U.S. Agency Nominees, Health-Care Ruling, RBS: Compliance
The U.S. Senate Banking Committee approved seven nominees for top finance regulatory positions, including President Barack Obama’s picks to lead the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency.
The Senate panel approved by voice vote Martin J. Gruenberg and Thomas J. Curry, the nominees for the FDIC and OCC jobs, as well as Daniel M. Gallagher and Luis Aguilar, two nominees for seats on the Securities and Exchange Commission. The nominations now move to the full Senate for consideration.
The Obama administration has been without several confirmed financial regulators as U.S. and European markets struggle with sovereign debt concerns and extended political fights over raising the U.S. debt limit. Gruenberg, the former vice chairman of the FDIC, is operating as the acting chairman of the agency, and John Walsh is the acting comptroller. The Federal Reserve, Commodity Futures Trading Commission and the Consumer Financial Protection Bureau also are awaiting confirmation of appointees.
The panel approved Obama’s nominees for two spots on the SEC with the approval of Gallagher, a securities lawyer and former SEC deputy division director, and Aguilar, an incumbent Democrat on the commission. Gallagher, a Republican, is currently a partner in the Washington office of Wilmer Cutler Pickering Hale & Dorr LLP.
Roy Woodall, a former Kentucky state commissioner, was approved by the panel to fill the insurance position on the 15- member Financial Stability Oversight Council. Gregory Karawan, a senior vice president and general counsel for Genworth Financial Inc. (GNW), and Anthony D’Agostino, the chief operating officer of UBS AG (UBS)’s Global Quantitative Analytics group, were approved by voice vote to be directors for the Securities Investor Protection Corp.
Deutsche Boerse-NYSE Would Kill Competition, Nasdaq Tells EU
Nasdaq OMX Group Inc. (NDAQ), the second-largest U.S. equity exchange operator, told the European Union that a combined Deutsche Boerse AG (DB1) and NYSE Euronext (NYX) would “drive competing platforms out of the market.”
Nasdaq made the statement in response to an EU questionnaire. The exchange, which dropped its bid in May for NYSE Euronext’s equities, options and listings businesses after the U.S. Justice Department threatened to block it, said the Deutsche Boerse tie-up would be able to repel rivals partly through “vastly lower collateral costs for customers.”
The European Commission last month opened an expanded probe into the deal, citing concerns over reduced innovation in derivatives products and technology.
The EU’s antitrust agency has set a deadline of Dec. 13 to rule on Deutsche Boerse’s plans.
Martin Hedensio, a Stockholm-based spokesman for Nasdaq, declined to comment.
Republicans Ask Geithner for Report on U.S. Rules Reductions
Republicans on the U.S. House Financial Services Committee asked Treasury Secretary Timothy F. Geithner to provide an update on rules that have been eliminated or streamlined since the enactment of the Dodd-Frank Act.
Representative Spencer Bachus of Alabama, chairman of the panel, made the statement at a press conference yesterday. He said he and his colleagues made the request to Geithner in a letter sent yesterday that cites a speech made on Aug. 2 of last year in which Geithner said he would “streamline and simplify” financial regulations wherever possible as agencies implement Dodd-Frank rules.
The lawmakers gave Geithner and the interagency panel he chairs, the Financial Stability Oversight Council, until Oct. 1 to report on efforts to reduce or eliminate “unnecessary or duplicative regulatory burdens.”
Republicans and Democrats have sparred over the merits of the new law since its enactment in July 2010, with Republican lawmakers mostly opposed, saying it represents regulatory overreach in financial markets.
Pisa Has Right to Annul Swaps, Italy’s Highest Court Rules
Pisa’s provincial government has the right to annul swaps contracts with Dexia Crediop SpA and Depfa Bank Plc, Italy’s highest administrative court ruled.
Italy’s Council of State ruled that Italy’s administrative courts have jurisdiction on the cases and that the agreements may be annulled, according to Pasquale Vulcano, Pisa’s lawyer.
Pisa, known for its leaning tower, had stopped making payments on the swaps, claiming that 95 million euros ($133 million) of bonds and derivatives sold by the banks in 2007 didn’t provide an economic advantage to the city. The city said that the bank hid so-called implicit costs on the swaps that made the new financing by Dexia, a unit of Brussels-based Dexia SA (DEXB), and Depfa more expensive than existing debt.
Dexia Crediop is considering appealing the ruling in Italy and the European Union, the company said in an e-mailed statement. Officials for Depfa didn’t have an immediate comment about the ruling.
