(Updates with India stock market in Compliance Policy; NYSE-Deutsche Boerse, Credit Mutuel units, HBOS-collapse inquiry in Compliance Action; CleanTech in Courts.)
Jan. 3 (Bloomberg) -- Hungary’s chances of obtaining a bailout receded after lawmakers approved new central bank regulations Dec. 30 that prompted the International Monetary Fund and the European Union to break off talks last month.
Parliament in Budapest stripped central bank President Andras Simor of his right to name deputies, expanded the rate- setting Monetary Council and created a position for a third vice president. A separate law also approved Dec. 30 makes it possible to demote the central bank president if the institution is combined with the financial regulator.
Hungary received its second sovereign credit downgrade to junk in a month when Standard and Poor’s followed Moody’s Investors Service in taking the country out of its investment grade category on Dec. 21. The forint has fallen 15 percent against the euro since June 30, making it the world’s worst- performing currency in the period.
The new central bank regulations “seriously harm” the country’s national interests, allow for political intervention in monetary policy and threaten economic stability, the Magyar Nemzeti Bank said Dec. 30. The laws have led to the “indefinite postponement” of talks on a financial aid package, the central bank said in a statement posted on its website.
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India to Allow Overseas Individual Investors to Buy Stocks
India’s government will allow overseas individual investors to directly buy local equities as the country seeks to boost capital inflows and reduce volatility in the stock market.
The new rule from the central bank and stock market regulator is expected to take effect by Jan. 15, the government said in an e-mailed statement Jan 1. Currently, individual investors can only invest in Indian shares through so-called participatory notes.
The move has been anticipated since October 2010 when a Finance Ministry official, who declined to be identified at the time, said the change was being considered. R. Gopalan, secretary of economic affairs at the Finance Ministry, confirmed this on Nov. 15.
The new rule will “widen the class of investors, attract more foreign funds, and reduce market volatility,” as well as deepen the Indian capital market, the government said in its statement.
Foreign investors pulled out $495.5 million from India’s equities last year, compared with a record inflow of $29.4 billion in 2010, data from the exchange regulator show.
FSOC Proposes Dodd-Frank Rule on Assessments for Treasury
The Financial Stability Oversight Council, a group of regulators charged with preventing a financial crisis, approved a proposal Dec. 29 outlining how the U.S. Treasury’s assessment fee would be administered.
The proposal, which will be open for public comment for 60 days, determines which companies will be subject to an assessment fee, identifies the total expenses necessary to carry out the activities covered by the assessment and determines how the fee will be calculated.
The rule is part of the sweeping financial-regulation overhaul mandated by Dodd-Frank to prevent a repeat of the market tumult that followed the 2008 bankruptcy of Lehman Brothers Holdings Inc. The fees will help replenish some operating expenses of the FSOC, the Office of Financial Research, the Financial Research Fund and some covered Federal Deposit Insurance Corp. expenses.
The companies subject to the assessment are U.S. bank holding companies with at least $50 billion in total consolidated assets, foreign banking organizations with at least $50 billion in total consolidated assets in U.S. operations and nonbank financial companies required to be supervised by the Federal Reserve Board.
The assessment rate will be announced June 2012 and companies will be billed in early July with the first payment due July 20. Initial assessment amounts will depend on the president’s 2013 fiscal year budget.
Liberty’s Malone Fined for Holding Stake in DirecTV Chile
Chile’s antitrust tribunal fined John C. Malone, the billionaire owner of Liberty Media Corp., $3.6 million for failing to abide by conditions imposed on the merger of his cable-television company with a competitor.
The tribunal, known as TDLC, said Malone would face additional sanctions if he doesn’t sell within six months his direct and indirect stakes in satellite-television provider DirecTV Chile SA, a rival of Liberty’s VTR Globalcom SA, according to a statement posted on the tribunal’s website.
Chile’s National Economic Prosecutor sued Malone in 2008, arguing that when VTR received approval to merge with cable TV operator Metropolis Intercom SA in 2004, it had agreed not to own stakes in other paid TV operators in the country.
Liberty acquired an interest in DirecTV in 2008 from Rupert Murdoch’s News Corp.
“Mr. Malone was aware of the conditions imposed on the merger, and still maintains a stake in DirecTV Chile even after being warned by the National Economic Prosecutor,” the TDLC wrote in its ruling.
Courtnee Ulrich, a spokeswoman for Englewood, Colorado- based Liberty, didn’t respond to a request for comment.
S. Korean Regulator to Focus on Crisis Management in 2012
South Korea’s financial regulator told the country’s lenders to keep three months of foreign currency funding on hand again this year to guard against potential market unrest stemming from Europe’s debt woes and risks from North Korea after the death of dictator Kim Jong Il.
