Financial Regulatory Forum

Shorting bans: What the four European regulators are prohibiting (and what they’re not)

By Peter Elstob

LONDON, Aug. 15 (Thomson Reuters Accelus) – The bans on short-selling the shares in a number of banks and insurance companies (and one stock exchange) that four member states imposed on Friday did not bring the single European rulebook any closer.

However, the European Commission will be hoping that the separate initiatives by the Belgian, French, Italian and Spanish market regulators, which came out of “coordinated discussions” during a conference call on Thursday evening involving all 27 members of the European Securities and Markets Authority, do not put it further away.

Some of the details of each national action are set out below, and they do indeed appear to be harmonised, at least to an extent. More detail, and also any updates to the lists of issuers included, should be sought on the respective regulators’ websites.

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Chinese reverse-merger firms delisted in U.S. may go private, lawyers say

By Patricia Lee

SINGAPORE, Aug. 5 (Thomson Reuters Accelus) - Chinese reverse merger companies recently suspended or delisted from U.S. stock exchanges for various breaches may find it more viable to go private than to re-list in the U.S. or elsewhere,  lawyers said. The protracted investigations by U.S. regulators and the potential costs involved in settling the lawsuits mean that, for some companies, selling their entities would be a better strategy.

When the benefits of listing are outweighed by the time and expense, some companies might choose not to re-gain listing in the U.S. or in other jurisdictions, Barry Genkin, partner at Blank Rome and chair of the firm’s Asia capital market practice told Thomson Reuters.  ”In other situations, from a strategic prospective, it may make sense for the company to be sold,” he added. (more…)

Recent corporate disclosures reflect unease over U.S. debt ceiling impasse

By Thomson Reuters Accelus – Staff

NEW YORK, July 29 (Business Law Currents) The U.S. debt ceiling debate may be a lot of noise to some of  the public, but for companies and investment funds, the governmental standoff has real consequences. The ripple effect through the markets should the government of the United States default on its obligations can’t be fully appreciated. The inevitable credit ratings hit will drive up the already high cost of borrowing for taxpayers. For many companies, who are starting to discuss the debt-ceiling debate in their regulatory filings, it is not only credit markets that will be affected. Independent government contractors may also get stiffed, not to mention lose future business. (more…)

Canada’s Anti-Bribery Cops Reel One In

By John Mackie

TORONTO, July 22 (Business Law Currents) – Though Canada has had foreign bribery legislation in effect for over a decade, prosecutions have proven very few and very far between. So it remains to be seen whether the recent guilty plea by Calgary’s Niko Resources under Canada’s Corruption of Foreign Public Officials Act marks a scaling-up of Canadian efforts on this front, or just another blip on the radar screen.

Canada’s Corruption of Foreign Public Officials Act (CFPOA) entered into force on February 14, 1999. The Act contemplates prosecutions in respect of three offences: bribing a foreign public official, laundering property and proceeds, and possession of property and proceeds. In addition, the CFPOA enables prosecutions for conspiracy, aiding and abetting, counselling, and the like.

One aspect of the CFPOA that has attracted criticism from the Organisation for Economic Cooperation and Development and Transparency International is that there must be a “real and substantial link” between the offence and Canada. While a bill has been introduced to eliminate this requirement, it has not passed into law, and arguably remains a significant barrier to investigations.

Delay in U.S. consumer bureau authority spares non-bank lenders

By Ted Knutson

WASHINGTON, July 21 (Thomson Reuters Accelus) – A political stalemate over the consumer protection bureau created under the Dodd-Frank financial regulation overhaul is allowing payday loan firms and other non-bank lenders to escape the agency’s authority for now, but industry participants say they have nonetheless boosted lending and disclosure standards.

Institutions including non-bank mortgage companies, student loan providers and payday lenders, and their trade organizations discussed their views with Thomson Reuters before Thursday’s official launch of the Consumer Financial Protection Bureau.

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U.S. ratings downgrade could make it harder for banks to raise capital, experts say

By Emmanuel Olaoye

NEW YORK, July 20 (Thomson Reuters Accelus) – Any downgrade in the U.S. government’s credit rating stemming from a failure to raise the debt limit would make it harder for American banks to raise capital at a time that they are facing higher capital requirements, banking experts and industry representatives warned. (more…)

Ratings agencies turn tables on global legislators

By Christopher Elias

London, July 20 (Business Law Currents) – Governments around the world may regret the vitriol they cast at rating agencies as these American companies turn the tables on sovereign debt-marred governments and drive the agenda in the U.S. and EU.

