German Bail-In Law, Trader Trial, Bankrate Fined: Compliance

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Germany’s plans to put senior creditors in line for losses when banks fail would disqualify some of their debt from being used as collateral at the European Central Bank, adding to pressure on lawmakers to consider tweaks of the draft law.

Germany plans to subordinate senior unsecured bonds to currently equal-ranking liabilities, such as unsecured deposits and derivatives, to make it easier to share the costs of bank failures with creditors, a process known as bail-in. That goal would be achieved with the draft law discussed by the parliament in Berlin, the ECB said in a legal opinion on the bill published Tuesday, but only at the price of senior bonds’ eligibility for its monetary-policy operations.

Germany is taking part in a global effort to ensure that future bank rescues aren’t funded by taxpayers. The law would clear the way for writedowns in a crisis and immediately create a stock of debt that can share losses, as it would apply to outstanding debts, not just newly issued ones.

The changes will be discussed by lawmakers in the governing coalition this week.

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Compliance Action

Bankrate Fined $15 Million to Settle Accounting Fraud Claims

Bankrate Inc. agreed to pay $15 million to settle accounting fraud claims lodged by the U.S. Securities and Exchange Commission after three former executives allegedly inflated revenue to meet analysts’ expectations and boost the company’s stock price.

Bankrate agreed to settle without admitting or denying the SEC’s findings.

The accounting entries referenced in the settlement were addressed as part of the restatement that Bankrate previously disclosed in a June regulatory filing, according to a statement from the company.

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Courts

Ex-Kit Digital Chairman Tuzman Charged With Accounting Fraud

Kit Digital Inc.’s former chairman and chief executive officer and its former chief financial officer were arrested and charged with accounting fraud at the software company.

Prosecutors in New York claim the former chairman and CEO, Kaleil Isaza Tuzman, 43, and the former chief financial officer, Robin Smyth, 61, conspired to mislead investors and regulators about the company’s financial health. Kit Digital filed for bankruptcy in 2013 and is now known as Piksel Inc.

Tuzman, who was arrested Sept. 7 in Colombia, and Smyth, arrested Tuesday in Australia, are being held pending extradition to the U.S. Both were also sued Tuesday in New York by the U.S. Securities and Exchange Commission .

The criminal case is U.S. v. Tuzman, 15-cr-00536, and the SEC case is Securities and Exchange Commission v. Tuzman, 15-cv-07057, U.S. District Court, Southern District of New York (Manhattan).

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Ex-Citigroup Trader Says Currency Exchange Truth to Be Heard

A former Citigroup Inc. currency trader, let go amid a global probe into foreign-exchange rate rigging, said on the first day of his unfair-dismissal trial in London that he would expose the “truth” about the bank’s conduct.

Perry Stimpson, saying he had not come to court to “mudsling,” said that the “information sharing” that resulted in his dismissal was widespread across the bank’s trading desk, and senior management was aware of the conduct.

New York-based Citigroup rejected Stimpson’s allegations and said he was dismissed for “serious breach of his contract,” which included disclosure of confidential client information to traders at other banks, according to documents prepared for the trial.

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Interviews/Studies

‘High-End’ Economic Crime Gap to Be Targeted in U.K. Report

The U.K. government will conclude it needs to do more to tackle “high-end” economic crime in its first-ever National Risk Assessment of Money Laundering and Terrorist Financing, according to one of the state’s top legal advisers.

The report, due to be published “soon,” will say that more needs to be done against sophisticated crimes where proceeds are held in banks or real estate, Robert Buckland, the Solicitor General, told a Cambridge conference on economic crime Monday.

The report is designed to pre-empt the Financial Action Task Force, the Paris-based body responsible for setting international standards on anti-money laundering. The Task Force plans an assessment of the U.K. in 2018.

Prime Minister David Cameron reiterated concerns that U.K. real estate was becoming a safe haven for corrupt money in a speech from Singapore in July.

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