The Financial Services Commission expects volatility in international financial markets to increase next year as Europe’s crisis threatens global economic growth, the regulator said in a report on its 2012 plans Dec. 29.
The commission will encourage local lenders to have enough foreign-currency liquidity during times of emergency to avoid the massive capital inflows and outflows that exacerbated the country’s financial crisis in 2008.
The regulator will ask domestic banks to boost loan-loss reserves and refrain from paying dividends that are too high to ensure they have buffers for potential losses. It will be “flexible” in operating capital flow measures such as the cap on banks’ holding on foreign-currency forwards contracts and foreign-currency liquidity ratio guidance, the government commission said Dec. 30, without elaborating.
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GM Downplays China’s End of Policy to Attract Foreign Investment
General Motors Co., the biggest overseas automaker in China, downplayed the risks to its expansion plans in the world’s largest car market after the state ends a seven-year policy to attract foreign investments.
The Detroit-based company said in a statement Dec. 30 that it expects the new guidelines to “have minimal negative impact on GM’s future plans in China.” Dayna Hart, a Shanghai-based spokeswoman at GM, didn’t elaborate on the statement.
The Dec. 29 announcement, which came two weeks after China announced it would impose punitive tariffs on U.S.-made vehicles, means overseas carmakers will probably face difficulties getting state approval to build future plants in the country, according to research firm LMC Automotive. Global automakers are counting on China and the U.S. to drive growth this year as Europe’s debt crisis hampers the region’s economy.
Officials at Volkswagen AG and Ford Motor Co. declined to comment on how the changes in government policy will affect their business in China and said current investments won’t be hurt.
Daimler AG and Toyota Motor Corp. officials didn’t immediately respond to e-mails, while Akihiro Nakanishi, a Guangzhou-based spokesman for Nissan Motor Co., declined to comment.
The new rules will go into effect Jan. 30, China’s National Development and Reform Commission and the nation’s commerce ministry said in a statement Dec. 29. The move, meant to allow for a “healthy development” of China’s auto industry, won’t apply to foreign investments in fuel-efficient vehicles, which will still be encouraged, they said.
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EU Said to Prepare Draft Decision on NYSE-Deutsche Boerse Merger
European officials may distribute as soon as this week a recommendation on Deutsche Boerse AG’s planned takeover of NYSE Euronext, people familiar with the discussions said.
The European Commission team examining the case indicated at a meeting on Dec. 21 that they are likely to propose prohibiting the deal, according to two people familiar with the situation, who declined to be identified as the conversations were private. The advice is non-binding.
NYSE and Deutsche Boerse have been trying to convince European regulators that merging to create the world’s largest exchange operator won’t stifle competition in derivatives and clearing. Officials told the companies at a meeting in Brussels in mid-December that concessions they offered didn’t go far enough to allay their concerns, two people familiar with the talks said at the time. The last day the commission can rule is Feb. 9.
James Dunseath, a London-based spokesman for NYSE Euronext, and Joe Hennon, a spokesman for the European Commission, declined to comment. Heiner Seidel, a spokesman for Deutsche Boerse in Frankfurt, didn’t immediately respond to requests for comment.
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Credit Mutuel Units Inspected by French Data Protection Watchdog
Two Credit Mutuel-CIC units were inspected by France’s data protection authority following a data system failure reported on Dec. 28 by weekly newspaper Canard Enchaine, the Paris-based watchdog said Jan. 1.
The Commission Nationale de l’Informatique et des Libertes searched an information-technology unit in Strasbourg, France, and a newspaper belonging to the bank in the French town of Woippy, CNIL said on its website.
“The commission is now analyzing the numerous pieces of evidence gathered during the inspections to decide what to do,” CNIL said.
Credit Mutuel-CIC declined to comment on the searches, Bruno Brouchiquan, a spokesman for the bank, said in an e-mail.
Myners Wants Report on HBOS Collapse, Sunday Times Reports
Paul Myners, a former Treasury minister who oversaw the bailout of U.K. banks, called on the nation’s securities regulator to publish a report on the collapse of HBOS Plc, the Sunday Times reported.
A detailed account of the bank’s demise was the minimum a taxpayer should expect, Myners was quoted as saying by the newspaper.
Nasdaq Can Delist Chinese Company CleanTech, U.S. Judge Says
Nasdaq Stock Market won a federal judge’s permission to delist a Chinese maker of wind towers over its objection that the procedures for kicking it out are marred by bias.
