Freddie-Fannie, Money Markets, Bank Conflicts: Compliance

Fannie Mae and Freddie Mac, the mortgage-finance giants operating under U.S. conservatorship, would be unwound and replaced by a lender-owned securities issuer under a proposal by U.S. Representative Maxine Waters.

Waters, the top Democrat on the House Financial Services Committee, released draft legislation yesterday calling for elimination of the two companies within five years and creation of a Mortgage Securities Cooperative to issue government-guaranteed debt. It also would finance a housing trust fund to provide access to lower-income borrowers.

The proposal is unlikely to gain traction in the Financial Services Committee, where Republican Chairman Jeb Hensarling has offered a bill that would almost entirely privatize the mortgage market. The Hensarling bill hasn’t gained enough support for a full House vote.

House Democrats have been split on the best way forward for a housing overhaul.

The Senate Banking Committee is working on bipartisan legislation that would wind down Fannie Mae and Freddie Mac.

Compliance Policy

SEC Said to Weigh Industry’s Retail Exemption in Money-Fund Rule

Securities regulators are considering a change in how they exempt retail investors from proposed restrictions on money- market mutual funds after fund companies complained the original plan was too onerous, according to three people familiar with the matter.

The new plan would allow retail funds that have only individuals as shareholders to keep their stable $1 share price, according to the people, who asked to not be named because the plan isn’t public. The Securities and Exchange Commission initially proposed defining retail funds as those limiting an investor’s redemptions to $1 million a day.

Under a rule proposal issued in June, money funds investing in corporate debt and catering to institutional investors would have to move to a floating-share price.

The SEC has “caved” to the money-market industry, Arthur Levitt, a former SEC chairman and an adviser to Goldman Sachs Group Inc., said in an interview on Bloomberg Radio.

SEC Chairman Mary Jo White said the rule will be voted on this year.

Draghi Says Bank of Spain Should Allow Review of Conflict Rules

European Central Bank President Mario Draghi said in a letter on the central bank’s website that Bank of Spain should revise its rules for supervisors on conflicts of interest to ensure consistency as the euro area centralizes oversight of lenders.

Bank of Spain began its review of the rules after the decision by ex-regulation chief Jose Maria Roldan to seek a lobbying position was questioned by Economy Minister Luis de Guindos. The Spanish Banking Association accepted Roldan’s candidacy this month, and its members will vote April 22 on the appointment.

Compliance Action

Two Libor Traders Face Fines From U.K. Watchdog as Number Grows

U.K. Financial Conduct Authority published penalty notices against two more traders for misconduct in relation to the London interbank offered rate.

One manager and one trader at a bank attempted to manipulate Libor benchmark submissions over two years, the regulator said. The FCA doesn’t name the individuals in the notices, which outline regulatory breaches that may lead to fines or bans against working in the industry.

Both traders made requests to their bank’s benchmark submitters to change rates, according to the regulator.

The FCA has issued seven penalty notices in relation to Libor.

Firms including Barclays Plc and UBS AG have been collectively fined about $6 billion for manipulating Libor and related benchmarks. Prosecutors and regulators around the world are investigating whether firms colluded to rig rates to benefit their own derivatives trades.


‘Remorseful’ SAC Urges Approval of U.S. Insider Trading Pact

SAC Capital Advisors LP urged a federal judge to approve its record $1.8 billion insider-trading settlement with the government, saying the firm is “deeply remorseful” for the illegal acts of its employees.

SAC lawyer Martin Klotz asked U.S. District Judge Laura Taylor Swain in a two-page letter yesterday to sign off on the agreement, which also calls for the firm to close its investment advisory business. A sentencing hearing before Swain is scheduled for April 10 in Manhattan.

Four SAC units were indicted last year, accused of reaping hundreds of millions of dollars in illegal profit through insider trades by employees dating to 1999. Founder Steven A. Cohen, 57, faces an administrative action by the Securities and Exchange Commission alleging he failed to supervise the hedge fund’s activities. Eight current or former SAC employees have been convicted of insider trading charges. Cohen has denied wrongdoing and isn’t accused of a crime.

Under the settlement, SAC will become a firm managing only Cohen’s personal wealth.

The criminal case is U.S. v. SAC Capital Advisors LP, 13-cr-00541, U.S. District Court, Southern District of New York (Manhattan). The civil case is U.S. v. SAC Capital Advisors LP, 1:13-cv-5182, U.S. District Court, Southern District of New York (Manhattan). The investor suit is Kaplan v. SAC Capital Advisors LP, 12-cv-09350, U.S. District Court, Southern District of New York (Manhattan).

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