Ex-UBS Trader Banned, Avon Settles, Yellen: Compliance

John Hughes, the former senior trader on the exchange-traded funds desk at UBS AG’s global synthetic equities division, was banned from working in the U.K. finance industry over his involvement in a $2.3 billion unauthorized trading loss caused by Kweku Adoboli, another former UBS trader.

Hughes knew about and didn’t report an internal fund, dubbed an “umbrella,” that Adoboli created to help them reserve profits to cover future losses, the Financial Conduct Authority said in a statement yesterday.

Adoboli is serving a seven-year sentence after being convicted in 2012 in London for fraud. The Zurich-based bank was fined 29.7 million pounds ($50.2 million) in 2012 for failing to detect or prevent the trades.

Hughes represented himself during proceedings at the FCA, the regulator said. It declined to release contact information for the former trader. Hughes cooperated with the probe, the regulator said.

Compliance Policy

Japan’s FSA Moves to Loosen Rules for Insurers, Sankei Reports

Japan’s Financial Services Agency submitted an amendment to a bill that will allow insurance companies to buy competitors with units that operate non-insurance businesses, Sankei reported, without attribution.

The new rule, which will take effect as early as this year, will enable insurers to buy the assets as long as they divest non-insurance units within five years of acquisition, the newspaper reported.

Compliance Action

SEC Fires First Shot Since ‘Flash Boys’ With NYSE Oversight Fine

The New York Stock Exchange agreed to a $4.5 million penalty in order to settle allegations by the Securities and Exchange Commission that it failed to formulate or ignored rules governing everything from how traders connect computers to when prices are disseminated to floor brokers.

It’s only the fifth time the SEC has imposed a monetary punishment on a U.S. exchange.

The NYSE was bought by IntercontinentalExchange Group Inc. last year.

The action had something for everybody in the market structure debate, with regulators making NYSE pay for lax compliance while citing years-old offenses that were mostly procedural. In September 2012, the company paid $5 million over rule violations for giving certain customers trading data before the public.

The sweeping complaint is the SEC’s first regulatory broadside against a major U.S. exchange since the publication of“Flash Boys,” by Michael Lewis, who is a columnist for Bloomberg View, a month ago. The book sparked a debate about how fairly the American equity markets are structured.

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Avon Agrees to Pay $135 Million to Resolve Foreign-Bribery Probe

Avon Products Inc., the world’s largest door-to-door seller of cosmetics, will spend $135 million to resolve U.S. criminal and civil inquiries into whether it paid bribes in China and other countries.

Avon will pay $68 million to settle with the Justice Department and $67 million to the Securities and Exchange Commission, the company said yesterday in a regulatory filing. The company will enter a deferred-prosecution agreement, with a Chinese unit pleading guilty to a books and records violation of the Foreign Corrupt Practices Act.

Avon also will have a compliance monitor for at least 18 months, according to the filing.

Germany Levies Fines on 61 Aircraft Operators Over Emissions

Germany ordered 61 aircraft operators from countries including Russia and the U.S. to pay fines for breaching emissions-trading rules of the European Union.

The penalties are the first since the EU included aviation in its carbon market in 2012. The emissions-trading system allows sanctions at the EU level and by individual governments.

German regulators sent sanction letters ordering 17 operators in Germany and 44 in other countries to pay fines for not observing the rules in 2012, a spokesman at the German environmental agency said April 30.

Total penalties amount to 2.7 million euros ($3.7 million). German officials declined to name the recipients of the sanction letters.


Yellen Says Fed Seeking ‘Smarter’ Supervision of Community Banks

Chair Janet Yellen said the Federal Reserve will tailor its supervision of community banks to reduce their regulatory burden, and that small lenders shouldn’t face the same sort of oversight as the biggest financial firms.

“We are taking a fresh look at how we supervise community banks and possible ways that supervision can be smarter, more nimble, and more effective,” Yellen said yesterday in a speech in Washington to the Independent Community Bankers of America.

The central bank is “asking whether it makes sense for a specific policy to apply to community banks,” she said.

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