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GLOBAL REGULATORY BRIEFING MAY 5, 2011

WEEK IN BRIEF The European Union launched a probe into whether major banks colluded in the market for credit-default swaps, while an EU draft proposal backtracked on regulating derivatives. U.S. congressional subcommittees voted for two measures to dampen Dodd-Frank regulatory reforms, but they are unlikely to win final passage. The New York Federal Reserve said it would send senior supervisors to lead on-site teams at major banks.

GLOBAL REGULATORY BRIEFING, MAY 5, 2011 2

IN THIS ISSUE QUOTES

TOP STORIES EU hits banks with credit default swap probe EU derivatives rules crackdown loses steam -sources U.S. House GOP tries to slow Dodd-Frank express New York Fed deploys senior supervisors to Wall Street

FINANCIAL SERVICES

REGULATORY REFORM Goldman lobbying hard to weaken Volcker rule Regional Feds shouldn't have policy votes –U.S. representative U.S. credit card execs see sunny days beyond regulations U.S. SEC to tackle mutual fund fees after July U.S. SEC, CFTC say modest budget boosts not enough

ENFORCEMENT U.S. sues Deutsche Bank in mortgage fraud case UK fraud office drops Keydata investigation Indonesia suspends banks from seeking new wealthy clients UBS settles in U.S. municipal bond-desk case Lloyds takes $5.3 billion hit for insurance mis-selling Former SAC analyst settles insider charges with SEC Lawyer for money manager Ken Starr pleads guilty AIG seeks to recoup billions it says lost to fraud Harbinger's Falcone gives details on SEC probes Dubai regulator fines US firm E*trade $200,000 U.S. SEC judge blocks retroactive ban on adviser U.S. SEC official eyes more administrative court cases US top court to decide credit card arbitration case Sarbanes law doesn't protect media leaks -US court Continued vigilance seen needed on Al Qaeda money flows SEC freezes China Voice assets, cites Ponzi scheme Volkswagen may face German lawsuit over short-squeeze Five former Brooke execs settle SEC fraud charges SEC eyes new charges in ICP fraud case

SUPERVISION UK governance gurus to review RBS, FSA failure Fed-sponsored group proposes agency fails charge Turkish watchdog warns banks on mortgages India central bank proposes norms on primary dealers' authorisation policy US lawmaker backs small banks on debit card battle


ACCOUNTING & FINANCIAL STANDARDS Third of Russian banks fail central bank stress test EU watchdog: banks failing stress tests may get 6 months to act French banks seen resisting capital crackdown Swiss minister defends tough banking proposals –report

GOVERNANCE Buffett admits error, calls Sokol events inexcusable UK regulator consults on breaking glass ceiling

DERIVATIVES CFTC panel to develop standardized info on derivatives Swaps players beg U.S. regulators for clarity Regulatory newbies may be eased into US swaps reforms U.S. plans to exempt forex swaps from new rules

EXCHANGES & TRADING PRACTICES LSE, TMX start long Canadian merger approval process Australia faces clearing and settlement conundrum after Chi-X licence UK regulator approves Baltic ship futures screen Icap's Traiana and LCH partner for swap clearing LME considers forming own clearing house

FUNDS MANAGEMENT Australia's adviser reforms to provide boost to exchange-traded funds

FINANCIAL CRISIS & ECONOMY U.S. pushes back day of reckoning on debt limit Dubai extends support fund access to more firms Sarkozy eyes tax break for mandatory bonus scheme South Korea to auction suspended debt-hit savings banks Nigeria's central bank sees all rescued lenders sold

TAX U.S. hedge funds could feel corporate tax revamp -group UK-Swiss asset tax deal to yield 3 billion pounds - report Swiss minister eyes German tax deal soon -report Greece unveils 12.7 billion euro anti-tax evasion plan

CURRENCY Israel FX swap transaction reporting starts July 1

TRADE & CROSS BORDER China wants investment treaty with U.S. -Geithner U.S. Treasury nears Iran sanctions on more banks Swiss reveal funds stashed by Gaddafi, Mubarak, Ben Ali

COMMODITIES & ENERGY US eyes price gouging, manipulation in energy market


Putin accuses oil firms of gasoline price fixing SEC rules on resource sector face delays EU asks states to approve new CO2 registry rules G20 to meet on nuclear safety on June 7-8 -OECD Japan says no limits to Tepco liability from nuclear disaster U.S Democrat details plan to cut energy tax breaks BP Alaska deal seen pointing to big Gulf fine Australia aims for carbon tax details by July Grain exporters raided again in Argentina tax probe Algeria court jails ex-head of state energy firm Italy approves decree capping solar incentives Italy minister confirms accord on solar decree Extract says Namibia govt plan taken out of context EU executive rejects Estonia's carbon permit plan

ISLAMIC FINANCE Oman opens door to Islamic banks to curb fund outflows

TELECOMS & MEDIA

TELECOMS U.S. probe of AT&T, T-Mobile deal deepens -source Telstra aims to wrap up talks on A$11 billion broadband deal in May Mexico starts probes of TV, telecoms competition French wireless auction set for late May

INTERNET & MASS COMMUNICATIONS China sets up agency to tighten grip on Internet U.S. attorney general confirms Sony data breach probe U.S. FTC prepping Google probe -report

PEOPLE U.S. SEC's Schapiro taps new deputy chief of staff "Banker to the poor" loses final appeal against dismissal

COMING UP


QUOTES "CDS play a useful role for financial markets and for the economy. Recent developments have shown, however, that the trading of this asset class suffers a number of inefficiencies that cannot be solved through regulation alone."

EU anti-trust commissioner Joaquin Almunia, announcing probe into possible collusion by major investment banks into the market for credit default swaps

"They often seemed to treat red flags as though they were green lights." Manhattan U.S. Attorney Preet Bharara, describing Deutsche Bank and MortgageIT, which the U.S. government sued over accusations they lied to obtain federal guarantees on mortgages they issued

"It's a shot across the bow to banks that the U.S. will scrutinize them much as it does military and health-care companies that contract with the government.”

David Stone, managing partner at law firm Stone & Magnanini, on the Deutsche suit

"We could see a window of say, six months, within which we expected remedial action to be taken."

Andrea Enria, head of the European Banking Authority, describing a possible grace period for European banks that fall short of standards set in pan-EU stress tests

"I obviously made a big mistake by not saying, 'Well when did you buy it?'" Warren Buffett, chairman of Berskshire Hathaway, referring to former top liutenant David Sokol’s purchase of Lubrizol shares while pitching the company as a possible takeover target

"When are we going to show them this? Are we just going to continue to roll this out and they're going to have to read it in piecemeal. Why don't we give them the full picture?"

Republican CFTC commissioner Scott O’Malia on a need for U.S. regulators to give a timetable for implementing reform in swaps markets

"I assume that UBS will not migrate from Switzerland. Even with the regulation of the big banks, which we are planning, Switzerland still offers companies like UBS overall far better conditions than any other country."

Swiss finance minister Eveline Widmer-Schlumpf, via SonntagsZeitung.

"Private placement of bonds can be tailored to the issuer ... to broaden financing channels for Chinese enterprises. It is an innovation not only in bond products but also in the method of bond issuance."

China’s National Association of Financial Market Institutional Investors, on China’s approval for private placement of bonds.


TOP STORIES

EU | REUTERS, APRIL 29

EU hits banks with credit default swap probe

The $28 trillion credit default swaps market came under investigation by the European Union, adding to official pressures bearing down on a huge and opaque business that is widely blamed for aggravating the recent banking and euro zone debt crises. The European Commission, the EU's executive body, said it is probing whether major investment banks, including Goldman Sachs and JP Morgan, colluded in their operations in a market that is already under scrutiny by U.S. authorities and being subjected to broad, new regulations. The EU probe comes as the 27-nation bloc struggles, along with the United States, to complete a government crackdown under way for months now on the broad, $600 trillion off-exchange derivatives markets, including CDS. The EU's anti-trust commissioner, Joaquin Almunia, said CDS played a useful role for financial markets and for the economy, but that the trading of this asset class suffered some inefficiencies that could be solved through regulation alone. Almunia added that a lack of transparency could lead to abusive behaviour and that he hoped the probe would improve financial markets and aid economic recovery. Learn more

EU | REUTERS, MAY 5

EU derivatives rules crackdown loses steam -sources

A UK-backed attempt to extend a European Union crackdown on derivatives has begun running out of steam, EU sources said. EU president Hungary's latest compromise on draft rules has ditched a broad reference to derivatives in favor of a focus only on those traded off exchanges or over-the-counter (OTC). It signals a successful fight back from countries such as Germany, where a blanket approach could force local exchange operator Deutsche Boerse AG to open up its integrated "vertical silo" business model to competition in clearing. Technical-level representatives from EU states failed this week to reach consensus on scope and it will now have to be decided by finance ministers, starting with their ambassadors next month, EU sources said. The issue will have impacts on competition and access to clearing services as well as the proposed merger of Deutsche Boerse and NYSE Euronext, a source said. Britain wants to ensure competition in clearing. There was also no agreement among EU states over how much power the new EU watchdog, the European Securities and Markets Authority (ESMA), should have at the expense of national supervisors in regulating derivatives. This will also have to be thrashed out at the political level, EU diplomats said. The law fulfils a pledge the bloc made with world leaders to clear and trade on a platform as many as possible of the $600 trillion OTC contracts which are now transacted bilaterally between banks. Although there is broad agreement on aims, agreeing details has become difficult and politicised. A failure among EU states to reach a deal on their version of the new rules will make it harder for them to shape the final text as parliament is due to hold a committee vote on May 24.

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US | REUTERS, MAY 4

U.S. House GOP tries to slow Dodd-Frank express

Two congressional committees led by Republicans approved measures to delay and weaken key provisions of last year's Dodd-Frank Wall Street reforms, but they were expected to fizzle in the Senate. With Democrats in control of the upper chamber of Congress and President Barack Obama able to defend Dodd-Frank with his veto pen, efforts by Republicans to water down and postpone the reforms seemed unlikely to succeed, analysts said. That is not stopping Republicans from pressing their rollback agenda, however, especially in the U.S. House of Representatives. A House Financial Services subcommittee voted in favor of weakening the powers of the new U.S. Consumer Financial Protection Bureau, or CFPB. The legislation would have the bureau run by a five-member board rather than a single director, and make it easier for the new Financial Stability Oversight Council to overturn bureau regulations. Another Republican-led committee voted for an 18-month delay of post-crisis regulations intended to reduce risk in the over-the-counter derivatives market. The rules are being implemented by the Commodity Futures Trading Commission and Securities and Exchange Commission. The legislation would keep in place the timeline for issuing final rules for definitions such as swaps and swap dealers, and for rules requiring record retention and regulatory reporting. Like the CFPB measure, the derivatives delay bill may win approval in the full House, but it has little chance of becoming law. There is no similar Senate bill and futures regulators have said that they do not need additional time. Learn more

US | REUTERS, APRIL 28

New York Fed deploys senior supervisors to Wall Street

Wall Street executives will soon get more face time with senior bank regulators as part of an effort to strengthen supervision and plug gaps in communication laid bare by the worst financial crisis since the Great Depression. The Federal Reserve Bank of New York has started to assign more senior officials to lead its on-site teams at big banks, aiming to strengthen its lines of communication with chief executives and directors, sources familiar with the matter said. Each of the largest financial firms the Fed supervises will be assigned an on-site senior supervisory officer who will be closer to New York Fed regulatory policy discussions and should bring a better sense of how the firm fits into the broader global regulatory framework, one source said. More regular communication could also help give financial executives more clarity on how regulators will carry out myriad new capital rules and compensation reforms. The move to add more senior staff to on-site teams comes from a review by the New York Fed's new head of bank supervision, Sarah Dahlgren. It aims to address a lesson from the crisis: that supervisors often didn't engage with senior management as much as they arguably should have. By putting more senior officials in place, the move hopes to change that culture and foster an environment in which people are not afraid to speak out.

