Japan Stock Tax Break, SAC E-Mails, Hearings: Compliance

A Japanese program that will provide tax breaks to spur people to buy stocks may achieve the government’s targeted 25 trillion yen ($268 billion) in investments by 2020, a Fidelity Japan researcher said.

The tax-free Individual Savings Account initiative, which is set to start in 2014, can grow by more than 3 trillion yen a year over the next seven years, Satoshi Nojiri, head of Fidelity Investor Education Institute in Tokyo, said in an interview.

Prime Minister Shinzo Abe’s government last month approved the plan, which was first proposed under the previous administration. Japanese policy makers are seeking to encourage households to move assets from cash to equities to fund growing industries and spur the world’s third-largest economy.

Under the 10-year program, modeled on a financial product created in the U.K., people will be allowed to invest as much as 1 million yen a year in stocks and investment trusts without paying tax on returns. Abe extended the term of the plan from the original three years sought by his predecessor’s government.

The 25 trillion yen amount is equivalent to 7.5 percent of the market value of the Tokyo Stock Exchange’s first section.

Japanese have been reluctant to invest in equities since the collapse of an asset bubble more than 20 years ago caused stocks to plunge and ushered in an era of deflation that increased the incentive to save. More than half of households’ 1,510 trillion yen of financial assets were in cash as of Sept. 30 and about 6 percent in equities, central bank figures show.

Still, the stock rebound since November is luring individual investors. Retail investors made up 33 percent of equity turnover in the final week of January, up from a weekly average of 21 percent last year before the rally.

Compliance Action

FSA Fines Nestor Healthcare $271,000 Over Director Share Deals

The U.K.’s financial watchdog fined Nestor Healthcare Group 175,000 pounds ($271,000) for failing to ensure board members and senior executives complied with rules on buying and selling the company’s shares.

The company didn’t “issue any reminders about its own share-dealing rules” to directors while it was listed, between 2006 and 2010, the U.K. Financial Services Authority said in an e-mailed statement. This led to board members buying shares in breach of listing rules, the agency said.

Saga Group Ltd. bought Nestor in December 2010 for about 124 million pounds. The company agreed to settle at an early stage of the investigation and so qualified for a 30 percent reduction in its fine, the FSA said.

Iceland Investigated 205 Cases Following Failure, FSA Says

Iceland’s Financial Regulator said it investigated 205 cases as part of a probe into the nation’s economic and financial collapse in 2008, according to a summary of the probe. comments in summary of probe into nation’s economic and

The FSA said 103 cases were sent to the prosecutors, four cases resulted in fines, and 98 cases were dropped.

Turkey’s Higher Deposit Insurance to Increase Bank Costs

Turkey’s Savings Deposit Insurance Fund plan to double its guarantee to 100,000 liras on personal savings deposits will increase banks’ costs, Banking Regulation and Supervision Agency Chairman Mukim Oztekin said at a news conference in Ankara yesterday.

The increase will bring the Turkish guarantee on deposits close to the 50,000 euros limit in Europe, Oztekin said.

The premiums banks pay to the fund will rise to 326m liras ($185 million) from 173m liras if the insurance limit is doubled, Global Securities said Feb. 11.


Fund Manager Fortuna Gets Probation After Aiding U.S. in Probe

Steven Fortuna, a hedge-fund manager who pleaded guilty and assisted in the insider-trading probe of Galleon Group LLC and other federal investigations, was sentenced to two years’ probation and six months’ home confinement.

He is one of 22 people who pleaded guilty in the Galleon probe.

U.S. District Judge Sidney Stein in Manhattan, who presided over the case, also ordered Fortuna to speak to graduate business students at Columbia University and undergraduates at Boston University, where he obtained his degrees.

Federal prosecutors filed papers last week seeking leniency for Fortuna, the co-founder and former managing director at S2 Capital LLC in Boston, saying he “immediately” agreed to cooperate with the U.S. when FBI agents first approached him on April 1, 2009. Fortuna pleaded guilty to federal insider-trading charges in October 2009.

Fortuna, 50, told Stein before being sentenced that he “made a grievous mistake” by choosing to act on inside information, and everything he once had has been destroyed.

Assistant U.S. Attorney Antonia Apps told Stein that Fortuna made more than 400 recordings of conversations with six friends and colleagues targeted in the crackdown on insider trading at hedge funds. Apps said Fortuna also wore a concealed body wire and recorded conversations with targets of the investigation at the behest of Federal Bureau of Investigation agents.

The case is U.S. v. Fortuna, 09-cr-1003, U.S. District Court, Southern District of New York (Manhattan).

For more, click here.

Solow Sues Citigroup, BofA Alleging Manipulation of Libor

A Sheldon H. Solow-led New York realty company sued Citigroup Inc., JPMorgan Chase & Co., Bank of America Corp. and several other banks for allegedly conspiring to manipulate the U.S. dollar Libor rate.

In a complaint filed yesterday in federal court in Manhattan, 7 West 57th Street Realty Co. accused the banks of falsely reporting to the British Bankers Association interest rates at which the lenders themselves were able to borrow money day to day, causing the BBA to set an “artificial” London Interbank Offered Rate for trillions of dollars worth of transactions including bank loans and municipal bonds.

Jennifer Zuccarelli, a spokeswoman for New York-based JPMorgan Chase, didn’t immediately respond to a telephone message seeking comment on the allegations.

Danielle Romero-Apsilos, a spokeswoman for New York-based Citigroup, and Lawrence Grayson, a spokesman for Charlotte, North Carolina-based Bank of America, declined to comment on the allegations.

The case is 7 West 57th Street Realty Co. LLC v. Citigroup Inc., 13-cv-0981, U.S. District Court, Southern District of New York (Manhattan).

