Swiss-HSBC Holdings, Money Funds Patchwork: Compliance

April 16 (Bloomberg) -- HSBC Holdings Plc’s Swiss private bank was an “open door” for money laundering and terrorist finance because managers failed to exercise controls, said Herve Falciani, a former software technician accused of stealing data.

Falciani made the remarks yesterday after a Spanish public prosecutor asked him whether HSBC’s Geneva-based unit had protocols for detecting money laundering or controlling terrorist finance. “In the bank I saw some scandalous actions,” he said.

Falciani was appearing in national court in Madrid to fight an extradition request by Swiss authorities.

HSBC, Europe’s largest bank by market value, has said it became aware in 2008 that Falciani had stolen details on 24,000 accounts from its private bank in Geneva. Falciani cooperated with French investigators who used the data to search for tax dodgers and shared the information with Italian, Spanish and British prosecutors. The Spanish public prosecutor will oppose the Swiss extradition request because Falciani’s actions don’t constitute a crime in Spain, said prosecutor Dolores Delgado.

“We have not been able to review the statements that were made today,” David Bruegger, a Zurich-based spokesman for HSBC’s private bank, said in an e-mailed statement yesterday. “As this is an extradition request from the Swiss federal prosecutor, HSBC is not involved in this and we therefore do not comment.”

Spain’s National Court will decide whether the Spanish government has the right to extradite Falciani and any decision will be handed on to the government, a court spokeswoman said.

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Compliance Policy

Gensler-Wheatley Panel Aims to End Conflicts in Benchmark Rates

Regulators will seek to eliminate conflicts that have led to manipulation of benchmark lending rates while investigations into Libor continue around the world.

A panel led by U.S. Commodity Futures Trading Commission Chairman Gary Gensler and U.K. Financial Conduct Authority Chief Executive Officer Martin Wheatley will issue a report as soon as today with draft recommendations on how rates should be set and what oversight regulators should have.

The panel is looking at how benchmarks can be strengthened after an investigation by U.S. and U.K. regulators uncovered widespread attempts by banks to manipulate the London interbank offered rate. Royal Bank of Scotland Group Plc, UBS AG, and Barclays Plc have been fined around $2.5 billion and at least a dozen firms remain under investigation.

The International Organization of Securities Commissions, which is issuing the report, will focus on overarching principles rather than specific rules in the draft proposals, according to two people familiar with the process who declined to be named because the report hasn’t been published. After the report is released, IOSCO will seek industry views on the plans before issuing final standards this year.

Madrid-based IOSCO, which represents regulators in more than 100 countries, responded to the interbank-rate scandal last year by announcing the task force, which is reviewing benchmarks across different financial sectors.

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EU Money-Market Fund Clients Seen at Risk in Oversight Patchwork

Money-market funds lack consistent supervision across the European Union, hampering investor protection, the bloc’s chief markets regulator said.

National regulators have varying approval processes for money-market funds, rely on different sources of data for their supervisory decisions and six of the 20 jurisdictions that monitor the funds have yet to implement guidelines from the European Securities and Markets Authority, the regulator said.

ESMA released guidelines in 2010 to harmonize supervision of money-market funds across the EU, where about 1,256 funds operate, according to the watchdog. Money-market funds may be subject to tougher rules in future and be required to hold minimum levels of liquid assets as part of a bid to tighten oversight of the $4.7 trillion global industry.

Michel Barnier, the EU’s financial services chief, may require money-market funds that maintain a fixed share price to build up a cash “buffer” equivalent to 3 percent of their assets. Barnier has identified regulation of money-market funds as a priority in the bloc’s efforts to rein in so-called shadow banks.

Regulators are working to impose tighter restrictions on the funds since the September 2008 collapse of the $62.5 billion Reserve Primary Fund. Its failure, caused by losses on debt issued by Lehman Brothers Holdings Inc., triggered a wider run on money funds that helped freeze global credit markets.

The International Monetary Fund and global regulators at the Financial Stability Board have urged national governments to press ahead with regulating money-market funds, and shadow banking more generally.

FSB Says Less Than Half Members Have Applied Swaps-Rule Overhaul

Global regulators urged nations to press ahead with implementing tougher clearing and trading rules for over-the-counter derivatives, amid findings that only a minority of governments in the Group of 20 nations have fully applied the measures.

“There remains significant scope for increases in trade reporting, central clearing, and exchange and electronic platform trading in global OTC derivatives markets,” the Financial Stability Board said in a statement on its website.

“Progress in meeting the G-20 commitments is expected to accelerate over the course of 2013, as jurisdictions finalize legislative and regulatory frameworks and as specific requirements come into force,” the FSB said.

The FSB brings together central bankers, regulators and finance ministry officials from the G-20 to coordinate rulemaking.

