Canada-Volcker Rule, Avon-Offer Hoax, Nationwide: Compliance

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The Volcker Rule, which restricts U.S. banks’ trading of foreign debt, violates the North American Free Trade Agreement and should be changed, Canada’s Finance Minister said.

Joe Oliver, speaking Wednesday in New York, called on the U.S. to grant Canada an exemption from the Volcker restrictions, citing the trade relationship between the two countries and Canada’s strong credit rating. The U.S. Treasury denied Oliver’s claim that the Volcker Rule violates NAFTA.

While bilateral trade is strong, “there’s one avenue where American investors cannot enjoy the Canadian advantage and that is the ban on proprietary trading of non-U.S. government securities by U.S. banks, a policy known as the Volcker Rule,” Oliver told a U.S.-Canada securities summit.

Suzanne Elio, a Treasury spokeswoman, said in an e-mail Wednesday that the Volcker Rule is clearly not a violation of NAFTA or any other trade agreement. Such agreements specifically safeguard the ability of the U.S. to protect the integrity and stability of its financial system, she said in the e-mail.

The Volcker Rule seeks to curb banks’ use of their own funds to make bets in capital markets. The measure, proposed by former Fed Chairman Paul Volcker, was part of a broad regulatory overhaul following the financial crisis. Oliver said he believes “with a strong legal basis” the rule violates NAFTA. He declined to elaborate.

Standard & Poor’s rates Canada AAA, one level above its AA+ grade for the U.S.

The rule restricts U.S. banks from proprietary trading of Canadian government debt. Oliver’s comments took aim at what he called a missed opportunity for U.S. investors -- signaling a concern that rules placed on U.S. banks could affect demand for Canadian bonds.

The Volcker rule also places some restrictions on the U.S. operations of Canadian banks, Kate Payne, a spokeswoman for the Canadian Bankers Association, said in an e-mail.

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Compliance Policy

Avon-Offer Hoax Shows It’s Easy To Fool Investors

Fooling investors is surprisingly easy. You can even do it on the government’s official site for company filings.

The latest reminder unspooled within a few minutes Thursday when a notice came out that a purported private-equity firm made a bid to buy Avon Products Inc.

In a market where computers scrape filings and trade automatically on news headlines, the stock shot up 20 percent before the company said it was a hoax. The notice, submitted by a firm registered at an empty office, was filed on the Securities and Exchange Commission’s Edgar system, which houses more than 20 million company filings for investors to peruse.

The SEC doesn’t verify whether entities using its filing systems “are real or have money,” said James Maloney, a former SEC official now at law firm Gibson Dunn & Crutcher. Getting access to Edgar is as easy as signing up for e-mail, he said.

There’s a history of scammers putting out phony press releases to juice a stock price and then sell to investors who bought their fake news and claims that stretch credibility have made their way onto the SEC’s system in the past.

The SEC is reviewing the legitimacy of the filing, a person familiar with the matter said. In the past, the agency has looked for unusual trading and has frozen related brokerage accounts.

SEC spokesman Kevin Callahan declined to comment.

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Compliance Action

Nationwide Settles Claim It Manipulated Fund Orders for 15 Years

Nationwide Mutual Insurance Co. will settle claims it delayed mail deliveries and in doing so allowed mutual funds underlying its products to be repriced before it carried out customers’ orders.

Nationwide agreed to pay $8 million to end the case, the U.S. Securities and Exchange Commission said Thursday in a statement. The SEC claimed that Nationwide delayed the mail at post-office boxes for a 15-year period through September 2011, so that buy and sell orders weren’t recorded until after a daily deadline for repricing the funds.

The insurer, which is owned by policyholders, said the agency didn’t allege that it benefited from the practice, or that some investors received preferential treatment.

“The SEC acknowledges Nationwide’s change in practices that occurred in 2011 and its cooperation in the investigation,” the Columbus, Ohio-based company said in an e-mailed statement. “Nationwide chose to settle this matter to bring closure and remain focused on the needs of its members.”

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Morgan Stanley Fined Over Flawed Short-Sale Reporting

Morgan Stanley was fined $2 million by the Financial Industry Regulatory Authority over claims it failed to completely report short positions in certain stocks.

Morgan Stanley didn’t accurately disclose billions of shares of short-interest positions over a period of more than six years, Finra said Wednesday in a statement. The New York-based bank also had a deficient supervisory system that failed to detect the violations, the industry-financed regulator said.

Morgan Stanley included holdings from non broker-dealer affiliates in its aggregate reported positions, tracked by other investors, violating a Securities and Exchange Commission rule governing short sales.

Morgan Stanley didn’t admit or deny the claims in entering into the settlement.

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European Steel Surges on EU Probe of Foreign Exporters

Shares of steelmakers ArcelorMittal and Salzgitter AG jumped after the European Union widened a competition probe, opening up the prospect of tariffs on non-stainless steels from China and Russia.

The EU is examining whether exporters of certain products sell them in the 28-nation bloc below cost, a practice known as dumping, according to a statement on Thursday. The investigation into cold-rolled flat products of iron or non-alloy steel follows a complaint from European industry group Eurofer.

The EU has already imposed tariffs as high as 35.9 Percent on electrical steel from the U.S., Russia, Japan, China and South Korea, it said Wednesday. Brussels-based Eurofer hailed the introduction of the antidumping duties, saying in a statement that they would “restore free trade in the EU market at non-injurious prices.”