Turning the hunted into the hunters, rating agencies have taken aim at political decisions in the U.S. and Europe as they constrain political decisions and break free from the much-promised legislative clampdown to impact euro zone restructurings and U.S. debt ceiling considerations. (more…)

How the BofA settlement deal got made

There are only 30 lawyers at Gibbs & Bruns, the Houston litigation boutique that orchestrated Tuesday’s $8.5 billion settlement between Bank of America and mortgage bond investors. But good things come in small packages. This deal, struck with the noteholders in 530 trusts that issued securities backed by Countrywide mortgage loans, would not have happened without Gibbs partner Kathy Patrick. She put together a coalition of major institutional investors that BofA’s trustee on the securitizations, Bank of New York Mellon, could not afford to ignore. Patrick sent a red-alert warning to the bank last October, by announcing publicly that Gibbs & Bruns and its bondholder clients were gearing up for litigation. That move alone sent BofA’s stock down five percent. Then Patrick worked with lawyers for BofA and BoNY to structure a novel deal that makes sense for all of them.

The settlement agreement submitted to New York state supreme court judge Barbara Krapnick Tuesday morning calls for BofA to pay Gibbs & Bruns $85 million if the settlement is approved. Patrick told OTC the firm has earned it. “We’re happy we’ll get paid for our work,” she said. “We’re very proud of this outcome.”

In a way, the roots of the BofA MBS deal are more than 10 years deep, dating back to when Gibbs & Bruns began representing a predecessor of the asset manager Black Rock in a Texas legal malpractice case that the firm eventually won at trial. Patrick’s relationship with Pimco, the gargantuan bond fund manager, goes back to 2003, when she was hired to bring suits against the banks that issued $2 billion in National Century Financial Enterprises securitizations. Pimco was one of the NCFE noteholders for whom Gibbs & Brun recovered more than $500 million.

from Christopher Whalen:

Did the FDIC really kill the repo market?

Back in April 2011, Jim Bianco penned a commentary, “Why The Federal Reserve May Have A Hard Time Raising Rates.” He argued that the increase in the FDIC insurance assessment rate for large banks adds to bank funding costs, and thus offsets the impact of Fed ease. Bianco and others infer a roughly 15bp tax or “wedge” on money market assets is created by the FDIC assessment rule.  By way of reference, the Fed’s target band for fed funds is 0 to 25bp but has been at low end of this range for months.

David Kotok of Cumberland Advisors subsequently wrote that the FDIC tax is offsetting the 25 bp paid to banks on Fed reserves and is effectively forcing U.S. banks out of the market.  (See my paper published by Networks Financial Institute at ISU, “What is a Core Deposit and Why Does It Matter?”, which goes into the changes to the deposit insurance made by the Dodd-Frank legislation.)

Let’s agree with the central contention of the “Bianco-Kotok Hypothesis” (or BKH), namely that the new FDIC assessment is affecting the money markets. But is this change the most compelling explanation for the alarming exodus of banks from the institutional credit markets?  Bianco’s research illustrates the collapse of yields in the securities repurchase (or repo) market since April, when the FDIC implemented the new deposit insurance assessment rules. He talks about the task the Fed faces to raise rates given the FDIC assessment:

from Tales from the Trail:

The wishful thinking behind a repatriation tax holiday

By Ryan McCarthy

The opinions expressed are his own.

Big U.S. multinationals have a strange sense of timing: apparently, now is the ideal time to fight for a tax holiday. The New York Times on Monday had an in-depth look at the topic of a repatriation tax holiday, with lovely charts and a helpful video detailing the myriad ways corporations cut their tax bills by stashing profits overseas. Given the clamoring about lack of demand in the economy, the deficit talks and swollen corporate cash holdings, the lobbying push seems poorly timed at best.

New York Times' David Kocieniewski is rightly skeptical of the effort that’s currently backed by even tech titans like Apple and Google. He ferrets out an NBER study that excoriates the results of an abysmal 2004 dalliance with a repatriation tax holiday, which the study finds, led to little actual hiring and investment in the U.S. The appeal of a repatriation tax holiday is that large U.S.-based corporations could temporarily see much of their taxable income fall to 5.25 percent -- the rate often paid through overseas subsidiaries -- from 35 percent, the U.S. corporate rate. In theory, this windfall would temporarily prevent corporations from stashing profits overseas, bring in tax revenue, create jobs and spur investment.

And while Kocieniewski spends nearly 2,000 words on the issue, he doesn't mention specifics of the actual legislation in play, which make the latest tax repatriation push seem just as unpromising as its predecessor.

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