Bitcoin Trust, HSBC Accord, Deloitte-Spain: Compliance

Cameron and Tyler Winklevoss’s proposal for an investment tracking the virtual currency Bitcoin faces a protracted fight to win over regulators and market makers.

The twins, who attended Harvard University at the same time as Facebook founder Mark Zuckerberg and claimed in a lawsuit that the idea for the social media site was theirs, this week filed with the U.S. Securities and Exchange Commission to create the Winklevoss Bitcoin Trust, a variation of an exchange-traded fund that would hold Bitcoins and issue shares on a secondary exchange.

The trust would be the first product in the $2 trillion ETF industry to track a virtual asset, rather than securities such as stocks and bonds or commodities such as gold and oil. The biggest hurdle for the 31-year-old brothers is persuading the SEC, which has moved haltingly when approving funds that break new ground, to give their product the green light. The examination could take years, according to Reginald Browne, head of exchange-traded product trading at Knight Capital Group Inc.

The trust aims to attract investors who might be put off by the complexities and costs associated with trading in the digital currency.

“We recognized that there was not an easy way to gain Bitcoin exposure, so we’re trying to creating a simple solution,” Tyler Winklevoss said in an e-mailed statement.

Bitcoin is a virtual currency that can be used to buy and sell a broad range of items. The Winklevosses own about $10 million of Bitcoins, 1 percent of the outstanding amount.

Regulators haven’t released comprehensive guidance on how Bitcoins might be regulated.

The SEC’s division of corporate finance reviews registration statements for securities issuers to make sure they comply with disclosure requirements, John Nester, a spokesman, said in an interview. The review doesn’t produce any comment on a product’s utility, he said. The Bitcoin trust would also require approval from the agency’s division for trading and markets, he said.

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Compliance Policy

Basel Group Revises Rules for Banks’ Investments in Funds

The Basel Committee on Banking Supervision published draft revisions to its capital rules for banks’ investments in funds.

“The committee believes the revised standard will more appropriately reflect the risk of a fund’s underlying investments and its leverage,” the group said in a statement on its website. “The revised standard will also help address risks associated with banks’ interactions with shadow banking entities.”

The Basel group, which brings together regulators from 27 nations, said that it would seek views on the plan until Oct. 4.

European Drug Group to Require Disclosing Payments to Doctors

Drugmakers operating in Europe must disclose payments made to doctors starting in 2016 in an effort to boost transparency and make patients aware of possible conflicts of interest.

The new ethical code requires all members of the European Federation of Pharmaceutical Industries and Associations to disclose payments made in 2015 by 2016, the trade group said in a statement July 2.

Each company must reveal names of health-care professionals and associations that have received payments, the amounts, and the types of relationships on their websites or on a common website, EFPIA said. The rule follows a similar U.S. provision in President Barack Obama’s health law.

The Association of the British Pharmaceutical Industry started publishing aggregate totals in May of payments made last year to health-care professionals.

China Bond Futures May Trade in September, Journal Says

China may restart trading of government bond futures in September, the China Securities Journal reported July 3, adding to signs an 18-year ban is drawing to an end.

The China Securities Regulatory Commission will decide on an exact time for the start of trading after the State Council approved the plan for government bond futures, the newspaper, which is controlled by the official Xinhua News Agency, reported July 3, citing people it didn’t identify. Trial trading of the futures during the past year has gone smoothly, the paper said.

China first allowed trading of treasury futures in 1992, before ordering a halt in 1995 after a probe into market manipulation led to the jailing of Guan Jinsheng, then president of Shanghai International Securities Co.

Regulators have sought to restart trading to provide investors with a hedging tool for the fixed-income market.

The securities regulator didn’t immediately respond to faxed questions seeking comment.

Compliance Action

Commerzbank Investigated for Possible Swiss Reporting Breach

Commerzbank AG is being investigated by Switzerland’s market regulator over the possible breach of reporting obligations for two structured products.

SIX Exchange Regulation is seeking to determine whether Commerzbank was late in submitting interest-rate fixings for two floating reverse convertibles traded on the Scoach Switzerland index, the Zurich-based watchdog said in a statement on its website today.

Commerzbank, which has listed about 540 structured products on the index, made interest payments on the products for the two periods in due time, according to the statement.

“There was no damage or hassle for investors,” the bank said today in a statement on its website. “Commerzbank emitted hundreds of structured products on Scoach over the years for which SIX’s reporting obligations were always respected.”

Google Ordered to Change Its Privacy Policy by U.K. Watchdog

Google Inc. must change its privacy policy in line with U.K. data protection rules or it will face a “formal enforcement action,” the country’s watchdog said in a letter sent to the owner of the world’s most-used search engine.

Google failed to “provide sufficient information” to help users understand how their data will be used by the company, and “must now amend” its policy, the U.K. data protection authority said yesterday. The decision stems from coordinated action that data privacy regulators across Europe announced in April.

Google faces probes across Europe over changes to harmonize privacy policies for more than 60 products last year. Global data-protection regulators last month wrote to the Mountain View, California-based company urging Chief Executive Officer Larry Page to contact them about possible issues with its web-enabled eyeglasses, called Google Glass.

