Platts, AMD Trade Secrets, Goldman Sachs: ComplianceCarla Main
May 17 (Bloomberg) -- Traders are standing by Platts, the company that provides benchmark prices for much of the world’s energy products, amid a European probe into market manipulation.
A total of 34 out of 55 traders, brokers and analysts surveyed by Bloomberg News May 15, or 62 percent, said the pricing system run by Platts, the energy news and data unit of McGraw Hill Financial Inc., is still the best way to determine prices in the $3.4 trillion-a-year market for crude and refined products. Royal Dutch Shell Plc, BP Plc and Statoil ASA said they’re also being investigated by the European Commission following raids in three countries May 14 while Neste Oil Oyj said yesterday it was asked to provide information.
As much as 80 percent of all crude and oil-product deals are linked to reference prices including those published by Platts, according to estimates by Total SA, Europe’s third-biggest producer. The European investigation marks the third time global pricing benchmarks have drawn regulators’ scrutiny in the past year following inquiries into bank manipulation of the London interbank offered rate, or Libor, and ISDAFix, the benchmark for the $379 trillion swaps market.
European regulators didn’t name the subjects of their probe and haven’t specified the markets they are investigating or the methods in question. “Companies may have colluded in reporting distorted prices to a Price Reporting Agency to manipulate the published prices for a number of oil and biofuel products,” according to a May 14 statement by the EC.
Kathleen Tanzy, a Houston-based spokeswoman for Platts, said on May 13 that the EC had undertaken a review at its office in London in relation to its price assessment process. In a submission to a 2012 report by the International Organization of Security Commissions on oil pricing regulation, the company said external controls over its activities would be an “unacceptable intrusion” on its rights as a publisher.
Platts’s North Sea Dated Brent benchmark sets the price of half the world’s crude, from Canada to Australia.
Bloomberg LP, the parent of Bloomberg News, competes with Platts and other companies in providing energy markets news and information.
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SEC’s White Rebuffs Call to Forswear Political Spending Rule
Securities and Exchange Commission Chairman Mary Jo White rebuffed calls by House Republicans to forswear a rule that would force public companies to disclose political spending, saying she won’t “prejudge the issue.”
Responding to lawmakers who pressed her on the matter at a Financial Services subcommittee oversight hearing yesterday, White said the SEC’s staff is reviewing a 2011 petition for such a rule signed by a group of prominent law professors.
She said no one is currently working on a proposal.
The agency’s rulemaking agenda indicates it is studying whether to propose a rule. Republicans urged White to swear off any action on the issue, calling it a partisan undertaking that would hurt the SEC’s credibility as a regulator.
Debate over corporate political spending gained attention after the U.S. Supreme Court ruled in a 2010 case known as Citizens United that companies and unions could spend unlimited money on election ads. More than 500,000 comments have been filed in response to the petition, which is supported by the Council of Institutional Investors and the American Federation of State, County and Municipal Employees.
The U.S. Chamber of Commerce and other large business groups oppose the call for a rule.
Rulemaking on the issue has been criticized as tied to partisan political agendas and a distraction from SEC mandates of protecting investors, maintaining efficient markets, and facilitating capital formation.
Separately, White told the panel that any proposed changes relating to money market mutual funds would “seek to preserve the many benefits of money market funds for investors and the short-term funding markets,” according to remarks prepared for the hearing.
The rule simultaneously would seek to reduce money-market funds’ “susceptibility to runs, improving their ability to manage and mitigate potential contagion from high levels of redemptions, and increasing the transparency of their risks,” she said.
Last month, White said the SEC is the best regulatory agency to handle the money market rule changes.
EU Weighs Bank-Structure Overhaul in Wake of Liikanen Plan
The European Union is weighing how far to go in forcing a break up of large lenders as it seeks to prevent banks in the debt-laden bloc from being too big to fail.
EU regulators are examining “a number of options” for how big a chunk of their trading activities banks should be forced to shift into separately capitalized units, according to a copy of the plans published on the European Commission website today.
The EU is seeking ways to structure riskier activities outside of more traditional banking in a bid to take taxpayers off the hook for bailouts and to protect depositors at crisis-hit lenders. Deutsche Bank AG and Credit Agricole SA are among banks in the European Union to have publicly lobbied against proposals by a high-level group, led by Bank of Finland governor Erkki Liikanen, to force lenders to separate their trading activities.
