Financial Regulatory Forum

Barclays scandal highlights value of monitoring and testing – governance experts

By Emmanuel Olaoye

WASHINGTON/NEW YORK, July 10 (Thomson Reuters Accelus) - A major theme in the Barclays scandal over rate-rigging is the firm’s failure to conduct adequate monitoring and testing of its compliance program, governance experts have told Thomson Reuters Accelus.

Barclays has agreed to pay $453 million to settle charges by U.S. and UK authorities that its employees manipulated the London Interbank Offered Rate, or LIBOR, a key benchmark for global financial transactions, including payments on mortgages, credit cards and other financial contracts.  (more…)

First wave of U.S. living wills has limitations, but offers useful start

By Bora Yagiz

NEW YORK, July 9 (Thomson Reuters Accelus) - The “living will” resolution plans submitted to U.S. regulators by nine big banks last week suffer from a number of limitations, including narrow scenarios of financial distress and an assumption that regulators will be coordinated in their approach. But there will be plenty of opportunity to perfect the blueprints.

Five major U.S. banking organizations and four foreign-based bank holding companies with $250 billion or more in total nonbank assets submitted on July 2 their resolution plans, or “living wills,” to the Federal Reserve Board and Federal Deposit Insurance Corporation (FDIC) as required by section 165(d) of the Dodd-Frank Act (DFA). This constituted the first of the three waves of submissions of a staggered schedule arranged according to the banks’ sizes and due to be completed by end-2013. These plans to complement the recovery plans that are designed to maintain firms under extreme stress as going concerns, will serve as the official point of entry for bankruptcy. (more…)

Exclusive jurisdiction clauses fall in the face of FINRA proceedings

By Christopher Elias (UK)

LONDON, July 5 (Business Law Currents) – The English courts recently decided that an exclusive jurisdiction clause between Citigroup’s English subsidiary and two corporate vehicles of family trusts belonging to a Saudi Arabian family did not prohibit the Saudi investors from bringing FINRA arbitration proceedings against Citigroup’s U.S. arm.

In Citigroup Global Markets Ltd v Amatra Leveraged Feeder Holdings Ltd, the court was tasked with deciding whether FINRA’s regulatory regime or an English exclusive jurisdiction clause should prevail. The court concluded that Citigroup’s U.S. subsidiary should not be prevented from facing proceedings in the U.S. as the benefit of the exclusive jurisdiction clause applied solely to Citigroup’s English subsidiary. (more…)

U.S. securities regulators focus rulemaking, exams on retirement products

By Stuart Gittleman

NEW YORK, July 5 (Thomson Reuters Accelus) – The U.S. Securities and Exchange Commission will return its rulemaking and examination focus to retail sales of retirement products, a Division of Investment Management official told the Insured Retirement Institute, an industry group.

“[T]o better understand the impact of our regulations on market participants, we are working to staff a new examination function within the division, as required by the Dodd-Frank Act,” associate division director Susan Nash said at the IRI government, legal and regulatory conference last week. (more…)

Barclays case gives U.S. futures regulator more clout on overseas derivatives, funding

By Nick Paraskeva

NEW YORK, July 5 (Thomson Reuters Accelus) - The U.S. Commodity Futures Trading Commission’s $200 million settlement with Barclays for manipulation and false reporting of benchmark interest rates not only helped fuel a firestorm that consumed the bank’s top management. It also gives the futures regulator more clout to apply new Dodd-Frank swaps rules to activities abroad despite industry and political opposition, and to make a case against congressional Republicans for a strong enforcement budget.

The CFTC joined the U.S. Justice Department and Britain’s Financial Services Authority (FSA) in settling allegations that Barclays had manipulated Libor interbank rates in London that affect U.S. consumers and markets. The fine paid to the CFTC was the largest monetary penalty in the case, and the enforcement came hard on the heels of the revelation by JPMorgan Chase that it had discovered losses on its UK derivatives transactions that may grow to as much as $9 billion. (more…)

Barclays’ governance, compliance weaknesses exposed in U.S. regulator’s findings

By Emmanuel Olaoye

WASHINGTON/NEW YORK, July 3 (Thomson Reuters Accelus) - A U.S. regulator’s case against Barclays revealed significant failures with the bank’s internal controls as well as failures with its corporate governance.

Barclays agreed last week to pay $453 million to U.S. and British authorities to settle allegations that it rigged key interbank lending rates, called the London Inter-bank Offering Rate (Libor) and a separate Euribor rate, by manipulating its reported rates in submissions to the British Bankers Association, which calculated the benchmark figures. (more…)

First wave of U.S. “living wills” provides a blueprint for the industry

By Bora Yagiz

NEW YORK, July 2 (Thomson Reuters Accelus) - The biggest U.S. banks and foreign banks with U.S. operations will show regulators and the world this week how they are not “too big to fail.”

On Monday U.S. bank holding companies with $250 billion or more in total nonbank assets and foreign-based bank holding companies with $250 billion or more in total U.S. nonbank assets are due to submit resolution plans, known as the “living wills” to the Federal Reserve and Federal Deposit Insurance Corp.  (more…)

Suit against U.S. Consumer Financial Protection Bureau could force it to define limits to its authority, says banking industry lawyer

By Emmanuel Olaoye

NEW YORK, June 29 (Thomson Reuters Accelus) - Even if a small bank’s lawsuit challenging the authority and leadership of U.S. Consumer Financial Protection Bureau fails in court, it could force the bureau to publicly define its limits, a top banking industry lawyer said.

Joseph Barloon, a partner at Skadden Arps in Washington, said the bureau could be forced to say what it can and cannot do, and provide the banking industry some guidance on the agency’s positions on issues such as mortgage lending. (more…)

U.S. state oversight of small investment advisers takes effect; exams and enforcement loom

By Jason Wallace

SAN DIEGO/NEW YORK, June 28 (Thomson Reuters Accelus) – A long anticipated and well-publicized deadline for “the switch” is here. According to recent estimates, 2,500 investment advisers with less than $100 million of regulatory assets under management will make the switch from the U.S. Securities and Exchange Commission oversight to registration and in one or more states, with the prospect of more frequent exams and vigorous enforcement.
Today’s deadline requires the firm to be registered in the applicable states and withdraw its SEC registration by the end of the day. Although the proverbial switch has been pulled, the regulatory changes have just begun. Newly transitioned mid-sized advisers will now face an imminent regulatory exam and be required to comply with unique state compliance requirements. (more…)

Barclays may have “early bird discount” in Libor cases

By Stuart Gittleman

NEW YORK/LONDON, June 28 (Thomson Reuters Accelus) - The $453 million settlement Wednesday between Barclays and UK and U.S. officials over the manipulation of a global interest-rate setting formula may be the first in a series of big-money settlements, and those who strike a deal later may face steeper terms.

“I think additional settlements with the other [banks potentially involved in the conduct] are likely,” said Peter Henning, a former U.S. federal prosecutor and enforcement lawyer with the Securities and Exchange Commission who teaches law at Wayne State University in Detroit. (more…)

  •