“Our privacy policy respects European law and allows us to create simpler, more effective services,” Al Verney, a Brussels-based spokesman for Google, said by phone. “We have engaged fully with the authorities involved throughout this process and will continue to do so going forward.”

Data protection regulators from the 28-nation EU, that make up the so-called Article 29 Data Protection Working Party, wrote to Page in October, saying the company “empowers itself to collect vast amounts of personal data about Internet users” without demonstrating the collection is “proportionate,” and asking the company to bring its policy in line with EU rules.

Spain May Sanction Deloitte for Failure to Probe Bankia Assets

Spain started proceedings to sanction Deloitte SL and partner Francisco Celma Sanchez over their role as auditors of Bankia SA before it was nationalized last year.

The Spanish Accounting and Audit Institute, a unit of the Economy Ministry, said Deloitte may have breached rules that could have compromised its independence as an auditor, according to a June 13 report obtained by Bloomberg. Sanctions may include a fine or, in the worst case, stripping Deloitte and Celma of their licenses to work as auditors in Spain, the report showed.

Deloitte may have had a conflict of interest because it advised Bankia’s parent company on its corporate structure at the same time it was auditing the lender, the institute said.

“This proceeding could perfectly well be dismissed or could conclude with a proposed penalty,” Deloitte said in an e-mailed statement. “The proceeding focuses on technical formalities which in no case represent a modification of the entity’s audited financial statements.”

Deloitte has 15 days from June 13 to respond to the allegations, the document said. Spokesmen at Bankia and the Economy Ministry in Madrid declined to comment and a spokeswoman for Deloitte referred questions to the statement.

Glaxo, Danone Probed as China Scrutinizes Foreign Companies

China’s probes of GlaxoSmithKline Plc and Danone highlight challenges for foreign companies in a market where they may be a bigger “prize” for regulators seeking to allay concerns that medicines and foods are unsafe.

The U.K. drugmaker is being probed for alleged bribery, while Danone, along with Nestle SA’s Wyeth brand, Mead Johnson Nutrition Co. and Abbott Laboratories, are under investigation for pricing that may have violated anti-monopoly laws.

Demands for a government crackdown on safety violations has taken hold in China, partly fueled by food-product scandals, and Premier Li Keqiang, who took office in March, has pledged to root out consumer abuses. More than two thirds of member companies that responded to a survey by the American Chamber of Commerce in Shanghai released in February said the regulatory environment was either “not improving” or “deteriorating.”

A senior Glaxo finance executive in Shanghai and employees in Beijing were detained as part of a corruption investigation, the South China Morning Post reported on July 1, citing an unidentified person from Shanghai’s drug industry. Simon Steel, a Glaxo spokesman in London, declined to comment on June 30 about whether any staff have been arrested or detained.

Police in the southern city of Changsha said June 28 that senior Glaxo China executives were suspected of economic crimes and were being investigated, without elaboration. The company is unclear about the nature of the investigation, Steel said.

Danone, Nestle’s Wyeth brand, Mead Johnson, Abbott Laboratories, Dutch producer Royal FrieslandCampina NV as well as local firm Biostime International Holdings Ltd. are being investigated by the National Development and Reform Commission, China’s top economic planning agency, for pricing of their infant formula, the official People’s Daily reported July 2.

The agency didn’t answer at least five calls or respond to a fax seeking comment on its investigation.

The NDRC has evidence the companies sold products at high prices in China and their prices have increased about 30 percent since 2008, according to the newspaper, which is published by the Communist Party.

Danone, Mead Johnson and Nestle said they are cooperating with the authorities. Biostime hasn’t received any official feedback or information on possible penalties from the NDRC, Jason Xu, the firm’s assistant chief financial officer, said over the phone July 3. Jan-Willem ter Avest, a spokesman from Royal FrieslandCampina, said in an e-mail that the company is fully cooperating with the government to comply with pricing policies and regulations. A spokesman for Abbott couldn’t be reached for comment.


Ex-UBS, Citigroup Trader Hayes to Enter Plea at Next Hearing

Tom Hayes, the former UBS AG and Citigroup Inc. trader, is scheduled to enter a plea on charges related to manipulation of the London interbank offered rate later this year.

Hayes, 33, was told by a judge in London yesterday to enter a plea at a hearing in late October. He spoke only to confirm his name. Prosecutors at the Serious Fraud Office agreed to give him more information on their case by Sept. 30.

Hayes, who remains on bail, is charged with working with employees at JPMorgan Chase & Co., Royal Bank of Scotland Group Plc, HSBC Holdings Plc, Rabobank Groep and Deutsche Bank AG, as well as Tullett Prebon Plc, ICAP Plc and RP Martin Holdings Ltd., over a four-year period to manipulate yen Libor rates.

At his first court appearance last month, Hayes’s lawyer, Lydia Jonson, declined to indicate how he would plead when asked by a judge.

Four of the charges cover the period from Aug. 8, 2006, until Dec. 3, 2009, while he worked at UBS, and the other four from Dec. 1, 2009, until Sept. 7, 2010, when he was at Citigroup.

