Bank-Muni Rules, Libor Suit Tossed, SAC Probe: Compliance
The U.S. Securities and Exchange Commission will force state and local government bond underwriters to disclose more information about donations to election campaigns supporting new debt sales.
Banks will be required to report the timing of their donations, any work done for campaigns and whether they won the underwriting after supporting a ballot measure that persuaded voters to approve debt. The rules, proposed by the Municipal Securities Rulemaking Board last year, were approved by the SEC on March 28.
The requirements for the $3.7 trillion municipal bond market are aimed at assessing whether public officials are steering underwriting business to banks in return for support on ballot campaigns. That could cost taxpayers if banks recover such donations by charging higher fees.
While underwriters are barred from giving to local government officials who award them work, there is no such ban on donating to campaigns supporting bond issues, such as those proposed by school boards.
Banks are currently required to report contributions to campaigns. Regulators have said that without information on the timing of the contributions and whether banks were later hired, it’s difficult to assess how large a role such donations play.
Taiwan to Let Mainland Lenders Own Bigger Stakes in Banks
Taiwan will let Chinese banks own as much as 20 percent of some financial institutions, raising a limit on mainland ownership from 5 percent as cross-strait economic integration deepens.
Taiwan’s Financial Supervisory Commission announced the move yesterday after its Chairman Chen Yuh-chang met his counterpart from the China Banking Regulatory Commission, Shang Fulin, in Taipei in the third gathering of its kind since 2011.
Larger potential investments may turn into partnership opportunities for Taiwanese banks such as Fubon Financial Holding Co. (2881) and Cathay Financial Holding Co. (2882), which are seeking greater profits outside of a saturated home market. Chinese President Xi Jinping has pledged to promote cross-strait ties, continuing efforts of the previous administration.
Mainland China banks will be allowed to take a 10 percent stake in listed financial institutions, 15 percent in unlisted firms, and as much as 20 percent of banking units of financial holding companies, the Taiwan regulator said in a statement.
The higher cap will take effect as soon as possible, Kuei Hsien-Nung, director general of the FSC’s banking bureau, said yesterday, and will be completed under the services and trade pact of the Economic Cooperation Framework Agreement signed between the two governments in 2010.
China will also let its commercial banks invest in Taiwan stocks under the qualified domestic institutional investor, or QDII, program. An agreement between the regulators signed yesterday will take effect within 60 days, the FSC said.
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U.K. Replaces ‘Failed’ FSA With Prudential Regulatory Authority
Chancellor of the Exchequer George Osborne will today hail the “resetting” of the U.K.’s financial services regulatory system with a new banking agency with greater powers to replace an “old failed regime” overseen by the Financial Services Authority.
The new Prudential Regulatory Authority is a subsidiary of the Bank of England with responsibility for ensuring effective regulation of firms that manage complex risks on their balance sheets, Osborne will say. He will reaffirm the government’s commitment to learning the lessons of the past and protect taxpayers from bank failures in the future.
The FSA, the brainchild of then-Chancellor of the Exchequer Gordon Brown, was created in 1997 after scandals in the 1990s such as fraud cases at Barings Plc and Bank of Credit & Commerce International dented confidence in London’s finance industry. The scandals of the 2008 credit crunch undid the FSA, however, as lawmakers criticized the regulator for failing to prevent the rescues of Northern Rock Plc, Royal Bank of Scotland Plc and Lloyds Banking Group Plc.
The move is part of a new regulatory system introduced this week which also includes the Financial Policy Committee, responsible for protecting and enhancing stability as a “macro- prudential” authority, and the Financial Conduct Authority, to ensure that financial services businesses advance the interests of all consumers and market participants.
Steinberg Backed by SAC as Federal Probe Moves Closer to Cohen
SAC Capital Advisors LP is stepping up its public defense as the arrest of Michael S. Steinberg brings the government’s probe closer to the billionaire hedge-fund founder.
Within an hour of the accusations, SAC issued a statement defending the 16-year veteran of the Stamford, Connecticut-based firm. Steinberg was arrested on the morning of March 29 and accused of insider trading at Cohen’s $15 billion hedge fund SAC. It was the first time SAC had come out publicly in support of an employee who had been charged in the government’s wide- ranging investigation of insider trading.
“Mike has conducted himself professionally and ethically during his long tenure at the firm,” Jonathan Gasthalter, a spokesman SAC, said in the statement. “We believe him to be a man of integrity.”
