AUGUST 12, 2011static.reuters.com/resources/media/editorial/20110812/... · 2011-08-12 · AUGUST...

AUGUST 12, 2011

Global markets saw their worst week of trading since the 2008 financial crisis, triggered by a downgrade of U.S. debt by Standard & Poor's and a growing loss of confidence in U.S. and European lawmakers to take adequate steps to deal with the crisis. The S&P downgrade sparked renewed calls for reform of the ratings industry, while in Europe several regulators banned short selling in an effort to stabilize markets rocked by rumors and fear surrounding debt levels in Spain, Italy and France. Bank of America was hit with a $10 billion lawsuit by AIG over mortgage-backed securities.

TOP STORIES S&P controversy fuels demands for ratings reforms....................................................... 6 Europe cracks down on short-selling, rumours ............................................................... 6 AIG sues Bank of America for $10 billion "fraud" ............................................................ 7 One bank in Asia cuts, others review exposure to French banks ................................... 7

FINANCIAL SERVICES

REGULATORY REFORM

S&P balks at SEC proposal to reveal rating errors .......................................................... 8 U.S. banks may seek relief from insurance fee surge ...................................................... 8 Massachusetts regulates use of expert network firms .................................................... 9 SEC urged to make companies list political spending .................................................... 9 UK likely to outlaw accident referral fees -ABI ................................................................. 9 U.S. banks pushing for legal shield on mortgages ........................................................ 10

ENFORCEMENT

Ex-Marvell accountant arrested for insider trading ........................................................ 10 SEC charges Stifel with fraud in Wisconsin deals ......................................................... 11 U.S. seeks as much as 24-1/2 years for Rajaratnam ...................................................... 11 U.S. agency sues Goldman over credit union losses ................................................... 12 Morgan Stanley may have to pay $1.7 billion in MBS cases .......................................... 12 Wiretap evidence allowed against insider defendant..................................................... 12 MF Global in $90 million accord over rogue trader ........................................................ 12 Fund manager charged as Marvel insider trader ........................................................... 13 Caribbean Ponzi schemer sentenced to 30 years .......................................................... 13 Broker asked to repay Lehman Brothers $2.2 million by FINRA ................................... 14 H&R Block settles subprime mortgage probe ................................................................ 14 U.S. sanctions Syrian bank, mobile phone company..................................................... 14 Ex-Citi senior trader fined $1.5 million for fraud ............................................................ 14 Former Mariner director, son admit illegal trades .......................................................... 15 Bank Austria wins dismissal of some Madoff claims..................................................... 15 Nigeria's SEC suspends trading on nationalised banks ................................................ 15 Two states sue BNY Mellon over FX trades.................................................................... 16 Ship firms challenge EU on Iran sanctions .................................................................... 16

SUPERVISION

Italian banks not showing liquidity problems ................................................................ 16 SEC examining Goldman's compliance with anti-bribery law ....................................... 17 Deere probed for possible violations of anti-bribery law ............................................... 17 FSA drawing up bank "living will" template ................................................................... 17 U.S. regulators send subpoenas to high-frequency trading firms ................................ 18 Federal probes of U.S. mortgage lenders fizzle ............................................................. 18 U.S. closes two more banks, 63 so far in 2011 ............................................................... 18 South Korea suspends ninth savings bank this year .................................................... 18

Turkey to penalise short-selling of stocks ..................................................................... 19 French watchdog warns over false rumours .................................................................. 19

ACCOUNTING & FINANCIAL STANDARDS

Chinese, U.S. audit regulators cite some progress ........................................................ 19 U.S. watchdog group to consider auditor rotation ......................................................... 20

GOVERNANCE

Wyoming bills would crack down on shell companies .................................................. 20 Lehman trustee hopes to pay customers in full ............................................................. 20

EXCHANGES & TRADING PRACTICES

Hong Kong exchange trading disrupted as hackers target website ............................. 21 NYSE seeks to toughen rules for reverse mergers ........................................................ 21 NYSE invokes rule for market open due to volatility ..................................................... 21

FUNDS MANAGEMENT

India allows foreign investors to buy local mutual funds .............................................. 22

FINANCIAL CRISIS & ECONOMY

S&P defends U.S. downgrade; Moody's says U.S. still AAA ......................................... 22 S&P says France more serious about debt than U.S. .................................................... 23 Echoes of 2008 crisis met with dull bailout tools ........................................................... 23 South Korea better prepared for crisis than in 2008 ...................................................... 23 German banks healthy amid debt crisis ......................................................................... 24 UK banks can weather market turmoil , says Osborne .................................................. 24 Cypriot banks face 1 billion euro hit from Greek rescue ............................................... 24 Insurance industry hoping riots are classified as riots ................................................. 25

TAX

Swiss, Germans agree tax deal on secret accounts ...................................................... 25 German officials hold new Swiss tax evader CD ............................................................ 26 Point Blank ex-CEO faces up to 11 years in tax plea ..................................................... 26

CURRENCY

Japan sharpens verbal warning on yen spike ................................................................ 27

TRADE & CROSS BORDER

US firm eyes trade case to force Argentina payment..................................................... 27 Argentina scraps Brady bond swap after court ruling ................................................... 28 Sudan oil tensions escalate, one shipment halted......................................................... 28

COMMODITIES & ENERGY

CFTC approves CME plan for higher corn trading limits ............................................... 28 U.S. grain group asks CFTC to revise taping rule .......................................................... 29

ISLAMIC FINANCE

Indonesia's JFX to launch sharia-backed commodity products ................................... 29

INDUSTRIAL POLICY

U.S. Senate Democrats urge FAA bill settlement ........................................................... 29

TELECOMS & MEDIA

TELECOMS

U.S. regulators link reviews of AT&T's transactions ...................................................... 31 UK may disrupt social networks during unrest .............................................................. 31

INTERNET & MASS COMMUNICATIONS

U.S. lawmaker eyes McAfee briefing on cyber attacks .................................................. 31

INTELLECTUAL PROPERTY RIGHTS

Copyright Infringement: Hong Kong offers safe harbor for online service providers .. 32 Chinese authorities find 22 more fake Apple stores ...................................................... 33

PEOPLE Six Republicans named to U.S. deficit super panel ....................................................... 34 Thirachai becomes finance minister as new Thai government is unveiled .................. 34

COMING UP

"They passed both measures to raise revenues and reduce expenditures and they also pushed through a politically contentious pension system reform which will improve the long-term fiscal sustainability of the French government. So we do see more seriousness in addressing fiscal issues in France than in the U.S."

S&P's analyst Nikola Swann on rumours France may lose its AAA rating.

"If the SEC were to define the term significant error ... we believe it would effectively be substituting its judgment [ for the credit-rating agency's]. Where errors have occurred, our practice of reacting swiftly and transparently has benefited the market."

S&P President Deven Sharma in a letter to the SEC, saying S&P's error correction policy had proven to be effective.

"What was their correction policy on their Enron rating? What was their correction policy on their Lehman rating? What was their correction policy on their Bear Stearns rating? They don't have an error correction policy -- they have an error denial policy, and the SEC is absolutely right to step in."

Barbara Roper, director of investor protection for the Consumer Federation of America, said S&P's policy has proven inadequate.

"Markets will rise and fall, but this is the United States of America. No matter what some agency may say, we have always been and always will be a triple-A country."

U.S. President Barack Obama on S&P's downgrade.

"He corrupted subordinates. He corrupted entire markets. Day after day, month after month, year after year, Rajaratnam operated as a billion-dollar force of deception and corruption on Wall Street."

Prosecutors in the Rajaratnam case, calling for a 24 ½ years jail sentence.

"[Bank of America was] engaged in a massive scheme to manipulate and deceive investors."

AIG in its $10 billion lawsuit against Bank of America.

"AIG recklessly chased high yields and profits throughout the mortgage and structured finance markets. It is the very definition of an informed, seasoned investor, with losses solely attributable to its own excesses and errors."

Bank of America spokesman Lawrence Di Rita said the insurer has only itself to blame.

