unraveled three years later, after client withdrawals exceeded what Bernard L. Madoff Investment Securities LLC, or BLMIS, could afford to pay. Prosecutors called it the biggest Ponzi scheme in U.S. history. The brothers, who worked for the company, denied involvement and were never charged. Mark Madoff killed himself in 2010.

Picard is seeking at least $35.3 million in damages from Andrew Madoff, the estate of Mark Madoff and his widow, Stephanie Mack. The claim could rise to $153.3 million if an appeals court backs Picard’s method of calculating damages. Picard claims Mack benefited from the fraud because her late husband used customer money to support her and buy homes.

Martin Flumenbaum, a lawyer for the brothers, called the latest allegations unfounded. Mack’s lawyer, Michael Klein, didn’t immediately respond to a request for comment on the trustee’s claims.

Picard has “forgotten” that Mark and Andrew Madoff are the ones who turned in their father to the authorities and ended the fraud, Flumenbaum, their lawyer, said in a phone interview yesterday.

The Madoff liquidation is Securities Investor Protection Corp. v. Bernard L. Madoff Investment Securities Inc., 08-bk-01789, U.S. Bankruptcy Court, Southern District of New York (Manhattan).


How Sifma Plans to Reform the U.S. Equity Market

Ken Bentsen, president and chief executive officer of the Securities Industry and Financial Market Association, discussed Sifma’s proposed stock market reforms with Pimm Fox and Keri Geiger on “Taking Stock.”

For the video, click here.

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