(Updates with EU criticism in Volcker rule item; Singapore law firms, SEC-private equity ‘inquiry’ in Compliance Action; Czech antitrust, SEC-Chartwell in Courts; and Fickes in Interviews.)
Feb. 14 (Bloomberg) -- France and Belgium ended bans on the short-selling of financial stocks, the countries’ financial markets regulators said yesterday.
The French curbs, barring short sales on companies including France’s biggest banks BNP Paribas SA, Societe Generale SA and Credit Agricole SA, expired Feb. 11 and haven’t been renewed, France’s Autorite des Marches Financiers said in a statement on its website without giving further reasons for the decision.
“The lower volatility of the markets” made the ban no longer necessary, Belgium’s Financial Services and Markets Authority said in its statement.
France, Belgium, Spain and Italy moved to ban short selling in August in an effort to stabilize markets after European banks including Societe Generale hit their lowest levels since the credit crisis of 2008.
The European Securities and Markets Authority, which coordinates markets policy in the region, “has been informed” of the French and Belgian actions, ESMA Spokesman Reemt Seibel said in a telephone interview yesterday.
Both France and Belgium have bans on so-called naked short- selling that remain in force.
April Group, CIC, CNP Assurances SA, Euler Hermes SA, Natixis SA, and Scor SE were also covered by the French ban. The AMF reiterated that it requires disclosure of short positions under rules adopted last February. France also restricted short sales in 2008 after the collapse of Lehman Brothers Holdings Inc.
U.S. Volcker Rule to Increase Financial System Risk, Critics Say
Representatives for the world’s largest banks said a U.S. proposal to ban proprietary trading would increase risk, raise costs for investors and be vulnerable to legal challenge.
Goldman Sachs Group Inc., JPMorgan Chase & Co. and Bank of America Corp., alongside foreign banks and governments, were set to file letters yesterday in opposition to the Volcker rule, a proposal made under the 2010 Dodd-Frank Act that seeks to limit risky trading at banks that receive federal assistance.
“The proposal will severely limit banking entities’ ability to hedge their own risk, thereby increasing rather than decreasing the risk to banking entities and the financial system,” the Clearing House Association, American Bankers Association, Securities Industry and Financial Markets Association, and Financial Services Roundtable said in joint 173-page letter.
The rule named for former Fed Chairman Paul Volcker, who championed it as an adviser to President Barack Obama, would seek to ban banks from proprietary trading while allowing them to continue short-term trades for hedging or market-making. It also would limit banks’ investments in private-equity and hedge funds.
The proposal is one of the most contentious provisions of Dodd-Frank, the regulatory overhaul enacted in 2010 that requires the ban on proprietary trading to be in place by July 21. A 298-page proposal released by U.S. regulators in October included more than 1,300 questions for affected banks to consider during the comment period, which closed yesterday.
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Separately, Canadian authorities reiterated warnings that the so-called Volcker rule may stem liquidity for Canadian government bonds, Finance Minister Jim Flaherty said in a letter to Treasury Secretary Timothy Geithner released yesterday.
Bank of Canada Governor Mark Carney echoed those concerns in a separate letter to Federal Reserve Chairman Ben S. Bernanke. “The proposed rule may undermine, rather than support, progress toward creating a safer, more resilient and more efficient global financial system,” Carney wrote.
Canadian policy makers have joined European and Asian colleagues in speaking out against the rule.
Canadian government bonds should be exempt from the regulations, Flaherty said, noting that U.S. government bonds are excluded. The rule risks impeding financial institutions from acting as “market makers” for government bonds in Canada, as well as for corporate bonds and stocks, he added.
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Separately, the Volcker rule may discriminate against funds based in the EU, the European Fund and Asset Management Association said yesterday in an e-mailed statement.
Parts of the Volcker rule would curb banks’ relationships with so-called UCITS and other types of regulated funds in the EU, without applying such restrictions to similar funds in the U.S., the group said.
SEC Starts Informal Inquiry of Private Equity Firms
The U.S. Securities and Exchange Commission’s review of how private equity firms value assets and market their funds is said to be looking at mainly smaller firms. The agency is interested in the way private equity values its portfolio companies when seeking to attract new investors.
Bloomberg’s Cristina Alesci reports on Bloomberg Television’s “Money Moves.”
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Singapore May Let Foreign Firms Invest in Local Law Firms
Singapore will allow foreign law firms to own stakes in local legal practices or share in their profits under legislative changes proposed by Law Minister K. Shanmugam today.
The Southeast Asian city will also relax the rules for the admission of experienced foreign trial lawyers, he told parliament. Shanmugam has said Singapore won’t “turn back” after licensing six foreign firms in December 2008 to practice local corporate law.
The decision to allow foreign law firms to own stakes in local practices may help proposed tie-ups such as one between London-based Allen & Overy LLP and Singapore’s Allen & Gledhill. The two firms said in November they were in preliminary talks on proposals to combine, subject to any necessary regulatory approvals in Singapore.
