Transaction Tax, Probing CME, Danes on Capital: Compliance
French President Nicolas Sarkozy said it is “unacceptable” that there’s no tax on financial transactions and said France “won’t wait for everyone to be agreed” before imposing the tax.
“How can you explain that when you buy an apartment or go to the supermarket you pay tax, but that financial transactions are the only sort of purchase where you don’t pay,” he said.
Sarkozy, adding that the euro zone “must take its responsibilities,” made the remarks to the closing session of the “New Worlds” conference in Paris Jan. 6.
A European Union financial-transaction tax would drive away investment and weaken employment unless a levy was accepted worldwide, said Margrethe Vestager, Denmark’s economy minister.
Vestager made the remarks late in the day on Jan. 5 in a telephone interview. “We only support a global tax.”
The European Commission in September proposed a regional financial-transaction tax that would take effect in 2014 and raise about 57 billion euros ($72 billion) a year. Denmark, which holds the EU’s rotating six-month presidency, sees the topic as a priority.
The European Parliament’s economic committee is set to discuss the plan in Brussels today.
France and Germany have led the push for a transaction tax to extract revenue from banks and other types of firms, which supporters say could raise funds to tackle climate change and reduce poverty. Skeptics, led by the U.K., have said that the tax might hurt Europe’s economy without curbing the risk of another financial crisis.
A transaction tax would need endorsement by the Group of 20 nations to succeed, Vestager said. She chided the U.S. for showing “little willingness to address this issue.”
President Barack Obama’s administration has focused on charging banks for their own regulation, favoring a levy on bank balance sheets to fund government protection to the financial system in lieu of a transaction-based fee.
SEC Alters Settlement Policy in Cases With Criminal Convictions
The U.S. Securities and Exchange Commission has modified its boilerplate settlement language to require that defendants admit wrongdoing when they have already done so in parallel criminal proceedings.
The change doesn’t affect the SEC’s typical approach of settling cases without requiring the subject of the action to admit wrongdoing when there is no criminal conviction, SEC Enforcement Director Robert Khuzami said Jan. 6 in a statement.
“The new policy does not require admissions or adjudications of fact beyond those already made in criminal cases, but eliminates language that may be construed as inconsistent with admissions or findings that have already been made in criminal cases,” Khuzami said.
The SEC has come under fire for allowing subjects of lawsuits to settle claims without admitting to the misconduct. U.S. District Court Judge Jed Rakoff cited that policy last month when he rejected the agency’s proposed $285 million settlement with Citigroup Inc. (C) over claims the bank misled investors in a financial product linked to risky mortgages.
The policy change, which has been under consideration for several months, is “separate and unrelated to” Rakoff’s ruling in the Citigroup matter and has no impact on cases with no parallel criminal proceeding, Khuzami said.
Peter Henning, a former SEC attorney who is now a law professor at Wayne State University in Detroit, said “given the admission of guilt in the criminal case, it’s hard to see how this would have any impact.”
Denmark Will Push to Complete EU Capital Rules, Minister Says
Denmark will push to complete European Union bank capital rules over the next six months, Danish Economy Minister Margrethe Vestager said.
Vestager made the remarks Jan. 6 in Copenhagen as the Danish government presented its program for holding the rotating EU presidency.
She said the ministry still needs to “work out some compromises,” including the minimum level of required capital, requirements to put on capital beyond the minimum level, and types of assets should go into different types of capital.’’
The EU executive arm in September set a July 2012 deadline for the bloc’s 27 member states to sign off on an overhaul of capital rules for them to go into effect in 2013. The EU proposed in July to apply rules set by the Basel Committee on Banking Supervision to more than 8,300 lenders.
EU banks must also raise 114.7 billion euros ($152.8 billion) in fresh capital ahead of a June 30 deadline as part of measures introduced to respond to the euro area’s sovereign-debt crisis, the European Banking Authority said on Dec. 8.
Hungary’s Orban Embraces Central Bank Chief to Save IMF Deal
Hungary’s Premier Viktor Orban retreated in his confrontation with central bank chief Andras Simor as he seeks to revive talks for an international bailout after a market rout last week. The currency and bonds gained even as the country received its third downgrade to junk.
Orban told reporters after meeting Simor Jan. 6 in Budapest that the president can count on the government’s support, including backing him personally. The government wants an IMF agreement “as soon as possible” and will do “everything” to support the central bank to stabilize the economy, he said.
The International Monetary Fund and the European Union broke off talks last month on Hungary’s bid for a bailout after Orban refused to withdraw a new central bank regulation the institutions said may undermine monetary-policy independence and Simor’s authority. The forint fell to a record against the euro Jan. 5 as investors speculated an IMF accord may be delayed.
