Bogle on Money Funds, Singapore Banks, Visa: Compliance

John C. Bogle, the founder of Vanguard Group Inc. who popularized index-based investing, said proposed rules for money-market mutual funds don’t go far enough to protect investors and the financial system.

The U.S Securities and Exchange Commission’s June 5 proposal to make only the riskiest money funds, known as prime funds, adopt a floating share price is a “compromise” forced by the fund industry’s resistance to reform, Bogle said yesterday in remarks at the Morningstar Investment Conference in Chicago. Regulators should force all money funds to float their share price, he said.

“The fact is money-market fund net-asset values fluctuate and they don’t want to let the world know,” Bogle said, referring to fund-company executives.

Bogle, 84, has spent his career advocating for lower costs and investor-friendly practices in the financial industry, sometimes putting him at odds with the firm he founded in 1975. Vanguard was among a group of firms including Fidelity Investments and Charles Schwab Corp. that earlier this year urged regulators to exempt retail-oriented money funds from regulation and focus only on those prime funds that cater to institutional clients.

U.S. regulators have debated how to make money funds safer since the September 2008 collapse of the $62.5 billion Reserve Primary Fund. Former SEC Chairman Mary Schapiro championed a plan in late 2011 and 2012 that envisioned changing the accounting standard for all money funds, including those that invest only in government securities or municipal bonds. After running into opposition from the fund industry, the SEC, now led by Mary Jo White, approved a set of narrower proposals.

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Compliance Policy

EU Nations Broker Provisional Deal to Overhaul Markets Rulebook

European Union nations reached a provisional deal on a sweeping overhaul of the bloc’s financial market rulebook that would toughen oversight of high-frequency trading and push more transactions onto regulated platforms.

Ambassadors from the EU’s 27 nations overcame obstacles to an accord at meetings June 12 and yesterday in Brussels, according to EU and national officials.

The draft plans, which must also be approved by the European Parliament to take effect, are set to be detailed and reviewed over the coming days so a deal can be confirmed following talks on June 17, according to the two officials, who can’t be cited by name, in line with their organizations’ policy.

Ireland, whose EU presidency runs out on June 30, urged countries this month to accept “difficult compromises” for the sake of an accord on the law, which triggered clashes between the U.K. and Germany over provisions to boost competition in the market for clearing derivatives trades. Ireland is targeting a deal on the law next week, according to a spokeswoman for the presidency, who can’t be identified under government rules.

EU Authorizes Exchange of Information With U.S. on Audit Probes

Audit regulators in the European Union won EU approval to swap information with their U.S. counterparts in a step that makes it easier for watchdogs to probe potential malpractice.

The U.S. Public Company Accounting Oversight Board and the U.S. Securities and Exchange Commission have internal secrecy and confidentiality rules that are sufficiently robust to allow information sharing, the European Commission said in a statement published in the EU’s Official Journal yesterday.

The decision means that EU regulators can share documents seized during raids on audit firms, and also take part in joint investigations, according to the statement, dated June 11.

Under earlier EU rules, audit regulators could only share such data with a counterpart based outside the bloc with a ruling by the commission. The new commission decision is valid from Aug. 1, 2013, to July 31, 2016.

Compliance Action

FX Rates Said to Face Global Regulation After Libor Review

Global regulators may start overseeing currency rates in a widening response to benchmark-rate setting scandals that began with revelations on the manipulation of Libor, according to two people familiar with the matter.

The International Organization of Securities Commissions, a Madrid-based group known as Iosco that harmonizes market rules, may propose final guidelines improving transparency and oversight of benchmarks, including the WM/Reuters rates, as soon as next month, said the people, who asked not to be named because the talks aren’t finalized.

The U.K. Financial Conduct Authority, which oversees markets and prosecutes financial crime, is looking into potential manipulation in the $4.7 trillion-a-day foreign-exchange market after being contacted by a whistle-blower in March. The regulator has sent requests for information to four banks, including Deutsche Bank AG and Citigroup Inc., according to one of the people.

The FCA “will review” Iosco’s recommendations and decide which rates to oversee, spokesman Chris Hamilton said. Martin Wheatley, the regulator’s chief executive officer, has already taken on oversight of the London interbank offered rate after his review of how the rate is set.

The currency market, the biggest in the financial system, is one of the least regulated as it takes place away from exchanges.

Sebastian Howell, a spokesman for Deutsche Bank, and Jeffrey French, a spokesman for Citigroup, declined to comment on the FCA requests.

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Singapore Regulator Said to Plan Bank Rebuke on Rate Rigging

Singapore’s central bank plans to reprimand banks in the city-state as early as today following an 11-month review into how benchmark interest rates are set, five people with knowledge of the matter said.