US | REUTERS, AUGUST 10

Concerns about S&P's downgrading of the U.S. credit rating and the resulting global stock sell-off sparked urgent calls for investigations and reinvigorated ongoing efforts to reform the ratings agencies, which have been under fire since the Enron scandal of 2001. Representative Maxine Waters, a California Democrat, called for the House Financial Services Committee to hold a hearing on the implications of the S&P downgrade. She also wrote to the Securities and Exchange Commission, asking it to investigate whether Standard & Poor's selectively disclosed information about a downgrade of U.S. government debt to certain financial institutions before it was publicly released. Waters said she was concerned by news reports that banking industry executives met with S&P before the downgrade, especially given heavy trading volumes and a large sell-off of equity securities during the day before S&P formally announced the news. The 2010 Dodd-Frank financial oversight law requires regulators to strip from their regulations the reliance on credit rating agencies' work to determine such things as capital requirements for banks based on the riskiness of their assets. Senator Al Franken, a Minnesota Democrat, who spearheaded a drive to eliminate the "issuer pays" conflict of interest, told Reuters that he has already been on the phone with "very high administration officials" to raise his concerns about the S&P downgrade and to revive his reform efforts. Franken, whose proposed amendment to the 2010 Dodd-Frank financial reform bill would have created a new board to assign initial ratings contracts to the agencies instead of letting borrowers pick a firm themselves, said he remains fully engaged.

EU | REUTERS, AUGUST 11

France, Italy, Spain and Belgium will ban the short-selling of stocks from August 12, European market regulator ESMA said. The European Securities and Markets Authority also said it will crack down on market participants who spread rumours and false or misleading news. The regulator said the EU's Market Abuse Directive prohibits the dissemination of information which gives misleading signals about financial instruments and that European authorities will take a firm stance against any abuse. It added that while short-selling can be a valid trading strategy, it is clearly abusive when used in combination with spreading false market rumours. The announcement comes after European bank shares have been battered in a sell-off partly sparked by a series of rumours about the solidity of banks and the credit rating of sovereign debt. French market regulator AMF said it would ban short-selling of financial shares for a 15-day period effective immediately. The shares include major banks BNP Paribas, Societe Generale, Credit Agricole and Natixis, and leading insurer AXA. ESMA said the four countries that have decided to impose or extend existing short-selling bans have done so to achieve a regulatory level playing field, given the close inter-linkage between some EU markets.


Bank of America Corp was hit by a $10 billion lawsuit from American International Group Inc alleging a "massive" mortgage fraud. The action raised new concerns about burgeoning losses related to the bank's $2.5 billion purchase of Countrywide Financial Corp in 2008 and prompted questions about the stability of the bank's management team. AIG challenged an $8.5 billion agreement Bank of America reached in late June to end litigation by several large investors who bought securities backed by subprime Countrywide loans. In its lawsuit, AIG accused Bank of America and its Countrywide and Merrill Lynch units of misrepresenting the quality of its mortgage-backed securities, including more than $28 billion bought by AIG. The insurer also said the bank lied to credit rating agencies about the underlying loans. AIG said it examined 262,322 mortgages underlying 349 offerings bought between 2005 and 2007 and found 40.2 percent of the mortgages were significantly inferior to what had been represented. The AIG lawsuit is the latest in a growing number from investors seeking to hold banks responsible for losses on soured mortgage securities that contributed to the 2008 financial crisis.

ASIA | REUTERS, AUGUST 11

One bank in Asia has cut credit lines to major French lenders while five other banks in Asia are reviewing trades and counterparty risk as worries about the exposure of French banks to peripheral euro zone debt mounts, banking sources told Reuters. Rumours that France was to lose its AAA rating, later denied by ratings agencies, helped trigger the biggest widening in the European credit default swap index since the credit crunch in 2008. That sudden rise in risk perception, combined with sharp share price falls in French banks, prompted some banks in Asia to speed up reviews of counterparty risk and look at whether they should cut exposure to European lenders, sources at each of the six banks in Asia said. The head of treasury risk management for Asia at one bank in Singapore said its credit lines to large French banks had been cut because of the perceived risks in lending to these counterparties. Several of the traders and bankers in Asia said that while they had not cut all exposure to any particular institution, they were very cautious about taking on new trading positions with them. A senior risk officer at a bank in Singapore said "obviously we are having a review", when asked if they were reassessing their positions with European counterparties. A compliance officer at another European bank in Singapore said banks were responding to changes in the risk outlook much more quickly than during the 2008 financial crisis.


Standard & Poor's, whose unprecedented downgrade of U.S. debt triggered a worldwide stocks sell-off, is pushing back against a U.S. government proposal that would require credit raters to disclose "significant errors" in how they calculate their ratings. S&P, which was accused by the Obama administration of making an error in its calculations leading to the downgrade, raised concern about the proposed new corrections policy and other issues in an 84-page letter to the Securities and Exchange Commission, dated Aug. 8. The 517-page proposal includes a requirement that ratings agencies post on their websites when a "significant error" is identified in their methodology for a credit rating action. The letter was sent three days after the U.S. Treasury Department accused S&P of miscalculating -- by some $2 trillion -- the U.S. debt in the next 10 years. That calculation was in a draft press release announcing a downgrade in the government's credit rating from AAA to AA-plus. S&P's criticism of the "significant error" proposal is part of a broader concern that the SEC's reforms prompted by the Dodd-Frank financial oversight law could give the U.S. government undue influence over its ratings decisions. S&P in particular is facing a tense relationship with Washington. Its downgrade sparked a backlash from Administration officials and lawmakers from both sides of the aisle. A Senate Banking Committee aide said the panel has begun looking into S&P's decision to downgrade the U.S. credit rating. The SEC's proposal, issued in May, contains a wide range of provisions, including requiring credit raters to disclose more about their internal controls, to protect against conflicts of interest, and to reveal more about their rating methods. But one issue that really rubbed Standard & Poor's the wrong way was the proposed requirement that raters disclose when a "significant error" is identified in a procedure or methodology -- and especially, who should define what that is.


U.S. banks might seek regulatory relief from costs associated with a flood of deposits, as investors seek safe places for their money, a top Washington banking official said. Wayne Abernathy, a top official with the American Bankers Association, said it would be a concern for banks if the temporary surge in deposits due to market turmoil led to banks having to pay higher insurance fees on the short-term bloat. More deposits mean banks have to pay more fees to the Federal Deposit Insurance Corp, which insures customer deposits up to $250,000. The fees are assessed on a quarterly basis and are calculated using the banks' daily average deposit and asset levels. Abernathy said that, if banks feel they will get hit by a big insurance bill, they would likely ask the FDIC to account for the unusual market conditions when determining the quarterly payment due.


Massachusetts will become the first state in the country to regulate so-called expert networks, companies at the heart of the government's insider trading probe, when a new rule takes effect in December 2011. The rule, which becomes effective on December 1, will require investment advisers such as hedge funds to get a written certification from experts saying they will not pass on confidential information and that they are not subject to any confidentiality restrictions. Secretary of the Commonwealth William Galvin, Massachusetts' top securities regulator, said that the regulation was designed to "thwart the misuse of inside information improperly obtained by these expert network consultants and ensure that information they provide was properly obtained". So-called expert network firms give stock pickers such as hedge fund managers access to doctors, engineers and mid-level sales executives to help educate investors about their industries. Many of these firms already have strict rules on what type of information their experts can pass on. In the last months, a handful of former consultants at these firms have pleaded guilty to illegally passing inside information or have been convicted of it. The government has been probing for years how these types of firms may have helped hedge funds get access to confidential corporate information.


A group of securities law experts are pushing for federal regulations forcing companies to reveal how much they spend on political activities. The 10 professors have formally petitioned the U.S. Securities and Exchange Commission to quickly write rules requiring regular disclosures to shareholders. They said the issue has gained importance because of the U.S. Supreme Court's "Citizens United" ruling in 2010 that found independent expenditures by corporations do not give rise to the appearance of corruption and are constitutional. The court decision said companies involved in political activities could be held accountable by their shareholders. For this mechanism to work, however, shareholders must have information about the company's political speech, the professors said in their letter to the SEC. The group of academics includes Lucian Bebchuk from Harvard Law School; John Coffee from Columbia Law School; James Cox from Duke Law School; Robert Jackson, Jr. from Columbia Law School; and Donald Langevoort from Georgetown Law School. The SEC does not currently require public companies to give detailed information on corporate spending on politics, unless the spending is considered "material." Instead, interested parties have to comb through a maze of incomplete disclosures given to federal, state and local government agencies, or rely upon companies to self disclose. In their letter, the professors said about 60 percent of companies in the S&P 100 have adopted political spending disclosure policies. It is unclear how quickly the SEC would or could draft such a rule. The SEC is under the gun to finalize dozens of rules called for in the Dodd-Frank financial oversight law.

UK | REUTERS, AUGUST 5

The British government looks set to ban lawyers from paying fees to people who refer accident victims to them, boosting insurers who blame the practice for a costly surge in bodily injury claims, the Association of British Insurers said. A call in June 2011 from former justice minister Jack

Straw to outlaw referral fees has given fresh momentum to the industry's campaign for a ban, and the government is now poised to act, said Nick Starling, the ABI's director of general insurance. Insurers say referral fees have encouraged a build-up of frivolous or fraudulent claims, with total bodily injury claims doubling to 14 billion pounds ($22.9 billion) between 2002 and 2009. Rising claims, combined with falling prices amid intense competition, has pushed the industry into an underwriting loss for each of the last 16 years, according to the ABI. That has forced insurers to lift their prices, with average motor insurance premiums rising 35.7 percent in the year to March, according to research by Deloitte.