The central bank law, which came into effect on Jan. 1, is “fully compatible” with EU rules, Economy Minister Gyorgy Matolcsy said in a letter sent to European Central Bank President Mario Draghi Jan. 5.
Orban shunned the IMF since taking office in 2010 to prevent interference in what he called his “unorthodox” measures, which included effectively nationalizing $13 billion of private pension-fund assets and imposing extraordinary industry taxes to tame the budget deficit. The EU has criticized all the policies.
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Basel Group to Study Nations’ Respect of Bank Capital Rules
Regulators and lenders in the U.S., European Union and Japan are to face “detailed” peer reviews of their implementation of international bank capital rules, global regulators said.
All member countries of the Basel Committee on Banking Supervision have agreed to undergo the assessments, the group’s governing board said in a statement on its website. The results of the reviews, to begin in the first quarter of 2012, will be published, it said.
The EU, U.S. and Japan will be the first to be assessed, it said. The reviews will include examining how lenders value their assets.
OCC to Clear Over-The-Counter S&P Index Options This Quarter
The Options Clearing Corp., or OCC, which clears and settles all equity options trades on U.S. exchanges, plans to begin processing over-the-counter transactions in three Standard & Poor’s indexes this quarter.
The Chicago-based organization will clear trades in the S&P 500 Index, S&P Midcap 400 Index and S&P Smallcap 600 Index, according to a regulatory filing dated Jan. 3. The company may clear transactions that occur away from exchanges based on other indexes and individual securities in the future, OCC said.
The SEC must approve the request before OCC can clear the products. The agency requested comments on the proposal.
OCC will determine the margin required from clearing firms by using its STANS system, which it employs for exchange-traded options, the proposal said. Over-the-counter options will not be interchangeable with exchange-traded products, although they will be among themselves if they have identical terms, OCC said.
Separately, a market partly owned by CBOE Holdings Inc. (CBOE), which runs the largest U.S. options exchange, acquired the 127- year-old National Stock Exchange to get access to new types of customers.
CBOE Stock Exchange, owned by Chicago-based CBOE Holdings and nine companies including Interactive Brokers Group Inc. (IBKR) and Susquehanna International Group LLP, completed its purchase of NSX on Dec. 30, according to David Harris, president and chief executive officer of CBSX. Terms of the deal weren’t disclosed.
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Ex-Soros Trader’s Hedge Fund Said to Return Outside Money
Former Soros Fund Management LLC trader John Zwaanstra plans to return outside capital in Penta Investment Advisers Ltd., the Asia-focused hedge fund he set up in 1998, said two people with knowledge of the matter.
The company plans to give investors more details this week, said the people, who asked not to be identified.
Penta managed as much as $2.9 billion in mid-2011, about 40 percent of which came from Penta principals, said another person. Its assets have fallen below $2 billion, said one of the people familiar with the plan to return investors’ money.
Zwaanstra and John Pridjian, chief financial officer of Penta Investment Advisers, didn’t reply to Bloomberg e-mails. Zwaanstra’s younger brother Todd, who works as a trader at its Hong Kong unit Old Peak Ltd., declined to comment, citing a company policy of not talking to the press.
Eurekahedge Asian Hedge Fund Index (EHFI38) dropped 8.3 percent last year, the second-worst annual loss since the Singapore-based data provider began keeping records in 2000, according to preliminary data. Its global hedge fund index (EHFI251) declined 4 percent.
About 123 Asian hedge funds closed in the first 10 months of 2011, almost the same as for the entire 2010, as performance faltered and managers struggled to raise capital, according to Eurekahedge. Peter Douglas, principal of Singapore-based advisory and wealth-management firm GFIA Pte, said an e-mail that “excessive regulation” and the “increasing demands of institutional investors are among the main drivers to ‘go underground’ and continue investing in an unconstrained and focused fashion.”
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MF Global Regulatory Probe Includes Review of CME Group’s Audit
The U.S. Commodity Futures Trading Commission is reviewing actions by CME Group Inc., (CME) the world’s largest futures exchange, as part of its investigation into the bankruptcy of MF Global Holdings Ltd, according to a person briefed on the probe.
The CFTC is reviewing CME Group’s audit of MF Global prior to the collapse of the New York-based broker, during which as much as $1.2 billion in client funds went missing. The CFTC, Securities and Exchange Commission, Justice Department and bankruptcy trustee overseeing the MF Global-liquidation are investigating the possible misuse of client funds.
