SEC High-Speed Site, Swaps Limbo, Secret Data: Compliance

Oct. 3 (Bloomberg) -- The U.S. Securities and Exchange Commission plans to unveil a public website next week that will allow it to publish data, research and analysis using the type of robust market data exploited by high-frequency trading firms.

The site will share some of the agency’s research into topics such as strategies that cancel a high-percentage of orders, which can give the appearance of false liquidity, SEC Chairman Mary Jo White said yesterday at a speech in Washington. It also will allow users to explore trading-activity patterns in “easy-to-read charts and graphs,” she said, according to prepared remarks for the Security Traders Association’s market structure conference.

The SEC’s effort is meant to inject data-driven analysis into complaints that technology has given some sophisticated traders an unfair advantage. The regulator has worked to improve its understanding of market behavior after taking more than four months to explain the May 2010 flash crash, when about $862 billion in U.S. equity value was wiped out in minutes before share prices recovered.

The SEC’s data-mining effort was boosted by its acquisition of Midas, an acronym for Market Information Data Analytics System. The agency acquired Midas last year from high-frequency trading firm and technology vendor Tradeworx Inc.

White said in April that the SEC needed to bring a “sense of urgency” to answering whether high-frequency trading, dark pools and the proliferation of complex order types harm retail investors or create an uneven playing field.

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Compliance Policy

EU Swaps Platforms in Limbo as CFTC Closed on Deadline Day

European Union attempts to win exemptions from U.S. rules for swaps trading platforms scheduled to take effect yesterday have been hampered by the partial shutdown of the American government.

Michel Barnier, the EU’s financial services chief, was unable to broker a deal with the U.S. Commodity Futures Trading Commission ahead of a budget standoff that’s left many government offices shuttered.

Barnier said in an interview yesterday that he remained confident about reaching a “definitive agreement.” What is required is “to confirm and clarify,” a broader deal reached by the Commission and CFTC in July.

The CFTC is overseeing the new platforms as part of an effort required under the 2010 Dodd-Frank Act to bring greater competition and transparency to swaps trading.

Gary Gensler, the CFTC’s chairman, earlier held firm on the deadline, planned for yesterday, for swaps execution facilities, or Sefs, to register with regulators, while the agency has granted temporary delays related to some other aspects of the swaps rules.

Barnier’s spokeswoman Chantal Hughes described the situation as “problematic” because American rules on Sef registration were expected to enter into force yesterday. She said while there is no technical contact, there is contact at “more senior political levels.”

Barnier wrote to Gensler this week urging the U.S. to delay the registration requirements until March. Hughes said Gensler hasn’t yet replied.

Calls to the CFTC yesterday went through to an automated answering service.

Separately, the CFTC won’t produce public reports such as Cotton on Call, Commitment of Traders, and the Bank Participation Report during the government shutdown.

Compliance with all required filings to the CFTC remains in place.

Compliance Action

Prosecutors Said to Pursue JPMorgan Indictment in Paschi Case

Siena prosecutors requested that JPMorgan Chase & Co. stand trial for obstructing regulators as part of a wider probe into Banca Monte dei Paschi di Siena SpA’s purchase of Banca Antonveneta SpA, according to four people with knowledge of the matter.

Prosecutors allege JPMorgan withheld information from regulators about a 1 billion-euro ($1.3 billion) financing the New York-based bank arranged for Monte Paschi’s takeover of Antonveneta in 2008, said the people, who asked not to be identified because the request isn’t public.

JPMorgan failed to oversee employees properly, according to the indictment request, the people said. A judge will review the request at a date that’s to be determined. Prosecutors also are seeking indictments against former Monte Paschi managers for obstructing regulators, as well as market manipulation and falsifying filings, the people said.

“No claim was ever made under the indemnity, which only existed for a matter of days, including either for the benefit of JPMorgan or any of its employees,” the U.S. bank said yesterday in an e-mailed statement. “We believe that JPMorgan and its employees acted correctly at all times. We will defend this action vigorously.”

JPMorgan Chief Executive Officer Jamie Dimon, 57, told employees on Sept. 17 to prepare for more legal woes while the bank undertakes an “unprecedented effort” to comply with regulations.

