(Updates with Fed hedge-fund survey in Compliance Policy, Aldar Properties bailout in Compliance Action and Burns in Interviews/Speeches.)
Dec. 30 (Bloomberg) -- India’s capital market regulator is reviewing the initial public offering process to stop companies from raising funds using falsified information, after seven firms were found to have violated rules.
The Securities and Exchange Board of India will take some “immediate measures” following its investigation into the seven IPOs, Chairman U.K. Sinha said yesterday. The regulator barred the companies from raising more money from the capital markets, according to separate rulings posted on its website.
The latest ruling is part of the authorities’ move to raise corporate governance standards in the $1 trillion market and attract more overseas investors. The SEBI order showed that the companies including Bharatiya Global Infomedia Ltd. and PG Electroplast Ltd. failed to make full disclosures and misused the share sale proceeds.
Taksheel Solutions Ltd., Tijaria Polypipes Ltd., Brooks Laboratories Ltd., Onelife Capital Advisors Ltd. and RDB Rasayans Ltd. were the other companies barred from accessing public funds, according to the regulator’s statement. SEBI asked the companies to place the unutilized money from their share sales in an interest-bearing escrow account with a bank.
The companies have lost at least half their market value since their listing in the past six months.
Rakesh Bhhatia, chairman of Bharatiya Global, wasn’t available at his office in Noida, near Delhi, when called for comment.
Sumit Gupta, an assistant vice president at Onelife Capital, declined to comment, saying the company is studying the order. Officials at the other six firms weren’t available to comment when Bloomberg News called their offices.
The regulator also barred three investment bankers including Almondz Global Securities Ltd., Atherstone Capital Markets Ltd. and PNB Investment Services Ltd. which managed the share sales, for failing to check facts.
Vinay Mehta, chief executive officer of Almondz Global wasn’t immediately available for comment at his office in New Delhi, while Gurunath Mudlapur, managing director of Atherstone Capital, didn’t answer two calls to his cellphone. J. K. Agarwal, chief operating officer at PNB Investment declined to comment.
Gulf Lease Sales Will Reduce U.S. Oil Dependence, Agency Finds
Ten planned lease sales in the Gulf of Mexico will reduce dependence on foreign oil, the U.S. Interior Department said in a draft environmental review.
The sales, planned for 2012 to 2017, will be off the coasts of Texas, Louisiana, Mississippi and Alabama, the department’s Bureau of Ocean Energy Management said in the proposed environmental-impact statement released yesterday.
President Barack Obama has set a target of reducing oil imports by a third by 2025. BP Plc’s offshore oil spill in 2010, the worst in U.S. waters, caused the administration to postpone lease sales to toughen offshore regulations. Republican presidential candidates including Texas Governor Rick Perry have said Obama isn’t permitting enough drilling to create jobs and reduce imports.
Bureau director Tommy Beaudreau said in a statement yesterday that the release of the draft was “an important step” toward implementing the administration’s offshore-leasing plans.
The analysis covers the western and central parts of the Gulf, which cover more than 95 million acres combined, according to the report.
Among new regulatory standards imposed after the BP spill, which poured about 4.9 million barrels of crude into the gulf, are requirements to certify that the well design is appropriate and that shear rams in a blowout preventer can cut pipe to prevent a spill.
The department announced three public hearings on the draft, starting on Jan. 10 in Houston. Sessions are also scheduled for Jan. 11 in New Orleans and Jan. 12 in Spanish Fort, Alabama.
The public has 45 days to submit written comments to the department before release of a final version.
Saudi Arabia to Set New Market Rules Mid-January, Reuters Says
Saudi Arabia, the country with the largest stock market in the Middle East, plans to unveil new stock market rules on Jan. 15 to further open the Saudi Stock Market to direct investments by foreigners, according to a report by Reuters, citing a source who declined to be identified.
Dialog about the rules is “clearly intensifying” and the exchange is “looking at mid-January for publishing the term sheet for access,” the source said, according to Reuters.
Foreigners can invest in stocks listed on the Saudi Stock Exchange by share swap transactions, which are purchased through international banks that deal with local partners, Reuters said. The local banks are fighting the new rules because they do not want “to be cut out of the deal,” the news service reported.