Hayes tried to manipulate rates “with the intention that the economic interests of others would be prejudiced and/or to make personal gain for themselves or another,” the SFO said in the indictment.

Hayes has also been charged by the U.S. Justice Department, which is running a parallel criminal investigation.

Aalberts Wins EU Court Ruling of $130 Million Antitrust Fine

Aalberts Industries NV overcame a court bid by antitrust regulators to reinstate a 100.8 million-euro ($130 million) copper cartel fine.

The EU Court of Justice, the bloc’s top tribunal, dismissed the European Commission’s attempt to resurrect the penalty in a ruling yesterday. A lower court overturned the fine against Langbroek, Netherlands-based Aalberts in March 2011.

Europe’s biggest maker of fittings used in taps and heaters was one of 30 companies fined a total of 314.7 million euros in 2006 for unlawfully colluding on prices of copper fittings used in plumbing and heating. Aalberts’s fine was 6 percent of its 2010 revenue of 1.68 billion euros.

Aalberts will try to recover costs related to legal proceedings, Chief Executive Officer Wim Pelsma said in an interview.

The commission “will carefully examine this judgment,” said Antoine Colombani, a spokesman for the EU regulator.

The case is: C-287/11 P, Aalberts Industries NV, Comap SA, formerly Aquatis France SAS, Simplex Armaturen + Fittings GmbH & Co. KG v. European Commission.

Prosecutors Lack Insider-Trading Evidence on Cohen, WSJ Says

Hedge-fund billionaire Steven A. Cohen isn’t likely to face criminal charges tied to the biggest alleged insider-trading case in history as U.S. prosecutors conclude there’s not enough evidence to meet a statute of limitations deadline to file a case, the Wall Street Journal reported, citing people familiar with the situation.

The evidence against Cohen, 57, that involves his $15 billion firm SAC Capital Advisors LP isn’t strong enough, the newspaper reported yesterday. It didn’t name its sources.

The case, part of a five-year U.S. crackdown of insider trading at hedge funds, stems from the insider-trading case against former SAC portfolio manager Mathew Martoma, who was charged in November in what prosecutors called the biggest insider-trading scheme in history. SAC paid a record $602 million to settle a civil case related to Martoma’s trades. The five-year statute of limitations deadline for prosecutors to bring charges for Martoma’s 2008 trades expires in late July.

Martoma has pleaded not guilty and isn’t cooperating with the U.S.

Jonathan Gasthalter, a spokesman for SAC at Sard Verbinnen & Co., declined to comment on the report. Jim Margolin, a spokesman for the FBI in New York, didn’t return a voice-mail message and e-mail message sent after business hours yesterday seeking comment. Martin Klotz, a lawyer for Cohen, didn’t respond to an e-mail seeking comment. Jerika Richardson, a spokeswoman for Manhattan U.S. Attorney Preet Bharara, declined to comment.

Cohen, who has denied any wrongdoing, hasn’t been charged with any crime.

The case is U.S. v. Martoma, 12-cr-00973, U.S. District Court, Southern District of New York (Manhattan).

HSBC Judge Approves $1.9 Billion Accord on Money Laundering

HSBC Holdings Plc’s $1.9 billion agreement with the U.S. to resolve charges it enabled Latin American drug cartels to launder billions of dollars was approved by a federal judge.

U.S. District Judge John Gleeson in Brooklyn, New York, signed off July 1 on a deferred-prosecution agreement, a critical component of the London-based bank’s settlement. The order was filed more than six months after the government announced reaching an accord with the bank.

Both sides argued Gleeson didn’t have the power to approve or reject the terms they came to, the judge said in his order. Gleeson disagreed, writing in his order that the court is “not a potted plant” and approving the deferred-prosecution agreement is “the legitimate exercise of the court’s authority.”

HSBC was accused of failing to monitor more than $670 billion in wire transfers and more than $9.4 billion in purchases of U.S. currency from HSBC Mexico, allowing for money laundering, prosecutors said.

Gleeson said he will continue supervising implementation of the deal, under which the bank agreed not to contest criminal charges of failing to maintain an effective anti-money-laundering program, among other violations.

The bank, Europe’s largest, agreed to pay a $1.25 billion forfeiture and $665 million in civil penalties, prosecutors announced in December.

The case is U.S. v. HSBC Bank USA NA, 12-cr-00763, U.S. District Court, Eastern District of New York (Brooklyn).


Mucci, Valliere, Others Comment on Health-Law Mandate Delay

Martin Mucci, chief executive officer of Paychex Inc., talked about the Obama administration’s decision to delay a crucial provision of its health-care law, giving businesses an extra year to comply with a requirement to provide their workers with insurance.

The delay is a “positive” for employers, he said. Mucci spoke with Betty Liu on Bloomberg Television’s “In the Loop.”

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Greg Valliere, chief political strategist at Potomac Research Group, described the decision to delay the provision as “blow” to Obama.

He was joined by New York University professor J.P. Eggers and Eurasia Group President Ian Bremmer in a discussion with Tom Keene, Scarlet Fu and Alix Steel on Bloomberg Television’s “Surveillance.”

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