Trader Acronyms, Trade Transparency, EU Meeting: Compliance

Updated on

Prosecutors combing through the e-mail transcripts of Wall Street traders suspected of illegal activity are looking for telltale acronyms that hint at suspicious activity.

TYOP (tell you on phone), TOL (talk offline) and LDL (let’s discuss live) are red flags according to defense attorneys and current and former prosecutors who agreed to speak on condition of anonymity.

Phrases such as “call my cell” and “let’s go off e-mail” remain popular among the people who plot insider trades or the rigging of some of the world’s biggest markets. New expressions and acronyms pop up all the time, and authorities say they build lists of favored terms.

Investigators for the Securities and Exchange Commission and Justice Department get so many e-mails they can’t possibly review them all without using their Control-F search function, said Reed Brodsky, a partner at Gibson, Dunn & Crutcher LLP who prosecuted Raj Rajaratnam, the fund manager convicted in 2011 of insider trading, when he was with the U.S. Southern District.

Homing in on a suggestion to go off e-mail is usually only the start. Authorities then have to go through hours of records to gather evidence that a crime was committed.

For more, click here.

Compliance Policy

EU Securities Revamp Risks Market Damage, Germany, U.K. Say

Germany, the U.K. and France called on European Union regulators to modify proposed trade transparency rules to avoid damaging securities markets.

The European Securities and Markets Authority’s approach to determining the liquidity of securities that would see them covered by new rules for pre- and post-trade transparency could have an “unintended consequence,” according to the three countries’ finance ministries.

Many financial instruments that should be eligible for waivers or deferrals from the rules under EU law “may have inappropriate transparency requirements applied to them, with resulting significant negative implications for the proper functioning of these vital markets,” the ministries said in a letter to ESMA and the European Commission, the EU’s executive arm.

ESMA proposed in December to increase pre- and post-trade transparency requirements for bonds and swaps as part of work to implement EU financial markets legislation known as MiFID II that was approved last year. The Association for Financial Markets in Europe has said the plan’s definition of market liquidity would damage trading by applying the transparency standards too broadly.

Final rules will be issued this year.

For more, click here.

Compliance Action

EU’s Juncker, Moscovici, Vestager to Meet Lawmakers on Tax

European Commission President Jean-Claude Juncker and EU Economic Affairs Commissioner Pierre Moscovici have agreed to meet with European Parliament members who are leading a consultation into tax rulings on Sept. 17.

European Union Competition Commissioner Margrethe Vestager is leading a probe into unlawful state aid arising from corporate low-tax arrangements. She will also attend the meeting with the European Parliament’s special tax committee and its economic and monetary affairs committee, according to comments on Twitter Wednesday by the Parliament’s economic affairs committee.

Governments that dole out tax subsidies to big companies shouldn’t be allowed to reap multibillion-euro windfalls if the EU orders them to claw back the aid, lawmakers probing tax loopholes have said.

Instead, the EU should consider changing the law so that money is shared among neighboring nations that played by the rules, according to the draft by a special committee on tax rulings in the Parliament.

For more, click here, and click here.


For BASF, Huge Potential Liability Emerges Years After Deal

When BASF SE acquired Engelhard Corp. nine years ago for $5 billion, executives unknowingly inherited a ticking legal time bomb.

It began decades ago with the apparently mundane industrial product talc, used in things such as wallboards and for handling auto tires on the factory line.

It wasn’t until 2009, after BASF assumed Engelhard’s liabilities, that another picture began to emerge. A former Engelhard scientist testified in a lawsuit as to trace amounts of asbestos in the talc and the company’s legal department was told to “purge our records.” A co-worker also testified about test results in the 1970s that showed the presence of asbestos in the talc.

The revelations set off a fight about what Engelhard knew about its talc, how its lawyers may have acted, and whether old lawsuits around the U.S. can be reopened.

BASF, based in Ludwigshafen, Germany, faces about 300 lawsuits related to talc. It has tried to distance itself from the alleged behavior of Engelhard and its former law firm. Plaintiffs’ law firms say as many as 10,000 potential cases related to Engelhard talc could be reopened.