EU Markets Law, EU Bank Supervisor, SEC: Compliance

By Carla Main

European Union nations must resume talks on a draft law to overhaul the bloc’s financial market rules, after ambassadors failed to resolve a clash between the U.K. and Germany on competition in derivatives clearing.

Ireland, which holds the EU’s rotating presidency, will seek to broker compromises on the measures, which would toughen oversight of high-frequency trading, and impose limits on traders’ positions in commodity derivatives markets, according to three European officials who aren’t authorized to be cited by name, in line with policy.

Michel Barnier, the EU’s financial services chief, proposed overhauling the EU’s Markets in Financial Instruments Directive, or Mifid, to counter “speculative trading activities” and implement agreements reached by the Group of 20 nations. His plans would also boost competition by forcing exchanges to hand over trade data to rival clearinghouses, so that they can compete in processing derivatives transactions.

The data-access plans are supported by the U.K. government, which says that greater competition will reduce costs for investors. Germany has resisted, arguing that the move would fragment markets and harm financial stability. Ireland’s EU presidency will continue efforts to reach consensus on the draft law, said a spokeswoman, who also couldn’t be named, in line with government policy. She said Ireland also aims to start negotiations with the European Parliament on the measures.

Compliance Policy

ECB to Take Bank Supervisor Role Next Year After EU Approves Law

The European Central Bank is set to take on oversight powers next year over all euro area banks after the legislation underpinning the supervisory system was signed off yesterday in Brussels.

“This agreement on the single banking supervisor is a major step towards banking union,” Irish Finance Minister Michael Noonan said in an e-mailed statement. “We need to build on this momentum to make progress on the next building blocks: bank resolution and deposit guarantees,” Noonan said.

Ireland holds the rotating presidency of the 27-nation EU.

Separately, the euro zone’s move toward common bank oversight must be accompanied by a common process for handling failing banks, European Union Economic and Monetary Affairs Commissioner Olli Rehn said yesterday.

The European Commission remains on track to unveil its proposal for a single resolution mechanism “before the summer,” Rehn said. He said further moves toward banking union are needed to prevent a recurrence of the sovereign debt and banking crisis that has so far forced five of the euro zone’s 17 nations to seek aid.

Compliance Action

SEC to Move Past Financial Crisis Cases Under Chairman White

Mary Jo White, the first former prosecutor to serve as chairman of the U.S. Securities and Exchange Commission, has pledged to run a “bold and unrelenting” enforcement program at the agency charged with regulating Wall Street.

With financial crisis cases mostly done and some of the biggest insider-trading cases in history closed, White will have to chart a course into new areas to keep that pledge.

White, who was sworn in last week, has provided a few signals about what that might be. During her Senate confirmation hearing, she said she intends to focus on high-frequency and automated trading. She has also raised questions about a drop in the number of accounting fraud cases.

One of her first steps, said four people familiar with her plans, will be to put the mission in the hands of a trusted lieutenant, Andrew Ceresney, who was a prosecutor under White when she served as U.S. Attorney for the Southern District of New York. He doesn’t have any experience working inside the SEC and will probably share the top role with George Canellos, the current SEC acting chief of enforcement, the people said.

The SEC hasn’t completely finished its probe of misconduct tied to the financial crisis. Investigators have signed so- called tolling agreements with executives and banks to extend the five-year statute of limitations on those cases. Also, the SEC has said its investigation into insider trading at hedge funds is continuing.

All the same, the number of such cases still in the pipeline has dwindled, and in recent months, the enforcement staff has formed teams to re-evaluate how they are organized and what kinds of misconduct are most ripe for investigation.

For more, click here.

Courts

SEC Sues Schottenfeld Trader Mancuso Over Goffer Insider Tips

The U.S. Securities and Exchange Commission sued Joseph Mancuso, a former trader at Schottenfeld Group LLC, accusing him of making about $350,000 on a series of illegal tips from Zvi Goffer, a former Galleon Group LLC trader.

