Financial Regulatory Forum

Taiwan takes tough stance on corporate governance

By Patricia Lee

(Complinet) Taiwan’s Financial Supervisory Commission has stepped up enforcement of its corporate governance regulations by making it mandatory for listed firms and financial institutions to appoint independent directors and set up a remuneration committee. The latest regulations will carry a penalty in the event of any breaches, an FSC official told Complinet, speaking on condition of anonymity.

According to the FSC official, although the requirement to appoint independent directors was not entirely new, the commission’s latest move built on its existing corporate governance regulations. It further expands their reach to cover the entire spectrum of the financial services sector.

Securities investment trust enterprises and integrated securities firms which are not subsidiaries of a financial holding company, exchange- or over-the-counter-listed futures commission merchants, as well as exchange- or OTC-listed non-financial institutions each with a paid-in capital of at least NT$10 billion ($344.7 million), but not exceeding NT$50 billion ($1.7 billion), are the four additional types of firms in the financial sector now covered under the corporate governance regulations.

The FSC official said: “The fact that the corporate governance regulations now cover as many different types of companies within the financial sector including those with a paid-in capital of NT$10billion shows that the FSC is serious about raising the standards of corporate governance of financial institutions in addition to that for listed companies.”

The FSC’s move to make setting up a remuneration committee mandatory for firms listed on the Taiwan Stock Exchange or traded over-the-counter, underscores its commitment to strengthening corporate governance and risk management. According to a recent FSC statement, the new regulation set out requirements governing the composition of the committee, the scope of its powers, rules of procedure, professional qualifications, independence, and the exercise of its powers. “The purpose of the regulations is to ensure a sound remuneration system for companies’ board members, supervisors, and executive officers,” it said.

Where to put the ring-fence: implications of the UK bank report

By Peter Elstob

LONDON, April 12 (Complinet) – The Independent Commission on Banking said on Monday that separating retail and wholesale banking in some way might have “a number of potential benefits”, and it invited views on the best design for a “retail ring-fence”.

In an annex to its interim report, the commission illustrated one way to devise such a ring-fence. This is to divide banking business into three broad categories: activities which must take place within the ring-fence; activities which may take place within it; and those which may not take place within it.

But the example leaves a lot of room for interpretation. (more…)

COLUMN – UK Bribery Act guidelines: has the lobbying worked?

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.

Japan’s material adverse change: from financings to M&A

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…)

Corporate Governance: Staggered U.S. boards are endangered species

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…)

COLUMN – U.S. Libya sanctions: vendors beware — and beware of your vendors

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…)

UK financial regulatory changes sharpen accountability of senior managers

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…)

U.S. budget cut seen threatening state, local financial crime-fighting

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…)

Dodd-Frank’s hatchet men: SEC & others go after incentive-based compensation

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…)

INTERVIEW-China seeks developed-country benchmark in corporate governance

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…)

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