Steinberg, who turns 41 this week, is the longest-serving SAC employee to be accused of insider trading while at the firm, and one of Cohen’s most trusted managers, having joined the firm in 1997.
In an indictment unsealed March 29, Steinberg was charged by a federal grand jury with five counts of conspiracy and securities fraud. He is accused of being part of a conspiracy that began in late 2007 and continued until 2009. The U.S. said he received and traded on illegal tips from Jon Horvath, a former analyst at Stamford, Connecticut- based SAC, on technology companies Dell Inc. and Nvidia Corp. (NVDA:US)
Steinberg has pleaded not guilty. Barry Berke, Steinberg’s lawyer, said his client is “caught in the crossfire of aggressive investigations” and that he did nothing wrong. Cohen hasn’t been accused of wrongdoing.
Steinberg is one of two portfolio managers who received and traded on inside information from Horvath, according to a filing by the U.S. Securities and Exchange Commission last month. Bloomberg News identified the second manager as Gabriel Plotkin.
SAC didn’t issue a statement when Horvath was charged in January 2012. The firm did defend Plotkin after Bloomberg News identified him, saying he did nothing wrong and built his career on legitimate research. Unlike Steinberg, Plotkin hasn’t been charged by the government.
Steinberg worked at SAC’s Sigma Capital Management unit and was one of 15 portfolio managers handling technology, media and telecommunications stocks before he was put on paid leave in September.
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Airlines Rejected by U.S. High Court on Price Advertising Rules
The U.S. Supreme Court turned away an airline-industry challenge to federal requirements that carriers display the total cost of a ticket more prominently than the pretax price on Web pages and in advertisements.
The justices yesterday left intact Transportation Department rules that were put in place last year to reduce consumer confusion about ticket charges. Airlines said the rules violate speech rights by preventing companies from emphasizing the impact of fees and taxes.
The department is trying to block companies “from drawing clear and conspicuous attention to truthful information about the significant tax burden on airline tickets, at a time when the administration is pushing to raise those taxes even higher,” Spirit Airlines Inc. (SAVE:US), Southwest Airlines Co. (LUV:US) and Allegiant Air LLC argued in court papers.
The court also let stand a Transportation Department requirement that airlines either allow penalty-free cancellation of reservations for 24 hours or let customers hold seats for a day without payment. The airlines said the rules amount to re- regulation of the industry.
President Barack Obama’s administration argued the rule is “a quintessential consumer-protection regulation.”
The case is Spirit v. U.S. Department of Transportation, 12-656, U.S. Supreme Court (Washington).
SEC’s Dodd-Frank Advisory Panel to Hold Meeting April 11
The U.S. Securities and Exchange Commission’s Dodd-Frank Investor Advisory Committee’s meeting will be open to the public, according to the agency’s website. The SEC didn’t post a meeting agenda.
The SEC will make a webcast of the meeting available on its website.
Panasonic Avionics Under U.S. Bribery Probe, WSJ Reports
A Panasonic Corp. (6752) unit that makes inflight entertainment and communications systems for airlines is under a bribery investigation by U.S. regulators, the Wall Street Journal reported.
The legal department of Panasonic Avionics, based in Lake Forest, California, told executives and employees to preserve documents that may be relevant to the government investigation, the newspaper said yesterday, citing company documents. Chieko Gyobu, a spokeswoman for the Osaka, Japan-based parent company, declined to comment when reached by phone yesterday.
Employees were asked to preserve documents related to gifts or benefits offered to airline employees or government officials, as well as any that reported rumors, concerns or complaints of alleged bribery or corruption, the report said, citing a Jan. 20 company notice. Panasonic Avionics received a subpoena from government investigators last month, the Journal said, citing a March 25 company notice.
Both notices reference the 1977 Foreign Corrupt Practices Act, which bars U.S. companies and those listed on U.S. stock exchanges from paying bribes to foreign government officials, the report said. Spokesmen for the U.S. Securities and Exchange Commission and the Justice Department, which enforce the act, declined to comment.
The January notice said Panasonic intends to cooperate with the investigation and that the existence of any inquiry doesn’t mean the company broke the law, the newspaper said.
United Continental Holdings Inc. (UAL:US), the world’s largest carrier and a customer of Panasonic Avionics’ satellite wireless Internet technology, declined to comment on whether it was involved in the probe, Rahsaan Johnson, a spokesman for the Chicago-based carrier, said in an e-mail.
