Financial Regulatory Forum

By Helen Parry,   senior regulatory intelligence expert, Complinet. The views expressed are her own.

LONDON, April 5 (Complinet) - Seemingly unnerved at the anti- Bribery Act lobby’s dire predictions of British corporations losing out to competitors hailing from jurisdictions with a more relaxed approach to such matters, the Ministry of Justice appears to have taken heed. This is clearly demonstrated by the reassuring, empathetic and positively emollient tone employed in the revised version of the guidance for companies issued last week, particularly when sensitive issues such as facilitation payments and corporate hospitality are being addressed. This change of heart can be clearly discerned by comparing the original and revised versions of the case study on facilitation payments featured in the guidance documents.

THE ORIGINAL CASE STUDY

The original version posited a UK company engaging with a US counterpart in a consortium which was contracting in a third country jurisdiction “rife with corruption.” They were already in serious trouble, having made facilitation payments, struck a deal with union leaders, replaced the facilitation payments with IT services to educational centres connected to an opposition party and been accused of bribery by an overseas government.

The “remedial” part of the scenario consisted of the company being subjected to a barrage of hostile questions designed to elucidate in excruciating detail precisely how the firm had (probably) failed to manage its business to prevent such chicanery. Senior managers were referred to specifically on more than one occasion. The questions included whether:

– They had undertaken a risk assessment informed by the political, social and media environment;

By John Mackie

TORONTO, March 23 (Westlaw Business) – Japan’s nuclear difficulties must be mourned, without qualification. At the same time, the business and legal communities cannot stand still, as they deal with several quite-unexpected ripple effects. Both M&A and capital markets transactions have suffered, and disclosure practices are now coming under review. Set against a backdrop of plummeting stock prices, companies in nuclear-related industries are caught in their own battle to sustain themselves. (more…)

By Erik Krusch

NEW YORK, March 23 (Westlaw Business) – Classified boards may be moving towards the endangered species list, as investors and even management are hunting them down.

Valero and Biogen Idec’s management teams, for example, are recommending that shareholders approve amendments declassifying their respective boards. Other corporations, such as Alcoa and McDonald’s Corp, however, are fighting their shareholders’ attempts to level their staggered boards. It remains to be seen how many staggered boards emerge from this proxy season unscathed. (more…)

By Richard J Cellini, Esq, CEO Briefcast analytics. The views expressed are his own.

NEW YORK, March 18 (Complinet) - New Libya sanction rules will have the biggest impact on suppliers and distributors of large U.S. companies. It’s official: the U.S. government has adopted unprecedented emergency regulations blocking property and prohibiting certain transactions connected with Libya and high-ranking Libyan officials. The new rules took effect on February 25, 2011.

These sanctions impose serious and far-reaching legal, financial and operational constraints on a broad range of US-based companies, business executives, investors and private individuals. And that’s the easy part. (more…)

By Susannah Hammond

LONDON, March 18 (Complinet) The new UK financial regulatory architecture is taking shape. The new bodies, their responsibilities and reporting lines are currently being consulted on and seem likely to be fairly close to the structures which will be in place by the end of 2012.

The regulatory philosophy which will underpin the new architecture has already been trailed as being more of the same intrusive and intensive approach to supervision. But it is also clear that senior managers of regulated firms will faced increased scrutiny as the regulators focus on individual accountability.

(more…)

By Brett Wolf

ST. LOUIS, March 11 (Complinet) – A looming cut to the federal financial crime agency’s budget could cripple state and local investigations that depend on transactions monitored via the anti-money laundering Bank Secrecy Act, worried authorities said.

In a surprise move, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has decided to save nearly $1.4 million by doing away with positions that facilitate state and local law enforcers’ access to the coveted data, often used in fighting drug trafficking, fraud and terrorism finance. (more…)

March 8 (Westlaw Business) –  Can Dodd-Frank’s latest anti-risk salvo, a new proposed rule on incentive-based compensation, solve as many questions as it raises? In theory, the idea is a noble one: break the chain of managing for the short-money by curtailing lopsided risks that ultimately soak the taxpayer. But even the SEC and the other agencies involved under the new Dodd-Frank regime admit there will be no shortage of questions.

Section 956 of the Dodd-Frank Wall Street Reform and Consumer Protection Act lays the groundwork for the regulation of incentive-based compensation. The statute formally rejects the idea that it “require[s] the reporting of the actual compensation of particular individuals;” likewise, the statute’s scheme thus offered does not apply to otherwise covered institutions lacking incentive-based compensation packages. (more…)

Patricia Lee in Singapore

SINGAPORE, March 7 (Complinet)  -  In an emerging market such as China, where its codes of market conduct oftentimes fail to keep up with market developments, shareholders and investors dabbling in its equities market remain largely unprotected. Even then, the lack of protection has far from become a deterrent to them. The reason, according to Zhengjun Zhang, senior research fellow at the Development Research Center of the State Council of China, was due mainly to the rush for returns from the country’s burgeoning albeit nascent equities market, which has continued to see rapid growth in new firms seeking an initial public offering.

A study of China’s corporate governance models adopted by Chinese listed firms and company law-governed non-listed firms reveals a number of features unique to the country whose history in corporate governance dates back to the early 1990s and follows closely that of Japan’s model.

The most striking feature of China’s corporate governance model, and perhaps a fundamental flaw, is a shareholding structure dominated by controlling shareholders, Zhang, whose center advises the government on economic matters, told Complinet in an interview. (more…)

By Keith Mullin, Editor at Large, International Financing Review; the views expressed are his own.

LONDON, March 4 (Reuters) – The European bank stress tests that are just kicking off are a pointless and futile exercise that will cause more harm than good.

I’ve written before in this column about the laws of unintended consequences. There could be some pretty serious ones here because the list of banks that fail the supposedly more rigorous tests will lead to an A and B list of saints and sinners.

NEW YORK, March 4 (Westlaw Business) Being an insider with a fiduciary duty sure is risky, as heavyweight Rajat Gupta is now finding out amidst serious SEC charges. So is having board members, as Goldman Sachs and Procter and Gamble are now worrying. Of great concern to each are the reputational risks and attendant costs that this might impose on them. The potential risks could relate to a broad range of issues, ranging from inside information, to disclosure of SEC investigation and board member protection. Though this likelihood may seem remote, recent experiences from Bank of America to Goldman Sachs itself show them to be painfully possible.

With a plot literally ripped from the headlines and a narrative crackling like a Law & Order script, the Commission has charged Gupta in the spreading Galleon insider trading scandal. The case links Berkshire Hathaway, Goldman Sachs and Procter and Gamble (P&G) to what is shaping up to be one of the biggest non-Madoff financial crime stories of the young century. (more…)