U.S. banks still wrestling with legal troubles springing from the subprime mortgage crisis are lobbying the new consumer agency for strong legal protection for future home loans. The Consumer Financial Protection Bureau is finalizing a proposal to entice banks to offer straightforward loans -- without interest-only payments and excessive fees -- by providing a legal shield. The question is whether to give banks full protection, known as a "safe harbor," or a more limited legal shelter. The Federal Reserve issued a proposed rule on the matter earlier this year, but then punted it to the consumer agency, which now has jurisdiction. The agency, which was created by the Dodd-Frank oversight law, opened its doors on July 21. This rule will be one of the first big tests of how tough the consumer agency will be on mortgage markets. The proposal has already launched a flurry of letters from large banks such as Wells Fargo & Co, JPMorgan Chase & Co and Bank of America Corp. Those banks and others are hobbled by stalled foreclosures nationwide due to legal questions and multibillion-dollar lawsuits from investors such as American International Group Inc that claim the quality of securities backing the mortgages was misrepresented. The banks argue the safe harbor for future high-quality loans would promote lending and assure investors who buy mortgage-backed securities that legal battles are not on the horizon. On the other side of the issue, consumer advocates charge banks want to take away one of the few legal tools available to borrowers who believe a lender pulled a fast one on them. The consumer agency is expected to issue a final regulation by early next year.


Former Marvell Technology Group Ltd accountant Stanley Ng was arrested as part of the government's probe into insider trading, officials said. Ng, 42, was charged with conspiracy to commit securities fraud by federal prosecutors in Manhattan, according to the complaint. The defendant was arrested at his home in Cupertino, California, an FBI spokesman said. Ng was released on $50,000 bail. Ng is the 50th person charged as part of the U.S. government's insider trading probe, which was unveiled in October 2009. He faces up to five years in prison if convicted. He was previously identified in Manhattan court proceedings as being part of a group of people sharing secret information at expert networking firms and hedge funds. His name surfaced in the recent trial of

Winifred Jiau, 43, a former consultant for expert networking firm Primary Global Research. A jury convicted on June 20 convicted Jiau on insider trading charges. The complaint said Ng on multiple occasions in 2008 tipped the Taiwanese-born Jiau on quarterly financial results at Marvell. Jiau would in turn tip hedge funds with the information she had obtained, prosecutors said.


The U.S. Securities and Exchange Commission charged St. Louis-based brokerage firm Stifel, Nicolaus & Co and a former top executive with defrauding five Wisconsin school districts by selling them risky investments that cost them tens of millions of dollars. It said the investigation was still ongoing, and named Royal Bank of Canada, which built the investment instruments, among "other relevant entities" in the case. The SEC said Stifel, a unit of Stifel Financial Corp, and former Senior Vice President David Noack created a proprietary program to help the school districts fund retiree benefits by investing in notes linked to the performance of synthetic collateralized debt obligations (CDOs). The school districts invested $200 million in three transactions from June to December 2006, paid for largely with borrowed funds. The investments were a "complete failure, but generated significant fees for Stifel and Noack," the SEC said in its complaint, filed in federal court in Milwaukee. Elaine Greenberg, chief of the SEC enforcement division's municipal securities and public pensions unit, said Stifel and Noack abused their long-standing relationships of trust with the school districts by "fraudulently peddling these inappropriate products to them". She said they were "clearly aware that the school districts could ill afford to bear the risk of catastrophic loss if these investments failed". The SEC said Stifel and Noack made sweeping assurances to the school districts, telling them that the CDO-linked investments were "Treasury-like" and it would take "15 Enrons," a catastrophic, overnight collapse, for the investments to fail. But they failed to disclose material facts, the SEC said, including that the portfolio in the first transaction performed poorly from the outset, that credit rating agencies put 10 percent of the portfolio on negative watch within 36 days of closing, and certain CDO providers declined to participate because they considered the program too risky.

US |REUTERS, AUGUST 9

Prosecutors asked a federal judge to sentence Raj Rajaratnam to as much as 24-1/2 years in prison, calling the Galleon Group hedge fund founder "arguably the most egregious violator" of insider trading laws ever to be caught. Rajaratnam, who was convicted of insider trading in May 2011, should receive a sentence of between 235 to 293 months, or roughly 19-1/2 to 24-1/2 years, said prosecutors, adding his criminal conduct was "brazen, arrogant, harmful, and pervasive". Prosecutors argued that the sentence they seek, which they said is in accordance with the federal guidelines, is needed to reflect the seriousness of Rajaratnam's criminal activity and to "deter others -- particularly in the hedge fund and money management world from engaging a crime that is far too rampant." Lawyers for Rajaratnam sought a sentence "substantially below" what U.S. guidelines recommend, saying a long prison term would be tantamount to a death sentence. Lawyers for the 54-year-old Rajaratnam said such a sentence would be unfair and overstate the seriousness of the offense. They said his failing health and the "unique constellation of ailments ravaging his body" meant that a lengthy period of imprisonment would constitute a death sentence. U.S. District Judge Richard Holwell is expected to sentence Rajaratnam on Sept. 27.


A U.S. regulator sued Goldman Sachs Group Inc, accusing the bank of violating federal and state law by selling risky mortgage-backed securities to two credit unions that later failed. The National Credit Union Administration is seeking more than $491 million of damages related to the sale of about $1.18 billion of securities, according to the agency and its lawsuit filed in the U.S. district court in Los Angeles. It is the fourth lawsuit filed since mid-June by the NCUA, following two against Royal Bank of Scotland Group Plc and one against JPMorgan Chase & Co. The four lawsuits seek to recover nearly $2 billion. In the Goldman case, the NCUA accused the bank of making "numerous material misrepresentations" to the U.S. Central and Western Corporate federal credit unions. It said these caused the credit unions to believe that their "substantial" risk of loss from investing in residential mortgage-backed securities (RMBS) was in fact only minimal.


Morgan Stanley detailed $1.7 billion in potential legal losses from four cases involving subprime mortgage deals structured in 2006 and 2007. The biggest potential legal loss stems from a structured investment vehicle called Cheyne Finance. Fifteen plaintiffs are seeking punitive damages in that deal, related to subprime mortgage bonds that lost value. Morgan Stanley believes it may incur $983 million in damages from the Cheyne case, it said in its 10-Q filling with the U.S. Securities and Exchange Commission. The bank said it might also lose at least $269 million on a lawsuit filed by Citigroup Inc's Citibank in connection with a credit default swap on a deal called Capmark VI CDO and $240 million from a credit default swap pegged to a deal called STACK 2006-1 CDO. Finally, the company outlined at least $223 million in possible losses on an insurance contract with MBIA Corp related to a 2007 mortgage-backed security deal that Morgan Stanley sponsored.


A federal judge has denied a former expert-networking executive's request to throw out wiretap evidence against him three weeks before his insider trading trial is to begin. James Fleishman, a former sales manager at Primary Global Research LLC caught up in the government's wide-ranging insider trading probe, had asked U.S. District Judge Jed Rakoff in Manhattan to suppress evidence obtained from wiretaps. Fleishman argued that the government had failed to comply with a law governing wiretaps known as Title III. But Rakoff denied the request. He said he would later issue an opinion explaining his reasons.


MF Global Holdings Ltd, its former parent and more than three dozen underwriters agreed to pay $90 million to settle a lawsuit by investors who claimed they were misled about risk management at the brokerage, which surfaced when a rogue broker caused a big trading loss.

The settlement agreement covers investors from July 2007 to February 2008 and was made public in a filing with the U.S. District Court in Manhattan. It requires court approval. An agreement in principle had been reached in January 2011. Investors led by four pension funds sued after MF Global revealed on Feb. 28, 2008 that the broker's trades resulted in a $141.5 million loss on wheat futures in roughly six to seven hours, which the commodities and derivatives brokerage would have to absorb. The investors said this disclosure revealed flaws in MF Global's risk management system that should have been made clear the previous July, when Britain's Man Group Plc spun off MF Global in a $2.92 billion initial public offering.


