China Blames West, Leumi Committee, Dole CEO: Compliance

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Western developed nations’ monetary policies are the main source of global financial volatility, not China’s currency devaluation or stock market rout, China’s official Xinhua News Agency wrote in a commentary.

Blaming China is “unfair and groundless” because the onus is on western developed countries for pumping “hot money” into emerging markets after 2008, damping policy makers’ efforts “to reduce leverage,” according to the unsigned piece published Thursday.

“Drastic changes in the value of major currencies” make financial markets even more turbulent, with the Federal Reserve’s signals of a possible interest-rate increase causing capital to flow back to the U.S., according to the commentary.

Chinese policy makers regularly use official media to send messages, and commentaries generally reflect the thinking of the ruling Communist Party’s elite.

Xinhua also said the prolonged European debt crisis has also cast a pall on the world’s economic recovery.

The commentary attributed the recent sell-offs in China’s stock market to “panic” by “irrational retail investors.”

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Compliance Policy

Haywire ETFs Draw Regulator and Investor Scrutiny After Crash

Investment managers facing tough questions from regulators over what caused trading disruptions for hundreds of exchange-traded funds this week said they got hit by a double whammy.

Volatility hammered futures markets Monday, hurting liquidity by making it difficult for market makers to obtain information vital to valuing ETFs. Then, once buying and selling began later that morning, prices moved so sharply, they triggered trading halts for more than 500 ETFs.

Assets in ETFs have increased almost sevenfold over the past decade largely because investors view them as easier to trade and cheaper than traditional mutual funds. Monday’s tumult showed a downside to ETFs, as they can be vulnerable to price swings during periods of market stress.

U.S. Securities and Exchange Commission officials are now reviewing whether they should revise certain safeguards put in place after the May 2010 flash crash, said a person familiar with the agency’s discussions, who asked not to be named because the examination is in its early stages.

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Compliance Action

Leumi Asked to Consider Bonus Clawbacks After U.S. Tax Fine

Bank of Israel asked Bank Leumi Le-Israel Ltd. to set up an independent committee to examine management performance and bonuses after the lender agreed in December to pay a fine to U.S. authorities in a tax probe.

Leumi, Israel’s second-largest lender, agreed to the $400 million fine after a seven-year U.S. probe into offshore tax evasion that predominantly focused on Switzerland. The settlement triggered investigations by Israeli authorities.

The independent committee should study management performance during the years 2008-2010, the central bank said in a report on the company’s U.S. activities filed by Leumi to the Tel Aviv Stock Exchange. The company should also review bonuses paid, including those to top executives, in light of the “heavy damage” caused to Leumi.

In response to the report, Leumi said that in March it set up an independent committee to study the matter. The panel will study whether damages should be sought from current or former employees, including bonus clawbacks, Leumi said in February.

The bank “did not identify and estimate the overall risks,” and did not manage them as required, the Bank of Israel said.

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Courts

Dole CEO, Ex-President Told to Pay $148 Million Over Buyout

Dole Food Co. Chief Executive Officer David Murdock and a former executive of the fresh-fruit producer were ordered to pay $148.1 million over allegations they drove down the value of the company so Murdock could take it private on the cheap in a $1.2 billion deal.

Delaware Chancery Judge Travis Laster, who ruled Thursday, also found Michael Carter, Dole’s ex-president, should be held personally liable for investors’ losses on the buyout.

The two executives’ actions “deprived shareholders of the ability to consider the merger on a fully informed basis,” the judge said.

Morgan Evans, a Dole spokeswoman, said the company had no comment on Laster’s ruling.

Murdock testified in February at the trial that he didn’t engineer the deal to enrich himself.

The case is In Re Dole Food Co. Inc. Stockholder Litigation, Consolidated CA 8703-VCL, Delaware Chancery Court (Wilmington).

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