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FINANCIAL SERVICES

REGULATORY REFORM

US | REUTERS, MAY 4

Goldman lobbying hard to weaken Volcker rule

Goldman Sachs Group Inc has just a few more months to put its stamp on the Volcker rule, and it is not wasting any time. The rule, designed to limit banks from speculating with their own money, will cost Goldman at least $3.7 billion in annual revenue, by one estimate. And billions more could be at stake if regulations now being drawn up are extra-tough. The Volcker rule was one of the main topics on the agenda when Chief Executive Lloyd Blankfein met recently with U.S. Securities and Exchange Commission Chairman Mary Schapiro. Wall Street chiefs do not often lobby top regulators directly, but this issue is unusually important to Goldman. Lobbying disclosures show Goldman representatives have been working both sides of the political aisle and meeting with top officials in the White House and regulatory agencies. One big area of concern for Goldman is that regulators who are interpreting the Volcker rule will severely limit the amount of time a bank can hold a security or derivative. The Volcker rule is not the only element of financial reform that Goldman is resisting. Important issues on its lobbying docket also include derivatives reform, capital requirements and bonus restrictions. Other bank heads, including Morgan Stanley's James Gorman, have met Schapiro about the Volcker rule. But the provision is most important for Goldman, whose business is far more weighted towards trading, three lobbying sources said.

US | REUTERS, MAY 3

Regional Feds shouldn't have policy votes –U.S. representative

A leading Democratic in the U.S. House of Representatives has renewed efforts to weaken the power of regional Federal Reserve banks, introducing legislation to deprive them of any vote on monetary policy. Representative Barney Frank, the top Democrat on the House committee that oversees the Fed, said his proposal would tackle "one of the greatest anomalies in our democratic system" -- allowing regional Fed bank presidents with no direct political accountability to have a say in setting U.S. interest rates. He said that while it was useful to have the advice of representatives of private interests, they should not be allowed to vote on "this extremely important issue of monetary policy." The Dodd-Frank bill will remove regional Fed presidents from the Fed's 12-member policy-setting Federal Open Market Committee. The 12 voting seats on the FOMC include, at any given time, five regional Fed bank chiefs. The president of the New York Fed always holds one of the five regional voting seats, while the presidents of the 11 other regional banks hold voting seats on an annual rotation basis. Regional Fed bank presidents are typically seen as more likely than their counterparts on the Fed's Washington Board of Governors, whose members need to win Senate confirmation, to call for higher interest rates even at the expense of jobs. Their powers have long been a target for Democrats on Capitol Hill. Frank said they disproportionately represent the financial services industry.


Kansas City Federal Reserve Bank President Thomas Hoenig said stripping regional Fed banks of their vote at the Fed would be a grave error because it would silence the input of voices outside Washington and Wall Street.

US | REUTERS, MAY 2

U.S. credit card execs see sunny days beyond regulations

For the first time in years, U.S. credit card executives are looking beyond the losses of the financial crisis -- and they're even losing less sleep over the prospect of tighter government oversight. Losses from credit defaults keep falling, an explosion in smartphone payment systems and other technology has raised the prospect of new long-term revenue growth, and executives now believe they can mitigate the effects of the latest regulatory overhaul of the U.S. card industry. Longtime credit card executive Stephen Eulie said he was optimistic, as nothing had been done that could not be rolled back quickly. Eulie, who has worked at JPMorgan Chase & Co and Citigroup Inc, is now the head of First National Bank of Omaha's card unit, which runs credit card programs for companies, including Chrysler Group LLC. He spoke to Reuters on the sidelines of an annual credit card industry conference in late April 2011, hosted by publisher SourceMedia. Much of the conference was dominated by discussion about new regulation -- from the lingering effects of a sweeping credit card law passed in 2009, to the so-called Durbin amendment to last year's Dodd-Frank financial reform law. Banks are increasingly looking to new technology, such as mobile phone and ecommerce payments, to grow businesses in developing countries where people do not regularly use credit and debit cards. Citigroup and American Express Co executives emphasized those opportunities at the conference, using their keynote speeches to discuss new types of payments technology instead of regulation. Former Citigroup credit cards chief Paul Galant told Reuters that the industry needed to figure out ways to grow business in a way that aligns with the Durbin rules. The Fed was supposed to finalize its rules on debit fee limits in mid-April, but said in March 2011 it needed more time to sort through an overwhelming number of comments on its proposals. The delay has given some bankers and credit card executives hope a broad industry campaign in Washington to repeal or delay the debit fee cuts will ultimately be successful.


U.S. SEC to tackle mutual fund fees after July

U.S. securities regulators do not expect to finalize new rules on mutual fund distribution fees until all new regulations required by the Dodd-Frank financial reform law have been implemented, a top regulator said. Elisse Walter, a commissioner at the Securities and Exchange Commission, discussed the agency's upcoming agenda for money market funds, target date funds and other investment company regulations in an address before the Mutual Fund Directors Forum. Walter said the agency plans to return to the issue "with full force" after the July 2011 deadline for Dodd-Frank rules. In July 2010, the SEC proposed new rules on so-called "12b-1" fees, which are deducted from mutual funds to pay for fund promotion and other shareholder services. Some SEC officials, including Schapiro and Walter, have expressed concern that investors may not realize the fees are being deducted from their funds or how the money is used. The plan proposed placing certain limits on sale charges and also aimed to bolster transparency to investors, in part by prohibiting funds from using the obscure reference "12b-1 fees" in communications with investors.


US | REUTERS, MAY 4

U.S. SEC, CFTC say modest budget boosts not enough

Federal securities and commodities regulators said they needed big budget boosts to police the vast derivatives market and to catch the next Bernard Madoff. Fresh from getting modest budget increases for the current fiscal year, the Securities and Exchange Commission and Commodity Futures Trading Commission told a Senate appropriations panel they need hundreds of millions of dollars more to be effective post-financial crisis regulators. SEC Chairman Mary Schapiro and CFTC Chairman Gary Gensler said the funds are critical to finalize -- and enforce -- dozens of new rules required by Dodd-Frank as a July 2011 implementation deadline looms. In testimony, the regulators took great care to try to illustrate how they are working to save money and run things more efficiently. The SEC is seeking a $222 million increase for its fiscal 2012 budget, beginning October 1, which would bring the total to $1.407 billion. The CFTC, meanwhile, is asking for an increase of $106 million, bringing its budget to $308 million.

ENFORCEMENT

US | REUTERS, MAY 3

U.S. sues Deutsche Bank in mortgage fraud case

The U.S. government sued Deutsche Bank AG for more than $1 billion, accusing the German bank of fraud for repeatedly lying to obtain federal guarantees on mortgages it issued. According to the lawsuit, Deutsche Bank and its MortgageIT Inc unit misled the Federal Housing Administration, the world's largest mortgage insurer, into believing their mortgages qualified for federal insurance, knowing they could make "substantial profits" when the loans were later sold. In fact, the government said, the loan quality was so poor that nearly one in three mortgages defaulted, a percentage elevated by Deutsche Bank's "dysfunctional" quality control. Manhattan U.S. Attorney Preet Bharara said Deutsche Bank and MortgageIT indulged in reckless lending practices, often treating "red flags as though they were green lights." Bharara also hinted that the government might bring legal action against other lenders. Deutsche Bank said that almost 90 percent of the loans covered by the complaint were made before it bought MortgageIT in 2007, and that the unit had been operating under federal oversight for nearly a decade. It said the claims against it were unreasonable and that it would defend itself vigorously. The complaint seeks triple damages on the $386 million of claims, as well as punitive damages and fines. The complaint did not name any individuals as defendants. Learn more

UK | REUTERS, MAY 3

UK fraud office drops Keydata investigation

Britain's Serious Fraud Office has dropped an investigation into Keydata Investment Services, in which thousands of UK pensioners sunk hundreds of millions of pounds, because it could not find enough evidence to prosecute. The SFO, which launched a probe after administrators discovered over 100 million pounds ($165 million) was missing when the company was pushed into administration in 2009, said it would now focus efforts on tracing lost assets.

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The agency, which plans to provide a further statement in July 2011, blamed an "error in internal communications processes" for its failure to regularly update victims -- many of whom have still not been compensated for their losses -- in one of the worst personal investment scandals in Britain in decades. Keydata sold products backed by second-hand U.S. life insurance policies -- so-called deathbonds -- to around 30,000 mainly elderly investors, pitching them as "low-risk" with almost guaranteed returns. Investors ploughed more than 450 million pounds into the business. But the Financial Services Authority (FSA), eyeing how Keydata was marketing products backed by the risky life settlement market, fast-tracked the firm into administration for breaching tax regulations in 2009 and put PwC in charge. All eyes are now on two investigations launched by the FSA; one into Keydata's practices and one into its rags-to-riches Scottish founder Stewart Ford for possible misconduct.

