Vatican ATMs Down, Circuit Breakers, JPMorgan: Compliance

A suspension of electronic payments in Vatican City is threatening finances in the world’s smallest state as pilgrims and tourists are forced to use cash in museums and shops with yearly sales of more than $100 million.

Credit and debit card payments and cash withdrawals stayed suspended Jan. 4 in the papal state for a fourth day after the Bank of Italy refused a request to keep providing the services by the operator, Deutsche Bank AG’s Italian unit. The central bank acted because the Vatican doesn’t comply with international money-laundering rules, a Bank of Italy official said.

The interruption to electronic payment services will be “brief,” the Vatican said in a statement Jan. 3. The papal state, home to Pope Benedict XVI, is in central Rome near the Tiber river.

Cash withdrawals from machines operated by the Vatican bank IOR aren’t affected, a Vatican spokesman, who declined to be named, said. Tourists will be able to buy tickets for the Vatican museums online until Jan. 15, he said.

The Rome-based central bank found in a 2010 inspection that the Deutsche Bank unit, which started operating the papal state’s point-of-service payment services in 1997, didn’t have the authorization to operate in the Vatican City, a Bank of Italy official said.

The central bank on Dec. 6 refused a permit request to Deutsche Bank SpA because the state lacks required banking and financial legislation, the official said. A Deutsche Bank spokeswoman for Italy declined to comment.

Vatican authorities are trying to find another bank provider, the Vatican press office said last week. A new operator may be announced today, the Financial Times reported Jan. 4, citing an unidentified person familiar with the matter.

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Compliance Policy

Curbs to Prevent Stock Volatility May Be Delayed, Bats Says

New curbs to limit rapid price moves in individual stocks and changes to rules designed to prevent market-wide routs may be delayed two months until April, according to exchange operator Bats Global Markets Inc.

The shift from circuit breakers that make trading pause if a stock rises or falls 10 percent in five minutes to curbs that limit moves without automatically triggering a halt will take effect April 8 instead of Feb. 4, subject to regulatory approval, the Lenexa, Kansas-based company said in a notice on its website.

Changes to an existing program that stops all equity-based trading across stocks, options and futures will also be delayed, Bats said in the statement.

Both measures are meant to protect investors from extreme price moves. The gauge that will trigger the marketwide circuit breakers is switching from the Dow Jones Industrial Average to the Standard & Poor’s 500 Index, while the price drop for trading to stop is being narrowed and the length of pauses shortened in most cases. The so-called limit-up/limit-down plan, which prevents individual stocks from moving outside a rolling price band, will replace the automatic halts implemented after the flash crash on May 6, 2010, when the 30-stock Dow average briefly fell 9.2 percent.

The U.S. Securities and Exchange Commission must approve the request to delay implementation of the limit-up/limit-down plan by the 13 stock exchanges and Financial Industry Regulatory Authority, which oversees more than 4,300 brokers, for it to go into effect. A separate delay request would have to be submitted by securities exchanges and Finra for the market-wide circuit breakers, introduced after the October 1987 market crash.

John Nester, a spokesman for the SEC, declined to comment. Also declining to comment were Keara Everdell, a spokeswoman for NYSE Euronext, Robert Madden of Nasdaq OMX Group Inc. and Jim Gorman at Direct Edge Holdings LLC. Dow Jones reported the planned delay earlier.

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Vietnam Plans to Have Exchange-Traded Funds in Fourth Quarter

Vietnam plans to allow exchange-traded funds beginning around the fourth quarter of this year, Vu Bang, chairman of State Securities Commission, said in a phone interview.

The preparation to set up the funds will take nearly a year, Bang said.

The regulator also proposes introducing covered warrants this year. The SSC outlined six measures to attract foreign investment and improve stock market liquidity, for proposal to the finance ministry, Bang said. He declined to elaborate, saying the information is currently confidential.

Rule Could Make Hedge Funds Fraud Informers, Reuters Says

The Financial Crimes Enforcement Network, or FinCEN, a part of the Treasury, is working on rule that would require U.S. hedge funds to file reports telling authorities of any suspicious trading by employees and outside parties, Reuters reported, citing the agency.

The rule would require the hedge fund industry to monitor itself in way similar to banks, mutual funds, and brokerages. The proposal would cover white collar crime including money laundering and insider trading.

The rule may be filed for public comment in the first half of year, a FinCEN spokesman, Steve Hudak, said, according to Reuters.

The rule is expected to meet with opposition from the hedge fund industry over concerns with costs and invasiveness, Reuters reported. A spokesman for the Managed Funds Association, the biggest hedge fund trade organization, didn’t respond to a request for comment, Reuters said.

Compliance Action

JPMorgan Faces Sanction for Refusing to Provide Madoff Documents

The U.S. Treasury Department’s inspector general threatened to punish JPMorgan Chase & Co. for failing to turn over documents to regulators investigating the bank’s ties to the Ponzi scheme of convicted con man Bernard L. Madoff.

Inspector General Eric Thorson gave the largest U.S. bank a Jan. 11 deadline to cooperate with the Office of the Comptroller of the Currency probe or risk sanctions for impeding the agency’s oversight. JPMorgan, according to the Dec. 21 letter, says the information is protected by attorney-client privilege.