Allen & Overy, Clifford Chance LLP, Norton Rose LLP, White & Case LLP, Herbert Smith LLP and Latham & Watkins LLP were awarded the six qualifying foreign law practice licenses in 2008. The firms made commitments to double their revenue, staffing and profits in Singapore in five years.
Lawmakers from the ruling party have raised concerns about the further opening of Singapore’s legal industry. That party has 81 of 87 seats in the country’s parliament. A vote on the proposed changes will take place at a later date.
Chaoda Chairman Denies Revealing Price Sensitive Information
Chaoda Modern Agriculture Holdings Ltd. Chairman Kwok Ho, a subject in a Hong Kong insider-trading probe, denied discussing an imminent share offering on conference calls with U.S.-based investors in 2009.
“Certainly, certainly not,” Kwok told Hong Kong’s Market Misconduct Tribunal Feb. 12 in response to a question about whether he said on the calls that the Chinese vegetable supplier would “soon” do a placement. He also denied that he wanted to assess investor support for a share sale on the calls.
The tribunal is investigating whether material, non-public information was improperly disclosed on phone calls involving Kwok, Chaoda’s chief financial officer Andy Chan and U.S. institutional investors in 2009. George Stairs, then a portfolio manager at Fidelity Management & Research Co., took part in one of those calls and sold some of his Chaoda holdings ahead of the sale, according to Hong Kong’s government.
Stairs believed the share placement information he was given by Chaoda’s chairman and chief financial officer was public, according to a letter from Fidelity’s lawyers presented in evidence to the tribunal.
Stairs and Chan have denied any wrongdoing.
Founded in 1994 by Kwok, Chaoda first sold shares to the public in Hong Kong in 2000. Kwok, 56, is a member of the Chinese People’s Political Consultative Conference, China’s top political advisory body, and has a 19.6 percent stake in the company, according to data compiled by Bloomberg.
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Cioffi, Tannin to Pay $1.05 Million to End SEC Lawsuit
Former Bear Stearns Cos. hedge-fund managers Ralph Cioffi and Matthew Tannin, acquitted in 2009 of criminal charges they misled investors, agreed to pay $1.05 million to settle a related civil case brought by the U.S. Securities and Exchange Commission.
Cioffi agreed to pay $800,000 and accept a three-year ban from the securities industry and Tannin agreed to pay $250,000 and to a two-year ban, SEC attorney John Worland told U.S. District Judge Frederic Block in Brooklyn, New York, in a hearing yesterday.
In November 2009, a federal jury found Cioffi and Tannin not guilty of conspiracy and securities and wire fraud in the first criminal trial stemming from a federal probe of the collapse of the subprime-mortgage market. Cioffi, 56, was portfolio manager for the hedge funds. Tannin, 50, was their chief operating officer. The government said investors lost $1.6 billion.
Block, who described the settlement as “chump change,” said at the hearing that he was “inclined to sign off on it,” and asked lawyers for both sides to file more papers by next week.
After the hearing, Cioffi’s lawyer, Edward Little of Hughes Hubbard & Reed LLP, and Tannin’s lawyer, Nina Beattie of Brune & Richard LLP, declined to comment.
John Nester, an SEC spokesman, didn’t immediately respond to an e-mail seeking comment on the settlement.
The civil case is Securities and Exchange Commission v. Cioffi, 08-cv-2457, and the criminal case is U.S. v. Cioffi, 08- CR-00415, U.S. District Court, Eastern District of New York (Brooklyn).
U.K. Files Extra Lawsuit Against ECB on Central Clearing Rules
The U.K. filed an additional lawsuit against the European Central Bank over its plans to block trades in some euro- denominated securities from being cleared outside of the 17 countries that share the currency.
U.K. authorities submitted a second case against the ECB at the European Union’s General Court in Luxembourg on Jan. 27, according to the court’s website.
The move follows an earlier complaint by the U.K. filed in October. The new action concerns comments made by the ECB since the original case was registered, according to the tribunal’s press service.
In the earlier suit, the U.K. sued the European Central Bank over plans to block trades in some euro-denominated securities from being cleared outside of the 17 countries that share the currency. The case was registered at the EU court, the region’s second-highest, on Sept. 15, according to the tribunal’s press service.
The U.K.’s lawsuit against the ECB over its location policy for clearinghouses was registered at the EU General Court in Luxembourg. A hearing could come within two years and a ruling may take as long as three years. It was the first such move by a country.
The Frankfurt-based ECB declined to comment on the latest lawsuit.
The case is T-45/12 pending case, United Kingdom v. ECB.
Siemens, Toshiba Lose EU Court Appeal Over Czech Antitrust Fines
Siemens AG, Toshiba Corp., Hitachi Ltd. are among electric- equipment makers that lost a European Court challenge to overturn more than 900 million koruna ($47 million) in Czech antitrust fines.