ISDA Asks Regulators to Suspend Initial Margin Requirements

The International Swaps and Derivatives Association asked regulators to suspend initial margin, or IM, requirements.

The ISDA made the request in a letter it signed with the Institute of International Finance, the Association for Financial Markets in Europe and the Securities Industry and Financial Markets Association.

The groups said they “harbor grave concerns” about the IM requirements for uncleared derivatives proposed by the Basel Committee on Banking Supervision and the International Organization of Securities Commissions.

The requirements “will have a significant adverse impact on the global economy, systemic risk, financial market activity and liquidity and end-user risk management,” the groups said.

Since the requirements are not specifically part of the G-20 commitment on derivatives regulatory reform, policy makers should consider other options, the groups stated in the letter. They also asked for the requirements to be withdrawn or suspended “until their consequences have been fully analyzed and clarified.”

China Insurers’ Shareholder Can Hold Up to 51% Stake in Co.

China allows some single shareholders of Chinese insurers to hold more than a 20 percent stake in the company, according to a statement posted on the website of the China Insurance Regulatory Commission.

A single investor’s holding of an insurer can’t exceed 51 percent, the Commission said in the statement. The company’s shareholders should have total assets of no less than 10 billion yuan as of the nearest year-end, it said.

The shareholders’ net assets should be at least 30 percent of total assets, according to the statement.

Compliance Action

Nordea Bank Fined for Inadequate Checks to Stop Money Laundering

Nordea Bank AB, the Nordic region’s largest lender, was fined 30 million kronor ($4.7 million) by Sweden’s financial watchdog for failing to comply with requirements designed to prevent money laundering, the regulator said today in a statement on its website.

Nordea “did not screen beneficial owners against the EU sanctions regulations for several years” and it “has exposed itself to the risk of giving blacklisted individuals access to funds and economic resources without the bank’s knowledge,” the Financial Supervisory Authority said in the statement. The bank failed to disclose all its transactions in frozen accounts, notifying the watchdog in only 16 of 74 such cases, the regulator said.

In a separate statement today, Nordea said the fine, which will be paid by its Swedish unit, was “high” given that no prohibited transactions had taken place in the frozen accounts mentioned. The bank said it has taken measures to reduce the risks listed in the FSA’s remark.

John Thomas’s CEO Is Cited by Finra for Fraud, Broker Threats

John Thomas Financial Inc. Chief Executive Officer and founder Anastasios “Tommy” Belesis was cited by industry regulators for fraud linked to selling stock and intimidating brokers.

John Thomas Financial, which already faces disciplinary action from the Securities and Exchange Commission, sold shares in America West Resources Inc. at the height of a price spike while preventing customers’ sell orders from being executed in the same stock, the Financial Industry Regulatory Authority said yesterday in a statement. Belesis and two other top executives also harassed and intimidated employees, known as registered representatives, or RRs, who disagreed with the CEO, Finra said.

The firm “has assaulted RRs (including threatened to have them ‘run over’), routinely berated them and threatened to ruin their financial careers,” the regulator wrote in its complaint.

Bloomberg News reported on Feb. 25 that Belesis, who founded John Thomas in 2007, has raised millions of dollars for companies with about 200 brokers in a boiler room for as little as $300 a week.

Ronald Cantalupo, a managing director at John Thomas, was also named in the complaint. Cantalupo had no immediate comment, when contacted by phone.

David Pitts, a John Thomas spokesman at public relations firm Argot Partners LLC, didn’t immediately respond to messages seeking comment. Last month he said that Belesis would “defend himself vigorously” against the SEC’s claims.

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Rhoen-Klinikum Opposes Cartel Decision, Handelsblatt Says

Rhoen-Klinikum AG, the health-care facility operator, has filed a complaint against the German cartel office’s decision to allow Asklepios Kliniken GmbH, the provider of medical and surgical hospital service, to build its stake, Handelsblatt reported.

Asklepios holding a blocking stake in Rhoen-Klinikum would “put the brakes on future fundamental strategic questions,” Handelsblatt quoted Rhoen-Klinikum CEO Martin Siebert as saying.

The cartel office ruled in March that Asklepios could lift its stake to more than 10 percent.


Ex-Rochdale Trader Pleads Guilty in Apple Stock Buy Case

A former Rochdale Securities LLC trader pleaded guilty to federal conspiracy and wire fraud charges in connection with an unauthorized $1 billion purchase of Apple Inc. stock which led to his company’s failure.

David Miller, 40, gave his plea yesterday before U.S. Magistrate Judge Donna F. Martinez in Hartford, Connecticut, prosecutors said in a statement. Miller also entered into a partial civil settlement with the U.S. Securities and Exchange Commission over the trade, according to the agency.

Miller, scheduled to be sentenced on July 8, faces as long as 25 years in prison, prosecutors said.