A consultation period on the EU’s possible follow-up to the Liikanen report runs until July 3, the commission said.
Under the Liikanen plans, the bank’s trading entity would be legally separate from other parts of the bank. High-risk activities that would have to be transferred to it would include, among others, unsecured loans to hedge funds and private equity investments. The proposals would affect both proprietary trading and market making.
Options under consideration by the EU range from “relatively few trading activities,” such as speculative proprietary trading, having to be split off, to a more radical solution where “all wholesale and investment banking activities would need to be separated,” the commission said.
The EU is examining several alternatives to the Liikanen definition of which assets should be transferred, according to the document. These include “a more narrow definition that excludes available for sale assets as mostly composed of securities held for liquidity purposes.”
EU Bank Stress Tests Delayed to 2014 on Asset-Quality Review
The European Union’s top banking regulator delayed stress tests until 2014, allowing time for a European Central Bank-led probe into the quality of assets held by some lenders in the debt-laden bloc.
The European Banking Authority said the ECB asset check will “help dispel concerns over the deterioration of asset quality due to macroeconomic conditions in Europe,” the London-based agency said in an e-mailed statement yesterday. The EBA, set up in 2011 to harmonize rules across EU, will still publish details of bank holdings in the second half of this year.
The EBA carried out the last formal EU stress tests in 2011, which were criticized for failing to catch problems at the lenders. Eight banks failed the exams with a combined shortfall of 2.5 billion euros ($3.2 billion).
European Central Bank Executive Board member Yves Mersch said an asset-quality review and a stress test for European banks should be carried out by mid-2014, before the central bank takes up supervision duties.
The Single Supervisory Mechanism at the ECB “could undertake the asset-quality review in the third quarter of this year until the first quarter of next year,” Mersch said in a speech in London today, adding that a stress test would be conducted in coordination with the European Banking Authority.
The EBA told lenders last year in what it described as a capital-raising exercise to hold on to more than 200 billion euros in profits and investments accumulated to pave the way for tougher global standards, known as Basel III, and in response to concerns about the quality of their European sovereign bond portfolios.
The ECB is set to take on supervisory powers next year over all euro-area banks after legislation underpinning the system was endorsed by member states. The EBA said it is seeking “alignment in methodologies and timeline” with the ECB’s assessment.
Leaders of the bloc’s 27 nations agreed last year that the central bank should become a regulator in a bid to ease the euro area’s fiscal crisis by bolstering investor confidence and breaking the link between bank solvency and national public finances.
BlackRock Develops Alternatives to Money Funds as Rules Loom
BlackRock Inc. and Western Asset Management Co. are offering a new twist on traditional money-market funds as regulators are set to impose sweeping changes on the $2.58 trillion industry.
BlackRock, the world’s biggest money manager, and Legg Mason Inc.’s Western Asset unit have started bond funds designed to work much like money funds, with a difference. The new “ultra-short” funds have share prices that fluctuate along with the value of their holdings, rather than a fixed net asset value, or NAV, a distinguishing feature of money funds. They also have shorter maturities than similar ultra-short bond funds that ran into trouble when credit markets froze in 2008.
The firms are preparing for what could be a seismic reallocation of assets by institutional investors and corporate treasurers if regulators overhaul money funds for a second time in three years in a bid to make them safer after the 2008 collapse of the Reserve Primary Fund. The U.S. Securities and Exchange Commission plans to order a floating NAV on institutional prime money-market funds, or those that invest in corporate debt, overriding opposition from the industry.
Mary Athridge, a spokeswoman for Baltimore-based Legg Mason, declined to comment on the Western Asset Ultra Short Obligations Fund, which the firm filed to register on May 8.
The new ultra-short fund is “clearly” not a money-market fund, though at first glance it may “look similar” to one, said Richard Hoerner, head of New York-based BlackRock’s global cash-management business.
BlackRock opened the BlackRock Ultra-Short Obligations Fund in November and it has about $25 million of assets.
Federal regulators have been searching for ways to prevent a replay of September 2008. In 2010, the SEC tightened rules on credit quality, shortened the maximum average maturity for funds and introduced minimum liquidity levels. The agency considered it an initial step toward making money funds more stable. The industry fought back against proposals and sought to limit the scope of changes. The SEC is now planning a narrower proposal.
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Ex-AMD Workers at Nvidia Barred From Revealing Trade Secrets
Advanced Micro Devices Inc. won a court order barring ex-employees who went to competing chipmaker Nvidia Corp. from disclosing trade secrets or soliciting former colleagues to join them.
