Financial Regulatory Forum

Record-setting bank forfeiture at ING ignites debate over lack of banker prosecutions

By Brett Wolf

NEW YORK, June 20 (Thomson Reuters Accelus) – A lack of any criminal prosecutions associated with the U.S. government’s deal last week in which Dutch bank ING agreed to forfeit a record $619 million for helping Iranians and Cubans pump billions of dollars through the U.S. financial system has drawn accusations that U.S. law enforcement agencies would rather collect fines than punish individual executives. (more…)

Gupta insider case puts focus on monitoring board members, financial-crisis challenges

Rajat GuptaBy Julie DiMauro and Stuart Gittleman

NEW YORK, June 18 (Thomson Reuters Accelus) - The insider-trading conviction of Rajat Gupta, a former McKinsey group chairman and a-list board member, had federal prosecutors and securities regulators glowing. But companies face stiff challenges protecting their boards from breaches confidentiality by directors and the reputational and other damages that ensue, consultants and lawyers said.

The conviction also draws a contrast with the relative lack of high-level prosecutions stemming from the 2008 financial crisis, which analysts said was rooted in practices harder to establish a case on.  (more…)

Beyond the numbers: do banks manage risk?

By Rachel Wolcott

LONDON, June 14 (Thomson Reuters Accelus) - It may seem like a subtle difference, but most of what banks call ‘risk management’ is often more akin to ‘risk measurement’. It is a myth that banks are in possession of fancy gadgetry that allows them to measure risk on a minute-by-minute basis from a specialised risk-control tower and react to it effectively, thus averting catastrophe. Instead, the financial crisis and trading losses, such as JPMorgan’s $2 billion blow-up in May, have shown that by the time banks measure and understand their risks, it is too late. Risk management is not about controlling risk, but about offsetting its impact after the fact.

Far from being a powerful high-tech unit within a firm that is charged with hedging risks on a macro basis — the way, for example, that JPMorgan’s chief investment office has been portrayed — risk management is more fragmented and limited. That is why many banks were badly hit when Lehman Brothers collapsed in 2008. It was just too difficult to get a picture of what their positions, exposures and risks were, let alone manage them. This is because, in many cases, banks’ risk management still has more to do with number crunching and measuring risk for compliance and regulatory purposes, such as regulatory capital requirements, credit value adjustment and counterparty risk. Managing risk, however, is something few firms do well, and they are certainly unable to do so in a holistic way. (more…)

U.S. Justice Department targeting shop landlords in fight against medical marijuana industry

By Brett Wolf

NEW YORK, June 12 (Thomson Reuters Accelus) - A civil statute designed primarily to seize the assets of drug trafficking organizations is now being wielded by federal prosecutors in California in an unconventional and little-noticed attack on medical-marijuana shops in the state.

Prosecutors have brought more than a dozen lawsuits seeking the forfeiture of commercial properties that house marijuana shops. The actions pressure owners to either evict these controversial tenants or face costly legal battles or the loss of their buildings. (more…)

Big banks can be shrunk — here’s how

By Stuart Gittleman

NEW YORK, June 12 (Thomson Reuters Accelus) – A need to break up big banks is one of the several lessons policy makers should have learned from the financial crisis that have either been ignored or forgotten, according to Phil Angelides, who chaired the congressionally appointed Financial Crisis Inquiry Commission.

If the largest banks can only be run so recklessly that they harm the economy as well as themselves, they should be broken up, Angelides said in a talk at the Center for National Policy, an independent Washington D.C. think tank. (more…)

Dewey & LeBoeuf collapse highlights importance to clients of safeguarding records

By Martin Coyle and Julie DiMauro

NEW YORK/LONDON, June 1 (Thomson Reuters Accelus) – The collapse of U.S. law firm Dewey & LeBoeuf underscores the importance to financial companies of gaining access to their legal records, ensuring continuity of advice, and safeguarding privileged information, according to regulatory lawyers and experts. Dewey, once one of the largest U.S. law firms with deep ties to Wall Street, filed for Chapter 11 bankruptcy protection earlier this week after failing to find a willing merger partner, and its UK unit was placed under administration. The former legal giant was saddled with $100 million debts, a criminal investigation and the departure of senior staff. It is likely to be liquidated. The failure is the biggest in the history of U.S. law firms. (more…)

Energy companies moving forward with CFTC compliance despite uncertainties

By Thomas A. Utzinger (U.S.)

NEW YORK, May 31 (Business Law Currents) – Electric utilities and natural gas companies are facing new regulatory uncertainties involving the jurisdictional reaches of two agencies overseeing futures and derivatives trading as well as wholesale energy transactions: the U.S. Commodity Futures Trading Commission (CFTC) and the Federal Energy Regulatory Commission (FERC). Recent rulemaking efforts and litigation have raised questions as to the overlap and division of powers of these two entities over certain financial transactions and enforcement actions of interest to the energy industry. (more…)

Offshore U.S. oversight of derivatives may bolster defenses against JPMorgan-type losses

By Nick Paraskeva

NEW YORK, May 29 (Thomson Reuters Accelus) – U.S. regulators are looking to use new their oversight authority over foreign derivatives trades to reduce the chances of new shocks such as JPMorgan Chase & Co’s trading loss of at least $2 billion.

Pointing out that JPMorgan’s money-losing trades on a credit default swap index were conducted in a London unit, similar to recent failures at AIG and Lehman Brothers, Commodity Futures Trading Commission Chairman Gary Gensler said implementation of Dodd-Frank regulatory reform rules would improve supervision of such activity in the future by expanding cross-border oversight. (more…)

Corporate investigations are getting riskier and more difficult, experts say

By Stuart Gittleman

NEW YORK, May 29 (Thomson Reuters Accelus) - U.S. corporate officers and directors are increasingly concerned over the business and legal challenges their entities face from potential securities enforcement and criminal probes, lawyers and corporate officers are saying.

A program last week analyzed how directors, executives and corporate counsel can appropriately manage the business and legal risks of an enforcement proceeding arising from earnings misstatements or employee misconduct at both low and high levels.  (more…)

Road shows, analysts and jumping the gun: the Facebook IPO

By Helen Parry, additional reporting by Julie Dimauro

LONDON/NEW YORK, May 25 (Thomson Reuters Accelus) – Facebook’s chaotic initial public offering has sparked much speculation and legal action based on the idea that securities laws and regulations over disclosure may have been breached, which would leave Facebook and others involved in the offering process liable to potential regulatory enforcement or civil liability for losses caused to investors.

An analyst at lead underwriter Morgan Stanley cut his revenue forecasts for Facebook in the days before the offering, information that may not have reached many investors before the stock was listed, Reuters has reported. (more…)

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