U.S. securities regulators have charged a California man with insider trading for buying speculative call options on Marvel Entertainment after learning that Walt Disney Co planned to acquire the comic-book superhero company. Toby Scammell, 26, is alleged to have bought Marvel call options in August 2009 after learning about the planned acquisition from his girlfriend of two years, according to a Securities and Exchange Commission complaint filed in a California federal court. Scammell's girlfriend worked on the Marvel acquisition as a six-month temporary employee in Disney's corporate strategy department and knew the details about the pricing and timing of the deal, the SEC said. Scammell secretly used the money in his older brother's accounts, which he had gained control over when his brother was deployed with the U.S. Army to Iraq in 2007, the agency said. Just before he bought the Marvel options, Scammell searched the Internet for terms like "insider trading" and "material, non-public information," the SEC complaint said. Scammell did not reveal his trades or profits to his brother or his girlfriend, the SEC said. In the weeks before announcement of the deal, the SEC said Scammell bought call options with strike prices of $50 and $45 -- something the agency said was "highly remarkable" because the stock price had never closed above $41.74 and the options were set to expire in a few weeks. He later sold the options for a profit of more than $192,000, or a 3,000 percent return, in less than a month, the SEC said.


A Jamaican banker who ran a Ponzi scheme that bilked thousands of investors in Florida and the Caribbean out of $220 million was sentenced to 30 years in a U.S. prison, officials said. David Smith, 42, pleaded guilty in an Orlando, Florida, court to charges of fraud and money laundering in March 2011. He was extradited from the Turks and Caicos Islands where he was sentenced to six-and-a-half years in prison on similar charges. A U.S. federal judge ruled the sentences run concurrently, the U.S. Attorney's office in Tampa, Florida, said in a statement. American officials plan to seek Smith's return to the United States once he has served his sentence in the Turks and Caicos, it said. In a plea agreement earlier this year, Smith admitted to defrauding more than 6,000 investors from the United States, Jamaica and other Caribbean territories, promising his investments in foreign currency trading would yield monthly average returns of 10 percent. Prosecutors say Smith, once a well-known philanthropist and supporter of a popular church in Jamaica, instead used the money to finance a lavish lifestyle that included a $2 million island home, a down payment on a Lear jet and expensive cars and jewelry. His victims included leading politicians and doctors in Jamaica, where he ran an investment house, according to Jamaican media reports.


A FINRA securities industry arbitration panel ordered a former Lehman Brothers Holdings Inc broker to pay the now defunct firm around $2.2 million for breaching the terms of two promissory notes. In April 2010, Lehman Brothers had accused former broker Bryon James Botsford for breach of contract relating to two promissory notes signed by Botsford, in April and July, 2008. Arbitrators ordered Botsford to pay Lehman Brothers $2 million in compensatory damages and $204,066 in interest. The broker will continue to accumulate a penalty of 3 percent on the $2 million award from July 20, 2011 till he completely repays the award, according to the ruling posted on the Financial Industry Regulatory Authority's website.


H&R Block Inc agreed to modify $115 million of home loans and make a $9.8 million payment to resolve charges by Massachusetts that the company's former Option One subprime lending unit discriminated against thousands of black and Hispanic borrowers. Option One, now known as Sand Canyon Corp, employed "a business model that absolutely failed to gauge the ability of borrowers to repay the loans," Massachusetts Attorney General Martha Coakley said. The settlement resolves a lawsuit brought in 2008 in Suffolk County Superior Court. Coakley accused Option One of making home loans from 2004 to 2007 that borrowers did not qualify for, posed an excessive risk of default and foreclosure, and carried unjustified fees. She said it was the first case by a state attorney general to accuse a subprime lender of civil rights violations. The settlement calls for H&R Block to direct American Home Mortgage Servicing Inc to modify as many as 5,500 eligible Option One loans it services in Massachusetts. It also provides a $5 million contingency for modifications that cannot be made. The $9.8 million payment includes restitution for consumers, as well as fees and costs.


The U.S. Treasury Department announced new sanctions on Syria, which it said were aimed at the financial infrastructure helping to hold up the government of President Bashar al-Assad. The department said it was designating the Commercial Bank of Syria, a Syrian state-owned financial institution, and its Lebanon-based subsidiary, Syrian Lebanese Commercial Bank, under a presidential executive order that targets proliferators of weapons of mass destruction and their supporters. It also designated Syriatel, the country's largest mobile phone operator, under a separate executive order that targets Syrian officials and others responsible for human rights abuses in Syria.


A former trader and vice President for Citigroup has been ordered by a federal court to pay over $1.49 million for unlawful trading, misappropriation, and fraud, the U.S. futures regulator said. Otmane El Rhazi, a Moroccan national, engaged in a series of "fictitious trades" starting on Nov.

23, 2010 in order to steal money from Citibank and deposit it into his own account, according to the court order. El Rhazi worked for Citigroup Global Markets Limited in the United Kingdom. The former Citi trader engaged in noncompetitive palladium and platinum futures transactions on the New York Mercantile Exchange's Globex trading platform that moved $373,860 from the Citi account to his own. The court order, which was entered on July 29, 2011 by Judge Denise Cote of the U.S. District Court for the Southern District of New York, requires El Rhazi to pay $373,860 in restitution and a $1,121,580 civil monetary penalty.


A former board member at Mariner Energy and his son pleaded guilty to illegally trading the company's stock ahead of its 2010 purchase by oil and gas company Apache Corp. H. Clayton Peterson, 65, who was a Mariner director at the time of the deal, and his son Drew Peterson, 35, pleaded guilty in Manhattan federal court to two counts each of conspiracy to commit securities fraud and securities fraud. The Securities and Exchange Commission also sued the two men, alleging the son made $5.2 million in ill-gotten gains for himself and those on whose behalf he traded. H. Clayton Peterson, of Denver, Colorado, told U.S. District Judge Robert Patterson that in the days ahead of the deal's announcement, he contacted his son to tell him about the company's planned acquisition by Houston-based Apache. Drew Peterson, also of Denver, confirmed the account, but added that he also gave the tip to others, including an unnamed co-conspirator at a Manhattan hedge fund.


A Manhattan federal judge has dismissed some claims against Bank Austria, a unit of Italy's UniCredit SpA, by the trustee seeking billions of dollars for victims of Bernard Madoff's Ponzi scheme. U.S. District Judge Jed Rakoff granted Bank Austria's request to dismiss so-called common law claims brought by the trustee Irving Picard. This followed Rakoff's dismissal on July 28 of similar claims totaling $8.6 billion against UniCredit, HSBC Holdings Plc and other defendants, saying the trustee did not have the power to bring those claims. Bank Austria sought the dismissal after Rakoff indicated that this rationale would apply to additional defendants.

NIGERIA | REUTERS, AUGUST 7

Nigeria's Securities and Exchange Commission (SEC) said it had suspended trading on the shares of Afribank, Spring Bank and Bank PHB, following the nationalization of the three lenders. The SEC also approved a technical suspension on the trading of Finbank, Intercontinental, Oceanic Bank and Union Bank shares, pending the completion of agreed recapitalization deals. A technical suspension means that trading on the shares can continue without any change in price. The Nigerian central bank revoked the licences of Afribank, Spring Bank and Bank PHB on August 5 because it said they did not show the necessary capacity to recapitalize following a $4 billion bailout of nine lenders in 2009.


Bank of New York Mellon was sued by two U.S. states over allegations that the company overcharged pension funds on foreign exchange transactions. The moves by Florida and Virginia escalate a legal battle over claims that custodial banks routinely overcharged their clients. California sued State Street Corp in 2009 over similar allegations. BNY Mellon spokesman Kevin Heine said the bank would fight the latest claims leveled by Florida and Virginia. Virginia's suit claims BNY Mellon assigned forex rates to the Virginia pension funds that were at the extremes of the ranges at which currencies actually traded on a given day -- rather than the actual rate at which the bank internally accounted for the trades. The spread between the rates "generated the tremendous amount of undisclosed income" for the bank at the expense of the funds, the suit states. The Florida lawsuit makes similar claims. High-level bank executives were aware of the arrangement, the Virginia suit also states. It quotes an email from one executive who wrote the standing-instruction trades were the most profitable and worried that fuller transparency for clients would lead to reduced fees.


Several shipping companies have launched a legal challenge against the European Union after the bloc imposed sanctions on them over their suspected involvement in Iran's nuclear programme and arms trafficking, a court application showed. In a summary application filed last week with the General Court of the European Union in Luxembourg, 36 entities led by Hamburg-based shipping firm Ocean Capital Administration sought an annulment of financial sanctions which, they said had led to an EU-wide freeze of their assets. In May 2011 the EU extended its sanctions adding more than 100 new entities to a list of companies and people affected, including those it said were owned or controlled by the Islamic Republic of Iran Shipping Lines (IRISL), already targeted under previous measures. The companies, based in Germany, Malta and Cyprus, said the financial effects and damage to their reputation from the "serious allegations" was enormous.