The Singapore Foreign Exchange Market Committee, which includes the Monetary Authority of Singapore and banks, plans to separately announce changes to the rate-setting process on the same day, two of the people said June 12, asking not to be identified before the announcements are made.

The island nation’s review into possible manipulation of the Singapore interbank offered rate follows a global crackdown on rigging of benchmark borrowing costs by banks and brokers. Barclays Plc, UBS AG and Royal Bank of Scotland Group Plc were fined $2.5 billion to settle claims with U.S. and U.K financial regulators. A British markets supervisor is considering opening a probe into potential manipulation in currency markets, another person briefed on the matter said.

Sibor, used to price debt ranging from commercial term-loans to home mortgages, is calculated on behalf of the Association of Banks in Singapore, based on submissions by banks including London-based Standard Chartered Plc, Singapore’s DBS Group Holdings Ltd. and New York-based JPMorgan Chase & Co. Edinburgh-based RBS last year withdrew from the panel.

Lenny Feder, chairman of the SFEMC and group head of financial markets at London-based Standard Chartered, didn’t return three calls to his mobile phone. John Lim, an external spokesman for the Association of Banks, declined to comment.

The monetary authority isn’t planning to impose criminal sanctions on the banks or any employees, said two of the people. MAS will probably require some of the banks to set aside funds as a deposit with the central bank for a period of time and strengthen their internal controls, two people said.

Visa Europe’s Bid to End EU Card-Fee Probe Faces Market Test

European Union antitrust regulators invited comments on Visa Europe Ltd.’s offer to cut “significantly” the fees it sets for processing cross-border credit-card payments in a bid to end an EU antitrust probe.

Visa Europe’s offer from last month would bring its fees into line with those of its main competitor MasterCard Inc., the European Commission said in an e-mailed statement yesterday. The operator of the EU’s largest payment-card network has also offered to overhaul its rules so that banks will be able to apply a reduced interbank fee when they compete for clients across borders.

“If the proposals address the commission’s competition concerns, the commission may decide to make them legally binding on Visa Europe” in exchange for ending the probe, the regulator said.

The commission sent a formal complaint to Visa about the interchange fees last year, as part of a broader campaign it has waged against such charges. MasterCard has started a legal challenge against a settlement it reached with the commission in 2009 to avoid a daily penalty of as much as 3.5 percent of sales. The EU is also probing MasterCard’s bank fees on foreign card payments such as when tourists go shopping in the 27-nation bloc.

Visa Europe declined to comment beyond statements made when the commitments were offered last month.

Separately, in the U.S., Visa Inc. sued Wal-Mart Stores Inc. in a bid to stop the world’s largest retailer from filing a lawsuit to press price-fixing claims over merchant swipe fees.

Wal-Mart is among more than 7,000 retailers that dropped out of a multibillion-dollar settlement with Visa and MasterCard Inc. over the fees, which are charged to merchants when consumers pay with credit cards. In a complaint made public yesterday in Brooklyn, New York, federal court, Visa said it wants to prevent “the continuation of endless, wasteful litigation between the parties.”

Visa, MasterCard and many of the country’s largest banks are seeking a Brooklyn federal judge’s final approval for a $7.25 billion settlement that would end an eight-year legal battle on behalf of millions of retailers over allegations that the card companies illegally fixed the fees.

A spokesman for Bentonville, Arkansas-based Wal-Mart, Randy Hargrove, said the retailer is still evaluating whether to pursue its own suit.

“We are disappointed that Visa chose to file this unwarranted and unsupportable lawsuit in retaliation for our decision to opt out and object to an unfair settlement agreement,” Hargrove said in a statement.

Visa Chief Executive Office Charlie Scharf said in a statement that the company’s suit against Wal-Mart is intended to protect its interests.

The cases are Visa U.S.A. Inc. v. Wal-Mart Stores Inc., 13-cv-03355, and In Re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, 05-md-01720, U.S. District Court, Eastern District of New York (Brooklyn).


ABN Told by Court to Pay Fired Energy Bankers $1.41 Million

ABN Amro Group NV was told by an Amsterdam court to pay

1.06 million euros ($1.41 million) in compensation to two bankers it fired after an oil-trading company complained the executives had sought a bribe.

ABN didn’t offer sufficient evidence to justify immediately dismissing Bruno Gremez, the global head of energy commodities, and a subordinate, Samir Kasmi, according to a June 10 ruling of the Amsterdam Subdistrict Court obtained by Bloomberg News.

Under the judgment, known as a preliminary relief ruling, ABN has to pay their salaries until their contracts end later this year. ABN Amro said in an e-mailed response it will only have to pay if subsequent proceedings confirm the dismissals were improper.