If the rules are implemented, the cost basis of trading is expected to come down by 70 to 80 basis points, according to the source, Reuters said.
India’s Upper House of Parliament Adjourns Without Graft Vote
India’s upper house of parliament adjourned amid uproar without voting on a bill to curb graft, as regional politicians protested parts of the legislation.
Indian upper house lawmakers yesterday debated a bill to curb corruption as Prime Minister Manmohan Singh fights to secure its passage after activist Anna Hazare ended his public fast early amid signs he may be losing support.
Approval in the upper chamber, where the ruling coalition is 28 seats short of a majority, is the final hurdle for legislation Singh is seeking to end a year of protests over alleged graft that have weakened his government, stalled policy making as Asia’s third largest economy slowed and led to the jailing of a minister and business executives.
The government must win the support of independent and regional lawmakers to clear the bill in the upper house, or Rajya Sabha. The bill, known as the Lokpal, passed in the lower house Dec. 27. An extended session of parliament was expected to end yesterday.
Singh’s government defeated Dec. 27 attempts by lower house lawmakers from several parties to give the proposed anti-graft ombudsman overall control of the country’s main criminal investigation agency, also a key demand of Hazare, who argues it is the only way to ensure the new body has the powers to probe and punish those accused of corruption.
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Fed Says Dealers Tighten Terms on Hedge-Fund Security Trades
Wall Street dealers made it tougher for hedge funds to finance trading of securities and derivatives in the three months through November, a Federal Reserve survey showed yesterday.
Responses “indicated a broad but moderate tightening of credit terms applicable to important classes of counterparties,” especially hedge-fund clients, trading real estate investment trusts and nonfinancial corporations, according to the quarterly survey of senior credit officers at 20 dealers covering the period of September to November. The central bank released the report in Washington.
The report adds to evidence of stress in the financial system from Europe’s sovereign-debt crisis. Investor concern about the continent’s turmoil has helped drive the premium banks pay to borrow dollars to the highest in more than two years. The Fed survey didn’t discuss causes of the tighter financing terms.
Respondents reporting tougher borrowing terms for hedge funds “most frequently pointed to a worsening in general market liquidity and functioning and to reduced willingness to take on risk and, to a lesser extent, adoption of more-stringent market conventions and deterioration in the strength of counterparties as the reasons,” the Fed said.
The Fed’s Senior Credit Officer Opinion Survey on Dealer Financing Terms was conducted from Nov. 15 to Nov. 28.
For more, click here.
Abu Dhabi $4.6 Billion Aldar Bailout Eases Concern, Moody’s Says
Abu Dhabi’s agreement to provide Aldar Properties PJSC with a 16.8 billion-dirham ($4.6 billion) bailout will alleviate concern about the property developer’s debt, Moody’s Investors Service said.
The decision is “credit positive” for Aldar and will reduce unease about debt maturing in 2012, the ratings company said in a note to investors yesterday. The developer’s credit profile will benefit from increased certainty about cash flow and less risk from property market volatility, Moody’s said.
The government will purchase 760 homes in the Al Raha Beach development and retire 5 billion dirhams of debt related to infrastructure on Yas Island, Aldar said in a statement Dec. 28.
Developers in Abu Dhabi and neighboring emirate Dubai are struggling to pay down debts after property prices fell by more than half since the market’s peak in 2008. The latest agreement takes the amount of government spending on Aldar, Abu Dhabi’s biggest developer, to 36 billion dirhams this year. The state also contributed to a $20 billion bailout of Dubai in 2009.
The government will also buy 5.7 billion dirhams of assets in Central Market, a project in downtown Abu Dhabi, and finance the completion of the district’s redevelopment. Aldar will receive 4.5 billion dirhams in the next two months as part of the agreement and the rest will be paid over four years, according to the statement. The deal will immediately reduce Aldar’s debt by 5 billion dirhams.
Moody’s said it will make a more detailed assessment of the effect of the government aid on the company’s medium-term credit and plans to revise its financial forecasts for the company.
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SEC Settles Overseas Bribery Case With Deutsche Telekom
Deutsche Telekom AG, Europe’s biggest phone company, and its Magyar Telekom unit will pay $95 million to settle allegations they violated the Foreign Corrupt Practices Act.
