CFTC Oversight, JPMorgan-Tianhe, Bonus Curbs: Compliance

The U.S. Commodity Futures Trading Commission formed a group that will review recordkeeping and reporting provisions for certain swaps transaction data, the agency said in a statement.

The group, to be led by the director of the Division of Market Oversight, will recommend questions for public comment on topics such as consistency in compliance among market participants and compliance with swaps reporting rules under Part 45 of the Code of Federal Regulations.

The group will publish a request for public comment by March 15.

The CFTC is moving to revamp oversight of swap-market data after a member said the agency’s current information wouldn’t help detect a loss like JPMorgan Chase & Co.’s London Whale trades.

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Compliance Policy

Morocco Weighs Pursuing $1.7 Trillion Islamic Finance Industry

Morocco plans this year to allow Islamic banking for the first time as the only North African nation with an investment-grade rating at Standard & Poor’s seeks to tap the $1.7 trillion industry.

The country’s cabinet approved a draft Islamic finance bill on Jan. 16, according to Abdeslam Ballaji, a lawmaker who worked on the proposed legislation and a member of the ruling party. The draft, which also regulates Islamic banks and allows for sukuk sales, is pending parliamentary approval and may be enacted within five months, he said last week.

Demand for financing that complies with Islam’s ban on interest is accelerating worldwide, with assets expected to climb to $3.4 trillion by 2018 from about $1.7 trillion last year, according to Ernst & Young LLP. More than 95 percent of Morocco’s population of 34 million back the introduction of banking that adheres to Shariah, according to Said Amaghdir, secretary general of the Moroccan Association of Participative Financiers.

The Moroccan Association estimates investment in Shariah-compliant products to reach $7 billion by 2018, provided the law comes into effect by the middle of the year, Amaghdir said by phone yesterday.

Compliance Action

JPMorgan Said to Quit Tianhe Chemicals IPO Amid Hiring Probe

JPMorgan Chase & Co. quit working on Tianhe Chemicals Group’s planned $1 billion initial public offering in Hong Kong amid a U.S. probe into hiring practices, two people with knowledge of the matter said.

The U.S. bank stepped out as questions arose over Joyce Wei, a former employee, whose father is Tianhe Chemicals Chairman Qi Wei, the people said, asking not to be identified because the information is private. UBS AG, which is also advising on the IPO, hired Wei toward the end of last year, two people with knowledge of the matter said.

U.S. authorities are examining whether JPMorgan hired people in Asia so that their relatives in government would steer business to the firm, people with knowledge with the investigations have said. The bank hasn’t been accused of wrongdoing.

Representatives of JPMorgan and UBS declined to comment. Joyce Wei also declined to comment.

JPMorgan’s withdrawal from Tianhe Chemical’s IPO was reported by Reuters earlier yesterday.


Geithner Told McGraw U.S. Would Respond to Downgrade, S&P Says

Former U.S. Treasury Secretary Timothy Geithner told McGraw Hill Financial Inc. Chairman Harold W. McGraw III in an Aug. 8, 2011 phone call that Standard & Poor’s downgrade of the U.S. debt would be met by a response and that the company would be held accountable, S&P said in a court filing.

McGraw said the call occurred after S&P was the only credit ratings company to downgrade the U.S. debt. The company claims the government sued in retaliation for the downgrade.

Government officials have said the downgrade was based on an error by S&P. The Justice Department last year accused S&P of lying about its ratings being free of conflicts of interest.

Thom Mrozek, a spokesman for the U.S. attorney’s office in Los Angeles, which brought the lawsuit, declined to comment on the filing.

Justice Department officials have previously said the lawsuit was unrelated to the downgrade.

The case is U.S. v. McGraw-Hill Cos., 13-cv-00779, U.S. District Court, Central District of California (Santa Ana).

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Executive Compensation

Bonus Curbs Under Threat From EBA Plan, Lawmaker Tells Barnier

European Union rules to cap banker bonuses at twice fixed pay may be undermined by recommendations from the European Banking Authority that would create widespread waivers to the curbs, a European Parliament lawmaker said.

The EU assembly last year clinched a deal on rules curtailing the bonus culture that lawmakers blamed for fueling the 2008 financial crisis. At least three parliament members have vowed to fight to keep the EBA from weakening the rules.

Once a proposal is issued, lawmakers will have an objection period before it can become law.

(Updates with Morocco Islamic finance laws in Compliance Policy. To be sent this column daily, click SALT COMPRPT.)
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