Taiwan-China Boost, EU Carbon Plan, Barclays: Compliance

Taiwan will double the limit on mainland Chinese institutions’ securities investments in its market as the cross-strait economic relationship deepens.

Maximum inbound investment from China will be increased to $1 billion from $500 million, according to Huang Tien-mu, Taiwan’s securities regulator. He spoke after a meeting yesterday between Guo Shuqing, chairman of the China Securities Regulatory Commission, and Taiwan’s top market regulator, Chen Yuh-chang, in Taipei.

The increased scope for investment from China coincides with Taiwan’s central bank allowing domestic lenders to conduct yuan business and as the island’s tourism bureau doubles the quota for mainland visitors. Financial market regulators on both sides of the Taiwan Strait signed a non-binding cooperation agreement in 2009.

China may relax minimum management asset requirements for Taiwan brokerages seeking quotas under the Qualified Foreign Institutional Investment program, CSRC Director General of International Affairs Tong Daochi told reporters in Taipei. Funds from outside China invest in the country’s capital markets through the QFII program. There are 207 approved QFIIs that have access to mainland stocks.

The CSRC is also considering a pilot program in Taiwan of the Renminbi Qualified Foreign Institutional Investor, or RQFII, which allows for the repatriation of offshore yuan, Tong said.

China will start a trial allowing Taiwan brokerages to hold controlling stakes in investment-consulting joint ventures in pilot areas, Taiwan’s Financial Supervisory Commission said in a statement after the meeting.

Compliance Policy

Finland Backs EU CO2 Plan; Denmark Calls Situation Unsustainable

Finland threw its weight behind a European Union rescue plan for the bloc’s carbon market as Denmark said the situation was unsustainable, highlighting the need for governments to tackle a record surplus of allowances.

Finland said yesterday that it is in favor of the European Commission’s stop-gap measure to delay auctions of some carbon permits, joining Spain, Italy and France, which signaled last year that they are going to support the proposed market fix. At stake is the price of permits in the world’s biggest emissions trading program, which slumped to a record low last week on concerns that policymakers will fail to act to strengthen the market.

The commission’s plan to sell fewer carbon permits in 2013-2015 and return them to the market in 2019-2020, a strategy known as backloading, has caused rifts among governments, industries and lawmakers. Several EU member states set conditions for supporting the measure and some don’t have a formal stance on the plan yet. Backloading needs qualified majority support from governments to be implemented.

Danish Climate Minister Martin Lidegaard, speaking in a phone interview yesterday, described the situation as “unsustainable.” Denmark, along with the U.K. and Sweden, favors deepening the EU emission-reduction target as the best option to tackle the glut, he said.

The U.K., with 29 votes, set some conditions for its support while signaling flexibility, EU officials with knowledge of the matter said last week. Germany, which also has 29 votes, remains undecided. Poland, with 27 votes, is leading efforts to block the measure.

Compliance Action

Barclays Failed to Refute Energy ‘Scheme,’ U.S. FERC Says

Barclays Plc failed to show that four former traders didn’t manipulate U.S. energy markets, the Federal Energy Regulatory Commission’s staff said, backing $488 million in penalties on the bank and the individuals.

The traders engaged in a “three-part manipulative scheme” to game the markets, FERC staff said in a filing Jan. 28, which was posted to the agency’s website yesterday. “Neither Barclays nor its individual traders are able to offer any credible explanation to show their conduct was proper,” it said, adding that the proposed penalties are “reasonable and appropriate.”

London-based Barclays and the traders have denied any wrongdoing and have vowed to challenge the accusations in court.

The combined penalties are the largest ever proposed by FERC for alleged market violations, and the outcome of the dispute may help clarify what constitutes market manipulation. Barclays said in a Dec. 14 regulatory filing that the FERC staff interpretation is too broad and may chill trading in power markets, where electricity supply is bought and sold.

“We believe that our trading was legitimate and in compliance with applicable law,” Mark Lane, a bank spokesman, said yesterday in an e-mailed statement. The FERC should throw out the proposed penalties and end the investigation, he said.

“If the FERC proceeds, we intend to vigorously defend this matter in federal court,” Lane said.

Banks, Regulators Must Make Headway on Living Wills, FSB Says

Banks and national regulators are too slow to draw up living wills showing how large international lenders can be wound down if they fail, a group of global regulators said yesterday.

“Significant work remains” to be done on the bank-crisis plans, the Financial Stability Board said in a statement following a meeting in Zurich. The board said that it would publish a review of nations’ progress in April, in a bid to identify lenders and regulators that aren’t up to speed.

U.S. and European Union regulators have called on large banks to prepare living wills, to be developed with their supervisors, showing how they might be safely broken up without causing market turmoil and taxpayer-funded bailouts. EU nations alone have provided as much as 4.6 trillion euros ($6.2 trillion) of capital injections and other support to lenders since 2008 to prevent a meltdown of the financial system following the collapse of Lehman Brothers Holdings Inc.

The European Banking Authority last week told 39 banks, including HSBC Holdings Plc and BNP Paribas SA, to draft such contingency plans by the end of this year.

The FSB brings together regulators, central bankers and finance ministry officials from the Group of 20 nations.

Insurance Beneficiaries Get $665.7 Million After New York Probe

Life insurance beneficiaries who were unaware they were entitled to funds received $665.7 million in payments after a probe into unpaid claims, a New York regulator said.