U.S. District Judge Richard J. Sullivan Dec. 30 lifted the restraining order imposed against Nasdaq by New York State Supreme Court Justice Melvin Schweitzer on Dec. 20. Sullivan also denied a request by CleanTech Innovations Inc., based in Tieling, China, that he impose his own temporary restraining order.
“The court finds that the state court lacked jurisdiction to enter a temporary restraining order in a matter arising under” the federal securities law, Sullivan wrote in his order. The U.S. Securities and Exchange Commission on Dec. 28 also denied CleanTech’s request for a stay, which the company can appeal to the federal court rather than the court imposing its own restraining order, Sullivan said.
CleanTech has been fighting removal since January, when Nasdaq asserted that the company, which makes towers for wind turbines, intentionally withheld material information about $20 million in financing during its listing application. The company says it provided all necessary information in a timely manner.
CleanTech alleged the exchange violated its own rules and the company’s right to due process in “arbitrarily and capriciously” seeking to remove it. Nasdaq’s practices are “racially motivated” and “blatantly discriminatory,” aimed at delisting Chinese companies, according to the complaint.
The case is Cleantech Innovations Inc. v. Nasdaq Stock Market LLC, 11-cv-9358, U.S. District Court, Southern District of New York (Manhattan).
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CDR Financial, Founder Plead Guilty in Bid-Rigging Case
CDR Financial Products Inc. and its founder, David Rubin, pleaded guilty less than a week before trial on charges tied to a federal investigation of bid- and auction-rigging in the municipal bond market.
Rubin, 50, and his Beverly Hills, California-based firm were charged along with two other employees. Prosecutors said Rubin, who served as chief executive officer, took kickbacks for running sham auctions for investments. The U.S. said the defendants conspired to rig bids on contracts with local governments to invest the proceeds of bond issues.
He pleaded guilty along with the company Dec. 30 in Manhattan federal court. Jury selection in the trial of Rubin, former CDR Chief Financial Officer Z. Stewart Wolmark and Vice President Evan Zarefsky was set to begin this week. Rubin lost a bid last week to postpone the trial because his wife is in the final stages of terminal cancer.
Rubin, who sobbed at the Dec. 30 plea hearing, will be sentenced April 27. His conviction is a victory for federal antitrust prosecutors in their five-year investigation of the $3.7 trillion municipal bond market.
The case is U.S. v. Rubin/Chambers, Dunhill Insurance Services Inc., 09-CR-01058, U.S. District Court, Southern District of New York (Manhattan).
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Fickes Discusses Groupon-SEC Correspondence About IPO
Mark Fickes, a partner at BraunHagey & Borden LLP, talked about correspondence between Groupon Inc. and the U.S. Securities and Exchange Commission regarding the company’s initial public offering.
He spoke with Cory Johnson on Bloomberg Television’s “Bloomberg West.”
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Wall Street ‘Isn’t Powerful’ on Capitol Hill, Says Analyst Hintz
Wall Street lacks influence on Capitol Hill and regulators have the “opportunity to move an agenda the way they want it,” according to Brad Hintz, an analyst at Sanford C. Bernstein & Co.
“How powerful is Wall Street on Capitol Hill right now during an election year?” Hintz said Dec. 30 on Bloomberg Television. “I don’t think it’s very powerful at all.”
Regulators are crafting language to implement the so-called Volcker rule included in the Dodd-Frank legislation passed to prohibit deposit-taking banks from making speculative bets with their own money. Financial firms have lobbied to weaken regulations created in the aftermath of the 2008 financial crisis, and have asked for a 90-day extension in the comment period for the Volcker rule.
“For regulators, this is an opportunity for them to move an agenda the way they want it,” Hintz said. “Unfortunately, it is not a good picture for the industry going forward.”
Comings and Goings
Latvia Nominates Kristaps Zakulis as Head of Bank Regulator
Latvia’s Finance Ministry and central bank nominated Kristaps Zakulis as head of the country’s bank regulator, the ministry said in an e-mailed statement.
Zakulis was head of security for state-owned telecommunications company SIA Lattelecom, according to the statement. Zakulis’s nomination needs parliamentary approval.
Irena Krumane, the former director of the regulator, resigned on Nov. 28 following the suspension of Latvijas Krajbanka AS, the country’s sixth-biggest deposit bank, and accusations of missing money at the lender.
--With assistance from Meera Louis in Washington; Zoltan Simon in Budapest; William Ahearn, Bob Van Voris and Martin Braun in New York; Eduardo Thomson in Santiago; Nandini Sukumar in London; Heather Smith and Aaron Eglitis in Riga; Natalie Obiko Pearson in Mumbai; Thom Weidlich in Brooklyn, New York. Editors: Stephen Farr, Glenn Holdcraft.
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