Bloomberg News

BOE Clawbacks, Herbalife FTC Probe, Finra Fines: Compliance

March 14, 2014

Banks operating in the U.K. should amend employee contracts so they can recoup bonus payments from workers who exceed their risk limits or break financial-conduct rules, the Bank of England said.

The central bank’s proposed rules on bonus clawbacks would allow lenders to retrieve bonuses for as long as six years after they’re paid, starting Jan. 1, the Prudential Regulation Authority, a unit of the BOE, said yesterday in a statement.

The rules are part of measures by global regulators aimed at hitting bankers’ wallets if their risk-taking leads to large losses at a lender. The European Union published plans yesterday to require debt used in employee bonus payments to convert into shares or be written down when a bank gets into difficulties.

The BOE rules would also apply to employees who knew about misconduct at their bank and failed to report it, and to decision-makers at business units that suffer a “material downturn” in their financial performance, the BOE said.

Compliance Policy

Hensarling Pushes for Data on Volcker Rule Effect on Bond Market

House Financial Services Committee Chairman Jeb Hensarling, a Republican from Texas, asked regulators to develop metrics as part of the assessment of the Volcker Rule’s effect on liquidity in the corporate bond market and the borrowing ability of U.S. businesses.

Hensarling also asked five financial agencies, including the Securities and Exchange Commission and the Federal Reserve, to report their findings to his committee quarterly.

His letter to regulators follows his request at a Feb. 5 hearing for quarterly reporting by the agencies.

Compliance Action

Herbalife Discloses Civil Probe by Federal Trade Commission

Herbalife Ltd. (HLF:US), the nutrition company that hedge fund manager Bill Ackman has called a pyramid scheme, said the U.S. Federal Trade Commission started an investigation into its practices.

The probe marks an achievement for Ackman, who in 2012 made a $1 billion bet against Herbalife’s shares and started working to persuade regulators to shut the company down, saying it misleads distributors, misrepresents sales figures and sells a commodity product at inflated prices. Herbalife has repeatedly denied Ackman’s allegations.

Herbalife fell 5.4 percent to $57.31 yesterday in New York trading (HLF:US), after dropping 7.4 percent the day before. The shares have gained 47 percent in the past 12 months.

“Herbalife welcomes the inquiry given the tremendous amount of misinformation in the marketplace,” the Cayman Islands-based company said yesterday in a statement. “We are confident that Herbalife is in compliance with all applicable laws and regulations.”

Pershing Square Capital Management LP, where Ackman is a managing member, and Justin Cole, a spokesman for the FTC, declined to comment.

Finra Fines Brokerages Triad Advisors, Securities America

The Financial Industry Regulatory Authority sanctioned and fined Triad Advisors and Securities America $650,000 and $625,000, respectively, for failing to supervise the use of consolidated reporting systems.

The weakness in reporting resulted in statements with inaccurate valuations being sent to customers, according to a statement March 12 by Finra. The agency said the firms also failed to retain consolidated reports in accordance with securities laws.

Triad in addition was ordered to pay $375,000 in restitution.

The companies consented to entry of Finra’s findings. Neither one admitted or denied the charges.

“Securities America has worked diligently to enhance supervision and books and records requirements for performance reports and will continue to do so,” the company said in an e-mailed statement yesterday.

Triad Advisors didn’t immediately respond to voice-mail and e-mail messages yesterday seeking comment on the Finra actions.

To contact the reporter on this story: Carla Main in New York at cmain2@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net Charles Carter, Andrew Dunn


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Companies Mentioned

  • HLF
    (Herbalife Ltd)
    • $51.6 USD
    • 0.37
    • 0.72%
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