INDONESIA | REUTERS, APRIL 29

Indonesia suspends banks from seeking new wealthy clients

Indonesia's central bank has asked 23 banks to stop seeking wealthy new customers for a month as police investigate suspected embezzlement at Citibank Indonesia's wealth management unit. The move, which comes into effect from May 2, could prove a short-term setback to a buoyant private banking industry in Southeast Asia's largest economy. The industry-wide suspension applies to both priority or premium customers, who may have savings of over $50,000, and to high net worth individuals who typically invest over $1 million. Indonesian police have said the Jakarta case involves around $2 million and have taken into custody Melinda Dee, a 47-year-old former wealth manager at Citi. Learn more

US | REUTERS, MAY 4

UBS settles in U.S. municipal bond-desk case

UBS AG acknowledged that former employees in its municipal bond reinvestment desk broke the law, and agreed to pay $160 million to U.S. federal and state agencies, the Justice Department said. UBS settled with the Justice Department, Securities and Exchange Commission, Internal Revenue Service and 25 state attorneys general. Some of the world's largest banks have been ensnared in a probe into allegations that their employees decided in advance which investment house would win the auctions of guaranteed investment contracts, which are essentially investments that cities and counties buy with proceeds from municipal bond sales. Often, there is a delay between when bonds are floated and when the money is actually paid out, allowing some time to invest it. UBS said the probe into its operations focused on the actions of the municipal reinvestment and derivatives group from 2001 to 2006. It said it was pleased to have reached the settlement. It said the underlying transactions were through a business that no longer exists at UBS and involved employees who no longer work for it. Bank of America, was first to report the bid-rigging problems within its Banc of America Securities unit to the Justice Department before federal law enforcement began an industry-wide investigation. Bank of America agreed to settle in December 2010 for $137 million. Learn more

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UK | REUTERS, MAY 5

Lloyds takes $5.3 billion hit for insurance mis-selling

British bank Lloyds took a shock 3.2 billion pound ($5.3 billion) charge to cover compensation for people sold insurance they could never claim or did not know they were buying. The hefty charge signalled far higher than expected costs for the whole industry to resolve a mis-selling issue that has dogged it for years, sending shares in British banks into retreat. Together with loan losses in crisis-hit Ireland and higher funding costs, the charge tipped the rescued bank into loss for the first quarter and raised fears about its recovery prospects. Lloyds, 41-percent owned by the British government after a credit crisis bailout, made the provision against payment protection insurance (PPI) complaints after banks lost a British court case on the way policies were sold to millions of customers. The policies were typically taken out alongside a personal loan, mortgage or purchase to cover repayment if the borrower was unable to pay due to unemployment, sickness or accident. But policies were mis-sold, to self-employed or unemployed people who would not have been able to claim, and to consumers did not realise they were taking out a policy. A court ruled last month the banks were at fault.


Former SAC analyst settles insider charges with SEC

Former SAC Capital Advisors LP analyst Jonathan Hollander reached a settlement with U.S. securities regulators over allegations he engaged in insider trading in his personal account, while working at Steven A. Cohen's $12 billion hedge fund. In settling with the U.S. Securities and Exchange Commission, Hollander agreed to pay a penalty of about $222,000, which included a fine and restitution for profits he, a family member and a friend made from trading on a January 2006 tip about the buyout of the Albertsons' supermarket chain, his lawyer said. The SEC did not name Cohen's fund in its complaint, which was filed in New York federal court. The disclosure of Hollander's settlement came on the same day that former SAC Capital portfolio manager Donald Longueuil entered a guilty plea in a different insider trading case. Longueuil pleaded guilty to securities fraud and conspiracy charges. So far, more than two dozen defendants have admitted to criminal wrongdoing in a nationwide federal probe into insider trading linked to hedge funds.

US | REUTERS, MAY 2

Lawyer for money manager Ken Starr pleads guilty

A former lawyer for a large U.S. law firm pleaded guilty to conspiring to launder almost $19 million for his one-time client Kenneth Starr, a money manager known for representing celebrities. Jonathan Bristol, 55, who once practiced at Winston & Strawn LLP, admitted that he used attorney trust accounts to help Starr launder money that Starr had taken fraudulently from clients. Manhattan federal prosecutors also said Starr used these accounts to purchase a luxury apartment in New York. U.S. Attorney Preet Bharara said Bristol abused his position as a partner at a prominent New York City law firm to break the law "over and over again". Susan Kellman, a lawyer for Bristol, said her client recognized he did something wrong. He will lose his law license, she said.



AIG seeks to recoup billions it says lost to fraud

American International Group Inc launched a fight to recoup billions of dollars the bailed-out insurer said it lost due to fraud, setting up a clash with Wall Street's biggest banks. The insurer, 92 percent-owned by the U.S. government, joined the swelling ranks of investors and insurers who are taking legal action over supposedly safe mortgage-related investments at the heart of the 2008 financial crisis. The insurance giant sued two money managers in New York State Supreme Court. The lawsuit against ICP Asset Management and Moore Capital contended that AIG suffered losses by insuring mortgage securities that one of the financial firms created. However, AIG will likely take aim at Bank of America Corp, Goldman Sachs Group Inc and others, according to a person familiar with AIG's strategy. The complaint was filed by Quinn Emanuel Urquhart & Sullivan LLP. It was brought by AIG's Financial Products unit as part of the insurer's "overall efforts to recoup potentially billions of dollars from the fraudulent conduct of these defendants and other parties," the complaint said.


Harbinger's Falcone gives details on SEC probes

Billionaire hedge fund manager Philip Falcone recently gave investors more information about three U.S. government investigations into his Harbinger Capital Partners fund firm. In a year-end financial statement, Falcone also disclosed for the first time that his $6 billion firm paid $60 million to settle a lawsuit with NACCO Industries. Falcone said the Securities and Exchange Commission is investigating whether his firm violated a short-selling rule involving three stocks and whether it engaged in market manipulation in unnamed debt securities, according to the statement sent to investors. Falcone said the probes were informal and that no criminal or enforcement charges have been brought against the firm. He also said the firm was cooperating with the investigations. The trader who was involved in the short-sale is no longer with Harbinger, a person familiar with the matter said. That person said the firm believes that the investigation into market manipulation is "immaterial," but said it was revealed to investors in an effort to be more transparent.

DUBAI | REUTERS, MAY 1

Dubai regulator fines US firm E*trade $200,000

E*Trade Financial Corp has been fined $200,000 by a regulator in the United Arab Emirates for breaching anti-money laundering controls, the local regulator said. Dubai Financial Services Authority (DFSA), which is the regulator for the Nasdaq Dubai bourse, said it fined E*Trade for failing to obtain sufficient evidence of its clients' source of wealth and for not providing adequate address details for some of its clients. Learn more

US | THOMSON REUTERS ACCELUS, MAY 2

U.S. SEC judge blocks retroactive ban on adviser

A U.S. Securities and Exchange Commission administrative law judge has refused to retroactively apply new stricter prohibitions on the associations of investment advisers for

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misconduct. The ruling by SEC Chief Administrative Law Judge Brenda Murray does not have an immediate broader legal impact, but it could complicate the SEC's controversial push to run more cases through administrative courts rather than federal courts, including cases stemming from the 2008 financial crisis. The Dodd-Frank regulatory reforms expanded the SEC's authority under the Investment Advisers Act of 1940 to bar or suspend someone from working in the industry. In addition to barring or suspending an individual from association with an investment adviser, the law would also let the SEC restrict association with a broker, dealer, municipal securities dealer, municipal advisor, transfer agent or credit rating agency. But Murray ruled that the agency could not apply this expanded authority to conduct that occurred before President Barack Obama signed Dodd-Frank on July 21, 2010. Learn more


U.S. SEC official eyes more administrative court cases

A top U.S. securities watchdog said his agency should explore bringing more of its enforcement cases in administrative courts, a controversial forum that critics say could deprive defendants of their rights. Bringing cases in administrative courts rather than in federal courts has several advantages, George Canellos, the New York chief of the U.S. Securities and Exchange Commission, said. Canellos, speaking at a legal forum sponsored by the Practising Law Institute in Manhattan, noted that the SEC recently added a fourth administrative law judge. He said the administrative law judges were fair, independent, smart, and well grounded in the law.

US | REUTERS, MAY 2

US top court to decide credit card arbitration case

The U.S. Supreme Court said it would hear an appeal by Synovus Financial Corp and CompuCredit Holdings Corp arguing that credit card claims under a 1996 law should be decided in arbitration, not in court. A U.S. appeals court in San Francisco ruled against the two companies and held the language in the law, the Credit Repair Organizations Act, was intended to bar arbitration of claims. According to the lawsuit, CompuCredit and Synovus market and issue a low-rate Aspire Visa card to people with low or weak credit ratings. The plaintiffs said they were promised $300 in available credit, but were charged $257 in fees in the first year they had the card. The lawsuit claimed imposition of certain fees violated the law and the companies failed to make certain required disclosures. Three consumers sued in federal court, seeking to represent a nationwide class of holders of the credit card. The companies said the dispute should be handled by arbitration because of the valid agreement the customers signed to receive the card. The Supreme Court is expected to hear arguments in the case and then rule during its upcoming term that begins in October.

US | REUTERS, MAY 3

Sarbanes law doesn't protect media leaks -US court

Whistleblower protections in a federal accounting law do not cover leaks to the media, a U.S. appeals court has ruled, dealing a blow to two former Boeing auditors who had sued the aviation company. Nicholas Tides and Matthew Neumann were fired from a group that tested information

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technology controls at Boeing. They sued the company, charging they were terminated for reporting violations under the 2002 Sarbanes-Oxley Act. The two auditors had expressed concerns to Boeing management about the integrity of data in the software system, but also disclosed information when approached by a reporter from the Seattle Post-Intelligencer. After the newspaper ran a story about computer security at Boeing, Tides and Neumann admitted in a company investigation that they had shared documents with the reporter. But the 9th Circuit appeals court upheld a lower court ruling and found that the auditors could not proceed with the lawsuit. Sarbanes-Oxley protects whistleblower disclosures to federal regulators, law enforcement, Congress and employee supervisors -- but not the media, the appeals court ruled. Learn more

UK | THOMSON REUTERS ACCELUS, MAY 4

Continued vigilance seen needed on Al Qaeda money flows

Osama bin Laden's demise is unlikely to lead to an influx of terrorist funds into Western banks but the threat of retaliation means that banks need to remain extremely vigilant, according to regulatory experts. Industry figures believe the demise of the Al Qaeda chief has highlighted the importance of the sanctions and of the politically exposed persons (PEPs) regime. Zia Ullah, a partner at Pannone in the UK, said that recent events should not prevent firms from continuing to screen bin Laden's name against EU and US sanctions lists. Ullah said much would depend on whether bin Laden's name was taken off sanctions lists by the various government agencies, but he believed the name would remain intact. Brian Dilley, head of KPMG's anti-money laundering practice, agreed and said that firms still needed to be extra careful about the handling of suspect money. Susannah Cogman, a partner at Herbert Smith, said firms needed to sit tight if they were in possession of frozen bin Laden money. She expected the situation to be resolved on the political level over the long term and advised firms to leave any frozen assets alone. Duncan Aldred, a partner at CMS Cameron McKenna, said that firms needed to be looking more widely than bin Laden, particularly in light of the recent upheaval in the Middle East. He added that bin Laden's death had highlighted the wider importance of the PEPs regime. The publicity surrounding the bin Laden situation had helped to illustrate exactly why the PEP regime had been put in place, he said. It had highlighted how successful people connected with such regimes could be in extracting funds the countries involved.