Japan Watchdog Recommends Penalty Against Abraham Private Bank

Japanese investment advisory firm Abraham Private Bank sold financial products to clients without a license, the Securities and Exchange Surveillance Commission said in a statement in Tokyo.

The SESC also recommended that the Financial Services Agency impose penalties against investment advisers IFA Japan and K2 Investment for selling products without license, according to a statement issued by the watchdog organization. The SESC statement doesn’t specify the punishment sought.

The SESC is an investigative arm of the FSA.

Charities May Get Compensation for Icelandic Bank Losses

Iceland’s Financial Conduct Authority said charities, clubs and societies are eligible for as much as 50,000 pounds in compensation from the collapse of Icelandic banks including Kaupthing Singer and Friedlander Bank and Landsbanki Islands hf in 2008.

The FCA commented on compensation for large unincorporated associations in an e-mailed statement.


U.S. Asks Spy Court to Deny Tech Firms’ Bid to Release Data

The U.S. asked the Foreign Intelligence Surveillance Court to deny a bid by technology companies including Microsoft Inc., Google Inc. and Facebook Inc. to release more data on the kinds of national security requests they receive from the government.

“The information that the companies seek to disclose is classified,” Justice Department lawyers wrote in court papers filed with the secret court on Sept. 30 and posted yesterday on the court website. “The disclosures would risk revealing the government’s collection capabilities as they presently exist and as they develop in the future.”

The companies are seeking the court’s approval to disclose aggregate data on requests the U.S. makes under national security rules. They currently aren’t authorized to break out the number of requests they get for user data under national security statutes, as opposed to inquiries by law enforcement.

The Google case is In re motion for declaratory judgment of Google Inc.’s First Amendment right to publish aggregate information about FISA orders, 13-03, U.S. Foreign Intelligence Foreign Surveillance Court (Washington).

Beanie Baby Creator Pleads Guilty to Swiss Bank Tax Dodge

H. Ty Warner, creator of Beanie Babies plush toys, pleaded guilty to failing to pay taxes on money he hid from the U.S. in a Swiss bank account.

Warner, who was charged with a single count of tax evasion last month, entered his plea yesterday before U.S. District Judge Charles P. Kocoras in Chicago.

He agreed to pay a civil penalty of almost $53.6 million. Tax evasion is punishable by as long as five years in prison. He also faces a fine of as much as $250,000. Sentencing is scheduled for Jan. 15.

Since 2009, the U.S. has prosecuted about 70 U.S. taxpayers and 30 bankers, lawyers and advisers in a crackdown on offshore tax evasion. The sole owner of TY Inc., which he founded in 1985, Warner held the highest account balance of the taxpayers prosecuted in the crackdown.

He admitted to failing to report $3.2 million in income on a secret UBS AG account that held as much as $93.6 million.

In 2009, Warner tried to avoid prosecution through the IRS Offshore Voluntary Disclosure Program, according to his lawyer, Gregory Scandaglia. He was denied entry.

“This is an unfortunate situation that Mr. Warner has been trying to resolve for several years now,” Scandaglia said in a statement when the charge was announced. “Mr. Warner accepts full responsibility for his actions with this plea agreement.”

Since 1995, Warner has donated almost $140 million in cash and plush toys to charities and organizations.

The case is U.S. v. Warner, 13-cr-00731, U.S. District Court, Northern District of Illinois (Chicago).

Wells Fargo Sued by New York Over Mortgage-Servicing Accord

Wells Fargo & Co. was sued by New York state over the bank’s failure to uphold terms of a $25 billion mortgage-servicing settlement, state Attorney General Eric Schneiderman said.

Wells Fargo and Bank of America were accused by Schneiderman’s office of violating the national settlement, under which five of the country’s largest mortgage servicers promised to reform foreclosure and loan-modification practices.

Bank of America Corp. has agreed to changes aimed at bringing it into compliance with the deal, Schneiderman said yesterday at a press conference in Manhattan.

