India Share Rule, Bristol-Myers Subpoena, RBS: Compliance
Indian companies may delay share sales valued at about 400 billion rupees ($7.6 billion) after a government official said the regulator plans to extend a deadline for owners to trim their holdings amid a market slump.
The benchmark Sensitive Index (SENSEX)’s 12 percent decline in the past year makes it difficult for companies to sell shares, according to the official, who declined to be identified citing rules. A new date has yet to be decided, the official said.
Prime Minister Manmohan Singh’s government in June 2010 ordered founders of private companies to reduce their holding to at least 75 percent by June 2013, and state-run companies by August next year. The requirement would have prompted firms including Bharat Heavy Electricals Ltd. (BHEL), India’s biggest maker of power equipment, and Wipro Ltd. (WPRO), chaired by billionaire Azim Premji, to sell about 400 billion rupees of stock, U.K. Sinha, chairman of the market regulator said on April 13.
The extension may result in a drop in shares of companies including Novartis India Ltd. (HCBA), BASF India Ltd. (BASF) and BOC India Ltd. (BOCI), which have risen on speculation the owners may take the company private to avoid having to reduce stakes, said Kishor Ostwal, managing director of CNI Research Ltd. (CNIR) BASF has risen 30 percent, while BOC has surged 71 percent this year.
An e-mail sent to the press office of the regulator, the Securities & Exchange Board of India, wasn’t answered. D S Malik, a spokesman for the finance ministry, declined to comment on the share sales.
U.K. Rules Risk $32 Billion of Future Market Value, RBS CEO Says
Royal Bank of Scotland Group Plc may lose as much as 20 billion pounds ($32 billion) from its future market value because of planned U.K. regulatory changes, Chief Executive Officer Stephen Hester said.
The “regulatory environment has changed even more dramatically than we bargained for,” Hester said in the text of a speech at the Manchester Business School yesterday. “U.K. regulatory reforms on their own have probably cost 10 to 20 billion pounds from our future market value.”
The government-sponsored Independent Commission on Banking recommended in September the U.K.’s biggest banks (SX7P) should boost capital, implement plans for an orderly bankruptcy and erect fire breaks around their consumer units to boost the stability of the financial system. The proposals also mean that banks will no longer be allowed to use their consumer units to provide cheap funding for investment-banking units.
Greater regulation is adding to a slower-than-expected economic recovery and turbulent markets, said Hester, 51.
The government was forced to rescue RBS at the height of the financial crisis, injecting 45.5 billion pounds of taxpayer money into the lender, making it the costliest bailout of any bank in the world.
EU Weighs Basel Reprieve for Banks If U.S Rivals Avoid Rules
Banks in the European Union may win a partial reprieve from Basel capital and liquidity rules if lenders in other regions such as the U.S. are allowed to escape the full force of the measures.
EU lawmakers are weighing safeguards to prevent lenders in the region from being left at a competitive disadvantage when a global accord by the Basel Committee on Banking Supervision is implemented, according to a document obtained by Bloomberg News.
The overhaul of capital and liquidity rules, known as Basel III, was designed to prevent a rerun of the crisis that cascaded across financial markets after the collapse of Lehman Brothers Holdings Inc. in 2008. EU Financial Services Commissioner Michel Barnier has already promised to be “vigilant” about the way the U.S. applies the Basel measures that were approved in 2010.
The European Banking Authority and the European Commission, the 27-nation region’s executive arm, should be empowered to “take appropriate measures in order to adjust to the level of global competition,” according to the document by Othmar Karas, the lawmaker guiding the adoption of the law through the European Parliament.
The Basel committee said on April 3 that the U.S. and China are among eight nations lagging behind in their implementation of its rules.
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Goldman Sachs Banker Probe Gone On for 2 1/2 Years, Lawyer Says
Goldman Sachs Group Inc. (GS) banker Matthew Korenberg has been the subject of a U.S. insider-trading investigation for 2 1/2 years related to Galleon Group LLC, his lawyer said.
Federal prosecutors in Los Angeles are investigating Korenberg, a banker at Goldman Sachs’s San Francisco office, and Paul Yook, a former Galleon fund manager, for insider-trading involving transactions in the health-care industry, said a person, who didn’t want to be identified because the investigation isn’t public.
Korenberg hasn’t been accused of giving inside tips directly to Galleon Group co-founder Raj Rajaratnam, said John Hueston, the banker’s lawyer in Los Angeles.
“There was an investigation of insider trading but it had nothing to do with Raj Rajaratnam,” Hueston said yesterday in a phone interview. “That’s very significant. He is still at Goldman Sachs and he has done nothing wrong and Goldman Sachs has stood behind him and continues to stand behind him.”
Goldman Sachs has been aware of the allegations for more than two years, conducted its own investigation and has fully cooperated with the U.S., said Michael DuVally, a spokesman for the New York-based bank, in an e-mail. Korenberg “remains actively employed,” DuVally said.
Among the transactions believed to be under investigation is Abbott Laboratories Inc. (ABT)’s acquisition of Advanced Medical Optics Inc. in 2009, the person familiar with the investigation said. Korenberg worked on the Goldman Sachs team that advised Advanced Medical Optics, according to The Deal magazine.