SEC freezes China Voice assets, cites Ponzi scheme

The U.S. Securities and Exchange Commission said it won a court order freezing the assets of China Voice Holding Corp, and accused a co-founder of the telecommunications company of running an $8.6 million Ponzi scheme. In a lawsuit, the SEC said China Voice, former Chief Executive William Burbank, 52, former Chief Financial Officer David Ronald Allen, 60, and others fraudulently overstated the company's financial condition and business activity in China. The SEC said the Ponzi scheme involved false promises made to investors by Allen and two accomplices: Alex Dowlatshahi, 36, and Christopher Mills, 34. According to the regulator, the men promised investors annual returns of least 25 percent with "minimal risk" on investments in at least 16 limited partnerships. Instead, the SEC said they used money to repay investors in earlier partnerships, fund China Voice and other companies that Allen controls, and enrich themselves and family members. The SEC also accused shareholders Gerald Patera, 69, and Ilya Drapkin, 34, of helping Allen finance

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promotions to drive up China Voice's share price, including a "blast fax" campaign, and dumping millions of China Voice shares onto the market. The lawsuit seeks to impose civil fines, bar Allen and Burbank from participating in penny stock offerings or serving as corporate officers and directors, and other remedies.

GERMANY | REUTERS, APRIL 30

Volkswagen may face German lawsuit over short-squeeze

Europe's biggest carmaker Volkswagen shrugged off a report of a lawsuit against it by investment funds that accuse the carmaker of causing high losses by manipulating markets in 2008. Business weekly WirtschaftsWoche reported that law firm CLLB is preparing a complaint by German investment funds against Volkswagen, and is likely to file a suit with the regional court of Brunswick in September 2011. A Volkswagen spokesman said the company had not seen a copy of the complaint, adding that the allegations were unsubstantiated. The suit would be the first filed against Volkswagen in Germany relating to claims by investors they suffered billions in losses when Porsche effectively cornered the market in tradeable Volkswagen ordinary shares in 2008. Porsche has already been the subject of lawsuits in Germany and the United States, which have so far failed, alleging it quietly bought up the shares as part of a plan to take over Volkswagen while saying publicly it had no plans to do so. The takeover attempt backfired and meant Porsche had to turn to Volkswagen for help. Volkswagen hopes to fold the sportscar maker into its operations this year, but the lawsuits are a major obstacle for the planned merger. The plaintiffs may ask for nearly 3 billion euros in damages, and U.S. based funds -- which are already suing Porsche for an additional 2 billion euros in damages -- could join the German funds in the lawsuit, the magazine reported.

US | REUTERS, MAY 4

Five former Brooke execs settle SEC fraud charges

Five former executives at Brooke Corp, which franchised insurance agencies and made loans to its franchisees, settled U.S. regulatory charges that they fraudulently hid worsening finances that led to the company's bankruptcy and the failure of several regional banks. The U.S. Securities and Exchange Commission said the executives used "virtually any means necessary" in 2007 and 2008 to hide Brooke's condition, including its "almost weekly" liquidity crises and fast-deteriorating loan quality. Two affiliates, Brooke Capital Corp and Aleritas Capital Corp, were publicly traded, and loan losses of hundreds of millions of dollars by Aleritas caused the bank failures, the SEC said in a complaint filed in Kansas City, Kansas, federal court. One of Aleritas' biggest lenders obtained funds from the U.S. Treasury Department's Troubled Asset Relief Program, the SEC added. Robert Orr and Leland Orr, who are brothers and were Brooke's respective chairman and chief executive, agreed to pay fines and disgorge profit in sums to be determined by the court, the SEC said. Three other former executives agreed to pay sums ranging from $130,000 to $414,000. None admitted wrongdoing. A sixth person, former Brooke Capital chief Kyle Garst, has yet to settle.


US | REUTERS, MAY 5

SEC eyes new charges in ICP fraud case

U.S. securities regulators say they want to bring new charges contending that a portfolio manager at a financial services firm improperly transferred three homes shortly after learning he would be accused of fraud. Thomas Priore, founder of ICP Asset Management LLC, transferred ownership of his homes in Martha's Vineyard, Massachusetts, and Chappaqua, New York into trusts for token sums only "days" after his lawyer learned the government planned to sue him for securities fraud, the U.S. Securities and Exchange Commission said in court papers. The SEC brought a civil case against ICP and Priore in June 2010, accusing them of fraudulently managing four multi-billion dollar collateralized debt obligations, known as Triaxx, for their own benefit. The lawsuit said ICP and Priore caused investors to lose millions of dollars when mortgage markets collapsed in 2007. The SEC said it was asking permission from U.S. District Court Judge Lewis Kaplan to file the new charges.

SUPERVISION

UK | REUTERS, MAY 5

UK governance gurus to review RBS, FSA failure

Two senior corporate governance experts will scrutinise a delayed public account of the near-failure of Royal Bank of Scotland in a bid to ensure it is neither a whitewash nor stymied by legal rows. The Treasury Select Committee (TSC) said it and the Financial Services Authority (FSA) had appointed David Walker, commissioned two years ago to run an enquiry into bank corporate governance, and lawyer Bill Knight, head of the Financial Reporting Council, to review the FSAs pending report. That report is to assess the causes of RBS's failure in 2008, its risk controls and governance processes and will examine how the FSA regulated and supervised it. The FSA triggered outrage last December by closing an RBS probe without pursuing RBS executives, such as former boss Fred Goodwin, and initially refusing to offer a public account of its confidential probe before an embarrassing climbdown. However the promised report -- originally scheduled by April -- has become mired in wrangling with lawyers worried it might spark further lawsuits against RBS or former senior executives, such as ex-investment banking head Johnny Cameron.


Fed-sponsored group proposes agency fails charge

An industry group sponsored by the New York Federal Reserve proposed a penalty charge when agency debt and agency mortgage-backed securities are not delivered on time. The Treasury Market Practices Group said the so-called fails charge would aim to improve the liquidity


and efficiency of the two markets and ensure that trading better reflects the underlying availability of securities. The group is seeking public comments on its recommendation through June 10. It said it currently expects an implementation date of early 2012. A spokesman for the New York Fed said the regional central bank supports the group's efforts as it believes that prolonged, elevated fails in these markets increase systemic risk and are harmful to market functioning. For the agency debt market and agency MBS, the proposed fails charge would include a $500 minimum claim threshold. For agency MBS, the fail would not be subject to a charge if delivery occurs on either of the two business days following the contractual settlement date. Learn more

TURKEY | REUTERS, MAY 4

Turkish watchdog warns banks on mortgages

Turkey's banking regulator (BDDK) has threatened to revoke mortgage licenses of lenders it considers to be in breach of regulations by issuing 100 percent mortgages and setting excessively high branch lending targets. BDDK head Tevfik Bilgin told Reuters a high increase in the value of general purpose loans stemmed from 100 percent financing in home sales, and the watchdog would investigate lending activities. Banks are advised to limit mortgage lending to 75 percent of the value of the property. Bilgin did not name any specific banks. He also warned real estate appraisal firms with the cancellation of their license over irregularities on home valuations.

INDIA | REUTERS, MAY 4

India central bank proposes norms on primary dealers' authorisation policy

India's central bank set pre-conditions for entities wanting to apply for primary dealership licences by proposing they should have a minimum turnover of 15 percent of total revenue in government securities business in the year prior to its application. The Reserve Bank of India (RBI) also wants such applicants to have a minimum turnover of 15 percent in gilts on behalf of mid-segment investors like provident funds, urban cooperative banks, regional rural banks. Releasing the proposed norms on authorisation policy for primary dealers, the RBI said there was a need to review the existing authorisation policy to make it more equitable and transparent. It added that these requirements had become more relevant given the large borrowing requirements of the government. The RBI also proposed that a company wanting to start a primary-dealer (PD) business should be registered as non-banking finance company for at least one-year prior to application. For subsidiaries or joint ventures set up by entities incorporated abroad wanting to apply for PD business, the parent foreign company should directly or through its subsidiaries have been in PD business for three years or more, the RBI said. Learn more

US | REUTERS, MAY 2

US lawmaker backs small banks on debit card battle

A key Republican lawmaker urged hundreds of tiny U.S. banks to "slay the dragons" when they battle Congress over new limits on debit card fees that could hurt their profits. Speaking to the

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bank executives before they set out to lobby lawmakers, Representative Spencer Bachus told them the outcome of the controversial "interchange" rule was up to them. Under the Dodd-Frank bill, regulators are crafting an interchange rule that will crack down on fees banks charge merchants on debit card transactions. The provision is detested by small banks as well as the big card networks Visa Inc and MasterCard Inc and big Wall Street banks such as Citigroup and JPMorgan Chase & Co. The Federal Reserve in December proposed capping the fees at about 12 cents per transaction -- a 75 percent cut. At the Fed's proposed level, the cap would cost the bank industry about $13 billion in annual revenue, CardHub.com has said. Deputy Treasury Secretary Neal Wolin, who along with Bachus spoke at a meeting of the Independent Community Bankers of America, said regulators were working to strike the right balance.

ACCOUNTING & FINANCIAL STANDARDS

RUSSIA | MAY 3

Third of Russian banks fail central bank stress test

The Russian central bank has warned that domestic banks may lose over half of their equity after conducting a stress-test earlier this year, and that some may need to be bailed out, analysts say. Based on the financial reports of Russia's 1,000-plus banks at the start of 2011, a third of the country's banks fall short of minimum capital requirements of 10 percent under the stress tests' assumptions. To meet capital requirements some lenders would require a bailout, or need to consolidate, or be allowed to fail. The scenario used by the central bank among other things assumes that Russian lenders face outflows of 10-20 percent of retail, and 5-10 percent of corporate deposits, forcing them to sell assets at a discount of up to 60 percent to fill liquidity gaps. The central bank did not name the 321 banks that failed the test but said they account for 50.8 percent of total assets, meaning the list may include some state-owned banks, which hold around 60 percent of assets, according to Reuters calculations.

EU | REUTERS, MAY 2

EU watchdog: banks failing stress tests may get 6 months to act

European banks that fall short of hurdles set in pan-EU stress tests may get up to six months to repair their finances or face further action, Andrea Enria, one of the region's top regulators, said. Enria added that he hoped publishing the results of the financial health checks would put banks under pressure to respond. Enria said the European Banking Authority he heads was examining data from banks outlining how they would cope if exposed to scenarios such as an economic slump or losses on government bonds they own. The results of the latest series of checks will be announced in the coming weeks and Enria said he hoped troubled lenders would have taken steps to address weaknesses on their balance sheets at the latest by the end of this year.


FRANCE | REUTERS, APRIL 29

French banks seen resisting capital crackdown

French banks are likely to stand pat and resist the fresh wave of capital increases across the sector ahead of Europe-wide stress tests this year, helped by a protective regulator and benign borrowing costs. French lenders such as BNP Paribas and Societe Generale are seen sticking to their guns and refusing to take part in a race for shareholders' cash, thanks in part to the Bank of France's support. Bank of France Governor Christian Noyer has said France's banking system is "solid" and that this year's stress tests are unlikely to reveal any unexpected chinks in its armour. French banks are counting on their own profit-generating power to top up capital over time. They reckon this will in most cases be enough to lift their capital ratios above the Basel III minimum of 7 percent by 2013, or five years before the deadline. Moody's credit analyst Nick Hill said the banks had reasonable capital generation and should be able to raise the capital needed without recourse to shareholders or other resources. However, some analysts said the cost of avoiding a capital increase would be reflected in lingering doubts from equity investors over SocGen and Credit Agricole, which are seen as less solid than BNP and more exposed to tougher regulatory requirements. They say there was potential for a tougher-than-expected upcoming decision from regulators over whether to impose additional capital buffers on big, complex banks seen as "systemic" -- a definition that could very well cover all of France's listed banks including Natixis parent BPCE.

