Holder Trading Probe, Tax Breaks, IBM Pension: Compliance

U.S. Attorney General Eric Holder promised Congress a thorough investigation into whether high-frequency trading violates laws against insider trading.

Holder made the comments in prepared remarks April 4 for a Congressional oversight hearing.

The Federal Bureau of Investigation has said its agents are probing whether firms that conduct high-frequency trading get an unfair jump on the competition by using computers and data lines to gain access to non-public information. The bureau has taken the unusual step of publicly appealing for traders and stock-exchange workers to blow the whistle on possible manipulation tied to the super-fast computer networks.

The practice drew extensive media coverage last week with the publication of “Flash Boys,” a book on the topic by Michael Lewis, a columnist for Bloomberg View.

The FBI’s inquiry stems from a multiyear crackdown on insider trading that has led to 79 convictions of hedge-fund traders and others. Other federal and state agencies also are examining high-frequency trading, which relies on computers and high-speed data connections to post and cancel orders in fractions of a second to profit on slight price discrepancies.

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Compliance Policy

Lapsed U.S. Tax Breaks for Wind, Corporations Revived in Senate

The U.S. Senate Finance Committee voted to revive almost all of the 55 tax breaks that expired Dec. 31, providing benefits for wind energy, U.S.-based multinational corporations and motor sports track owners.

While senators said they lamented the need to routinely extend tax breaks, lawmakers continue the temporary revival pattern. Making the breaks permanent would require accounting for 10 years of forgone revenue. Lawmakers back provisions that are particularly important in their home states and trade support for other members’ favored breaks.

Compliance Action

Lawsky Said to Probe Credit Suisse Role in Tax Shelters

New York’s top banking regulator is investigating whether Credit Suisse Group AG’s private banking practices resulted in the evasion of state taxes, according to a person with knowledge of the matter.

Benjamin Lawsky, superintendent of New York’s Department of Financial Services, sent the Zurich-based bank a demand for documents last month, said the person, who asked not to be identified because the probe is confidential.

Lawsky also petitioned the U.S. Senate’s Permanent Subcommittee on Investigations for material gathered during that panel’s probe of Credit Suisse’s private banking and wealth management business, the person said.

Marc Dosch, a spokesman for Credit Suisse, declined to comment on the probe.


IBM Pension Changes Breached Employee Rights, U.K. Judge Says

International Business Machines Corp. unfairly changed its U.K. pension plan in a bid to reduce a deficit of 890 million pounds ($1.48 billion), a judge in London ruled, handing a victory to a group of employees who had opposed the move by the company.

IBM’s “Project Waltz,” which cut benefits to 5,000 employees, breached the company’s duties to them, Judge Nicholas Warren said in the 430-page ruling.

“The court’s opinion acknowledges IBM’s right to make changes in its U.K. pension programs,” said Ken Saunders, a company spokesman. IBM disagrees with the decision and will appeal, he said.

David Young, a lawyer for the employees, didn’t immediately respond to requests for comment on the ruling.

The case is IBM United Kingdom Holdings Ltd., IBM United Kingdom Ltd. v Stuart Dalgleish & Ors, High Court of Justice, Chancery Division, HC10C01796.

SAC Capital Judge Urged by U.S. to Accept $900 Million Penalty

SAC Capital Advisors LP’s plea agreement to pay a $900 million penalty should be accepted, U.S. prosecutors told a judge April 3 as they seek the biggest criminal fine ever imposed for insider trading. The fine is part of a larger settlement with the hedge fund.

U.S. District Judge Laura Taylor Swain is set to decide April 10 whether she will accept the plea.

SAC pleaded guilty in November to securities fraud and wire fraud for allowing eight employees to engage in illicit trading dating back to 1999.

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).

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