Financial Regulatory Forum

NYSE and Deutsche Borse: New York not home, so merger far from home-free

By Guest Contributor
February 18, 2011

A U.S. flag hangs outside the New York Stock Exchange building, February 15, 2011. Deutsche Boerse will take over NYSE Euronext to create the world's largest exchange operator in a deal that dodges key questions that could yet threaten its completion. REUTERS/Joshua Lott Feb. 18 (Westlaw Business) The much-ballyhooed merger of the parent company of the New York Stock Exchange with that of German exchange Deutsche Borse makes two things clear – if they can make it through the thicket of global regulatory approvals and similarly convince their shareholders to tender into the offer, they’re home free. The just-filed agreement and related corporate governance documents make equally clear that “home” will not really be New York, and the NYSE Euronext will be the New York Stock Exchange no more.  This may make regulatory approval that much more difficult, with U.S. regulators in particular looking at issues from antitrust to financial markets, to national security. (more…)

Protests in Middle East, North Africa spur look at corporate risk disclosures globally -Westlaw Business

By Guest Contributor
February 18, 2011

A man prays for demonstrators who were injured after riot police stormed an anti-government protest camp, outside the Salmaniya hospital where the casualties were sent to, in Manama February 17, 2011. Troops took control of Manama on Thursday after riot police stormed the anti-government protest camp at dawn and fought demonstrators on the streets, killing four people in Bahrain's worst violence in decades. REUTERS/Hamad I MohammedFeb. 18 (Westlaw Business) The winds of change blowing across the Northern Sahara all but demand a look at foreign operations disclosures, particularly as many companies are deeply entrenched in preparing this year’s annual reports. Political risk has many guises—war, expropriation, currency devaluation—but for companies doing business abroad, these risks don’t begin to give a complete picture of potential threats to earnings. Just six weeks into 2011, a number of well-known companies have already provided a glimpse of what’s keeping their board members awake at night.

COLUMN-Qatar bank ban bad for Islamic finance

By Guest Contributor
February 18, 2011

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

COLUMN-Two paths to failure on Dodd-Frank

By Guest Contributor
February 14, 2011

capitol bldg 2 RTXX2LO_Comp.jpg(Scott McCleskey is a managing editor for the ThomsonReuters Governance, Risk and Compliance unit. The views expressed are his own)

LSE and TMX: ‘London Bridge’ shakes from staggering complexity

By Guest Contributor
February 11, 2011

Office workers are seen in the London Place business district near Tower Bridge in central London February 9, 2011. REUTERS/Toby MelvilleBy John Mackie

Feb. 10 (Westlaw Business) The blockbuster merger bridging the London and Toronto Stock Exchanges may have been announced, but this London bridge may yet fall under the sheer weight of staggering legal complexity. A broad group, from AIM to Borse Dubai, and from the Montreal Exchange to Borsa Italiana, stand to be impacted by these issues. And what a set of issues it is, ranging from post-Potash foreign investment concerns to restrictive provincial securities laws to undertakings regarding corporate governance. Even legacy contractual commitments from past acquisitions by the TSX must be considered. Global markets affecting everything from equities to derivatives to venture funding await.

US sentencing guidelines: a cornerstone of hedge fund compliance practices

By Guest Contributor
February 8, 2011

By Judith Gross

The following is a guest column for Complinet  by Judith Gross, the principal and founder of JG Advisory Services. She develops compliance training for hedge funds, specializing in compliance and related topics, such as insider trading. The views expressed are her own.