The bankers were fired on March 26 after ABN Amro received a complaint in November from Oil Marketing & Trading International LLC claiming a bribe had been requested by the two men. A probe of the matter was then done by the bank.

“The dissolution ruling gives a conditional judgment on the matter as the proceedings chosen don’t offer room for an full test of the evidence,” Jeroen van Maarschalkerweerd, a spokesman for Amsterdam-based ABN Amro, said by e-mail. “Our view remains unchanged.”

The bank will study the ruling and consider its next steps, he said. Either party can request the Amsterdam court to reexamine the matter in greater detail.

The cases are: EA-13-429, ABN Amro Bank NV v. Bruno Gremez and EA 13-430, ABN Amro Bank NV v. Samir Kasmi, Amsterdam Subdistrict Court; 1423777 KK EXPL 13-581, Bruno Gremez v. ABN Amro Bank NV and 2051370 KK EXPL 13-770, Samir Kasmi v. ABN Amro Bank NV.

Ex-Bradford & Bingley Banker May Be Fined in Secret FCA Case

Chris Willford, former group finance director at nationalized lender Bradford & Bingley Plc, may be fined as much as 100,000 pounds ($157,000) for risk management failures after losing a court appeal yesterday.

The U.K. Financial Conduct Authority’s predecessor properly notified Willford of the fine in 2010, Judge Martin Moore-Bick said. Willford’s identity had been secret throughout the three-year-old dispute until the court yesterday overturned restrictions that limited the press to calling him “C.”

Bradford & Bingley was rescued by the British government in 2008 after credit markets froze in the wake of Lehman Brothers Holdings Inc.’s collapse. Willford didn’t do enough to warn the board about its deteriorating financial position, FCA lawyer Michael Brindle said at a February court hearing.

The FCA’s decision to fine Willford 100,000 pounds was overturned by a judge in May 2012 because he ruled the regulator, then known as the Financial Services Authority, didn’t give proper reasons in the notice of its decision. The court of appeal reversed that ruling.

The fine hasn’t been confirmed and Willford may still challenge it at a higher tribunal that hears regulatory disputes. Willford is now chief operating officer at online storage company My Wealth Cloud.

Nikunj Kiri, his lawyer, declined to comment after the ruling. Chris Hamilton, a spokesman for the FCA, also declined to comment.

Judge Moore-Bick rejected Willford’s request for an extension of the privacy order.

The case is The Queen on the Application of Christopher Willford v. Financial Services Authority, Court of Appeal, Queen’s Bench Division (Administrative Court) C1/2012/1551.

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Austrian Central Banker Charged on Syrian Money Bribe

Austrian prosecutors charged nine people, including the vice-governor at the national bank, with bribery and money laundering in connection with money-printing deals in Syria and Azerbaijan.

Wolfgang Duchatczek, 63, and the unnamed co-defendants paid 14 million euros ($18.6 million), or as much as 20 percent of order volumes, to win contracts, according to a statement from Nina Bussek, a spokeswoman for the Vienna prosecutor.

The charges follow an 18-month investigation into Oesterreichische Banknoten-und Sicherheitsdruck GmbH, the money-printing press owned by the central bank. Duchatczek headed the unit’s supervisory board.

Duchatczek’s lawyer, Gabriel Lansky, said via telephone that his client isn’t guilty. Duchatczek, whose term ends in July, said when reached by mobile phone that he wouldn’t comment before having the opportunity to study the indictment.

The central bank’s general council will hold a special meeting June 18 to discuss the matter, according to a statement from the Vienna-based institution.

Comings and Goings

RBS Slips After Hester Departure as 2,000 Job Cuts Planned

Royal Bank of Scotland Group Plc, Britain’s biggest government-owned lender, fell in London trading after Chief Executive Officer Stephen Hester quit and the company started to cut 2,000 investment-banking jobs.

RBS will exit its equity derivatives and structured retail products divisions, Edinburgh-based RBS said in a memo to employees yesterday. Hester, 52, said June 12 he would step down after almost five years in the post, without naming a successor.

His exit may delay the government’s plans to reduce its 81 percent stake in RBS to late 2014, according to Bank of America Corp. analyst Michael Helsby. It may be hard to find a replacement given the political interference in how the bank is run, said Crispin Odey, whose London-based Odey Asset Management LLP oversees $9.5 billion. A panel of British lawmakers is this week considering whether to push for a break-up of the lender, which received the biggest banking bailout in the world during the financial crisis.

After coming under pressure from government and regulators to bolster capital, the bank said in February it was considering how to shrink its investment bank further. It had announced about 3,800 job-cuts the previous year as well as plans to sell or close the unprofitable cash equities, mergers advisory and equity-capital markets divisions.

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