The EU Court of Justice ruled that the Czech antitrust regulator was right to fine at least 10 companies a record 979 million koruna in 2007, a month after the EU authority had levied a 750.7 million-euro penalty ($988 million) on them for colluding on prices of electric equipment. The companies, also including Areva SA and Alstom SA, challenged the legality of the Czech fine, which was later cut to 942 million koruna.
The case is C-17/10, Toshiba Corporation, Areva, Mitsubishi Electric Corp., Alstom, Fuji Electric, VA TECH Transmission & Distribution GmbH & Co. KEG, Siemens AG, Hitachi Ltd, Japan AE Power Systems Corp., Nuova Magrini Galileo SpA v. Urad pro ochranu hospodarske souteze.
Chartwell Insider Suit Dismissed by SEC, Citing Lack of Evidence
The U.S. Securities and Exchange Commission dropped a suit against Geneva-based Chartwell Asset Management Services and asked a court to let it dismiss claims against two other Swiss firms, citing difficulties in getting evidence.
The SEC sued Chartwell, along with Compania Internacional Financiera SA and Coudree Capital Gestion SA, in federal court in Manhattan in July. The agency claimed they made millions of dollars by buying shares in Arch Chemicals Inc. in the days before Basel, Switzerland-based Lonza Group Ltd. announced its plan to buy the specialty chemicals maker for $1.2 billion.
In court papers filed Feb. 10, the SEC agreed with Chartwell to drop the suit without prejudice, or without any bar against refiling it later. The SEC asked the court to let it drop the case against the other two firms without prejudice. The SEC said it had difficulty getting documents and other evidence and claims Compania Internacional and Coudree Capital have obstructed its efforts.
Chartwell’s agreement with the SEC allows the firm to recover $9.3 million frozen during the litigation. Chartwell, an investment adviser, has cooperated with the agency, Marc Greenwald, a U.S. lawyer for the firm, said in a telephone interview.
Compania Internacional and Coudree Capital will respond to the SEC’s claims in court papers, their lawyer, Ira Sorkin, said in a telephone interview, declining further comment.
The case is SEC v. Compania Internacional Financiera SA, 11-cv-4904, U.S. District Court, Southern District of New York (Manhattan).
Fickes Says SEC May Review Facebook Voting Rights
Mark Fickes, a partner at BraunHagey & Borden LLP, talked about regulators’ scrutiny of Facebook Inc.’s initial public offering filing.
He spoke with Cory Johnson on Bloomberg Television’s “Bloomberg West.” Bloomberg’s Emily Chang also speaks. (Source: Bloomberg)
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Fearful Irish Bankers Will Sidestep Armageddon, Shatter Says
Irish banks may be suffering a “fear factor” in lending after the collapse of a real estate bubble that resembled “a Ponzi scheme,” according to Justice Minister Alan Shatter.
Lenders handed out 623 million euros ($827 million) of home loans in the third quarter, according to the Irish Banking Federation. They lent 11 billion euros in the same period five years earlier, the height of the boom.
“What our financial institutions were running in the 2003-2007 period was the nearest thing to a residential property pyramid scheme,” Shatter said in a Feb. 10 interview at his Dublin office. “We have gone from a situation from where they were throwing money at any dog that moved,” to one where the banks are being “unduly difficult.”
Almost 13 percent of private residential mortgages were either more than 90 days in arrears or restructured at the end of September, according to the Irish central bank.
Ireland’s Finance Minister Michael Noonan said yesterday that Allied Irish Banks Plc and Bank of Ireland Plc have been set “ambitious” lending targets by the government to lend 3.5 billion euros to small and medium sized businesses this year and 4 billion in 2013. The banks lent about 3 billion euros in 2011, he said.
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Comings and Goings/Notable Passings
Thomas Storrs, Who Set Stage for Bank of America, Dies at 93
Thomas Storrs, whose determination to expand North Carolina National Bank beyond state borders laid the foundation for today’s Bank of America Corp., has died. He was 93.
Storrs died Feb. 10 in Charlotte, North Carolina, according to a notice in The State newspaper of Columbia, South Carolina. No cause was given.
As chairman and chief executive officer from 1974 to 1983 of NCNB Corp., the Charlotte-based parent of North Carolina National Bank, Storrs set his sights on challenging federal laws that generally limited a bank’s operations to its home state. He began the process in 1982 by using a quirk in Florida law to successfully arrange the acquisition of three Florida banks, according to accounts in the New York Times.
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--With assistance from Thom Weidlich and Bob Van Voris in New York; Heather Smith in Paris; Ben Moshinsky, Aoife White and Jim Brunsden in Brussels; Laurence Arnold, Cheyenne Hopkins and Silla Brush in Washington; Andrew Mayeda in Ottawa; Finbarr Flynn in Dublin; Colm Heatley in Belfast; Andrea Tan in Singapore; and Debra Mao in Hong Kong. Editor: Glenn Holdcraft
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