ANALYSIS-Madoff whistleblower tries new shield tactic in bank-fraud suits

By Guest Contributor
February 4, 2011
19:09 03Feb11 -REFILE-ANALYSIS-Madoff whistleblower tries new shield tactic (Refiles to fix typo in headline) * Markopolos turns to Delaware law to protect whistleblowers * Markopolos boasts of more fraud cases “in pipeline” By Ross Kerber and Tom Hals BOSTON/WILMINGTON, Del., Feb 3 (Reuters) – Delaware touts itself as a business-friendly haven, but a new strategy by a well-known whistleblower takes the rules in an unexpected direction. Recent suits against major banks claiming they defrauded public pension funds were filed by Delaware partnerships tied to Harry Markopolos, an associate said. Markopolos is the Massachusetts fraud investigator best known for trying to tip authorities to Bernard Madoff’s massive Ponzi scheme. It is not unusual for companies to file suits seeking a share of damages that officials might recover in fraud cases. The twist is that by using Delaware entities that disclose few details about themselves, Markopolos has made it easier to shield the identities of the insiders who bring forward evidence of wrongdoing, said Patrick Burns, spokesman for Taxpayers Against Fraud, a Washington group Markopolos has worked with in the past. “This was something Harry figured out,” Burns said in an interview on the recent cases. “It’s to protect the anonymity of the whistleblowers who are still in their industries, and helped set up teams of whistleblowers who can work together.” Markopolos declined to comment via e-mail. Burns declined to discuss many more specifics. Another person who has worked with Markopolos, Los Angeles attorney Mark Labaton of Motley Rice, said the new partnerships also could be a way to protect whistleblowers from retaliation from companies whose fraud they are reporting, a concern Markopolos has expressed in the past. “That is something new and I think it reflects a certain amount of creative thinking,” Labaton said of the partnerships. Just how to protect the identity of whisteblowers has been a hot topic among like-minded attorneys in the past, he said. DELAWARE FILINGS The suits against the banks claim they overcharged public pension funds. They include one filed in Fairfax County, Virginia, circuit court by a Delaware partnership, FX Analytics, against Bank of New York Mellon Corp <BK.N>, in which Virginia Attorney General Kenneth Cuccinelli has intervened; and one unsealed in 2009 by then-California Attorney General Jerry Brown against State Street Corp <STT.N>, which states it was built on a suit first filed by another Delaware corporation Associates Against FX Insider Trading. Also, on Thursday Florida Attorney General Pam Bondi filed a motion to intervene in and unseal a case that FX Analytics had filed against Bank of New York Mellon. [ID:nN03280263] The two large custody banks deny wrongdoing. Neither partnership provided many details in filings, a common omission permitted by state rules. They were created in 2008 and 2009. The partnership strategy fleshes out some details that Markopolos has left vague in past interviews, and shows the growing power of investigators and attorneys to leverage laws such as the False Claims Act and state statutes. Broadly these allow individuals who bring forward evidence of fraud to share in money recovered by the government. Such cases are on the rise. Last fall a former GlaxoSmithKline PLC <GSK.L> employee was awarded about $96 million after reporting problems at a drug-making plant in Puerto Rico, believed to be a record recovery. Also, in a Jan. 24 letter to U.S. Sen. Charles Grassley of Iowa, officials noted the number of new Justice Department healthcare fraud investigations — often sparked by whistleblowers — had risen 10 percent in fiscal year 2010 from 2009, after rising 17 percent that year compared with 2008. It is not unusual for these suits to be brought by companies rather than individuals. Just on Tuesday, for instance, a Texas jury ordered a unit of Iceland’s Actavis to pay $170 million for overcharging the state’s Medicaid program, in a case first brought by the owners of Florida pharmacy Ven-a-Care, themselves a group of former healthcare workers. LEGAL SECRECY Ven-a-Care has been quite public about its role. Delaware laws allow partnerships like FX Analytics much secrecy, however, under a state effort to get companies to register themselves under its business-friendly laws. The state says it has attracted more than 50 percent of all U.S. publicly traded companies, including nearly two-thirds of the Fortune 500. Lately the lack of transparency has itself come under fire as potentially aiding tax fraud or terrorism. Michigan Sen. Carl Levin has criticized the state and Nevada for allowing businesses to set themselves up with “less information than is required to open a bank account or get a driver’s license,” as Levin told a Senate hearing in 2004. SHADOWY IMAGE Markopolos himself has cultivated a somewhat shadowy image, an approach he has said in interviews was needed to help protect employees rooting out fraud. Markopolos discussed some of his thinking in the book he published last spring, “No One Would Listen,” about his unsuccessful efforts to get securities regulators interested in Madoff years before his scheme blew up. In it Markopolos described how matters he unearthed became the basis of the fraud suit filed by California against State Street Corp. “I have many other cases in the pipeline,” Markopolos wrote. He added, “In fact I intend to be in this business until I can’t find any more financial or Medicare frauds — which makes me think I’m going to be in the whistleblower business for a long, long time.” (Reporting by Ross Kerber; additional reporting by Tom Hals), editing by Matthew Lewis) ((Ross.Kerber@ThomsonReuters.com; + 1 617-856-4341; Ross.Kerber.Reuters.com@Reuters.net)) Keywords: WHISTLEBLOWERS/MARKOPOLOS Thursday, 03 February 2011 19:09:44RTRS [nN03135825] {C}ENDS

Harry Markopolos, a former financial executive, testifies before a House Financial Services Subcommittee on "Assessing the Madoff Ponzi Scheme and Regulatory Failures" in Washington February 4, 2009. Markopolos, who tried to blow the whistle on Bernard Madoff, told Congress that securities regulators had ignored his repeated pleas for a thorough investigation of the accused swindler's alleged $50 billion fraud. REUTERS/Jason Reed By Ross Kerber and Tom Hals

SEC cracks down on disclosure of lawsuit costs (Westlaw News & Insight)

By Guest Contributor
February 3, 2011

By Carlyn Kolker

NEW YORK, Feb 3 (Reuters Legal) – The U.S. Securities and Exchange Commission is cracking down on corporate disclosure of litigation costs, a Reuters Legal analysis has found. In particular, the agency is targeting banks and other institutions that have reported large settlements of financial crisis-related lawsuits that they had not disclosed in prior regulatory filings. (more…)

SEC whistleblower rules raise risk for companies, lawyers say (Complinet)

By Guest Contributor
February 3, 2011

By Emmanuel Olaoye

NEW YORK, Feb. 2 (Complinet) Proposed increases in federal rewards for whistleblowers who report securities violations to the Securities and Exchange Commission raise the risk that employees will go outside their firms to report trouble, according to industry officials. Firms can avoid being the victims of potential whistleblowers by better publicizing their internal channels for reporting wrongdoing and getting creative with incentives for using them, they said. (more…)

U.S. corporate shareholders gain more (frequent) say-on-pay (Westlaw Business)

By Guest Contributor
February 2, 2011

Lloyd Blankfein (R) of Goldman Sachs and his wife Laura arrive for the state dinner hosted by U.S. President Barack Obama and first lady Michelle Obama for President of China Hu Jintao at the White House in Washington, January 19, 2011. REUTERS/Jonathan ErnstBy Erik Krusch

Feb. 2 (Westlaw Business) – Dodd-Frank and SEC-bolstered shareholders officially have a say on company pay. The SEC recently adopted rules requiring companies to hold say-on-pay, say-on-pay frequency, and golden parachute approval votes. Companies from Deere & Co. and Apple to Johnson Controls and Monsanto’s proxies are drafted, filed and poised to comply with the new rules. Companies and shareholders, however, still have plenty to hash out around the mechanics of executive compensation votes this proxy season. (more…)