Other customers including Latam Airlines Group SA (LFL:US), Emirates and Singapore Airlines Ltd. (SIA) didn’t immediately return calls or e-mails seeking comments.
Libor Claims by Bondholders Tossed Over Lack of Damage Evidence
Banks including Bank of America Corp. (BAC:US), Barclays Plc (BARC) and JPMorgan Chase & Co. (JPM:US) won dismissal of antitrust lawsuits by plaintiffs claiming they were harmed by the rigging of the London interbank offered rate.
In more than two dozen interrelated cases before U.S. District Judge Naomi Reice Buchwald in New York, the banks were alleged to have conspired to depress Libor by understating their borrowing costs, thereby lowering their interest expenses on products tied to the rates.
While potential damages were estimated to be in the billions of dollars, the judge ruled the cases must be dismissed because of the inability of litigants to show they were harmed. Buchwald, whose March 29 ruling allowed some commodities- manipulations claims to proceed to a trial, said that, while private plaintiffs must show actual harm, her ruling didn’t impede governments from pursuing antitrust claims tied to attempts to manipulate Libor.
Buchwald dismissed the antitrust claims because the plaintiffs didn’t allege enough facts to show that they were harmed by the alleged misconduct. The judge dismissed some commodities-manipulation claims because they centered on transactions that were too long ago. Other such claims may proceed, she said.
Libor is a key metric for setting interest rates for trillions of dollars in financial instruments. Global authorities have been investigating claims that more than a dozen banks altered submissions used to set benchmarks such as Libor to profit from bets on interest-rate derivatives or make the lenders’ finances appear healthier.
Lawrence Grayson, a spokesman for Charlotte-based Bank of America, and Kristin Lemkau, a spokeswoman for New York-based JPMorgan, declined to comment on the ruling.
Michael Hausfeld, a lawyer for the plaintiffs, didn’t return an e-mail seeking comment on the decision.
The consolidated case is In re Libor-Based Financial Instruments Antitrust Litigation, 11-md-02262, U.S. District Court, Southern District of New York (Manhattan).
Cohen’s Recent Personal Purchases ‘Premature,’ Berenzweig Says
Seth Berenzweig, managing partner at Berenzweig Leonard, talked about the insider trading indictment of SAC Capital Advisors LP fund manager Michael Steinberg and the outlook for SAC founder Steven A. Cohen.
He spoke with Deirdre Bolton on Bloomberg Television’s “Money Moves.” Bloomberg’s Sheelah Kolhatkar also spoke.
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Simon Doesn’t Expect SAC’s Cohen Will Be Indicted
Attorney Bradley Simon, a former federal prosecutor, talked about the U.S. criminal investigation of SAC Capital Advisors LP founder Steven A. Cohen.
The insider trading indictment last week of SAC fund manager Michael Steinberg, a 16-year veteran of the firm, involved the most senior member of Cohen’s firm charged so far. Bradley spoke with Erik Schatzker and Sara Eisen on Bloomberg Television’s “Market Makers.”
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Levitt Says SAC’s Cohen Is Next Government Target
Arthur Levitt, former chairman of the U.S. Securities and Exchange Commission, said the arrest of SAC Capital Advisors LP fund manager Michael S. Steinberg indicates that the government now has SAC founder Steven A. Cohen “in its cross hairs.” Levitt talked with Bloomberg’s Tom Keene and Joe Brusuelas on Bloomberg Radio’s “Bloomberg Surveillance.”
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Buchheit Comments on Why Cyprus Might Need Another Bailout
The sovereign debt crisis in Cyprus marks the fifth European nation to need a bailout in recent memory, but this crisis is unique because European Union regulators are taking the unprecedented step of taxing bank deposits to finance part of the bailout for the nation’s banks.
Lee Buchheit, sovereign debt guru and architect of Greece’s bailouts, told Bloomberg Law’s Lee Pacchia that despite the drastic measures taken, the endgame for Cyprus might be another round of restructuring. “I’m not sure this is over,” said the Cleary Gottlieb veteran.
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Comings and Goings
Former SEC Chairman Mary Schapiro Joins Promontory Financial
Mary Schapiro, the former chairman of the U.S. Securities and Exchange Commission, joined Promontory Financial Group as a managing director and chairman of its governance and markets practice.
Schapiro will be based in Washington for Promontory, a compliance and risk-management consulting firm, the company said today in a statement.
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