ITALY | REUTERS, AUGUST 10

Italian banks have reported no sign of difficulty accessing funds amid recent market turmoil, a source at the Italian banking association said. The source, a senior official who spoke on condition of anonymity, said funding requirements in August, the traditional holiday month, were in any case normally lower than at other times due to an overall reduction in economic activity. The comments were made in response to market talk mid-sized Italian banks may have been facing pressure from funding costs which have been driven up by a sharp escalation of the euro zone debt crisis. The source said a steep rise in borrowing by Italian banks from the Bank of Italy in July followed months of low borrowing levels. Italian banks almost doubled their borrowing from the Bank of

Italy in July as yields on Italian government bonds spiked higher, fuelling concerns that the euro zone's third biggest economy would be the next domino to fall in the debt crisis. Mid-sized banks in particular have come under increasing strain with funding costs rising, short-selling of their shares more prevalent and commercial banks parking more money with the European central bank.


Goldman Sachs said in a securities filing that the U.S. securities regulator is probing whether the bank is in compliance with a law that bars American companies from bribing foreign officials. In a filing with the U.S. Securities and Exchange Commission (SEC), Goldman said the SEC is examining whether the bank was in "compliance with the U.S. Foreign Corrupt Practices Act." Goldman did not provide details of the probe in the filing. Separately, the Wall Street Journal said that SEC is scrutinizing Goldman's dealings with the Libyan Investment Authority -- the North African country's sovereign wealth fund. The Journal had cited "people familiar with the probe" as its source. In 2008, Goldman made options trades for the Libyan fund that resulted in losses of more than $1 billion, the newspaper said. SEC officials are particularly looking into a $50 million fee that Goldman had initially agreed to pay in order to help the fund recoup its losses, the paper said. However, Goldman eventually did not make the payment. But according to legal experts the bank could still be exposed to U.S. corruption laws, the Journal reported.


The U.S. securities regulator is probing farm machine maker Deere & Co for possible violations of a law that bars American companies from bribing foreign officials, the Wall Street Journal said citing two people familiar with the matter. The company received an inquiry from the Securities and Exchange Commission (SEC) last month regarding payments made in Russia and nearby countries, one person told the WSJ. The probe is looking at whether the payments violated the Foreign Corrupt Practices Act -- a law that bars companies from paying bribes to foreign officials. An SEC spokesman declined to comment the Journal. In a statement to the Journal, Deere said the company received a voluntary request from the SEC on July 25 to produce documents relating to Deere's activities, as well as those of third parties, in "certain foreign countries."


Britain's top banks will need to have plans in place by the middle of next year for potential disposals and how to unwind complex derivatives deals if they hit trouble, the industry regulator said. Britain's Financial Services Authority is moving ahead with a framework for banks' recovery and resolution plans -- so-called "living wills" -- and most banks will have to have plans in place by the end of June 2012. On August 9, the FSA launched a three-month consultation on proposals aimed at preventing or limiting the damage from a bank collapsing. The Financial Stability Board (FSB) is attempting to force systemically important financial institutions around the world to produce living wills by the end of 2012. These are designed to limit the fallout from a banking failure, after the collapse of

Lehman Brothers in 2008, which had a disastrous knock-on effect on economies and markets worldwide.


The U.S. securities regulator has sent subpoenas to high-frequency trading firms in relation to last year's "flash crash" probe, the Wall Street Journal reported, citing people familiar with the matter. The Securities and Exchange Commission (SEC) is also examining whether these firms further exacerbated the panic on May 6, 2010, when U.S. stock markets suffered a record fall within minutes, the Journal said. Some of the subpoenas have been sent since the start of the summer, the people told the Journal. The paper did not name the firms involved.


Federal criminal investigations into failed U.S. mortgage lenders IndyMac Bancorp and New Century Financial Corp have stalled, the Wall Street Journal reported. A third probe, into Washington Mutual Inc (WaMu), has ended with no charges being filed, the Department of Justice said. Both the IndyMac and Century Financial investigations were essentially dormant, the newspaper said, citing people familiar with the situation. Both probes could still gain new momentum if fresh evidence surfaced, the newspaper added. The three investigations were among the first to weigh criminal charges against the companies and executives at the heart of the U.S. housing crisis, which was in part caused by offering so-called sub-prime loans to people who may not have otherwise qualified for credit.


U.S. regulators closed two banks, bringing the total number closed in 2011 to 63, but the pace of closures has slowed. A year ago, 157 banks failed, and there were 140 failures in 2009. The bulk of the failures have increasingly been smaller institutions, with less than $1 billion in assets. This year's bank failures illustrate the problems facing small community banks, many of which are hard hit by the slow economic recovery. The Federal Deposit Insurance Corporation (FDIC) said on Friday that the Bank of Shorewood in Shorewood, Illinois, had been closed. It said the banks's three branches would reopen on Saturday as part of Heartland Bank and Trust Company. The Bank of Shorewood had approximately $110.7 million in total assets and $104.0 million in total deposits as of June 30, 2011. The FDIC also said that Bank of Whitman in Colfax, Washington, had been closed.

SOUTH KOREA | REUTERS, AUGUST 5

South Korea temporarily closed another savings bank as part of its efforts to prevent financial contagion in the savings bank sector. The country's financial regulators imposed a six-month suspension on debt-stricken Kyong Eun Savings Bank, the Financial Services Commission (FSC) said, making the small lender the ninth suspended so far this year.

Authorities suspended the previous eight for inadequate liquidity as the savings bank industry, which consists of 105 small lenders, is scrambling with mounting real estate related loans after the global financial crisis. FSC has asked the finance ministry to earmark 500 billion won ($471 million) for a special fund to shore up the ailing sector in next year's budget. If it cannot survive independently by means such as a new share issue within 45 days, Kyong Eun Savings Bank could face a public sale, FSC said in a statement.

TURKEY | REUTERS, AUGUST 11

Turkey said it would impose heavy penalties for short-selling of stocks, joining other countries in an effort to stem a market slump. The Capital Markets Board said it had launched a probe into short-selling on the Istanbul Stock Exchange and Derivatives Exchange, and raised the minimum equity ratio to 70 percent for short-selling. It also said listed companies would be able to buy back up to 10 percent of their paid-in capital, in a move aimed at reducing volatility and provide transparency for company transactions in their own shares.

FRANCE | REUTERS, AUGUST 11

France's AMF stock market regulator warned that publishing unfounded information was liable to be sanctioned, after French bank stocks were rocked by a series of rumours this week. "The AMF notes that the regular functioning of the markets is affected by the dissemination of unfounded rumours concerning financial stocks listed in Paris," the AMF said in a statement.


U.S. and Chinese accounting regulators discussed exchanging visits to learn more about how each inspects audits, U.S. and Chinese regulators said in a joint statement, a month after meetings in Beijing arranged to ease U.S. concern over Chinese accounting scandals. At the meeting U.S. regulators outlined how they conduct audit reviews in other countries and invited their Chinese counterparts to further discussions in Washington. Though whether that invitation was accepted was not known, regulators did describe the Beijing talks as "very productive," and "a first step toward deeper cooperation." The meetings on July 11 and 12 in Beijing came at a time of rising concern about the quality of financial reports at Chinese companies. At dozens of Chinese firms with stocks trading in the United States and Canada, shares have been delisted over scandals, trading has stopped, share prices have collapsed, auditors have resigned and regulatory probes have been launched.


The main U.S. auditor watchdog will consider ways to assure more auditor independence, including a requirement that companies change audit firms periodically, at a meeting next week. Seeking ways to assure tougher, more skeptical audits of companies' books, the U.S. Public Company Accounting Oversight Board will consider mandatory auditor rotation among other reforms at a meeting on Aug. 16, the board announced. While the partner on an accounting job must be switched every five years, there are no term limits on audit firms themselves, a policy that has left intact client relationships stretching more than a century in some cases. About 175 companies in the S&P 500 index have had the same auditor for 25 years or more, according to data compiled by Audit Analytics. Such ultra-long stints have been a concern to investor groups, who say entrenched auditors were tied to some of the biggest accounting scandals in the past.


Wyoming state legislators will consider three new bills aimed at reining in "shell" companies formed under the state's liberal incorporation laws, according to Wyoming Secretary of State Max Maxfield. The move follows a Reuters investigation in June that showed how Wyoming, Nevada and Delaware have become popular business-secrecy destinations at a time when Washington is demanding other countries improve financial and corporate transparency. Reuters found that one 1,700-square-foot house in Cheyenne is home to more than 2,000 firms, including hundreds of shell companies -- paper-only firms with few assets. Some of those firms have been used to shield real estate for a jailed former prime minister of Ukraine, sell fake parts to the Pentagon and process payments for illegal online gambling. Maxfield told the Wyoming Tribune-Eagle newspaper on Aug. 8 that the bills would strengthen his office's ability to issue cease-and-desist orders against firms that file false documents with the state, close a fee-related loophole and ban "nominee" officers and directors.