In 2012, a coalition of 49 states and the U.S. reached the national settlement with Wells Fargo, Bank of America, JPMorgan Chase & Co., Citigroup Inc. and Ally Financial Inc. in an effort to combat mortgage-servicing abuses.

The suit, filed yesterday in federal court in Washington, asks the court to enforce the settlement upon Wells Fargo, which Schneiderman said is one of the most difficult banks for distressed homeowners to deal with.

Vickee Adams, a spokeswoman for Wells Fargo, said Oct. 1 in an e-mailed statement that “if true, it is very disappointing that the New York attorney general continues to pursue his course, given our commitment to the terms of the national mortgage settlement.”

“Wells Fargo is proud of its track record of providing important relief to borrowers in New York and nationwide,” she said. The bank has helped families “maintain homeownership with more than 880,000 modifications nationwide and 26,000 in New York over the last four years,” Adams said.

Dan Frahm, a Bank of America spokesman, said yesterday the bank was pleased to resolve the issues raised by Schneiderman’s office without litigation.

The case is U.S. v. Bank of America Corp., 12-cv-00361, U.S. District Court, District of Columbia (Washington).


Chilton Says Shutdown Raises Market Oversight Concerns

Bart Chilton, a commissioner at the U.S. Commodity Futures Trading Commission, talked about the partial government shutdown and its impact on markets and the economy.

Chilton, who spoke with Tom Keene, Sara Eisen and Scarlet Fu on Bloomberg Television’s “Surveillance,” also discussed financial regulations. Kamran Ansari, a senior associate at Greycroft Partners, also spoke.

For the video, click here.

U.K. Frustrated by Delays to EU Insurance Rules, Adams Says

U.K. regulators are “as frustrated as much of the industry,” over delays to proposed European rules to make insurance companies more resilient, Julian Adams, deputy chief of the Prudential Regulation Authority, said in a speech in London.

The guidelines, known as Solvency II, have been held up by “a number of outstanding policy issues” which may be resolved soon, Adams, the PRA’s insurance director, told an audience of finance executives today.

Separately, Michel Barnier, the EU’s financial services chief, said he proposed postponing the start of Solvency II insurance rules until Jan. 1, 2016.

Barnier cited ongoing legislative work as reason for the delay.

Schwab’s Sonders Says So Far Shutdown is a ‘Big Yawn’

Liz Ann Sonders, chief investment strategist with Charles Schwab Corp., says markets are so far disregarding the government shutdown.

Sonders said it may be a function of the market having become immune to political dysfunction, the Federal Reserve deciding not to taper, or a belief that the shutdown won’t last long. Sonders talked with Bloomberg’s Vonnie Quinn and Peggy Collins on Bloomberg Radio’s “The Hays Advantage.”

For the audio, click here.

Comings and Goings/Executive Pay

Mizuho Replaces Compliance Director After Loans to Crime Groups

Mizuho Bank replaced Masakane Koike as head of compliance after the Japan regulator penalized the company for transactions with “anti-social” groups, said Masako Shiono, a spokeswoman for the lender.

Mizuho Bank appointed Deputy President Yasunori Tsujita to the position, Shiono says by phone. Parent Mizuho Financial Group also replaced Koike as compliance head with Deputy President Toshitsugu Okabe, Shiono said. The decisions were made on Sept. 30 and the changes became effective the same day, she said.

The Financial Services Agency ordered Mizuho to strengthen compliance last week for failing to prevent two years of lending to organized crime groups through consumer credit companies.

Corporate Pay Overhaul Sought by U.K. Accounting Regulator

The U.K.’s accounting regulator said it may overhaul rules for corporate pay and introduce measures to make it easier to seize executive bonuses.

The Financial Reporting Council may propose changes to the U.K. Corporate Governance Code that would also restrict who can serve as a non-executive director on remuneration committees. The proposals follow U.K. legislation on the approval of executive pay, which went into force Oct. 1.

The FRC said it will look at bonus clawback arrangements, executives sitting as non-executives on peer remuneration committees, and steps to take when pay isn’t agreed on by majority vote.

Industry groups can offer their views on the changes and no new rules would take effect before October 2014, the FRC said.

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

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

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