The court will appoint an expert to assess whether the contracts were economically convenient, the ruling said.
Alliance One, Deltafina Lose EU Antitrust Fine Court Appeal
Universal Corp.’s Italian unit Deltafina and Alliance One International Inc. (AOI) lost European Union court appeals against antitrust fines totaling 54 million euros ($75 million) for colluding on prices they paid tobacco growers.
The EU General Court, the 27-nation region’s second-highest tribunal, ruled today that the penalties were valid.
The European Commission, the EU’s antitrust regulator, fined four companies, including two Alliance One units, 56 million euros for unlawfully rigging prices for more than six years in a cartel that ended in 2002. Deltafina was fined 30 million euros while Alliance One was held jointly liable with its two units for a 24 million-euro penalty.
Spokespeople for the companies in the U.S. didn’t immediately respond to calls outside normal office hours.
The cases are: T-12/06, Deltafina v. European Commission; T-25/06, Alliance One v. European Commission.
Weavering Capital Criminal Probe Dropped by U.K. Prosecutors
U.K. fraud prosecutors dropped a criminal investigation into the collapse of hedge-fund firm Weavering Capital (UK) Ltd. and its founder Magnus Peterson.
The Serious Fraud Office decided not to bring charges because it didn’t think it could win a conviction, the agency said yesterday. Weavering Capital collapsed in March 2009 with losses of more than $500 million after discovering the counterparty for its biggest trading position was controlled by the fund’s manager.
The agency was investigating interest-rate swaps between the Weavering Macro Fixed Income Fund Ltd. and another Weavering fund in the British Virgin Islands that were valued at more than $600 million.
After considering the evidence, there wasn’t a reasonable prospect of getting a conviction, SFO spokesman David Jones said in an e-mail.
Monty Raphael, Peterson’s attorney, didn’t return a phone call and e-mail seeking comment.
SEC Files Action Against Deloitte Unit Amid Longtop Inquiry
The U.S. Securities and Exchange Commission filed an enforcement action against Shanghai-based Deloitte Touche Tohmatsu CPA Ltd. for failing to produce documents related to an investigation of its former auditing client Longtop Financial Technologies Ltd. (LFT)
D&T Shanghai hasn’t provided any documents to the SEC, which issued subpoenas to the firm on May 27, the agency said in a statement, citing a filing in U.S. District Court in Washington. As a result, the SEC has been unable to access “critical” information in its probe of possible fraud at Longtop, according to the statement.
Longtop, based in Hong Kong, said in May that D&T Shanghai quit because of errors in the company’s financial records. The SEC also began an investigation. In July, the SEC and Public Company Accounting Oversight Board met with counterparts in China to discuss cross-border oversight.
A phone call after business hours to D&T Shanghai wasn’t answered. An e-mail to Wilfred Lee, public relations senior manager for Deloitte Touche Tohmatsu, wasn’t immediately returned.
Health-Care Law Challenges Thrown Out by U.S. Appeals Court
A federal appeals court in Virginia threw out two challenges to the Obama administration’s 2010 health-care law, saying it lacked authority to decide whether the measure is constitutional.
With the rulings, the court in Richmond yesterday became the second U.S. appellate panel this year to leave the law intact after lower court judges ruled on its constitutionality. A third appeals court threw out that mandate. The decisions came in separate cases challenging the statute’s requirement that individuals buy insurance or pay a tax penalty.
The rulings broaden the range of opinions on the health- care law among the intermediate federal courts, a division likely to be resolved by the U.S. Supreme Court.
The judges, in both decisions, said the court didn’t have jurisdiction over the cases and dismissed them. In one, the judges said a statute that generally blocks decisions on tax law before taxes are collected barred a ruling on the health- insurance mandate. In the other, they said the state of Virginia lacked the legal right to bring its lawsuit.
The Virginia appeals stem from one challenge by the state and another by Liberty University.
Virginia Attorney General Ken Cuccinelli said in a statement that he would appeal the ruling without specifying to which court.
Mathew Staver, dean of the Liberty University School of Law called the outcome “astounding.” He said in an interview that the school will petition the U.S. Supreme Court for review.
Tracy Schmaler, a spokeswoman for the Justice Department, said in statement that “we welcome the dismissal of these two challenges.”
The cases are Liberty University v. Geithner, 10-02347, and Commonwealth of Virginia v. Sebelius, 11-01057, U.S. Court of Appeals for the Fourth Circuit (Richmond).