Thorson’s letter didn’t spell out what documents the OCC is seeking or the focus of its investigation.

The previously undisclosed OCC probe adds to the lender’s troubles in Washington, where several agencies and lawmakers are investigating the bank’s loss of at least $6.2 billion on botched derivatives trades. The losses have prompted regulators including the Federal Reserve to consider tightening proposed restrictions on proprietary trading.

Jennifer Zuccarelli, a JPMorgan spokeswoman, said the bank “will of course continue to work together with our regulators” on the investigation.

“This dispute does not go to the merits of the matter but it does raise an important issue of principle: Whether we and other banks, large and small alike, have the fundamental right long recognized in this country to communicate freely with and seek confidential guidance from their lawyers,” Zuccarelli said in an interview.

Bryan Hubbard, an OCC spokesman, declined to comment on the agency’s Madoff inquiry.

In the letter to JPMorgan general counsel Stephen Cutler, the inspector general -- the Treasury’s internal watchdog -- dismissed JPMorgan’s arguments on attorney-client privilege, saying the OCC “could not do its work” if banks were allowed to withhold information on that basis. The OCC asked the IG office to review the situation, Thorson said in the letter.

Congress Probes SEC Spending on Booz Allen, Reuters Says

The U.S. Securities and Exchange Commission has until Jan. 17 to turn over documents showing payments to consulting firm Booz Allen Hamilton, Reuters reported, citing a Jan. 3 letter.

The letter, sent to SEC Chairman Elisse Walter by House Oversight Chairman Darrell Issa, a Republican from California, comes as part of a probe of agency spending on Booz Allen, Reuters reported.

The SEC spent more than $8.5 million on consultants to advise on reforming workflow and back-office operations, Reuters reported last year.

Booz Allen didn’t respond to a request for comment on the letter, Reuters said.


Weavering Founder Appears in Court Over Hedge Fund’s Collapse

Weavering Capital (UK) Ltd. founding director Magnus Peterson appeared in a London court today facing six charges of fraud, forgery, fraudulent trading and false accounting over the collapse of the hedge fund in 2009.

Judge Michael Snow ordered Peterson, 49, to appear at a higher criminal court in 12 weeks and surrender his passport. The defunct fund had about $640 million under management in late 2008 before discovering the counterparty for its biggest trading position was controlled by the fund’s manager.

Prosecutors at the Serious Fraud Office dropped their initial criminal probe into Peterson over concerns it wouldn’t win a conviction. The SFO reopened the case in July.

The hedge fund’s administrators won a lawsuit to recover $450 million from Peterson and other former employees in May.


Anchin’s Rosenthal Discusses Hedge Fund Regulation

Jeffrey Rosenthal, a partner at Anchin, Block & Anchin LLP, discussed an increase in the regulation of hedge funds. Rosenthal talked with Bloomberg’s Pimm Fox and Vonnie Quinn on Bloomberg Radio’s “Taking Stock.”

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Comings and Goings/Agency Personnel

Geithner Said to Plan to Depart Before Debt-Ceiling Debate Ends

Treasury Secretary Timothy F. Geithner has indicated to White House officials he wants to carry through with his plan to leave the administration by the end of this month even if debt-limit negotiations aren’t concluded, according to two people familiar with the matter.

Geithner contemplated leaving the position June 2011 while the debt ceiling was being debated, and President Barack Obama persuaded him to stay.

His departure now would increase pressure on the president to name his successor at Treasury. White House Chief of Staff Jack Lew remains the leading contender, according to the people, who requested anonymity to discuss the private talks.

Geithner, 51, is the only remaining member of Obama’s original economic team and was a key figure in the taxpayer-funded bailouts during the 2008 financial crisis. He’s also had a principal role in negotiations with Congress on the budget deal and in past deliberations over the debt ceiling.

Because Lew has spent most of his career in government, Obama may seek to name a Wall Street executive as deputy Treasury secretary, the people said.

Mailbox Bombing Probed at U.S. Treasury Inspector General’s Home

U.S. authorities are investigating the bombing last week of a mailbox at the home of the Treasury Department’s inspector general.

Fairfax County, Virginia, police officers were called to Inspector General Eric Thorson’s home in suburban Washington on Dec. 31 after he discovered his mailbox destroyed from what appeared to be a pipe bomb.

The matter is under investigation by the Fairfax County police and the Bureau of Alcohol, Tobacco, Firearms and Explosives, according to Rich Delmar, counsel to the inspector general. Investigators are trying to determine if the bombing is connected to the official’s work, said a person familiar with the matter who asked to remain anonymous because the probe was in its early stages.

Thorson’s office conducts independent audits of the department and investigates cases of waste, fraud and abuse of government resources. It handles some financially related criminal cases, such as thefts of checks issued by the Treasury.

Hambrecht Won’t Join BASF Supervisory Board This Year, FAS Says

Former BASF Chief Executive Officer Juergen Hambrecht won’t seek election before 2014 to the company’s supervisory board, Frankfurter Allgemeine Sonntagszeitung reported, citing an interview.

Corporate law rules would allow him to join the board in 2013 after a mandatory two-year waiting period since departing from a management post, the FAS reported.

Hambrecht said he will wait until the term of the current supervisory board expires next year, according to FAS.

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