The CFTC’s five commissioners haven’t voted to begin a formal investigation into CME Group, according to the person briefed on the matter, who requested anonymity because the investigation is private.
“We haven’t been notified that we’re under investigation,” Anita Liskey, a CME Group spokeswoman, said Jan. 6 in an interview. CME Group was MF Global’s primary auditor.
MF Global used about $700 million of customer funds to “meet liquidity issues” at its broker-dealer in the days prior to the bankruptcy, according to CME Group.
The New York Times reported earlier on the review of CME.
Capital Injection for Piraeus Bank (TPEIR) Wins Temporary EU Approval
The European Commission has temporarily approved, under European Union state aid rules, a 380 million-euro capital injection into Piraeus Bank provided under the Greek support scheme for credit institutions.
The approval is temporary and will only be prolonged if the Greek authorities submit an updated restructuring plan for Piraeus Bank, the commission said Jan. 6.
Separately, the commission said it will seek views on possible measures to get rid of obstacles to the European market for card, Internet and mobile payments.
The consultation, starting Jan. 11, “assesses the current landscape of card, Internet and mobile payments in Europe, identifies the gaps between the current situation and the vision of a fully integrated payments market and the barriers which have created these gaps,” the commission said on its website Jan. 6.
Nigeria Banks to Cut Services as Workers Plan General Strike
Nigeria’s lenders (NGSEB10), including Diamond Bank Plc (DIAMONDB) and Standard Chartered Plc (STAN), will run limited branch services from Jan. 9 during a nationwide strike to protest the scrapping of fuel subsidies that doubled gasoline prices.
“There will be skeletal services, people on essential duties will come to work,” Abdulrahman Yinusa, chief financial officer at Lagos-based Diamond Bank, which operates 220 branches with 3,000 employees, said by phone Jan. 6 that there will be “skeletal services” and only people on essential duties will come to work.
Trade unions called an indefinite nationwide strike and threatened to shut down ports, fuel stations, banks and oil operations in Africa’s largest crude producer if the government fails to restore the fuel subsidy. President Goodluck Jonathan will hold an emergency meeting with governors of 36 states tonight in Abuja, the capital, to discuss measures that can help ease higher prices.
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ENRC Sues Former Executive in Dispute Over ‘Dishonest’ Raise
Eurasian Natural Resources Corp. (ENRC), the producer of metals in Kazakhstan, sued its former head of human resources Andrew Balgarnie, accusing the ex-Morgan Stanley banker of dishonestly giving himself a 100,000 pound ($154,500) raise.
ENRC filed the counterclaim against Balgarnie last month, according to court documents. The move follows Balgarnie’s decision to sue ENRC for wrongful dismissal in November, claiming he is owed 310,000 pounds in back pay and bonuses.
The company said it is seeking the return of 74,000 pounds which resulted from a pay increase not properly approved by Chief Executive Officer Felix Vulis.
ENRC, which held a three-month review of its corporate governance last year amid conflicts between the board and shareholders, agreed Jan. 5 to acquire First Quantum Minerals Ltd.’s assets in the Democratic Republic of Congo for $1.25 billion, ending a legal dispute between the companies over the Kolwezi copper project.
“The allegations of misconduct and dishonesty as set out in ENRC’s counterclaim are vigorously resisted,” Balgarnie’s lawyer James Cox said in an e-mailed statement.
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Comings and Goings
CFTC Names Vincente Martinez Director of Whistle-Blower Office
The Commodity Futures Trading Commission named Vincente Martinez as the first director of the agency’s whistle-blower office.
Martinez had been an assistant director in the division of enforcement at the Securities and Exchange Commission, according to an e-mailed statement.
RBS Hires Kibble From PwC to Lead Strategy and Corporate Finance
Royal Bank of Scotland Group Plc (RBS), the U.K.’s largest government-owned bank, hired Richard Kibble from PricewaterhouseCoopers LLP as group director of strategy and corporate finance.
Kibble, 43, will start work in March and will report to Chief Executive Officer Stephen Hester and Finance Director Bruce Van Saun, Edinburgh-based RBS said in a statement Jan. 6. Kibble has been a partner at PwC from 2008 and before that was managing partner at Marakon Associates.
RBS last week hired Lazard Ltd. (LAZ) to advise on the sale of parts of its equities unit, including stockbroker Hoare Govett, said a person with knowledge of the talks. Hester is shrinking the lender’s securities unit after the bank received the biggest banking bailout in the world in 2008. Hester said in November plans by the government-backed Independent Commission on Banking will force the lender to cut the division further.
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