The existence of the California investigation was disclosed in court proceedings in New York involving Rajat Gupta, the former Goldman Sachs director who’s accused of passing illegal tips about Goldman Sachs and other companies to Rajaratnam.
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Google Is Being Investigated by Argentina, Korea Regulators
Google Inc.’s business practices are the subject of investigations by regulators in Argentina and South Korea, according to a regulatory filing.
Argentina’s main antitrust agency and the Korea Fair Trade Commission in South Korea have opened an investigation into “certain business practices,” Mountain View, California-based Google said in a filing with the U.S. Securities and Exchange Commission this week.
“The Argentinian Competition Commission notified us that they are conducting a preliminary inquiry into our search and search advertising services, and we are of course happy to answer their questions,” Google said in a e-mailed statement.
The probe in South Korea, Google said, “is an ongoing inquiry that started last year and we continue to cooperate with regulators.”
A spokesman at the Korea Fair Trade Commission declined to comment on the investigation or to be identified, citing internal policy prohibiting officials from discussing on-going probes on the record.
Argentina’s antitrust agency was considering an investigation into whether Google accepts payments in return for letting certain websites appear at the top of Internet searches, Argentina’s El Cronista newspaper reported early last year, without saying where it obtained the information.
Google’s Seoul office was raided by South Korea’s antitrust regulator as part of a probe into whether the owner of the world’s largest search engine unfairly blocked competitors in the mobile-search market, a person familiar with the investigation said in September.
A message left outside regular business hours with Argentina’s Comision Nacional de Defensa de la Competencia wasn’t immediately returned.
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European Law Firms Show ‘Worrying’ Risk Complacency, Survey Says
More than 40 percent of European law firms don’t know whether they have suffered a data breach in the last three years, a data management company said yesterday in announcing the results of a risk survey.
Law firms’ responses to questions on data breaches, data- loss and non-compliance showed complacency on information protection to an extent that made them the worst-performing industry in the report, according to Iron Mountain Inc. (IRM)
Law firms averaged just 33.3 points from their survey responses out of an ideal score of 100. The financial services sector ranked highest with 46.3, compared to a European company- average of 40. The report, done with PricewaterhouseCoopers LLP and released in March, questioned 600 businesses across Europe including insurance, financial services and pharmaceutical companies.
Just under 30 percent of law firms that responded said they don’t have any training programs in place to teach employees about risk.
Bristol-Myers Discloses U.S. Subpoena in Overseas Bribery Probe
Bristol-Myers Squibb Co. (BMY), maker of the blood thinner Plavix, said it received a U.S. Securities and Exchange Commission subpoena last month seeking information on its “sales and marketing practices in various countries.”
The drugmaker is cooperating with the investigation into possible violations of a federal law banning bribes to foreign officials, New York-based Bristol said in a filing yesterday. As disclosed in October 2006, the SEC also is probing the company’s German subsidiaries on the issue, according to the filing.
Ken Dominski, a spokesman for Bristol-Myers, didn’t immediately provide a comment on the subpoenas.
The 1977 Foreign Corrupt Practices Act makes paying bribes to foreign officials illegal.
U.K. FSA Fines Exillon Energy $473,000 on Payment to Ex-Chairman
Exillon Energy Plc (EXI), a London-listed oil producer operating in Russia, was fined 292,950 pounds ($473,000) by the U.K.’s Financial Services Authority for failing to notify the watchdog of payments to its former chairman.
The company failed to disclose to the agency payments of around 930,000 pounds to Maksat Arip, breaching rules for listed companies. Arip didn’t act improperly and no shareholder suffered losses, the FSA said in an e-mailed statement. The FSA said that Exillon’s “senior officers responsible were not adequately trained.”
David Lawton, the FSA’s acting director of market regulation, said in an e-mail that Exillon fell below expected standards and companies must have systems and controls that enable them to “comply fully” with the listing rules.
The FSA is cracking down on companies with inadequate systems and controls.
Exillon agreed to settle with the FSA at an early stage of the investigation and so earned a 30 percent reduction in the fine. Tom Blackwell, a spokesman for Exillon, couldn’t be immediately reached for comment.
Michigan Panel Refuses Referendum on Emergency-Manager Law
A ballot issue to repeal a Michigan emergency-manager law that allows takeovers of financially crippled cities was rejected by an elections board.
The Board of Canvassers refused to allow the measure on the November ballot in a meeting yesterday in Lansing, the capital. The board deadlocked 2-2 on party lines after opponents argued petitions to repeal the law used lettering that was too small.
Repeal supporters said they would challenge the board’s decision in court. The petitions had at least 203,238 valid signatures; a minimum of 161,305 is needed.
If the question is eventually approved for the ballot, the year-old emergency manager law pushed by Republican Governor Rick Snyder would be suspended until voters decide its fate in November. A 1990 law that gave emergency managers less power would take effect until then.
Four cities and three school districts -- including Detroit Public Schools -- are under emergency managers because of failing finances.