SAC Probe Said to Be Hampered by 2008 Auto-Delete E-Mail Policy

The federal investigation of insider trading by SAC Capital Advisors LP and its founder, Steven A. Cohen, has been hampered by a lack of extensive e-mail evidence.

A reason is a policy in place at SAC during July 2008, the period of time at the heart of the probe, to automatically delete e-mails. SAC changed its policy just months later, requiring preservation of electronic communications. By then, most messages relevant to the $700 million in alleged illegal trades had been erased, according to a person familiar with the matter.

Until the fall of 2008, SAC e-mails were deleted from employee electronic mailboxes every 30 or 60 days, according to SAC General Counsel Peter Nussbaum. He was questioned in a deposition two years ago by lawyers for Fairfax Financial Holdings Ltd., which had sued SAC and other hedge funds over damage caused by short sales. SAC, a $14 billion fund, was ultimately dismissed from that case. Bloomberg News reviewed a transcript of the deposition.

Federal regulators don’t regard SAC’s lack of a formal e-mail retention policy before the fall of 2008 as evidence of any intent to hide details about the trades under investigation, according to two people familiar with the matter. The policy was in place before the government investigated the trades.

On Nov. 20, the U.S. charged Mathew Martoma, a former portfolio manager at CR Intrinsic, an SAC unit, with using material, non-public information to persuade Cohen to sell shares of two drug companies just days before negative news caused both stocks to plummet.

The U.S. Securities and Exchange Commission sued Martoma, 38, and the unit over the same conduct. Cohen, 56, might be added to the lawsuit, a person familiar with the matter said at the time.

U.S. Attorney Preet Bharara in Manhattan said in announcing the Martoma charges that Stamford, Connecticut-based SAC had netted $276 million in profit and avoided losses on the trades.

Martoma has pleaded not guilty.

SAC Capital and Cohen haven’t been charged with any wrongdoing regarding the trades. Cohen has said he acted appropriately in selling his $700 million stakes in Wyeth LLC and Elan Corp.

Jonathan Gasthalter, a spokesman for SAC, declined to comment on why the policy change was voluntarily initiated. Ellen Davis, a spokeswoman for Bharara, declined to comment, as did SEC spokesman John Nester. The criminal case is U.S. v. Martoma, 12-02985, and the civil case is SEC v. CR Intrinsic Investors LLC, 12-08466, U.S. District Court, Southern District of New York (Manhattan).

For more, click here, and see Interviews, below.


Lew on Cayman Fund, Financial Regulation at Confirmation Hearing

Jack Lew, President Barack Obama’s nominee for Treasury secretary, testified before the Senate Finance Committee at his confirmation hearing in Washington.

Lew, who was Obama’s former chief of staff, responded to questions about a variety of topics including the Glass-Steagall Act, Dodd-Frank, tax policy, financial regulation, bank regulation, and small business capital access.

He also addressed questions from senators about his work at Citigroup Inc. and his personal investment involving a fund in the Cayman Islands.

Lew said he wasn’t aware that a personal investment involved a fund in the Cayman Islands and he lost money when he sold the holding.

“It was jaw-dropping to hear the Treasury secretary nominee say he’s still unfamiliar with Ugland House,” his investment in Cayman Islands-based fund, Senator Chuck Grassley, a Republican from Iowa, said in e-mailed statement.

For the video, click here.

SAC Probe Impeded by Deleted E-Mails, Berenzweig Says

Seth Berenzweig, managing partner at Berenzweig Leonard, talked about the outlook for the U.S. investigation of insider trading by SAC Capital Advisors LP.

The federal probe of the hedge fund and its founder Steven A. Cohen has been hampered by a lack of extensive e-mail evidence because of a policy of automatic e-mail deletion at the company during the time that is of interest to the probe.

Berenzweig spoke with Deirdre Bolton on Bloomberg Television’s “Money Moves.”

For the video, click here.

Neil Barofsky Says Financial Crisis Is Not Over

Neil Barofsky, former special inspector for the U.S. Treasury’s Troubled Asset Relief Program and a Bloomberg Television contributing editor, said the Obama administration’s message that the financial crisis is over and the so-called “silence on regulation” is wrong. He said this is “not an accurate mood” because “difficult regulatory battles” remain.

Barofsky talked with Bloomberg’s Tom Keene, Sara Eisen and Scarlet Fu on Bloomberg Radio’s “Bloomberg Surveillance.”

For the audio, click here.

OCC’s Curry Defends $9 Billion Foreclosure Deal With Servicers

As paychecks for consultants hired to review faulty foreclosures threatened to exceed compensation to the homeowners harmed by the flaws, the U.S. Comptroller of the Currency says he decided to end the reviews.

About 19 months after his agency ordered 14 of the largest mortgage servicers to hire consultants to search for foreclosure missteps, those consultants had made almost $2 billion and nobody who’d been cheated on a foreclosure in 2009 or 2010 had been paid, the comptroller, Thomas Curry, said in remarks prepared for a speech for a Women in Housing and Finance event yesterday.

Curry’s agency and the Federal Reserve reached $9.3 billion in settlements last month with 13 mortgage servicers for their foreclosure faults after a U.S. housing-market collapse contributed to the worst financial crisis since the Great Depression.

The deal, which has been criticized by some lawmakers and consumer groups, specified a cash payout of $3.6 billion that will be divided among 4.4 million borrowers and is “several times the potential payout had the reviews run their course,” Curry said.

The regulators’ 2011 orders for review also included steps firms had to take to fix their methods, which Curry said started a “sea change” in industry practices, including better communications with borrowers and controls to halt foreclosures when borrowers get loan modifications.

The bulk of the settlement with 13 of the largest mortgage servicers -- $5.7 billion -- will go toward mortgage assistance for current borrowers.

For more, click here.

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