Mancuso, 36, of Manhattan, worked with Goffer when both men were at Schottenfeld, and was described by regulators as Mancuso’s “good friend and colleague.” Goffer shared tips with him about nonpublic information concerning the acquisition of Avaya Inc., 3Com Corp., Axcan Pharma Inc., Hilton Hotels Corp. and Kronos Inc., the SEC said in a complaint filed April 17 in federal court in Manhattan.

Mancuso obtained tips from Goffer through his “close, personal and professional relationship” with him, according to the complaint. The two met in college in the 1990s, the SEC said.

Goffer obtained the information leaked by two Ropes & Gray LLC lawyers, Brien Santarlas and Arthur Cutillo, about the firm’s clients, which he passed on to his friends, the SEC said. Goffer also paid kickbacks to the two lawyers in exchange for the inside information. Prosecutors said Goffer and others to whom he passed the information earned $10 million.

Goffer is serving a 10-year prison term after being convicted in 2011 of 14 counts of conspiracy and securities fraud. Santarlas was sentenced to six months in prison while Cutillo received a 30-month sentence.

The case is SEC v. Mancuso, 13-cv-02555, U.S. District Court, Southern District of New York (Manhattan).

Schindler Should Lose Cartel Fine Appeal, EU Court Aide Says

Schindler Holding AG (SCHP) should lose a final appeal against a 143.7 million-euro ($187.5 million) cartel fine for colluding with competitors in the markets for elevators and escalators, an adviser to the European Union’s highest court said.

The appeal should be dismissed in its entirety, Advocate General Juliane Kokott of the EU Court of Justice said in a non- binding opinion yesterday. The Luxembourg-based court follows such advice in most cases.

The European Commission fined five companies 992.3 million euros in February 2007 for their roles in the elevator cartel. ThyssenKrupp AG (TKA) two years ago won a first court appeal to slice 159.9 million euros off a 479.7 million-euro antitrust fine for carving up the markets for elevators and escalators.

Schindler is appealing a 2011 ruling by the EU General Court, the bloc’s second-highest tribunal, to uphold its penalty and is calling for a decision that overturns the EU regulator’s original order.

“At the time of the infringements Schindler Holding had -- as expressly acknowledged by the General Court -- done its utmost to prevent its subsidiaries from violating EU competition law through a state-of-the-art compliance program,” Barbara Schmidhauser, a spokeswoman for the company, said by e-mail. If the top EU court follows Kokott’s advice, the incentive to use such compliance programs “would be rather low.”

The elevator companies were accused of setting prices in northern European countries between at least 1995 and 2004.

The case is: C-501/11 P, Schindler Holding Ltd., Schindler Management AG, Schindler SA, Schindler Sarl, Schindler Liften BV and Schindler Deutschland Holding GmbH v. European Commission.

Interviews/Speeches

Lawsky Reviews Private Equity’s ‘Troubling’ Insurance Role

New York’s financial regulator is scrutinizing what he called the “troubling role” of private-equity firms as they expand into the insurance industry through acquisitions, according to a speech yesterday.

The remarks were made by New York Department of Financial Services SuperintendentBenjamin Lawsky as part of a prepared speech.

Private-equity firms “may not be long-term players in the insurance industry and their short-term focus may result in an incentive to increase investment risk and leverage in order to boost short-term returns,” Lawsky said.

“This type of business model isn’t necessarily a natural fit for the insurance business, where a failure can put policyholders at significant risk,” he said.

Leon Black’s Apollo Global Management LLC (APO) has agreed to buy four insurers since 2008, including a $1.8 billion deal in December for Aviva Plc’s U.S. life and annuity business. A firm owned by Guggenheim Partners LLC shareholders agreed the same month to buy a variable-annuity unit from Sun Life Financial Inc. for $1.35 billion.

Fed’s Tarullo Cites Progress, ‘Ways to Go’ for Banks

Federal Reserve Governor Daniel Tarullo said “too-big-to- fail” banks have made “a good deal of progress” but have a “ways to go.” Tarullo talked with Bloomberg’s Sara Eisen on the sidelines of the International Monetary Fund and World Bank meetings in Washington on Bloomberg Radio’s “Bloomberg Surveillance.”

For the audio, click here.

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

source

please give me comments thanks