The trustee winding down Lehman Brothers Holdings Inc's brokerage hopes to repay customers in full, but expects a significant shortfall in paying back $47.5 billion owed to general creditors. The bulk of brokerage Lehman Brothers Inc's $20.6 billion in assets will probably go to customers, James Kobak, a lawyer for trustee James Giddens, said. Customers have asserted $12 billion in allowed claims and another $43 billion in unresolved claims, Kobak said at the trustee's "State of the Estate" address in U.S. Bankruptcy Court in Manhattan. Giddens has said he believes the bulk of the unresolved amount will be found invalid. Giddens told the court he hoped to make at least partial payouts to net equity customers by March or April 2012, adding that key customer claims disputes will be hashed out in court soon. But the dispute with the European broker-dealer, slated for trial in early 2013, is the "elephant in the room," Judge James Peck said. The key area of dispute is Lehman Brothers International

http://link.reuters.com/wug23s

Europe's $8.3 billion "house" claim over money the brokerage holds on its behalf. At issue is whether money held on behalf of foreign affiliates can be considered customer money. If allowed, the claim could eat up a significant portion of the brokerage's resources for paying back its customers. Regardless of the outcome, however, the brokerage will not be able to make significant payouts on the $47.5 billion in general creditor claims, which face an "inevitable" shortfall, Kobak said.

HONG KONG | REUTERS, AUGUST 10

The Hong Kong stock exchange was forced to suspend trading in stocks, including HSBC Holdings, after hackers broke into the exchange's website, preventing investors from accessing company announcements made during the midday break. HKEx said it had adopted a half-day (one trading session) suspension policy for issuers that announce price-sensitive information during the lunch hour. Other systems at the exchange were not affected and trading in its securities and derivatives markets operated normally, the exchange said. Mark Dickens, head of listing at HKEx, said the move to suspend trading was part of a contingency plan approved by the territory's stock regulator.


NYSE Euronext is seeking to tighten its listing standards for reverse merger companies, in a move designed to combat the recent rash of accounting scandals with U.S.-listed Chinese companies. NYSE's proposal, dated Aug. 4, would make it harder for reverse merger companies to list on the exchange unless they meet certain criteria. The criteria would include requiring them to first trade on a U.S. over-the-counter market or another U.S. or foreign exchange for at least a year, file the appropriate 8K or 20F disclosure form, maintain a minimum average stock price of $4, and file timely disclosures following the reverse merger, including at least one annual report with audited financial statements. NYSE's proposal comes as the Securities and Exchange Commission and the Federal Bureau of Investigation continue to probe accounting problems with U.S. shell companies that have merged with foreign companies in China and elsewhere in order to gain access to America's capital markets. Since March 2011, there have already been more than two dozen China-based companies who have disclosed auditor resignations and other accounting irregularities after listing in the United States.


The New York Stock Exchange and NYSE Amex Cash Markets invoked a rule to smooth trading at the market open, as futures pointed to a drop of more than 2 percent. Rule 48 allows

the exchange to suspend price indications that help determine the floor price at the open during regular sessions. Bypassing the requirement helps speed the beginning of trading. Among the triggers for invoking the rule are "substantial activity in the futures market before the open," according to the exchange's website.

INDIA | REUTERS, AUGUST 9

India allowed foreign investors to buy up to a cumulative $10 billion in domestic equity funds, opening the door wider to capital flows into an expanding economy. Qualified foreign investors, or QFIs, can also buy another $3 billion of debt funds that invest in at least 5-year infrastructure-related debt, the Securities and Exchange Board of India (SEBI) said. The announcement followed Finance Minister Pranab Mukherjee's proposal in his annual budget in February to further liberalise foreign investments. So far only foreign institutional investors (FIIs) and overseas Indians were allowed to buy units of domestic mutual funds. Foreign retail investors had to rely on emerging market or country specific overseas funds to take an exposure to India. SEBI said QFIs can buy units of equity or debt funds in the primary market, but cannot trade in the secondary market. The capital market regulator also said that when the cumulative QFI investment reaches $8 billion in equity schemes, SEBI would auction the remaining limit to foreign investors who can then buy the units from funds of their choice. A similar process will be followed when the investment in debt hits $2.5 billion.


Ratings agency Standard & Poor's, still under fire for downgrading the United States, restated the reasons for its decision while rival Moody's set itself apart, saying America still has the characteristics of a AAA-rated country. In Washington, President Barack Obama stopped short of sharply criticizing S&P, which senior administration officials had accused of misjudging the political outlook for further deficit cuts in Washington. Still, a top Moody's analyst reiterated that the United States is running out of time to reduce its debt burden before his company, too, would downgrade the country's debt. Competing agency Fitch Ratings, which has promised to conclude a review of the U.S. rating by the end of the month, remained mum. Top S&P officials made the rounds in TV shows and a phone conference with clients to explain the move they made, including that the decision was misled by a $2 trillion calculation "error." Moody's Investors Service, which on Aug. 2 confirmed the U.S. Aaa rating with a negative outlook, explained it was not "necessarily impossible" that U.S. lawmakers would come up with additional deficit-reduction measures next year. Failure to do so by the end of 2013 would

probably lead to a downgrade of U.S. ratings, Steven Hess, Moody's top analyst for the United States, told Reuters.


The French government has been more serious than the United States in addressing fiscal issues, therefore France's AAA sovereign rating is not at risk, a Standard & Poor's analyst said. Fears that France could be the next AAA-rated country to be downgraded after the United States have hurt the euro and stocks of French banks. S&P's analyst Nikola Swann downplayed those concerns in a phone conference with clients, saying France has better fiscal flows and lower budget deficits than the United States, although indebtedness ratios are similar in both countries. S&P also believed France was on track to solve its debt problems, unlike the United States.


Extreme market volatility has sparked comparisons to the 2008 global credit crisis, but Washington's ability to help out weak financial firms is dramatically different. The 2010 Dodd-Frank financial oversight law purposefully limits regulators' ability to prop up firms caught in the cross-hairs of a market crisis of confidence. The idea, meanwhile, that Congress would approve any special assistance is remote, with both liberals and conservatives still holding their noses from the public stink raised by bank bailouts during the financial crisis. Markets' fear factor has been sky high recently as worries about the global economy escalate after an embarrassing downgrade of U.S. debt. In addition, fears remain that European efforts to put a safety net under heavily indebted Italy and Spain might not suffice to avert wider credit market disruptions. Questions remain about the ability of U.S. banks to deal with their mortgage exposures and what might happen if market volatility evolves into a credit crisis. Dodd-Frank restrains regulators from aiding individual firms, and instead pushes the government to seize and liquidate in an orderly fashion a large, failing financial firm. For instance, it ends the Fed's ability to extend emergency loans under its so-called "13(3)" powers. It also prevents the Federal Deposit Insurance Corp from providing "open bank" assistance directly to an individual institution, as it did for Citigroup Inc in November 2008, to help keep it in business. Regardless of the restrictions the law places on banking agencies, several analysts and industry lawyers said the creativity of regulators should not be underestimated if they decide quick action is needed. The law, for instance, does allow both the Fed and the FDIC to create programs intended to deal with liquidity problems that would be considered financial industry-wide. Several analysts said it is unclear how this would work in practice. But they said regulators might have some wiggle room that could allow them to help one or only a few banks without violating the law.

SOUTH KOREA | REUTERS, AUGUST 11

South Korea is now better prepared for any impending financial crisis than it was in 2008, when it was threatened with a currency crisis, and will take "decisive" and "prompt" action, government and central bank officials said. The country is now sitting on larger reserves, has a stronger fiscal position and the central bank has more flexible scope in monetary policy, the finance ministry,

Bank of Korea and the financial regulator said, without specifying what action could be taken. Authorities said that a temporary ban on stock-short selling announced on August 9 was only the first stage of their response. South Korea's stock market was hit harder than many of its Asian peers in the wake of the U.S. debt downgrade and economists say that while Asia's fourth largest economy is in better shape than it was in 2008, it remains extremely vulnerable to global selloffs due to its financial system and corporate exposure to foreign loans. In response to the 2008 crisis, the government pushed through supplementary budgets and pumped money into the banking sector as the Bank of Korea slashed the base rate by 325 basis points between late 2008 and early 2009, entering urgency swap contracts with the United States and neighbouring countries.

