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Corporate Penalties, EU Audit Rules, CFPB Audit: Compliance

April 04, 2014

Higher fines and jail time are being considered by U.S. lawmakers who grilled General Motors Co. (GM:US) Chief Executive Officer Mary Barra over why it took years to recall 2.6 million cars for faulty ignition switches.

The questions of what GM and regulators knew and when are bringing together partisan lawmakers. Henry Waxman, the top Democrat on the U.S. House Energy and Commerce Committee, introduced legislation to increase penalties for failing to disclose defects. Senate legislation introduced by Democrats Edward Markey of Massachusetts and Richard Blumenthal of Connecticut would mandate greater industry data disclosures.

The prospects for criminal penalties increased after the Justice Department last month won an agreement from Toyota to pay $1.2 billion to settle a four-year criminal investigation into whether it hid safety defects related to uncontrolled acceleration.

For more, click here.

Compliance Action

EU Lawmakers Approve Deal on Audit Rules for Public Companies

The European Parliament in Brussels yesterday backed the agreement on audit rules struck last year.

European Union lawmakers brokered a draft agreement Dec. 17 in Brussels under which banks and companies listed on stock exchanges would be forced to change auditing teams after a maximum of 24 years. Companies will have to change accounting every 10 years, with a one-off right to an extension as long as 14 years if they carry out a tender process, Michel Barnier, the EU’s financial services chief said in an e-mailed statement to Bloomberg News in December.

Audit firms will also face curbs on providing consulting and other services to companies whose accounts they review.

Banks have warned that the rotation rules may also capture lenders based outside of the EU, depending on how the final accord is drafted.

U.S. Consumer Bureau Failed on Supervision Timeframes, IG Says

The U.S. Consumer Financial Protection Bureau needs to improve the efficiency of its program for direct supervision of banks and nonbanks, a federal watchdog said April 1.

The inspector general at the Federal Reserve, which audits CFPB activities, said the agency has failed to meet its own timeline for completing examination reports. The documents, which give companies feedback on their compliance with federal consumer protection laws, have generally been delayed at every step of the process, the inspector general said.

As part of its mandate to protect consumers, CFPB directly examines banks with assets greater than $10 billion, including JPMorgan Chase & Co. (JPM:US) and regional companies like Regions Financial Corp. (RF:US) The CFPB, an independent agency funded by the Fed, also supervises non-depository financial firms, such as payday lenders, mortgage originators and student-loan servicers.

The speed of CFPB examinations have been a source of complaints by banks, and the report reflects their grievances.

The inspector general looked at data from examinations from July 2011, when supervision began, to July 2013.


Agencies Should Hire More Trading Floor Veterans: Jim Himes

Financial regulators such as the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission are “heavy with lawyers” yet lack people with in-depth understanding of trading floors or complex financial tools, Democratic Representative Jim Himes of Connecticut told Bloomberg Television in an interview on high-frequency trading.

All regulators could do better by persuading such people to join and help educate, said Himes, a former Goldman Sachs (GS:US) investment banker who is a member of House Financial Services Committee. Himes said he has long been puzzled about the integrity of a market in which bids are measured in nanoseconds and questioned the push to build business models around obtaining more rapid information.

To contact the reporter on this story: Carla Main in New Jersey at

To contact the editors responsible for this story: Michael Hytha at Mary Romano, Charles Carter

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