Sino-Forest Halt Extended to January by Regulator Amid Probe
Canada’s main securities regulator extended the trading ban on Sino-Forest Corp. (TRE)’s shares while it pores over tens of thousands of documents as part of an investigation into possible fraud at the forestry company.
Ontario Securities Commission Vice Chairman Mary G. Condon lengthened the suspension to Jan. 25 at a hearing in Toronto yesterday. Lawyers for Sino-Forest and former Chief Executive Officer Allen Chan agreed to the move. Chan and four other executives of the Hong Kong- and Mississauga, Ontario-based company will be unable to trade securities through that date.
There isn’t “adequate information in the market” for Sino-Forest investors to make decisions, Karen Manarin, a lawyer for the commission, said at the hearing. The commission’s staff sought an extension of the trading ban to give it time to review the conclusions of the independent review, Manarin said.
Shareholders including billionaire Richard Chandler must now wait at least four months to trade their shares. The stock has plunged 74 percent in Toronto since June 1, the day before short seller Carson Block’s Muddy Waters LLC research firm said in a report Sino-Forest overstated timber holdings. Sino-Forest has denied the allegations. The commission halted trading on Aug. 26 and Chan resigned as chairman and CEO two days later.
Sino-Forest has established an independent committee of directors to examine and respond to the allegations in the Muddy Waters report. The company said Aug. 15 the investigation would take until the end of the year to complete.
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FSA Gets New Freeze Order Against Online Bank-Services Firm
The Financial Services Authority won a court order extending a freeze on some MonoBank Plc (WNW) assets, arguing the online bank services company can’t solicit business in the U.K. because it isn’t conducting business properly and may not be authorized in the country.
Judge Guy Newey in London also renewed an order requiring MonoBank to disclose information the FSA is seeking today. The extended deadline was suggested by the company, said Ian Smith, a lawyer for the financial regulator.
MonoBank, founded in 2004 and based in London, offers prepaid credit cards and services on the Internet to the “credit challenged” and small-business market in North and South America, Europe and Asia, according to its website. Its shares are listed on in Frankfurt.
The company and its lawyers weren’t in court yesterday. A call to a number listed on the company website wasn’t answered by MonoBank.
The case is: The Financial Services Authority v. MonoBank.
France Telecom May Lose Appeal Over $1.55 Billion in Aid
France Telecom SA (FTE), France’s largest phone company, should lose an appeal over an order by the European Union to pay as much as 1.1 billion euros ($1.55 billion) in back taxes to the French government, an adviser to the EU’s top court said.
Niilo Jaeaeskinen, an advocate general for the EU Court of Justice, said in a non-binding opinion yesterday that the EU court should dismiss the appeal. The Luxembourg-based tribunal follows such advice in a majority of cases.
The European Commission had probed France’s support for the phone company when it was close to bankruptcy in 2002, deciding that France Telecom had received improper tax benefits from 1994 through 2004. The Paris-based company is appealing a lower EU court’s decision that sided with the regulator in 2009.
The Brussels-based commission won a separate case at the EU high court in 2007 over France’s failure to recoup the tax breaks. The tribunal rejected France’s arguments that the commission should have given a more precise figure when it ruled in 2004 that France Telecom must pay back as much as 1.1 billion euros, plus interest.
Rulings by the EU’s top court take about six months from the time of the opinion. France Telecom said the company has set aside the funds in an escrow provision.
The case is: C-81/10 P, France Telecom v. European Commission.
Comings and Goings
RBS Says 800 Jobs Saved After Condemned Offices Are Reprieved
Royal Bank of Scotland Group Plc (RBS), Britain’s biggest government-controlled bank, reprieved two offices slated for closure and committed to keep open a third site, saving about 800 jobs.
RBS will keep its Norwich and Liverpool offices open after last year announcing their closure, according to an internal e- mail sent to staff and confirmed by a spokesman. The Liverpool site will now form part of a 300-branch sale to Santander U.K. Plc. RBS will also keep its Nottingham office open after earlier saying it was under review.
RBS has cut about 27,000 jobs since Stephen Hester took over as chief executive officer from Fred Goodwin in 2008. European banks announced more than 40,000 job cuts last month, according to data compiled by Bloomberg, including 2,000 posts axed by RBS’s securities unit, the bank said on Aug. 5.
David Fleming, the Unite trade union national officer, said Unite “is extremely pleased” with the news.
To contact the editor responsible for this report: Michael Hytha at email@example.com.