U.S. District Judge Timothy Hillman said in his order that AMD may win its lawsuit claiming misappropriation of confidential information, according to a filing May 15 in Boston.
AMD, based in Sunnyvale, California, accused ex-employees of taking sensitive company documents when they went to work for Nvidia. The former employees transferred more than 100,000 electronic files pertaining to AMD’s graphics-processor business in the days before their departure, AMD said in its complaint filed in January. The employees also allegedly recruited other AMD workers to leave the company.
The order, called a preliminary injunction, replaces a temporary restraining order granted after the suit was filed.
Nvidia, based in Santa Clara, California, isn’t a defendant in the suit.
The case is Advanced Micro Devices v. Feldstein, 13-cv-40007, U.S. District Court, District of Massachusetts (Boston).
Goldman Sachs Tax Deal Didn’t Break U.K. Law, Judge Rules
Goldman Sachs Group Inc.’s deal with the U.K. government that may have saved the investment bank as much as 20 million pounds ($30.6 million) on its taxes didn’t break any laws, a judge ruled.
Her Majesty’s Revenue & Customs’s decision to reduce the New York-based bank’s tax bill was properly conducted, a judge in London ruled yesterday. Still, Judge Andrew Nicol criticized tax officials who considered the potential embarrassment to Chancellor of the Exchequer George Osborne if a deal with Goldman Sachs wasn’t completed.
The U.K. government has pledged to clamp down on tax-avoidance schemes following widespread media and public anger caused by corporation tax structures in the country. Lawmakers said in a report last month that increased transparency about companies’ tax affairs would build pressure on multinational businesses to “pay a fair share.”
UK Uncut Legal Action, an advocacy group that lobbies for alternatives to government spending cuts, said HMRC reached the agreement with Goldman Sachs on the day Osborne announced a bankers’ code to counter tax avoidance. An HMRC executive said in an e-mail cited by UK Uncut that he was concerned the bank might drop out of the code if the deal was scuttled.
“Obviously while we are deeply disappointed that this deal has not been declared unlawful, the judge’s ruling that top HMRC officials played politics with major tax deals to protect Osborne’s reputation is a major victory in exposing the truth behind these secret deals,” Anna Walker, campaigns director of UK Uncut Legal Action, said in an e-mailed statement.
Goldman Sachs wasn’t involved in the litigation. Fiona Laffan, a London-based spokeswoman for Goldman Sachs, declined to comment.
The case is a judicial review, a legal mechanism that examines the decision-making process of public bodies. While an authority may be ordered to reconsider an action, it may be allowed to draw the same conclusion provided all procedures are correctly followed.
Spain Judge Orders Jail for Ex-Caja Madrid Chairman Miguel Blesa
A Spanish judge ordered that Miguel Blesa, the former chairman of Caja Madrid, be put in jail amid a probe into alleged irregularities relating to the lender’s purchase of a bank in the U.S.
Judge Elpidio Silva said Blesa, 65, should be detained as he investigates Caja Madrid’s purchase of City National Bank of Florida in 2008 in a deal valued at more than $900 million. Bail was set at 2.5 million euros ($3.2 million).
Caja Madrid merged with Bancaja and five other savings banks in 2010 to form Bankia, a banking group that needed a 22 billion-euro rescue last year that forced Spain to seek bailout funds from Europe to salvage its banking industry.
Blesa’s lawyer Carlos Aguilar didn’t immediately to respond to a phone message left by Bloomberg News yesterday.
Comings and Goings
Obama FCC Nominee to Divest From AT&T, Verizon to Avoid Conflict
Tom Wheeler, President Barack Obama’s nominee to head the FCC, agreed to sell holdings of $500,001 to $1 million in both AT&T Inc. and Verizon Communications Inc. to resolve possible conflicts of interest before taking office.
Wheeler, a former head of wireless and cable trade groups, disclosed his holdings and willingness to divest from 78 companies that also include Google Inc. and smartphone maker Apple Inc. in documents released yesterday by the U.S. Office of Government Ethics. He also reported stakes in top cable company Comcast Corp. worth $2,002 to $30,000 that he would sell.
As head of the Federal Communications Commission, Wheeler would regulate broadcast and cable companies, review industry mergers and help set rules for auctioning airwaves coveted by leading U.S. telephone company AT&T and number two Verizon for the wireless services powering their growth.
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