AmEx Settlement, Taiwan OBUs, BOE-McKinsey: Compliance

American Express Co. reached a settlement with U.S. regulators over the firm’s marketing of credit-card add-on products.

The lender, the biggest credit-card issuer by purchases, will pay about $59.5 million in restitution in a deal with the Federal Deposit Insurance Corp. and the Consumer Financial Protection Bureau, according to a statement Dec. 24 from the FDIC.

Compliance Policy

Japan Bank Regulator Seeks Authority Over Tibor Benchmark Rate

Japan’s banking regulator will seek to introduce penalties for manipulation of financial benchmarks, joining market watchdogs around the globe in pushing for broader authority and tougher supervision.

The Financial Services Agency should get formal authority to supervise organizations that set benchmarks such as the Tokyo Interbank Offered Rate, or Tibor, and to conduct investigations, an advisory committee to the regulator said in a statement yesterday. The FSA plans to submit a bill including the changes to parliament next year, an FSA official said at a news briefing, asking not to be identified, citing agency policy.

The recommendations sum up the work of the committee, formed last month to revamp the regulatory framework for Tibor and other benchmarks in line with international trends. Global fines on companies including Deutsche Bank AG and Royal Bank of Scotland Group Plc reached $6 billion this month, and other firms are under investigation around the world.

The FSA, which has already investigated some manipulation of rates under its mandate to police markets, should create a framework to inspect and supervise organizations that set rates, while introducing penalties against financial firms that manipulate data submissions, according to the statement.

In Japan, banks including the lending unit of Mitsubishi UFJ Financial Group Inc., the nation’s biggest lender, are responsible for submitting interbank offered rates to the Bankers Association. The lobby group then compiles the data and sets the benchmark, according to the group’s website.

The association pledged in July to step up oversight of Tibor, drawing up a code of conduct and possibly reducing the number of rates it calculates.

Taiwan to Ease Rules on Offshore Banking Units, FSC Says

Taiwan will remove restrictions on qualification of non-residents for derivative products at offshore banking units, known as OBUs, the Financial Supervisory Commission said in a statement on its website.

The regulator also eased application procedures for OBUs’ foreign currency business.

The FSC will allow OBUs to provide foreign currency-denominated derivatives to offshore individuals, according to the statement.

Sebi Approves Rule Change to Regulate Collective Investment Plan

The Securities and Exchange Board of India approved a rule change to regulate collective investment plans, the regulator said in an e-mailed statement.

The rules were amended to provide a framework for regulation of such plans and additional requirements for continuous compliance, India’s stock market regulator said in the statement.

SEBI’s board also approved rules for search and seizure by the regulator consistent with the terms of the Income Tax law. In addition, the regulator approved rules for settlement of civil proceedings, including a provision of monetary and non-monetary settlements.

Indonesia to Ease Foreign Investment Caps From Airports to Power

Indonesia will ease foreign ownership restrictions in airport and power projects to lure capital as the nation grapples with a current-account deficit that’s sending the rupiah to its worst yearly drop since 2000.

Foreigners may own as much as 49 percent of airports and 100 percent of power plants built under public-private partnerships, the investment coordinating board said in a statement in Jakarta. The government will simplify processes to boost investment after completing talks Dec. 24 on its revised negative-investment list, which limits overseas ownership in some industries, Coordinating Minister for Economic Affairs Hatta Rajasa told reporters.

Airports and terminals for land transportation were previously closed to foreign companies, said Mahendra Siregar, chairman of the investment coordinating board. Overseas investors may own 100 percent of power plants with capacities of more than 10 megawatt and 95 percent if the plant isn’t built under a public-private partnership project, he said.

The government will ease the foreign-ownership limit in pharmaceutical ventures to 85 percent from 75 percent. It will set a 51 percent cap for advertisement ventures for investors from the Association of Southeast Asian Nations, from no overseas ownership previously, he said.

Compliance Action

Raters Fail to Follow Criteria, Keep Adequate Records, SEC Says

Credit raters failed to follow their own criteria, allowed research analysts to discuss fees with issuers and kept incomplete records, according to a report from the U.S. Securities and Exchange Commission.

The SEC’s Office of Credit Ratings didn’t name specific companies in its third annual examination report released Dec. 24, distinguishing them as either larger firms, such as McGraw-Hill Co.’s Standard & Poor’s, Moody’s Corp., Moody’s Investors Service and Fitch Ratings, or smaller ones, including Kroll Bond Rating Agency Inc. and DBRS Inc. The regulator also didn’t identify firms in its two prior reports.

