Aviva Charge, CFTC Nominees, Rule 105 Accord: Compliance

Aviva Plc took a 132 million pound ($221 million) charge after saying two former employees breached its trading policy since 2006 to the benefit of external hedge funds.

The London-based insurer, which yesterday reported full-year results, said it found evidence last year of “improper allocation of trades” in fixed income by Aviva Investors from 2006 to 2012. Aviva, which has notified regulators about the improper trades, first disclosed them in a letter to clients in December.

The company said measures have been implemented to improve controls.

Aviva said the total cost to operating profit from the improper trades includes the “compensation” of 126 million pounds that is expected to be claimed in connection with the breaches and other “associated costs” of 6 million pounds, according to the statement. Aviva Investors contributed 3 percent to Aviva’s overall operating profit in 2013.

Aviva didn’t name the former employees or the external hedge funds. A Financial Conduct Authority spokesman declined to comment when contacted by Bloomberg News yesterday.

Compliance Policy

Japan Says Bitcoin Not Currency Amid Calls for Regulation

Japan’s government said Bitcoin isn’t a currency amid calls for its regulation a week after the bankruptcy of Mt. Gox, the Tokyo-based exchange that was once the world’s biggest.

There is no law to define Bitcoin and relevant ministries are gathering information on it, Prime Minister Shinzo Abe’s cabinet said in a statement in response to questions from an opposition party lawmaker. Bitcoin transactions can be taxed, according to the statement obtained by Bloomberg News.

Japan isn’t the only country grappling with the regulation of Bitcoin amid reports of hacking into exchanges including Mt. Gox and concern that the virtual currency can be used for money laundering. In the U.S., states are wrestling with how digital-currency businesses could be regulated as money transmitters, while Russia has said Bitcoin is illegal under current law.

The Japanese banking law doesn’t allow lenders to broker Bitcoin transactions or set up accounts for customers to store the digital assets, according to the statement. At the same time, current rules don’t prevent brokerages and asset managers from managing clients’ Bitcoins, it said.

Finance Minister Taro Aso said today that the government hasn’t decided whether to regulate Bitcoin. Earlier this week Aso said it wasn’t clear yet whether Mt. Gox’s failure was a crime.

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Compliance Action

Worldwide Capital to Pay $7.2 Million Over SEC Short-Sale Claims

Worldwide Capital Inc., a New York-based proprietary trading firm, agreed to pay a record $7.2 million to settle U.S. regulatory claims it improperly bought shares of companies it had bet against days earlier.

The firm and its founder, Jeffrey Lynn, sold stock short in 60 public offerings between October 2007 and February 2012, while buying shares in the same offerings, the Securities and Exchange Commission said in a statement. Worldwide Capital violated SEC Rule 105, which prohibits taking part in a public offering after selling the stock short during a restricted period leading up to the pricing of the sale.

The settlement is the largest obtained by the SEC for such violations, according to the statement. Lynn and Worldwide Capital didn’t admit or deny wrongdoing. Lynn’s attorney, Ira Lee Sorkin, declined to comment.

Comings and Goings

Massad Joins CFTC Nominees Facing Senate on U.S. Swaps Oversight

Three nominees for seats at the top U.S. derivatives regulator faced questions about how tenaciously they’ll enforce the Dodd-Frank Act’s restrictions on the swaps market at a Senate confirmation hearing in Washington.

Timothy Massad, 57, the Treasury Department official nominated by President Barack Obama to serve as chairman of the five-member Commodity Futures Trading Commission, has drawn skepticism from outside interest groups about his views on regulation and how he’d lead the agency.

He was expected to be joined at the Senate Agriculture Committee hearing yesterday by nominees Sharon Y. Bowen and J. Christopher Giancarlo. Nominees faced questions on the role of speculation in commodity markets and the reach of Dodd-Frank rules overseas.

The CFTC is in a period of transition. The three nominees, who require approval by the full Senate, would change the face of the five-member commission.

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Deutsche Bank Compliance Chief Procter Will Leave for Law Firm

Deutsche Bank AG’s compliance chief, Andrew Procter, will leave for law firm Herbert Smith Freehills LLP.

Procter, 52, who was also Deutsche Bank’s head of government and regulatory affairs, will join the law firm’s financial services regulatory practice as a partner in June, London-based Herbert Smith Freehills said in a statement March 5.

He will work at Deutsche Bank during a transitional period, the bank said in a staff e-mail, which it confirmed by phone yesterday.

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