GERMANY | REUTERS, AUGUST 5

The head of the German state-funded bank rescue, Soffin, said the nation's lenders were not under any threat of collapsing from the current sovereign debt crisis. Christopher Pleister told German business daily Handelsblatt there was "no cause for concern in regards to concrete cases in the domestic financial sector." His comments came after Reuters reported that Germany's second-biggest lender, Commerzbank, would post writedowns of more than 700 million euros ($993 mln) on its Greek sovereign bond holdings in the second quarter, making it the most affected major European bank. Should the fiscal situation escalate and debt markets continue to deteriorate, however, Soffin is prepared to act to rescue banks that need it. Pleister said there were 20 billion euros in funds available to inject fresh equity to plug sagging bank balance sheets in an emergency. He added that German lenders were becoming increasingly risk-averse.


Britain's banks hold enough capital and liquidity to weather the current market turmoil, British finance minister George Osborne said. In a special parliament session, called in the wake of riots in London and other major British cities, Osborne reiterated that Britain must stick to its tough austerity plans and leaders must redouble efforts to tackle the euro zone debt crisis as the world economy faces the most dangerous time since the height of the financial crisis in 2008. The global recovery would take longer and be harder than had been hoped, he said. "Markets are waking up to this fact. That is what makes this the most dangerous time for the global economy since 2008." He said the assessment of the Bank of England, the FSA and the Treasury was that British banks were sufficiently well capitalised and held enough liquidity to be able to cope with the current market turbulence. "We have in place well-developed and well-rehearsed contingency plans."

CYPRUS | REUTERS, AUGUST 8

Cypriot banks could take a hit of more than 1 billion euros ($1.4 billion) to shoulder their Greek bailout obligations, forcing them to raise capital and potentially deepening concerns over the island's own sovereign debt. Bank of Cyprus and Marfin Popular Bank have not yet committed to join a voluntary private sector plan to rescue Greece, whereby investors will take a 21 percent loss on the country's bonds. Marfin held 3.4 billion euros of Greek bonds at the end of last year,

and is the biggest overseas creditor not yet to pledge to join. It faces a loss of more than 700 million euros. Bank of Cyprus held 1.7 billion euros at the end of May 2011. The banks are waiting for more details to emerge on the offer. These are due to come in mid-August and investors are expected to sign up in early September, sources have said. The central bank and Bank of Cyprus have warned Cyprus could need a bailout if it does not take urgent action to repair its finances. It would become the fourth state in the euro zone to request a rescue after Greece, Ireland and Portugal. Cyprus, which accounts for only about 0.2 percent of the 17-nation euro zone's economy, would not strain Europe's resources but it would show how the crisis can spread and how intertwined banks are with sovereign borrowers. Cyprus's banks are seen as profitable and well regulated and have successfully raised capital in the past, so the risk of a full-blown crisis was low, analysts said.

UK | THOMSON REUTERS ACCELUS, AUGUST 8

The insurance industry is hoping the UK government will confirm that the recent scenes of unrest throughout the country were in fact "riots" so that the police have to foot some of the bill. The industry is also looking to the government to extend the deadline for making a claim to give it a fair chance to act. Steve Foulsham, technical services manager at the British Insurance Brokers' Association, told Thomson Reuters that the authorities had not yet confirmed that the incidents of looting and arson were definitely riots under the Riot Act. It seems highly likely that they will have to be, given that the definition of a riot is having any group of 12 or more people unlawfully assembled and having to be dispersed or face punitive action. Provided that what was witnessed on the streets in the past week were riots, insurers will be able to make a counter claim against the police for damage to property, although not for loss of business earnings or motor vehicle damage. Foulsham said another major issue facing the industry was the tight deadlines they needed to hit. Insurers have 14 days to make a claim to the police, so consumers and small businesses are being urged to lodge their claims within seven days.


Switzerland and Germany have agreed to tax money stashed by German citizens in secret Swiss accounts, in a deal that may net Germany billions of francs and will force the Swiss banking sector to clean up its act. Citizens of Germany -- keen to claw back funds as the worsening euro zone debt crisis expands its role as the region's main paymaster -- have an estimated 150 billion Swiss francs ($203 billion) hidden in secret accounts. In a deal that could set a model for agreements between Switzerland and other countries, existing funds will be taxed at a rate between 19 and 34 percent, based on how long the money

has been stashed away and the rate of capital gains. Future investment income and capital gains will be taxed at a rate of 26.375 percent, in line with the current flat-rate withholding tax in Germany, the Swiss government said in a statement. Banks UBS and Credit Suisse both welcomed the deal, but the German tax trade union said it was sceptical. By introducing a withholding tax, the deal allows Switzerland to avoid the automatic exchange of information, for which Germany had been pushing. Switzerland will now cooperate more readily with Germany's attempts to catch tax cheats in exchange for Germany's agreement not to buy any more stolen tax data. Germany's decision to pay for stolen data soured relations between the two countries. German fiscal authorities will be allowed to put in between 750-999 requests with their Swiss counterparts in a two-year period, if they have good grounds to suspect cases of tax dodging. Germany will not be able to pursue any large-scale "fishing expeditions". The agreement should take effect at the start of 2013, and the two countries agreed to improve market access for their financial institutions. In Germany, it must be approved by both houses of parliament.

GERMANY | REUTERS, AUGUST 11

German officials have obtained a new CD containing details on thousands of German tax evaders holding accounts in Switzerland, newspaper Frankfurter Rundschau reported. The existence of the data, revealed a day after the two countries agreed on how to handle money secretly stashed away in Swiss banks, may raise fresh questions over the tax issue before it even reaches parliament for ratification. Citing unnamed official sources, the paper said investigators in Germany are worried that the data on the new CD which they purchased, containing data from a large Swiss bank, now risked being worthless. Their concern stems from the fact that according to the August 10 deal, Germany has agreed not to buy any more stolen bank data, a practice several German states have used, but which has soured ties with its southern neighbor. A source within the negotiations has told Reuters that procedures involving data already purchased would be followed through, and that the agreement only banned future purchase of data on tax dodgers. But with the deal yet to be approved by parliament and not due to take effect until 2013, it is unclear what would happen to any new CDs obtained between now and then -- or how long they would be legally valid in court. Separately, prosecutors in the western city of Duesseldorf said they were intensifying their tax evasion probe of Credit Suisse, which has been raided by investigators, in a case based on the purchase of a CD in 2010. Germans have an estimated 150 billion Swiss francs ($203 billion) hidden in secret Swiss accounts, and its leaders are keen to claw back funds as the euro zone debt crisis expands its role as the region's main paymaster. The agreement reached on August 10 would net Berlin billions of francs, taxing existing funds at a rate between 19 and 34 percent, based on how long the money has been stashed away and the rate of capital gains. Meanwhile, future investment income and capital gains will be taxed at a rate of 26.375 percent, in line with the current flat-rate withholding tax in Germany.


The former chief executive of military contractor Point Blank Solutions Inc pleaded guilty to tax fraud charges, even as he seeks a new trial following his conviction for looting the company out of nearly $200 million. David Brooks, 56, will face up to 11 years in prison when he is sentenced by U.S. District Judge Joanna Seybert, according to his attorney, Gerald Shargel.

Shargel said the guilty plea would allow Brooks and his attorneys to focus on a more pressing legal battle -- his motion for a new trial after he was convicted in September on 17 charges related to a scheme to loot and defraud Point Blank. The tax charges were not a part of Brooks's nearly eight-month trial in Long Island federal court, in which he and former DHB chief operating officer Sandra Hatfield were found guilty of insider trading, fraud and obstruction of justice, among other charges. He faces up to life in prison.

JAPAN | REUTERS, AUGUST 11

Japanese Finance Minister Yoshihiko Noda sharpened his warning to currency markets in the wake of the yen's rise near record highs against the dollar, keeping markets jittery about the possibility of a second round of intervention. Markets were also on guard after the Swiss National Bank said it would flood the market with even more francs to dampen demand for the currency which, like the yen, is soaring on safe-haven demand. Prime Minister Naoto Kan also told parliament the government will consider what it can do to address what he saw as "somewhat one-sided moves" in the yen, although he did not elaborate. Japan has kept firing warnings to markets against pushing up the yen too much, but that has not kept the currency from rising.