Magyar Telekom, based in Budapest, will disgorge $31.2 million and pay a $59.6 million criminal penalty as part of a deferred prosecution agreement with the U.S. Department of Justice, according to a statement yesterday by the U.S. Securities and Exchange Commission. The Bonn-based parent company will pay $4.36 million as part of a DOJ non-prosecution agreement, the SEC said. Both companies settled a civil suit filed yesterday with the SEC.
Magyar Telekom, Hungary’s former phone monopoly, in June said it set aside 11.7 billion forint ($48.7 million) as it negotiated a settlement with the SEC over FCPA violations.
The SEC filed separate lawsuits in federal court in Manhattan against the companies and three former executives of Magyar Telekom. The defendants are former Chief Executive Officer Elek Straub, former Director of Central Strategic Organization Andras Balogh and former Director of Business Development and Acquisitions in the Central Strategic Organization Tamas Morvai.
“Deutsche Telekom has not been accused of violating the ban on bribery,” the company said in an e-mailed statement forwarded by spokeswoman Elpida Trizi. “The settlement terminates the investigations against Deutsche Telekom without a criminal charge.”
“The final settlements recognize the DOJ’s and the SEC’s consideration of the company’s self-reporting, thorough internal investigation, remediation and cooperation with the DOJ’s and the SEC’s investigations,” Magyar Telekom said in a statement.
Lawyers for the three former executives couldn’t immediately be reached for comment about the lawsuit.
The cases are U.S. Securities and Exchange Commission v. Magyar Telekom Plc, 11-cv-9646, and U.S. Securities and Exchange Commission v. Straub, 11-cv-9645, U.S. District Court, Southern District of New York (Manhattan).
Attorney Burns Says Hurd Letter Raises Legal Questions
Douglas Burns, a former federal prosecutor, talks about a letter released by a court yesterday which alleges former Hewlett-Packard Co. Chief Executive Officer Mark Hurd tried to persuade Jodie Fisher to have sex and kissed and touched her inappropriately while she was a company events contractor.
Hurd’s relationship with Fisher led to his resignation as CEO on Aug. 6, 2010, after a company investigation found he had violated its standards of business conduct.
Burns speaks with Sara Eisen and Jon Erlichman on Bloomberg Television’s “InsideTrack.”
For the video, click here.
Comings and Goings/Business Closures
Juncker Has No Plans to Step Down as Premier in Next Few Years
Luxembourg’s prime minister, Jean-Claude Juncker, said he has no plans to step down from his post in “the next few years.”
Juncker, whose chairmanship of the group of euro-area finance ministers ends in mid-2012, said he won’t seek to remain in charge of the group when the job becomes full-time.
The prime minister made the comments in an interview with the Luxemburger Wort newspaper that will be published today.
He said the decision about “how this position would work” will be made in May or June.
Juncker added that Europe faces a “great catastrophe” without budget consolidation and a reduction of public debt in the region.
Germany’s DJE Kapital Closes $291 Million Real-Estate Fund
DJE Kapital AG said its investment unit closed a property fund with assets of 225 million euros ($291 million) because of “difficult” market conditions.
The DJE Real Estate fund was closed yesterday after a large number of investors withdrew their money, DJE Investment SA said in an e-mailed statement yesterday.
Germany’s 85 billion-euro real-estate mutual fund industry may be facing the biggest crisis in its 50-year history. A dozen of the 44 funds, which own 28 percent of the industry’s assets, are liquidating or have suspended redemptions, according to Frankfurt-based BVI Bundesverband Investment & Asset Management.
DJE Kapital is based in Pullach, a town near Munich, according to its website. DJE Investment’s headquarters are in Luxembourg.
--With assistance from Thom Weidlich and Matthew Leising in New York, Stephanie Bodoni in Luxembourg, Jim Snyder and Scott Lanman in Washington, Andrew Blackman in Berlin, Rajhkumar K Shaaw in Mumbai, Anto Antony and Bibhudatta Pradhan in New Delhi, and Zainab Fattah in Dubai. Editor: Mary Romano.
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