SWITZERLAND | REUTERS, MAY 1

Swiss minister defends tough banking proposals –report

Swiss finance minister Eveline Widmer-Schlumpf does not think UBS will leave the country if tough bank rules are adopted as Switzerland will still offer the bank better conditions than any other country. The Swiss government is pushing ahead with plans to make both UBS and Credit Suisse reach tough new capital standards, saying the benefits to the economy outweigh the costs to the banks. She said in an interview with Switzerland's SonntagsZeitung that despite the new regulations for big banks, Switzerland still offered companies like UBS overall far better conditions than any other country. The Swiss government has proposed both big banks will need an equity Tier 1 capital ratio of at least 10 percent of assets, more than the 7 percent minimum set under the Basel III global standards which begin to take effect in 2013.


GOVERNANCE


Buffett admits error, calls Sokol events inexcusable

Warren Buffett said he was wrong not to press David Sokol about purchases of Lubrizol Corp stock while his former top lieutenant was pitching the chemicals company as a possible takeover target for Berkshire Hathaway Inc. Buffett said Sokol had violated Berkshire insider trading rules by failing to disclose his January purchase of Lubrizol shares, less than four weeks after starting talks with Citigroup Inc bankers about the company. He said he “obviously made a big mistake” by not asking for more details when Sokol told him he bought shares. Sokol, who chaired Berkshire's MidAmerican Energy unit, ran its NetJets plane leasing unit, and was a top Buffett deal maker, was considered a leading contender to succeed 80-year-old Buffett as Berkshire's chief executive. But he resigned in March 2011 when his Lubrizol stake was revealed. Sokol got a $3 million profit on that stake when Berkshire agreed to buy Lubrizol for about $9 billion. The U.S. Securities and Exchange Commission is probing Sokol, a person familiar with the matter has said. The controversy has called Buffett's management into question. Buffett, called the Sokol situation "inexplicable and inexcusable," and told Reuters Insider that his much-criticized March 30 press release announcing Sokol's resignation had been "inept.”

UK | REUTERS, MAY 5

UK regulator consults on breaking glass ceiling

Britain's listed companies should be forced to explain why they have so few women on their boards, the country's corporate governance policeman said. The Financial Reporting Council is consulting on requiring all listed firms to explain what steps they are taking to smash the glass ceiling holding back women in the corporate world. The FRC said women made up only 12.5 percent of board members in Britain's top 100 blue chip companies last year and that diversity makes a board more effective. A new section in companies' annual reports should include a description of the board's policy on gender diversity in the boardroom, including any measurable objectives that have been set, the FRC's proposed code change said. Under UK listing rules firms must report how they comply with the FRC's standards of good practice, including board composition, audit and relations with shareholders. The FRC will announce later this year if and when it will change the code. Learn more

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DERIVATIVES

US | REUTERS, MAY 4

CFTC panel to develop standardized info on derivatives

The U.S. futures market regulator created an advisory panel that will help it implement portions of the new Dodd-Frank law that gives the government more oversight of the derivatives market. The special panel, which will be part of the Commodity Futures Trading Commission's technology advisory committee, will focus on standardizing the reference data used to describe and value derivatives that are traded on regulated exchanges and in the over-the-counter market. This will make it easier to track derivatives and other financial instruments, along with the firms and customers that bought and sold them. The special data panel will be chaired by CFTC chief economist Andrei Kirilenko, who will report the panel's findings to the full advisory committee. For panel members, the commission wants representatives from government agencies, industry, exchanges, academia, information technology and groups involved in standardized data design. Nominations are due May 16. Learn more

US | REUTERS, MAY 2

Swaps players beg U.S. regulators for clarity

Wall Street banks and major market players said they are equipped to comply with derivatives reforms, but accused U.S. regulators of dragging their feet on clarifying how and when they will go into effect. At the start of a two-day roundtable held by the U.S. Commodity and Futures Trading Commission and the Securities and Exchange Commission to design a roadmap for when the reforms will be rolled out, the industry said timelines are essential and regulators were not doing enough to allow them to prepare. The CFTC is considering a phase-in approach that would weigh many factors in determining when entities must comply. This could include giving market participants who are not used to strict regulatory oversight more time to comply. Robert Cook, the SEC's trading and markets division director, said his agency does not "have a fixed timeframe in mind. Market players voiced concern about what the first phase should be. Lee Olesky, the CEO of Tradeweb, which is majority-owned by Thomson Reuters, said registration could be a first step toward implementation as market participants would benefit from having certainty as to who the SEFs and central counterparties were. Republican CFTC Commissioner Scott O'Malia has also said regulators are not doing enough to work with the industry, saying it would be better for the industry if regulations were not issued piecemeal to the industry.


Regulatory newbies may be eased into US swaps reforms

Market participants not used to strict regulatory oversight may be given more time to comply with new swaps rules, but those with ties to big banks could be hit sooner, under rough guidelines the Commodity Futures Trading Commission is considering. The futures regulator outlined a 13 factors, or concepts, it is considering as it determines when those affected by sweeping new financial reform rules must comply. The agency said implementation will be phased-in in a way

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that lowers risk and minimizes cost. It said the concepts reflected the idea that the financial industry would not be subjected to implementation of all of the Dodd-Frank rules at once. The CFTC said compliance dates for swap dealers, major swap participants and others could depend on a complex set of guidelines, including the asset class, the availability of data; and costs and time to make necessary technological upgrades. The CFTC said it is considering giving entities that have not been previously subjected to regulatory oversight more time. Swap dealers that may have previously been part of a bank holding company, and were already regulated, may have an easier time complying. Compliance dates for certain rules may also be dependent on whether it links with other rules. Another option could include having different phase-in dates for various stages of a transaction -- such as clearing and trading requirements, data reporting, and compliance with position limits. Learn more


U.S. plans to exempt forex swaps from new rules

In a big win for business, the U.S. Treasury proposed to exempt commonly used foreign exchange swaps and forwards from the most onerous new rules for the derivatives market. The Treasury Department said that forcing these financial products through clearinghouses and onto exchanges was not necessary because existing procedures in the foreign exchange market mitigate risk and ensure stability. Any disruptions to this market "could have serious negative economic consequences," the department said. The business community applauded Treasury's decision and said the government recognized that the products did not pose a risk to the financial system. Democratic Senator Carl Levin said he was concerned the exemption relied on current industry practices that were inadequate and could be changed by the industry unless the exemption was "conditioned upon their remaining in place." The proposal is open for comment for 30 days. Learn more

EXCHANGES & TRADING PRACTICES

CANADA | REUTERS, APRIL 29

LSE, TMX start long Canadian merger approval process

The London and Toronto stock exchanges started the clock ticking for the months-long Canadian government review of a $3 billion tie-up that has already polarized public opinion. Nearly three months after announcing the deal, to opposition from some banks, politicians and companies, the London Stock Exchange and TMX Group filed an application for review under the Investment Canada Act and said they had talked with provincial securities regulators. The London Stock Exchange bid on Feb. 9 for the TMX Group, Canada's largest stock exchange operator and one of the largest concentrations of mining equity in the world, but had not yet filed for approval for regulators. Proponents say the deal will help Canadian capital markets, while detractors say it will hand control to London. Learn more

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AUSTRALIA | THOMSON REUTERS ACCELUS, MAY 5

Australia faces clearing and settlement conundrum after Chi-X licence

The Australian government's decision to grant a market licence to Chi-X this week has highlighted two inconvenient truths about the Australian exchange landscape - clearing and settlement. The reality that regulators in Australia face is that it is difficult to introduce genuine competition into a jurisdiction without addressing the dominance of the entrenched, vertically integrated incumbent exchange operator, according to industry figures. The concerns around clearing and settlement in Australia have come under scrutiny in recent weeks as a result of two confluent events. The first was the government's decision to block the ill-fated ASX-SGX merger on the grounds that it would give an overseas entity control over the ASX's clearing and settlement functions, which treasurer Wayne Swan described as "critically important" pieces of financial infrastructure. He added that the Council of Financial Regulators would consider putting new regulatory controls around the ASX's clearing and settlement functions to address these issues. The second major event was the government's decision to introduce market competition - in the form of a licence for Chi-X to run a market for ASX-listed securities. Chi-X's three-year quest to secure a market licence follows unsuccessful applications from Liquidnet and AXE-ECN, numerous regulatory reviews, consultations and a barrage of strenuous opposition from the incumbent ASX. Yet during the four-year period since the first market licence was requested for AXE-ECN in early 2007, little has been done to address the issue of ASX's clearing and settlement monopoly. The industry has voiced concerns about how competition can really function when the dominant player also has a stranglehold on critical market infrastructure - and in the case of settlement, non-contestable market infrastructure. But in October when Chi-X goes live it will be routing trades through ASX Clear and ASX Settlement Corporation. There will be no regulatory controls, other than general competition law, on how the ASX charges for the use of these facilities.

UK | REUTERS, MAY 4

UK regulator approves Baltic ship futures screen

The UK's financial regulator has given approval to the Baltic Exchange to trade dry freight derivatives on a central screen, with a launch date imminent, the exchange said. The Baltic said the Financial Services Authority (FSA) had authorised subsidiary Baltic Exchange Derivatives Trading Ltd (BEDT) to run a multilateral trading facility for the screen service called Baltex. It said Baltex would be the only FFA trading platform in London authorised by the FSA. The screen will provide live FFA prices and will support straight through processing to the international clearing houses CME, LCH, NOS and SGX. The transaction's clearing status will be displayed in real time, the Baltic Exchange said. It added that Baltex also had provisional approval from the Swiss Financial Market Supervisory Authority and Monetary Authority of Singapore, and was expected to gain authorisation from other jurisdictions in the coming months.

UK | REUTERS, MAY 5

Icap's Traiana and LCH partner for swap clearing

Icap-owned system vendor Traiana has become the latest firm seeking to profit from regulatory changes, by partnering with British clearing house LCH.Clearnet to launch a swap clearing service.


Traiana said it will offer brokerage members of its flagship Harmony service access to LCH.Clearnet's equity clearing service, allowing them to trade contracts for difference (CFD) equity swaps more efficiently. Traiana said 60 of the world's largest brokerages, as well as fund managers and hedge funds, use Harmony to clear CFD equity swaps but it has joined with LCH to support banks trading CFDs over the counter (OTC) - a growing market for the firms. Traiana said it expects to launch the service later this year. The partnership marks the latest effort by an inter-dealer broker to gain an advantage in this ultra-competitive industry before the introduction of wholesale rule changes in the United States and Europe, which are set to shake up their OTC markets.