More than 89,000 payments have been made since the review began in 2011, according to an e-mailed statement yesterday from the New York Department of Financial Services, which oversees financial and insurance products in the state.

The department, under new regulations that took effect last year, now makes “good faith efforts” to find beneficiaries of life insurance policies, rather than waiting for claimants to come forward, according to the statement.

Almunia Says More Antitrust Complaints to Follow on Patents

European Union Competition Commissioner Joaquin Almunia signaled today that he would send further antitrust complaints to technology companies concerning their use of legal injunctions to block competitors from using key patents.

The European Commission last year sent antitrust objections to Samsung Electronics Co. over such injunctions and opened two probes into Google Inc.’s Motorola Mobility unit on similar issues.

Saint-Gobain’s $1.2 Billion Fine Said to Be Cut Over EU Error

Cie. de Saint-Gobain SA’s record 896 million-euro ($1.2 billion) cartel fine may be reduced by European Union regulators within weeks as officials seek to correct a calculation error, according to two people familiar with the decision.

Regulators will make small reductions in the penalty because they made a mistake in the way they evaluated car-glass sales, said the people, who declined to be identified because the fining process isn’t public. A 370 million-euro fine against Pilkington Group Ltd., a Nippon Sheet Glass Co. unit, may also be reduced for the same reason, one of the people said.

Saint-Gobain, Europe’s largest building-materials supplier, was handed the highest EU fine against a single company in 2008 for plotting with rivals to fix the price of car windows sold to auto manufacturers from 1998 to 2003. Saint-Gobain’s penalty was increased because the company was a repeat offender already punished for a separate cartel to fix prices for glass used in the construction industry.

The European Commission, the EU’s Brussels-based antitrust Authority, and Sophie Chevallon, a spokeswoman for Saint-Gobain in Courbevoie near Paris, declined to comment. David Roycroft, a spokesman for St. Helens, England-based Pilkington, didn’t return a call and an e-mail seeking comment.

Saint-Gobain and Pilkington have challenged the fines at the EU’s General Court in Luxembourg.

ASIC Accepts Enforceable Undertaking From Macquarie Equities

The Australian Securities and Investments Commission accepted an enforceable undertaking from Macquarie Equities following a surveillance that found some recurring compliance deficiencies by and in the supervision of the company’s advisers.

The company is a unit of Macquarie Group and is authorized under its Australian Financial Services license to offer financial advice, ASIC said on website.

A Macquarie spokeswoman said the broker was committed to the changes in the Jan. 28 enforceable undertaking, The Age reported today, without identifying the spokeswoman.

“We take our obligations to regulators very seriously. We have a strong track record of compliance practice and if concerns are raised, we work diligently to resolve them. Accordingly, we have been working and will continue to work constructively with ASIC,” said the spokeswoman, according to The Age.


Texas Day Trader Sued by SEC Over High-Frequency Trading Claims

A Texas day trader illegally raised more than $6 million from the Houston-area Lebanese community by making false promises that his algorithmic trading program would generate 30 percent returns, U.S. regulators said.

Firas Hamdan, 49, hid $1.5 million in losses from his 33 investors, telling them the funds were tied up in the Greek debt crisis and the 2011 MF Global Holdings Ltd. bankruptcy, the Securities and Exchange Commission said in a lawsuit filed yesterday in U.S. District Court in Houston. The suit seeks penalties and other relief. Hamdan, who raised the money from 2007 to 2012, is contesting the SEC’s claims.

Hamdan told fellow members of the Lebanese and Druze communities that he would pool their investments with his own money and conduct high-frequency trading using a proprietary trading algorithm, the SEC said. He showed them phony documentation of positive returns in 59 of 60 months from 2007 through 2012, and falsely claimed that a well-known Dallas-area hedge fund manager had invested $1 million with him, according to the lawsuit.

“Mr. Hamdan is disappointed the SEC took this step,” said Robert Heim, Hamdan’s attorney at Meyers & Heim LLP in New York. “We intend to contest the SEC’s case, and we believe the SEC’s allegations are without merit.”


Feinberg Talks About Jefferies CEO Pay, Executive Salaries

Kenneth Feinberg, managing partner at Feinberg Rozen LLP and former U.S. special master on executive compensation, discussed the decision by Jefferies Group Inc. to pay Chief Executive Officer Richard Handler $19 million for fiscal 2012 and to approve $39 million in restricted stock awards for the next three years. Feinberg also talked about government bailouts and setting private pay of executives, and the likelihood of seeing such intervention again.

He spoke with Stephanie Ruhle and Erik Schatzker on Bloomberg Television’s “Market Makers.”

For the video, click here.

Constancio Says ECB Bank Supervision Comes With Reputation Risk

European Central Bank Vice President Vitor Constancio said any “negative event” in banking supervision “could damage the central bank’s reputation as a monetary authority.”

He made the comments in a speech in Frankfurt yesterday, where he said reputation risk is a “true risk” associated with assuming supervisory tasks. Constancio added that “supervision is an area that can never be perfect,” and said that “accidents are always possible.”

The ECB may gain more power to give direct orders to banks as European Union lawmakers and governments thrash out a final deal on handing oversight powers to the central bank. The issue is before the European Parliament.

“It is neither realistic nor desirable that the European Central Bank would supervise alone more than 6,000 credit institutions,” Constancio said. He said the concern over conflicts of interest is a “false risk.”

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