One large company and five smaller firms didn’t follow their own methodologies in determining ratings, the SEC said in its report on Nationally Recognized Statistical Rating Organizations or NRSROs. Four smaller companies failed to separate analytical and business divisions, and all large and six smaller firms didn’t keep adequate records related to ratings actions.

The SEC began filing its annual examination reports after Congress passed the Dodd-Frank financial reform law in 2010, instructing regulators to stop relying on ratings and increase oversight of the companies that issue them. The Financial Crisis Inquiry Commission blamed the firms for awarding top credit grades to risky mortgage bonds, helping ignite the worst recession since the Great Depression when defaults soared.

India Probes Billionaire Agarwal on Hindustan Zinc Stake

India’s top investigating agency started a probe into the role of billionaire Anil Agarwal and some government officials in the sale of a stake in Hindustan Zinc Ltd., citing irregularities in the divestment process.

A preliminary inquiry has been initiated into Agarwal, who bought a majority stake in the nation’s biggest zinc producer in 2002 through Sterlite Industries (India) Ltd., Central Bureau of Investigation spokeswoman Kanchan Prasad said Dec. 23 in a phone interview. Sterlite was merged with iron ore miner Sesa Goa Ltd., also controlled by Agarwal, in August this year to form Sesa Sterlite Ltd.

Agarwal’s holding company Vedanta Resources Plc has been trying to buy the government’s 29.5 percent holding in Hindustan Zinc, of which Sesa Sterlite owns 64.9 percent. Vedanta, which also owns 51 percent of aluminum producer Bharat Aluminium Co., is seeking to purchase the government’s 49 percent stake. It has shareholder approval to spend as much as $3.48 billion to buy the stakes.

“Since the stake sale by the government, Hindustan Zinc has grown more than fivefold,” the company said in reply to an e-mail seeking comment on the probe. “At the time of disinvestment, the company’s reserves and resources were 143.7 million tons, which have been increased through rigorous exploration to 348 million tons. Since disinvestment, the company has successfully executed four phases of expansion plans with an investment of 120 billion rupees ($1.9 billion).”


SAP Co-CEO’s Ex-Assistant Settles SEC Insider-Trading Claims

A former board assistant to the co-chief executive officer of SAP AG, the German software maker, made $43,500 in illicit profit through insider trading, the U.S. Securities and Exchange Commission claimed in a lawsuit.

David F. Marchand, 41, was sued Dec. 23 in federal court in Newark, New Jersey, and agreed to pay $89,155 to settle the case. The SEC claimed he profited from trades he made before SAP said it would buy SuccessFactors Inc. in 2011 and Ariba Inc. in 2012. Marchand also bought SAP shares before the company’s January 2012 release of favorable financial performance results, the SEC said.

A judge must approve the agreement. Marchand, of Campbell, California, neither admitted nor denied the allegations in consenting to the judgment. He had agreed in December 2005 not to disclose or use confidential information from Walldorf, Germany-based SAP, according to the SEC.

Marchand didn’t immediately return a call seeking comment on the settlement.

The case is Securities and Exchange Commission v. Marchand, 13-cv-7754, U.S. District Court, District of New Jersey (Newark).


McKinsey Won’t Determine Bank of England’s Strategy, Hogg Says

The Bank of England will determine its own strategy and McKinsey & Co. isn’t dictating a review of the 319-year-old institution, Chief Operating Officer Charlotte Hogg assured directors last month.

“McKinsey’s role was not to set the strategy, though they were providing input from their experience of other similar organizations, and arranging visits to some,” Hogg said at the Nov. 14 meeting of the bank’s supervisory board, known as the Court of Directors, according to minutes published on its website this week. The U.S. consulting firm “was facilitating the process, but it was being run by the bank,” the minutes show.

Governor Mark Carney hired McKinsey this year to examine strategy and Deloitte LLP to conduct a “value for money” study after the institution gained unprecedented powers to regulate the financial industry. Hogg, a former McKinsey employee who joined the central bank at the same time as Carney in July, is overseeing the consultants’ work.

Hogg presented progress reports on the two reviews to the Court. Directors described them as helpful, while Court member Bradley Fried was “impressed by the progress” so far. Carney told the directors that they will have a chance to review the “full emerging plans” in January at a specially arranged meeting.

Bloomberg News first reported Carney’s hiring of McKinsey on Oct. 22. A prior study by the same consulting firm in the late 1960s had a “limited” impact, former BOE official Guy de Moubray said in an interview published this month.

Among other matters discussed by the directors, the central bank will begin publishing more detailed projections in its quarterly Inflation Report beginning in February, Chief Economist Spencer Dale told the Court.

Before it's here, it's on the Bloomberg Terminal.