UK | REUTERS, MAY 3

LME considers forming own clearing house

The London Metal Exchange is considering building its own clearing system, a move market participants said could help it boost earnings although it would incur significant start-up costs. At present the members of the LME, the world's leading industrial metals futures exchange, pay for the task to be done by Europe's largest independent clearing house, LCH.Clearnet. The LME said self-clearing would boost its earnings.

FUNDS MANAGEMENT

AUSTRALIA | THOMSON REUTERS ACCELUS, MAY 5

Australia's adviser reforms to provide boost to exchange-traded funds

The Future of Financial Advice reforms could prove a catalyst for growth in Australia's A$5 billion market for exchange-traded funds, according to industry analysts. In particular, the move to a fee-for-service model is expected to benefit the asset class, which market participants said had struggled to take off under the traditional commission-based remuneration model. BlackRock has predicted 20 to 30 percent growth rates for the ETF sector for the next few years and has cited the FOFA reforms as one significant driver of growth. BetaShares Capital also expects a strong stimulus from the FOFA package. According to Drew Corbett, head of investment strategy and distribution at BetaShares, the Australian ETF market could grow to A$15-20 billion within the next five years from approximately A$5 billion today. While low costs are one attractive benefit, ETFs in Europe have recently come under significant scrutiny on the back of counterparty credit risk considerations. This is specifically the case for synthetic ETFs that replicate an index using total return swaps. Using total return swaps allows the ETF provider to guarantee the performance of the index, but it comes with a level of counterparty credit risk. The guarantees provided by the swap counterparty are only as strong as the counterparty's own credit quality. That has driven a number of organisations, including the International Monetary Fund, the Financial Stability Board and the Bank of International Settlements to start reviewing potential systemic implications resulting from these counterparty credit risk exposures. In Australia, however, market participants say these considerations do not apply, because most ETFs use physical replication strategies which by definition do not have counterparty risk. Learn more

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FINANCIAL CRISIS & ECONOMY

US | REUTERS, MAY 2-4

U.S. pushes back day of reckoning on debt limit

The U.S. Treasury pushed back the date when it expects the nation will run out of options for avoiding a default on its obligations by three weeks, buying more time to strike a budget deal with Congress. Treasury Secretary Timothy Geithner told lawmakers that stronger-than-expected spring tax receipts coupled with emergency steps to preserve borrowing capacity will allow the government to continue issuing debt under the $14.3 trillion legal limit until August 2, 2011. Geithner had previously estimated that all room to borrow would be exhausted by July 8. House of Representatives Speaker John Boehner, under intense pressure from business groups for a prompt and tidy handling of the debt limit, said he favored raising the debt limit “sooner rather than later,” and told reporters "why wait" until the last minute to pass legislation. Although the new estimate gives lawmakers roughly until their traditional August recess to reach a deal, Geithner told them that he will begin to take extraordinary steps to preserve borrowing capacity by halting issuance of State and Local Government Series securities. He said other extraordinary steps to avoid default would follow. The Treasury secretary also reiterated warnings that a default on U.S. debt triggered by a budget policy stalemate would have dire consequences for the economy. The Treasury later told lawmakers a roughly $2 trillion increase in the debt limit was needed to ensure the government can keep borrowing through the 2012 presidential election, sources with knowledge of the discussions said. Republicans did not step back from their demand that any increase in U.S. borrowing authority be accompanied by serious spending reductions.

DUBAI | REUTERS, MAY 1

Dubai extends support fund access to more firms

A support fund set up to help Dubai's state-linked entities at the height of its debt crisis can now extend loans to more firms, if needed, according to a decree from the Gulf Arab emirate's ruler. The Dubai Financial Support Fund (DFSF), set up in 2009 to disburse proceeds from a $20 billion sovereign bond programme to state-linked firms, can give grant loans and credit facilities to government and non-government entities alike. The decree was posted on Sheikh Mohammed bin Rashid al-Maktoum's website and is effective from March 17. Dubai's department of finance said the amendment was intended to give the fund the flexibility to support private entities that could have some kind of link to the government.

FRANCE | REUTERS, MAY 3

Sarkozy eyes tax break for mandatory bonus scheme

French companies may receive tax breaks on welfare contributions of up to 1,200 ($1,784) euros per employee as compensation for a new scheme of mandatory bonuses, President Nicolas Sarkozy said. Critics from business leaders to unions have blasted Sarkozy's plan to make large and mid-sized companies pay staff bonuses if they increase shareholder dividends this year. Sarkozy, battered in the polls a year away from a presidential election, said workers should reap the benefits of economic recovery following the heavy job losses suffered during the recession. He said in an interview with L'Expresse magazine that companies with over 50


employees that increased dividends would have to pay a bonus but would be spared up to 1,200 euros in welfare contributions per employee. Firms with fewer than 50 employees would not be required to pay the bonuses, but Sarkozy said they would benefit from the tax break if they did pay them.

SOUTH KOREA | REUTERS, APRIL 29

South Korea to auction suspended debt-hit savings banks

South Korea is seeking to sell seven suspended savings banks as part of efforts to salvage the ailing sector, the country's top financial watchdog said. The Financial Services Commission (FSC) said that sale notices for the banks would be issued in May and preferred bidders selected in June. The savings bank problem, triggered by souring property loans after the global financial crisis, has become a major issue for regulators in Asia's No.4 economy.

NIGERIA | REUTERS, MAY 5

Nigeria's central bank sees all rescued lenders sold

All of Nigeria's systemically important banks rescued in a bailout two years ago will find new investors, with four of them already agreed in principle on mergers, Central Bank Governor Lamido Sanusi said. Nigeria's central bank in 2009 injected $4 billion into nine lenders deemed by auditors to have become so weakly capitalised that they posed a risk to the entire banking system in sub-Saharan Africa's second-biggest economy. An asset management company (AMCON) has been set up to restore them to zero shareholders funds but new investors have been sought to bring them up to minimum capital adequacy. Sanusi told Reuters on the sidelines of a World Economic Forum event in Cape Town that four banks were on the way to merging, two others had good suitors but remained apart over terms, and he was confident all would be sold.

TAX

US | REUTERS, MAY 1

U.S. hedge funds could feel corporate tax revamp -group

The Obama administration is considering a plan to force more businesses to pay the corporate income tax, an industry group said. Partnerships like law firms and hedge firms would likely be the most affected. Under a package that could be unveiled as early as this month, entities with more than $50 million in gross receipts would pay the corporate income tax, instead of the individual income tax they now pay, according to a letter to members of the National Association of Publicly Traded Partnerships from its executive director Mary Lyman. The Obama administration is drawing up a plan to trim the top 35 percent corporate tax rate, among the highest in the world, while cutting deductions, credits and other breaks.


UK | REUTERS, MAY 3

UK-Swiss asset tax deal to yield 3 billion pounds - report

Britain is likely to reach a deal with Switzerland in May 2011 to tax undeclared assets that will raise 3 billion pounds ($5 billion) by 2015, the Financial Times said, citing a source familiar with the negotiations. The two countries have been in talks since October to levy a one-off tax on assets that Britons have stashed in secret Swiss bank accounts, and to introduce a withholding tax on new deposits. Britain's finance ministry said it was still in talks with Switzerland and that no deal had been signed. The FT said a withholding tax rate of 50 percent would apply to income from Swiss bank accounts held by British taxpayers, raising 3 billion pounds by the time of British national elections in May 2015. An extra one-off levy on top of this would apply to undeclared assets that were brought into the tax system, to represent tax that had been avoided.


Swiss minister eyes German tax deal soon -report

Switzerland could reach a taxation deal with Germany this summer, Swiss Finance Minister Eveline Widmer-Schlumpf was quoted as saying in an interview with Swiss newspaper SonntagsZeitung. Last year Switzerland and Germany agreed the outlines of a deal to impose a withholding tax on an estimated 200 billion euros ($296 billion) hidden in secret Swiss accounts. Widmer-Schlumpf declined to give any details about a deal with Germany, saying only it would be a "milestone" and that agreements with both Germany and the United Kingdom could become test cases. She also said Switzerland was in talks with the United States regarding the planned Foreign Account Tax Compliance Act, which should help identify U.S clients with accounts at foreign banks.

GREECE | REUTERS, MAY 2

Greece unveils 12.7 billion euro anti-tax evasion plan

Greece will target 12.7 billion euros in revenues over the next three years with a new anti-tax evasion plan, the government said. Greece wants the plan to yield 2.5 billion euros this year, 4.4 billion next year and 5.8 billion in 2013, a finance ministry document said.

CURRENCY

ISRAEL | REUTERS, MAY 5

Israel FX swap transaction reporting starts July 1

The Bank of Israel said an order requiring reporting of transactions in foreign exchange swaps and forwards aimed at stemming shekel appreciation would go into effect on July 1. The central bank said it had made the reporting requirements more stringent since initially announcing the order in January by widening the range of market participants required to report and including further transactions such as repurchase agreements.


Israelis and foreigners will be required to report shekel and foreign exchange swap and forward transactions totalling at least $10 million. Also, non-residents who perform transactions in short-term Bank of Israel bills, known as makams, and short-term government bonds of more than 10 million shekels in one day will be required to report details of the transactions and their balance of holdings of such assets. Learn more learn more

TRADE & CROSS BORDER

US | REUTERS, MAY 3

China wants investment treaty with U.S. -Geithner

U.S. Treasury Secretary Timothy Geithner said that China wants more access to U.S. technology and wants a bilateral investment treaty with the United States. Geithner was speaking days before a May 9-10 meeting in Washington of the Strategic and Economic Dialogue, an annual event that brings top Chinese and U.S. officials together for talks on economic and diplomatic issues.

US | REUTERS, MAY 3

U.S. Treasury nears Iran sanctions on more banks

The U.S. Treasury is close to a decision whether to blacklist more banks that appear to be defying sanctions against Iran, including an institution in Turkey, a senior Treasury official said. David Cohen, nominated to be Treasury's undersecretary for terrorism and financial crimes, told a U.S. Senate confirmation hearing that he will vigorously enforce the Comprehensive Iran Sanctions, Accountability and Disinvestment Act (CISADA). The law, aimed at curbing Iran's nuclear program, effectively requires banks to choose between dealing with the U.S.-led financial system or to continue doing business with Iran. Members of the Senate Banking Committee questioned Cohen on why Treasury had not sanctioned any banks under CISADA, which was passed in July 2010 to enforce tougher U.N. sanctions against Iran. Cohen did not name any of the banks, but said that one institution in Turkey was effectively violating the sanctions.