Nomura Insider-Trading Probe Intensifies, Reuters Says
Japan’s Securities and Exchange Surveillance Commission has sent investigators to Nomura (8604) offices seeking information into suspected leaks, Reuters reported, citing unidentified people with knowledge of matter.
Nomura in March was said to have been involved in insider trading of Inpex (1605)’s 2010 public offering, and said it would cooperate with the investigation.
Ex-Amaranth Trader Backed by CFTC in $30 Million FERC Case
A former natural gas trader at Amaranth Advisors LLC is being backed by the U.S. Commodity Futures Trading Commission in his court challenge to a $30 million fine imposed by the Federal Energy Regulatory Commission.
The CFTC in a filing April 25 in the U.S. Court of Appeals in Washington said FERC lacks authority to punish Brian Hunter for allegedly manipulating the natural-gas futures market in 2006.
Hunter sued FERC in December after the agency ordered him to pay $30 million in penalties, ruling he manipulated the price of contracts on the New York Mercantile Exchange in 2006 while boosting the value of financial derivatives.
Amaranth, which lost $6.6 billion betting on the price of natural gas, collapsed in 2006. In August 2009, the company agreed to pay $7.5 million to end U.S. cases brought by FERC and the CFTC for trying to manipulate natural-gas prices.
The case is Hunter v. Federal Energy Regulatory Commission, 11-1477, U.S. Court of Appeals for the District of Columbia (Washington).
French Court Overturns AMF on KBL Richelieu Insider Trading Fine
France’s Conseil d’Etat, the highest administrative court, overturned a January 2010 decision by the country’s financial- markets regulator to fine two KBL Richelieu fund managers 30,000 euros ($39,630) for insider trading. The Conseil d’Etat ordered the Autorite des Marches Financiers to remove the decision from its website and to pay them 3,000 euros each to cover costs, according to the April 24 ruling on the court’s website.
Europe Needs Joint Bonds, Fiscal Integration, FSA’s Turner Says
Euro-area countries need to pool their resources and issue joint bonds for the single European currency to work, said Adair Turner, chairman of the U.K.’s Financial Services Authority.
The national debt of euro-region countries “cannot be considered risk-free,” Turner said, according to the text of a speech to be delivered in Dublin today. “Fixing this problem is almost certain to require the creation within the euro zone of a true risk-free asset such as euro bonds, playing the same role within the euro zone banking system that T Bonds play in the U.S. and gilts within the U.K.”
Without integrating euro-area treasuries, it would be impossible to “permanently cut the toxic link between euro-zone bank and sovereign credit risks,” Turner said. The text of the speech was distributed by the FSA.
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EU Should Harmonize Capital Definitions, Banking Regulator Says
Andrea Enria, Europe’s top banking regulator, called for powers to create a legally-binding list of financial instruments that banks can count as part of their loss-bearing reserves, leaving “no room for watering down requirements.”
The European Banking Authority should keep a strict list of authorized capital structures to make sure that no European Union state diverges from the region’s standards for so-called core tier one capital, Enria, chairman of the European Banking Authority, said in a speech in Dublin at a conference organized by Ireland’s central bank.
The EBA has told banks to raise 114.7 billion euros ($186 billion) in fresh capital by the end of June as part of measures introduced to respond to the euro area’s sovereign-debt crisis.
HUD’s Donovan Says GSE Reform Plan Unlikely in Next Few Weeks
President Barack Obama’s administration doesn’t have a specific timetable for completing a proposal for winding down Fannie Mae (FNMA) and Freddie Mac (FMCC) and bringing private capital back into the housing market, Housing and Urban Development Secretary Shaun Donovan said yesterday.
“We have continued to work on refining potential proposals for the GSEs,” Donovan told lawmakers at a Senate Banking Committee hearing in Washington. “We’ve been encouraged to see bipartisan legislative proposals.”
The administration has made “significant” strides toward bringing private capital back into the housing market without action from Congress, Donovan said.
Comings and Goings
Google Antitrust Probe Bolstered by Outside Counsel at FTC
The U.S. Federal Trade Commission hired a top Washington litigator to run its antitrust investigation of Google Inc. (GOOG), signaling the agency may be preparing a lawsuit against the world’s largest search engine.
The FTC is bringing in Beth Wilkinson, a partner with Paul, Weiss, Rifkind, Wharton & Garrison LLP, who is known for winning the death sentence against Oklahoma City bomber Timothy McVeigh and litigating for companies including Pfizer Inc. (PFE) and Philip Morris International Inc. (PM) General counsel of Fannie Mae from 2006 to 2008, Wilkinson, 49, has never lost a case.
Google disclosed in June that the FTC had opened a broad antitrust investigation of its business practices. The FTC is focusing on whether Google unfairly ranks search results to favor its own businesses and increased advertising rates for competitors, people familiar with the probe told Bloomberg News at the time.
Google spokeswoman Mistique Cano declined to comment on Wilkinson’s hiring.
The FTC is hiring Wilkinson as the European Commission is poised to decide on its own antitrust investigation of Google. European Competition Commissioner Joaquin Almunia said April 23 that a decision is expected soon.
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