Government Shakedown

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If financial institutions once did finance, now they seem to practice law.   And if regulators once did regulation, now they seem to raise capital. Government seems to be in a shakedown motion. The switch of roles was mostly a consequence of laws such as Dodd-Frank and many others that seem to become an opportunity for regulators to promote their careers, to jump to the private sector and a way to raise funds for the newly created Consumer … [Read more...]

Banks Find Comfort In Dodd-Frank Loopholes

Banks find comfort in Dodd-Frank

It is not surprising to find loopholes in the Dodd-Frank Act for banks.   But when loopholes allow “collateral transformation”, potential consequences are questionable. As has previously been reported, the Dodd-Frank reforms require derivative deals to be executed on a clearinghouse. This means that traders will need to post collateral while regulators will have a central place to spot risks in the market. However, it seems that … [Read more...]

High-Frequency Traders May Face EU Fees

Under European Union plan to limit market abuse, high-frequency traders and similar investors may be required to pay penalty fees when they create market volatility by placing excessive numbers of canceled orders. The introduced fees would be similar to the fee structure introduced last year on Nasdaq OMX Group Inc. (NDAQ) exchanges in Nordic countries. The plan addresses May 2010 “flash crash” during which the Dow Jones Industrial … [Read more...]

Bank of America Settle Mortgage Securities Action for $315 Million

Bank of America Corp. reached a $315 million settlement with a group of investors who sued its Merrill Lynch unit claiming they were misled about mortgage- backed securities. According to a court filing, holders of the asset-backed certificates sued Merrill Lynch in December 2008 claiming false and misleading prospectus statements related to the securities. The investors argued that inaccurate statements were made about qualifications of … [Read more...]

CME May Face Liability Related to MF Global

According to various sources, CME Group, Inc may face liability for misleading regulators over what it knew about MF Global Holdings Ltd.     Examiners from Chicago-based CME Group found unexplained wire transfers at the broker-dealer unit of MF Global and a $900 million shortfall in client funds during the weekend the failing broker MF Global was talking with possible buyers.    CME, the world’s largest futures exchange oversees its … [Read more...]

Japan Regulators and Tokyo Stock Exchange team up on Olympus Fraud

Japan’s Financial Service Agency will work closely with the Tokyo Stock Exchange to urge Olympus Corp. to disclose facts behind its loss cover-up. Olympushas lost more than 500 billion yen ($6.4 billion) of market capitalization since mid-October, when the company ousted President Michael C. Woodford after accusations of fraud.    Since Woodford’s whistle blowing, the company has disclosed that three executives helped conceal decades of … [Read more...]

MF Global Bondholders May Get as Little as 10%

According to Fitch Ratings, MF Global Holdings Ltd.’s bondholders may recover as little as 10 cents on the dollar in the company’s bankruptcy recently filed. Owners of the failed broker’s senior unsecured debt will get back between 10% and 30% of the notes’ face value.    The analysis is based on MF Global’s balance sheet as reported in public filings and doesn’t consider the potential performance of the broker’s European … [Read more...]

Mutual Funds Defend Use of Derivatives

According to various news sources, leading asset-management firms asked the U.S. Securities and Exchange Commission for less regulation when it comes to setting new rules for how mutual and exchange-traded funds use derivatives. In letters to the SEC earlier this week, firms including BlackRock, Inc. and State Street Corp. argued that derivatives have an important role in managing large asset portfolios. The letter further argued that that a … [Read more...]

Another bad news for Raj

After receiving the longest-ever prison sentence for insider-trading, the Galleon Group founder, Raj Rajaratnam now faces the largest-ever fine in an insider-trading case. U.S. District Judge Jed Rakoff ordered Mr. Rajaratnam to pay $92.8 million in the Securities and Exchange Commission civil case against him.   The $92.8 million fine is the maximum allowed under law, equivalent to three times Rajaratnam's illicit gains. The judge rejected … [Read more...]