Swiss reveal funds stashed by Gaddafi, Mubarak, Ben Ali

Switzerland has found 360 million Swiss francs ($415.8 million) of potentially illegal assets linked to Libyan leader Muammar Gaddafi and his circle stashed in the Alpine country, the Foreign Ministry said. Some 410 million Swiss francs traced to former Egyptian President Hosni Mubarak and 60 million Swiss francs linked to former Tunisian President Zine al-Abidine Ben Ali have also been identified, Foreign Ministry spokesman Lars Knuchel said. He said the amounts were frozen in Switzerland following blocking orders by the Swiss government. Both Tunisia and Egypt -- where unrest led to the ousting of Ben Ali and Mubarak -- are in touch with Swiss judicial authorities regarding their formal requests for legal assistance to seek return of the funds and property, according to Knuchel. No such discussions are underway

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with authorities in Libya, where Gaddafi is clinging to power in the face of an uprising and NATO air strikes.

COMMODITIES & ENERGY

US | REUTERS, MAY 3

US eyes price gouging, manipulation in energy market

A new taskforce focused on fraud in energy markets will look into whether consumers are being gouged at the gas pump or traders are manipulating the markets, U.S. Attorney General Eric Holder said. He said the focus of the taskforce would be to look into gouging, manipulation and other "things of that nature that have had a devastating impact on average Americans". The panel met for the first time last week.

RUSSIA | REUTERS, MAY 5

Putin accuses oil firms of gasoline price fixing

Russian Prime Minister Vladimir Putin accused oil companies of a "conspiracy" to force up gasoline prices, as the world's largest oil producer struggles to combat fuel shortages. Putin rebuked Deputy Prime Minister Igor Sechin, his point man for energy, for suggesting at a government meeting that price rises had resulted from a lack of oil products offered for sale on commodities exchanges. Putin told Sechin there was no shortage and said “This is a conspiracy. They are colluding." Sechin, who serves on the board of state-controlled oil major Rosneft and is widely seen as the chief spokesman for the industry. The government last week raised gasoline export duties by 44 percent to keep fuel in the domestic market after pumps ran dry in some regions and shortages spread to Moscow and St Petersburg. Sechin has chaired talks to discuss proposed amendments to oil tax reforms that would ramp up export duties on refined products to punitive levels if crude oil prices are high. Analysts blame the shortages on price curbs demanded by Putin from industry bosses in February, and a lack of investment in the refinery capacity needed to produce the premium fuel used by Russia's growing fleet of modern cars.

US | REUTERS, MAY 3

SEC rules on resource sector face delays

The U.S. Securities and Exchange Commission is unlikely to finalise its new anti-corruption requirements for resource companies before August 2011, delaying a process that should have been done by April. The reasons for the delay remain unclear but the SEC has said it hopes to have the rules completed by August, if not sooner. Some U.S. congressmen have said the process may not be finished before December..


EU | REUTERS, MAY 5

EU asks states to approve new CO2 registry rules

The European Commission is seeking approval from member states on measures to increase the security of the bloc's national emissions registries, after the theft of over 3 million spot carbon permits this year. The Commission discussed the proposals with carbon market participants in Brussels in March and member states have now been asked to consider the measures. A Commission spokesman said the measures will need to be scrutinised by the EU's climate change committee and then the EU Parliament, and that they could be effective in five to six months' time at the earliest. The proposals include implementing a 24-hour delay on permit transfer between registry accounts, requiring at least two people to authorise the transfer of permits and preventing those convicted in the last five years for money laundering, tax fraud or terrorist financing from having registry accounts. Under another proposal, each member state would designate a national administrator to access and manage its accounts. The Commission held a meeting this week with market participants to discuss the wider issues of supervision and regulatory oversight of the spot carbon market. At the meeting, EU officials and stakeholders debated whether to tighten regulation by classifying all carbon permits as financial instruments or by way of a tailor-made regime for EUAs that would build on existing financial market rules. Learn more

GLOBAL | REUTERS, APRIL 28

G20 to meet on nuclear safety on June 7-8 -OECD

The Group of 20 economic powers will meet in Paris on June 7-8 to discuss nuclear safety in the wake of Japan's Fukushima disaster, OECD Secretary General Angel Gurria said. Ministers in charge of nuclear safety will meet on June 7 and safety regulators on June 8 to try to hammer out a common position before a ministerial nuclear meeting at the International Atomic Energy Agency (IAEA) on June 20-24. The agenda for the combined G8 and G20 talks in Paris is still being finalised, but the focus will be on strengthening international safety standards and other measures to prevent future atomic accidents.

JAPAN | REUTERS, MAY 2

Japan says no limits to Tepco liability from nuclear disaster

Tokyo Electric Power should face unlimited liability for damages stemming from its crippled nuclear power plant, Chief Cabinet Secretary Yukio Edano said. A rescue plan under discussion would create a fund to provide loans for and buy preferred shares from Tokyo Electric, commonly known as Tepco. Other utilities would pay premiums as a buffer against future accidents, and Tepco would repay the fund from its profits over several years, sources with knowledge of the talks told Reuters. The liability cap has been one of the most contentious issues in the talks. Tepco and its creditor banks have argued for a limit on compensation, warning that without one Tepco's credit ratings could be cut to junk, making it impossible for the utility to raise funds, sources say. The decision on who bears compensation costs will hinge in part on the interpretation of Japanese law, which states that a nuclear plant operator can be granted an exemption from paying damages if an accident was caused by "a grave natural disaster of an exceptional character".

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Edano has repeatedly said he does not believe the accident at Tepco's Fukushima Daiichi nuclear plant should qualify for that exemption.


U.S Democrat details plan to cut energy tax breaks

The top Democrat on the tax-writing U.S. Senate Finance Committee sketched out some details of the Democrats' plan to roll back billions in tax breaks for the oil and gas industry. Senator Max Baucus’s wish list includes ending a manufacturing deduction used by energy companies and trimming a credit that companies get for royalties paid to foreign governments for exploration. Baucus also proposes to add an excise tax on certain leases in the Gulf of Mexico and backs new incentives for consumers and manufactures to buy and make fuel efficient vehicles. In the House of Representatives, Budget Committee Chairman Paul Ryan said he supports cutting tax breaks for the oil industry. The Republican congressman said he agreed that oil company subsidies should end. A statement from his office to the Politico news organization said the House-passed budget resolution clearly stated that as part of an overall corporate tax reform, tax loopholes and deductions for all corporations should be scaled back or eliminated entirely.

UK | REUTERS, MAY 4

BP Alaska deal seen pointing to big Gulf fine

BP Plc's $85 million settlement with the U.S. Department of Justice for oil spills in Alaska in 2006 suggests the government will push for higher than expected fines for the Gulf of Mexico blowout. Legal experts said the size of a $25 million penalty levied as part of the deal, when calculated on the number of spilled barrels, and the DoJ's willingness to invoke legislation to threaten BP, set a bad precedent for the British oil major. BP has indicated it will face fines of under $5 billion related to the 2010 Gulf disaster, rather than the around $21 billion it could face if it was found guilty of gross negligence. However, if the Alaska settlement is a template, BP could end up paying out well in excess of $21 billion, as the spill at Prudhoe Bay in 2006 was dwarfed by the nearly 5 million barrels spewed from BP's ruptured Macondo well last summer. The two Alaska spills led to 5,078 barrels of crude spilling on to the tundra, the DoJ said. The fine paid by BP equates to over $4,900 per barrel as against a maximum $4,300 per barrel fine applicable under the Clean Water Act, the main statute that covers oil spills. The DoJ said it was the largest per-barrel penalty to date for an oil spill. BP denied the penalty was assessed on a per barrel basis. BP has also agreed to spend an additional $60 million in improving safety. These amounts are on top of a $12 million criminal fine, and $8 million in other penalties.

AUSTRALIA | REUTERS, MAY 4

Australia aims for carbon tax details by July

Australia will announce details of its new carbon tax by July 2011, Prime Minister Julia Gillard said, as a new poll shows overwhelming public opposition to the plan which is a central policy of the minority government. A Newspoll in the Australian newspaper found 60 percent of voters opposed the proposed carbon tax, with only 30 percent in favour, adding pressure on a government which needs Greens and independent support for its parliamentary majority. The government, Greens and independent lawmakers are working on details of the carbon tax, to start in July 2012 ahead of a full emissions trade scheme, and the levels of compensation to industry and households. The opposition Liberal Party and big business have run a strong


campaign against the carbon price, and the country's powerful trade union movement, which is allied to Gillard's government, has also warned it would oppose the plan if it leads to job losses.

ARGENTINA | REUTERS, APRIL 28

Grain exporters raided again in Argentina tax probe

Argentine tax inspectors raided the premises of some of the country's largest multinational grains exporters as part an investigation into alleged evasion, the AFIP tax agency said. The local offices of agribusiness giants Bunge Ltd and Cargill were among those raided, a source close to the probe said on condition of anonymity. The AFIP accused the companies raided under a federal court order of evading about $72 million in taxes by striking deals on the black market. The raids on 165 premises, which involved 1,200 tax agents, were similar to an offensive launched by the AFIP in early March, when it accused companies of evading some $36 million in taxes. Other firms raided included Argentina's Vicentin, Aceitera General Deheza (AGD) and Molinos Rio de la Plata, the source said.

ALGERIA | REUTERS, MAY 4

Algeria court jails ex-head of state energy firm

A court in Algeria sentenced the former head of state energy firm Sonatrach to two years in prison after finding him guilty of misappropriation of public property, the official news agency reported. In the biggest shake-up in Algeria's energy sector for years, Mohamed Meziane was suspended as Sonatrach chief executive last year when he and several of the company's senior executives were named as part of a corruption investigation. The court in Oran, western Algeria, also ordered that Abdelhafid Feghouli, the man who briefly took over as caretaker CEO after Meziane was suspended, serve one year in jail, the APS news agency reported.

ITALY | REUTERS, MAY 5

Italy approves decree capping solar incentives

Italy has approved a decree that caps spending on generous solar power incentives, ending uncertainty which had raised complaints from international investors and operators in the sector. Italy's solar market has boomed since 2007 when the government boosted production subsidies, but Rome has sought to cut incentives to help consumers who support the scheme through power bills. The new solar decree sees a transitional period with gradual cuts in incentives to 2013, after which the incentives will automatically be linked to reaching a certain level of installed capacity, the industry ministry said. A cap on incentives and a registry for big installations only will help eliminate speculation, it said. The full text of the decree is yet to be published. According to the draft decree seen by Reuters earlier, Rome has tightened the planned cap on the money it intends to spend for solar power incentives in the transitional period from June this year to the end of 2012.


ITALY | REUTERS, MAY 4

Italy minister confirms accord on solar decree

Italy's draft renewable energy decree, which caps incentives to the solar sector, contains support measure for rooftop and ground-based installations with a capacity of up to 200 megawatts, Environment Minister Stefania Prestigiacomo said. Presigiacomo confirmed she had reached an accord with Industry Minister Paolo Romani over the text of a decree to be presented to cabinet. She also said the draft decree contained provision for compensation to be paid in case of delays in connection to the electricity grid.