The government alleged that Miller placed an order on Oct. 25 for 1.6 million shares of Apple that he said was for a customer who wasn’t named in court filings. The customer claimed to have sought only 1,625 shares, according to a criminal complaint. The Stamford, Connecticut-based brokerage was left shouldering a loss on the 1.6 million shares when Apple’s stock didn’t perform as Miller had hoped, according to the complaint.

Rochdale suffered a $5.3 million loss as a result of the trade, causing the 37-year-old firm’s assets to fall below regulatory limits, according to the SEC. It eventually ceased operations, according to the agency. The website of the firm has since been taken down and calls to two phone numbers listed for it weren’t answered.

Kenneth C. Murphy, a lawyer for Miller, said in a phone interview that his client “deeply regrets what he has done and the harm it has caused to other people.”

Miller surrendered to federal authorities in December. He was released on $300,000 bail.

The case is U.S. v. Miller, 3:12-mj-288, U.S. District Court, District of Connecticut (Bridgeport).

Commerzbank Loses Case of Woman Fired for Suing Deutsche Bank

An ex-Commerzbank AG director won her employment tribunal case against the German lender for firing her when it discovered she was suing her previous employer, Deutsche Bank AG, for sexual discrimination.

Latifa Bouabdillah was “victimized” by Commerzbank, Judge Alexandra Davidson in London said in a written ruling dated April 11. While Bouabdillah is seeking about 13 million pounds ($20 million), the employment tribunal hasn’t yet ruled on how much she will get in compensation.

Bouabdillah joined Commerzbank as head of product engineering in March 2012, and didn’t tell managers she was suing Deutsche Bank for promoting male colleagues ahead of her and giving them larger bonuses. Commerzbank staff read about the tribunal suit in a Bloomberg News story, warned her she had put the bank’s reputation at risk, then fired her in June, Judge Davidson said in the ruling.

The tribunal rejected Bouabdillah’s argument that Commerzbank had also discriminated based on her gender. Damages for unfair firing are normally capped at about 70,000 pounds unless there is proof of discrimination or other wrongdoing.

Commerzbank said in an e-mailed statement it would consider its options after the ruling. The bank said Bouabdillah was fired because she breached its trust by not revealing the real reason she left Deutsche Bank.

Tim Johnson, her lawyer, said the tribunal found she hadn’t misled Commerzbank and had acted honestly and professionally. Bouabdillah settled her suit against Deutsche Bank on confidential terms, he said. Kathryn Hanes, a spokeswoman for Deutsche Bank, declined to comment.

The tribunal will hold a hearing in September to decide how much compensation Commerzbank should pay Bouabdillah.


Debelle Says Aussie Supported by Resource Investment Inflows

The sustained strength of the Australian dollar partly reflects international companies’ offshore funding of the nation’s resource investment boom, central bank Assistant Governor Guy Debelle said.

“The capital inflow to the resource sector to fund investment along with the increased purchases of government debt, have been putting upward pressure on the currency,” Debelle said in the text of a speech in Canberra today. “At the same time, the reduction in offshore borrowing by the banking system has been putting downward pressure on it.”

Australia’s biggest miners have favored funding from internal cash flows, rather than banks, to finance resource projects in Australia’s north and west, and inflows are boosted by foreign ownership of companies like BHP Billiton Ltd. Debelle said three-quarters foreign ownership of BHP implies three-quarters of BHP’s internal funding is recorded as foreign.

“Taking all this together suggests that around four-fifths of the investment funding has been sourced from offshore,” said Debelle, who oversees financial markets at the Reserve Bank of Australia. “The net effect of all these flows however, is that the Australian dollar is higher than one would expect, given fundamentals such as the terms of trade and interest differentials.”

In addition to resource investment, the Aussie has been boosted by foreign purchases of Australian government debt.

Debelle didn’t address monetary policy in the speech.

Prison Sentences Needed for Libor Scandal, Umunna Says

Traders who tried to manipulate the London interbank offered rate should serve time in prison, Chuka Umunna, the shadow business secretary, said yesterday.

“I would be most surprised if we don’t see charges brought and if at some point see someone serve a custodial sentence,” Umunna, a Labour opposition member of the U.K. Parliament, said. “We need to see strong action.”

Levitt Says SEC Must Be Branded ‘Investors’ Protector’

Arthur Levitt, former chairman of the U.S. Securities and Exchange Commission, said the priority for SEC Chairman Mary Jo White must be investor protection.

Levitt talked with Bloomberg’s Tom Keene and Michael McKee on Bloomberg Radio’s “Bloomberg Surveillance.”

For the audio, click here.

To contact the reporter on this story: Carla Main in New Jersey at

To contact the editor responsible for this report: Michael Hytha at

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