AFRICA | REUTERS, APRIL 29

Extract says Namibia govt plan taken out of context

Uranium explorer Extract Resources said it would seek clarity from the Namibia government on media reports it planned to assign almost all mining and exploration rights to a state-owned company. In Namibia, a government official confirmed to Reuters that the minister of mines and energy, Isak Katali, would likely hold a news conference soon to clarify the matter. In a statement issued regarding its March 29 cabinet meeting, the government of the resource-rich African nation said: that the cabinet endorsed that uranium, gold, copper, coal, diamonds and rare earth metals were declared strategic minerals and that the right to own licences for strategic minerals would only be issued to a state company. Australia-listed Extract said that earlier comments had been taken out of context and the Namibian government fully supported Extract and its Husab Uranium Project in the country.

EU | REUTERS, APRIL 29

EU executive rejects Estonia's carbon permit plan

The European Union's executive said it had again rejected Estonia's strategy for distributing carbon emissions permits to industry during 2008-2012, because it was over-generous.

ISLAMIC FINANCE

MIDDLE EAST | REUTERS, MAY 3

Oman opens door to Islamic banks to curb fund outflows

Oman will finally open the door to Islamic banking and let conventional lenders run sharia-compliant operations in a bid to keep investment funds in the Gulf state and grab a share of the rapidly growing industry. A central bank official told Reuters applications were open for the creation of Oman's first standalone Islamic bank, after a decree from ruler Sultan Qaboos bin Said. Existing banks in the Gulf state will not be allowed to switch to become Islamic banks, the official added. Oman is the only Gulf Arab state which until now has not set up a bank specifically offering products and services complying with Islamic law. Its central bank head said in 2007 that Oman believed that "banks should be universal".


Conventional lenders in Oman will gain from operating Islamic windows as it will provide means to diversify revenue and potential volume growth, analysts said.


TELECOMS & MEDIA

TELECOMS

US | REUTERS, MAY 3

U.S. probe of AT&T, T-Mobile deal deepens -source

The U.S. Justice Department has decided to pursue an in-depth investigation of AT&T's plan to buy T-Mobile USA, according to a source familiar with the deal. The decision was widely expected as antitrust enforcers typically give close scrutiny to big deals that involve large market shares. Justice Department spokeswoman Gina Talamona declined to confirm that the antitrust division had deepened its probe but said the investigation was continuing.

AUSTRALIA | REUTERS, MAY 2

Telstra aims to wrap up talks on A$11 billion broadband deal in May

Telstra Corp, Australia's biggest phone company, is looking to conclude long-delayed talks with the government by the end of May 2011 to hand over its copper network to the National Broadband Network for A$11 billion, a newspaper reported. The government is believed to want an announcement as soon as possible after the May 10 federal budget, while an industry source pointed to May 23 as a more likely date, the Australian Financial Review said.

MEXICO | REUTERS, APRIL 29

Mexico starts probes of TV, telecoms competition

Mexico's Federal Competition Commission said it has started separate investigations into alleged monopolistic practices in the sale of television advertising and telecommunications interconnection services. Neither announcement named any companies directly, but the two investigations are the result of complaints filed with the authority.

FRANCE | REUTERS, MAY 4

French wireless auction set for late May

France will open the auction of fourth-generation wireless frequencies to telecom operators in late May, and will cap the amount any single company can buy to protect competition, a government minister said. Some telecom operators quickly dismissed the cap proposed by the government as too high to prevent deep-pocketed bidders like France Telecom from buying the majority of frequencies and gaining a major advantage over smaller players. The government, amid intense lobbying from the operators, it is trying to balance its desire to get the most money for state coffers with the need to ensure a competitive mobile market that doesn't overcharge consumers.


Industry minister Eric Besson said the government would include a cap in the auction to "protect effective and long-term competition to benefit consumers." Besson said the government would limit each operator to buying 15 megahertz of 4G frequencies in the all-important lower band, known as the 800 MHZ band. However, executives from France's third-biggest mobile player Bouygues and Iliad, which will launch mobile service next year, both said the government's cap would be ineffective.

INTERNET & MASS COMMUNICATIONS

CHINA | REUTERS, MAY 4

China sets up agency to tighten grip on Internet

China announced a new State Internet Information Office to oversee the Chinese Internet, which Beijing views as both a potential gold mine and a political threat. The State Internet Information Office appears intended to help improve coordination and rivalry among the dozen or more Chinese government ministries and agencies with a stake in the Internet. It will be based in the State Council Information Office, the government's propaganda and information arm. Chinese authorities have long worried that the Internet could become a threatening channel for politically unacceptable ideas and images. The government intensified censorship in recent months, fearing online calls for protests inspired by uprisings in the Middle East and North Africa. China's Internet is also a booming industry, attracting investors and government agencies hoping for a stake in online revenues through licensing and regulation. That has bred poor coordination and even open feuding among regulators. The announcement left unclear how much formal authority the new office would exercise over other ministries and agencies, including the Ministry of Industry and Information Technology. Senior staff who will work concurrently at the office while keeping other posts will include its boss Wang Chen, also the director of the State Council Information Office, and Zhang Xinfeng, a Vice Minister of Public Security. The new office will also have a role in registering domain names and websites and distributing IP addresses. Learn more

US | REUTERS, MAY 4

U.S. attorney general confirms Sony data breach probe

U.S. Attorney General Eric Holder told the Senate Judiciary Committee that the Justice Department had an open investigation into the Sony Corp data breach. The FBI is working with federal prosecutors in San Diego as agents try to determine the facts and circumstances of the alleged crimes, an FBI spokesman has said. Analysts have said the incident, in which customers could decide to replace their credit cards, could cost Sony more than $1.5 billion.

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U.S. FTC prepping Google probe -report

The U.S. Federal Trade Commission is alerting high-tech companies to gather data ahead of a probe of the dominance of Google Inc in the Internet search industry, Bloomberg reported. The report, citing three people familiar with the matter, said the agency told companies it plans to issue civil investigative demands -- which are similar to subpoenas -- for the information.


PEOPLE

US | REUTERS, MAY 3

U.S. SEC's Schapiro taps new deputy chief of staff

U.S. Securities and Exchange Commission Chairman Mary Schapiro has tapped SEC insider Jim Burns as her new deputy chief of staff to replace Kayla Gillan, according to an internal email reviewed by Reuters. As the No. 2 staffer in Schapiro's office, Burns will be heavily involved in advising the chairman on policy matters and planning the timing for implementing roughly 100 new rules required by the Dodd-Frank Wall Street overhaul law. Burns has already served on the chairman's staff since March 2010 where he worked as her liaison to the trading and markets division, the unit responsible for writing most of the new rules for the $600 trillion over-the-counter derivatives market. SEC employees familiar with the personnel change say Gillan left the agency to take a job at PricewaterhouseCoopers.

BANGLADESH | REUTERS, MAY 5

"Banker to the poor" loses final appeal against dismissal

Bangladesh's Supreme Court rejected a final appeal by "banker to the poor" Nobel laureate Muhammad Yunus against his dismissal as managing director of Grameen Bank, the micro-lender he founded. A government probe last month cleared Grameen of financial irregularities, but the finding did not change the decision to fire him. Yunus, 70, was dismissed on the grounds that he had overstayed his position and refused requests to quit. The official retirement age for managing directors of commercial banks is 60. Associates say his removal from his post was government retaliation after he briefly considered a political career to challenge Prime Minister Sheikh Hasina. After a short hearing, which Yunus did not attend, Attorney General Mahbubey Alam told reporters the Supreme Court had dismissed Yunus's final petition. The action against Yunus coincides with growing criticism of microlending in developing countries, including neighbouring India, with officials accusing bankers of exploiting the poor.


COMING UP *Denotes new entry *May 9 - Institute of International Finance banking lobby holds London news conference on bank resolution issues May 10 – SEC roundtable on money market funds *May 10 - Economist Bellwether conference in London on redefining capital markets. Speakers include Hong Kong regulator Martin Wheatley, European Commission, London Stock Exchange, Goldman Sachs May 11 - Association for Financial Markets in Europe (AFME) holds one-day conference in London on post-trading. May 13 – Comments due to U.S. Financial Industry Regulatory Authority on firms’ supervision responsibilities for outsourcing arrangements May 16 – Deadline for responses to Financial Stability Board on task force views toward regulating shadow banking sector May 19 – Comments due to U.S. Federal Reserve on risk-management standards for operations of systematically important financial market utilities *May 19 – Comments to due SEC on removal of references to credit rating agencies under Exchange Act May 23 – Comments due to FDIC on definition of “financial company” in orderly liquidation rule May 23 – Comments due to U.S. Office of Comptroller of Currency on proposed rule authorizing national banks, federal branches or agencies of foreign banks, and their operating subsidiaries to engage in off-exchange transactions in foreign currency with retail customers. May 24 - European Parliament economic committee to vote on regulation of OTC derivatives, central counterparties and trade repositories May 27 – Comments due to U.S. Financial Stability Oversight Council on criteria for designiating systematically important financial institutions May 30 - Deadline for responses to International Organization of Securities Commissions consultation paper on suspension of redemptions for collective investment schemes JUNE *June 2 - Comments due to CFTC on proposed margin requirements for uncleared swaps *June 3 – Comments due to CFTC on extended rulemakings under Dodd-Frank and order for final rulemakings under Dodd-Frank June 9 – Comments due to CFTC on swap data recordkeeping and reporting requirements


June 10 – Comments due on credit-risk retention rule proposed by U.S. Federal Reserve and other agencies. June 22 - European Commission to publish amendments to capital requirements directives June 24 – Comments due on swaps-market margin and capital requirements as proposed by U.S. Federal Deposit Insurance Corp and other bank regulators JULY July - Financial Stability Board to consider initial draft recommendations on regulation of shadow banking system July 7 – SEC roundtable on incorporating International Financial Reporting Standards July 22 – Comments due on U.S. Federal Reserve proposal on minimum mortgage underwriting standards, including ability-to-pay requirements. (Coming Up calendar includes contributions from CMS Cameron McKenna LLP, via www.complinet.com, a Thomson Reuters company and leading provider of compliance information to the regulated financial services

GLOBAL REGULATORY BRIEFING is produced by Thomson Reuters Accelus (accelus.thomsonreuters.com). Editor: Randall Mikkelsen 22 Thomson Place, Boston, MA 02210USA For questions or comments about this report, or to subscribe, email us at: [email protected] Contact: +1 617-856-4402 Follow us on Twitter at: http://twitter.com/reutersregbrief Thomson Reuters: http://thomsonreuters.com For more information about our products: http://thomsonreuters.com/products_services © 2011 Thomson Reuters. All rights reserved. This content is the intellectual property of Thomson Reuters. Any copying, distribution or redistribution of this content is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters shall not be liable for any errors or delays in content, or for any actions taken in reliance thereon.

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