A U.S. company plans to ask the Obama administration for help in recovering more than $230 million it says it is owned by the government of Argentina, an attorney for the company said. Stephen Kho, a lawyer with the Akin Gump law firm, said it would be the first time a U.S. company has used the "Section 301" trade law to pressure a foreign government to pay an award decided by an arbitrator in an investment dispute. The case involves Azurix Corp., a Houston-based water services and investment company which was granted a 30-year water concession in Argentina in 1999. As a result of "unwarranted political interference", the company was forced to terminate the contract in 2002, Representative John Culberson said in a July 15 letter urging U.S. Treasury Secretary Timothy Geithner to take action. Azurix filed an arbitration case under the U.S.-Argentina Bilateral Investment Treaty to recoup its losses. The case was heard by the World Bank's International Center for Settlement of Investment Disputes (ICSID), which "rejected every argument put forth by Argentina and awarded Azurix over $165 million, plus interest," Culberson said. Argentina appealed but lost again. It has refused to pay, telling Azurix it must go through Argentina's domestic court system to collect the award, Kho said.

ARGENTINA | REUTERS, AUGUST 5

Argentina canceled an offer for creditors to swap up to $263 million and 54 million euros in defaulted Brady bonds for new debt after a U.S. court ruling effectively blocked the exchange. Brady bonds take their name from U.S. Treasury Secretary Nicholas Brady who in the early 1990s helped Latin America out of a deep debt crisis, by creating bonds to exchange for debt the region was struggling to repay. At the height of Argentina's 2001-2002 economic crisis, the country defaulted on some $100 billion in sovereign debt, including Brady bonds issued in 1992. Through swaps in 2005 and 2010, the government restructured 92 percent of the defaulted bonds. Last December, the government launched a debt exchange offer that was contingent on U.S. court approval, which attracted creditors holding about $270 million in defaulted Brady bonds. But two weeks ago, a U.S. appeals court blocked the exchange, upholding the original attachment orders granted to a holdout investment fund that has sued Argentina to recover the full value of its defaulted bonds. This meant the collateral backing the Brady bonds would be subject to seizure by the holdout fund if the debt exchange went ahead.

SUDAN | REUTERS, AUGUST 5

North Sudan has halted an oil shipment from landlocked South Sudan in a dispute over customs fees, signalling a rise in tensions that could disrupt supplies from one of Africa's largest producers. South Sudan became independent in July after a referendum in January agreed under a 2005 peace deal that ended decades of civil war with the North. The South took 75 percent of the country's 500,000 barrels a day of oil production, Africa's fifth largest, but depends on the North to use the only cross-border pipeline to the Red Sea port of Port Sudan to sell the oil. Customs authorities in Port Sudan stopped one shipment because duties had not been paid, a spokesman for the foreign ministry in Khartoum said without giving other details. He said the action had been the decision of the customs authorities and was not related to current talks between North and South about sharing oil revenues. The two sides have failed so far to reach an agreement on a transit fee to be paid by the South. Until now both split equally the oil, the lifeline of both economies.


The U.S. futures regulator approved a plan by the CME Group to raise daily trading limits on corn futures, allowing the exchange to implement a change that many grain-handling companies strongly oppose. The CME said in July it would ask the Commodity Futures Trading Commission for permission to raise the trading limit to 40 cents per bushel from the current 30 cents. The CFTC's five commissioners did not object to the plan, an agency spokesman said.

The current daily limit for corn futures is expandable to 45 cents, then again to 70 cents. The limit widens in the following session after a limit-up or limit-down close. CME, the world's largest derivatives exchange, has proposed that the maximum expansion be 60 cents.


The largest U.S. grain group urged the Commodity Futures Trading Commission to "clarify" a proposed new rule that could require every conversation between a producer and grain elevator be tape recorded. The National Grain and Feed Association said in a letter to CFTC that it urged the regulator to "narrow and clarify" application of the proposed rule. The proposal, outlined in a 48-page document in the Federal Register on June 7, seeks a number of "conforming changes" for the commodities industry to align with the landmark Dodd-Frank market reform legislation signed in July 2010. Included in the rule change is a section that requires members of futures exchanges "to record all oral communications that lead to the execution of transactions in a commodity interest or cash commodity." The recordings, which must be stored for five years and be in addition to full electronic records of transactions, also need to be "identifiable by counterparty and transaction." The NGFA said it believed such regulation of the cash marketplace was not intended by Congress.

INDONESIA | REUTERS, AUGUST 9

The Jakarta Futures Exchange (JFX) will launch sharia-compliant commodity contracts in September, an official said. Bihar Sakti Wibowo, a director at JFX, said both Indonesia's future trading regulatory body and National Sharia Council at Indonesian Ulema Association (MUI) had approved the new scheme. JFX plans to launch contracts for several agricultural products, including coffee, cocoa, crude palm oil and rubber in the first stage, with energy products like coal, diesel oil and ethanol to follow, Wibowo said.


U.S. Senate Democrats urged Republicans in the House of Representatives to begin "serious negotiations" on an aviation funding bill that they said could help the struggling U.S. economy. In a letter to House Speaker John Boehner, a group of Senate Democrats asked him to appoint a

formal negotiating panel "so that serious negotiations may begin" with the Senate over the stalled legislation. An impasse between House Republicans and Senate Democrats over funding for rural airports and workers' rights forced a partial shutdown of the Federal Aviation Administration last month that lasted for nearly two weeks. Airport construction was halted and thousands of workers were idled. Work started up again after a temporary funding bill passed Congress, but that money runs out on September 16. The House and the Senate have passed different versions of FAA funding legislation earlier this year and the two bodies have to work out their differences before Congress can send a final bill to President Barack Obama for his signature.


AT&T Inc's $1.9 billion offer for some of Qualcomm Inc's wireless licenses will be tied to a simultaneous review of AT&T's $39 billion proposed takeover of T-Mobile USA, U.S. communications regulators said. The Federal Communications Commission, citing the many related issues, dropped the agency's informal 180-day timeline for review of the Qualcomm deal. The move could significantly delay completion of the smaller Qualcomm deal because the review of AT&T's bid for Deutsche Telekom AG's T-Mobile is expected to extend at least into the first quarter of 2012. Qualcomm said swift action on its deal was in line with the FCC's goal to free up more airwaves for mobile broadband use.


Britain is considering disrupting online social networking such as Blackberry Messenger and Twitter during civil unrest, Prime Minister David Cameron said, a move widely condemned as repressive when used by other countries. Egyptian authorities shut down mobile and Internet services in January during mass protests against then-President Hosni Mubarak, while China is quick to shut down online communication it sees as subversive. Police and politicians have said online social networks, in particular Research in Motion's popular Blackberry Messager (BBM), were used by rioters and looters to coordinate during four days of disorder across England this week. Many of the rioters favoured Canadian firm RIM's BBM over Twitter and other social media because its messages are encrypted and private. The company said that it cooperates with all telecommunications, law enforcement and regulatory authorities, but it declined to say whether it would hand over chat logs or user details to police.


A U.S. congresswoman requested more information on security company McAfee's report detailing a five-year hacking campaign that breached 72 organizations globally. Representative Mary Bono Mack, chairman of the House Commerce subcommittee with jurisdiction over

cybersecurity, said she was alarmed by the report on a slew of cyber attacks that McAfee has dubbed "Operation Shady RAT." In a letter to Dmitri Alperovitch, vice president of threat research for McAfee and author of the report, Bono Mack requested a briefing with his research team and asked how the government and private sector could more effectively mitigate data breaches. McAfee uncovered the biggest hacking campaign discovered to date, a multiyear campaign targeting governments, corporations, the United Nations, defense contractors and others. Its report, released last week, said a single "state actor" -- which the company did not identify -- seeking military, diplomatic and economic advantage was behind the attacks. Bono Mack, in the letter, asked McAfee if it believed greater public disclosure of significant, potentially damaging breaches would help or harm efforts to curb cyber crime. The congresswoman introduced legislation in July 2011 that would require companies that collect consumers' personal information to implement data security measures and notify consumers of data breaches. Bono Mack also asked about the five-year hacking campaign's financial impact on the United States, and whether the company found evidence that consumers' sensitive or personal information was compromised.

HONG KONG | BUSINESS LAW CURRENTS, AUGUST 9

Lawmakers in Hong Kong are in the last stages of updating the city’s copyright laws to remain relevant in the digital age. After five years of considering different proposals for copyright reform, the Hong Kong government tabled the Copyright (Amendment) Bill 2011 at the Legislative Council earlier this summer. The main purpose of the reforms is to boost copyright protection in the digital realm; however, the introduction of major proposals such as liability caps for online service providers have raised questions of whether the new laws are aimed at protecting copyright owners or shielding online service providers. The Copyright (Amendment) Bill 2011 introduces several proposals that are significant for online service providers. On safe harbors, a legal framework to limit the liability of online service providers in copyright infringement cases where the infringing act has occurred on their servers. To qualify for safe harbor protection, online service providers will have to demonstrate that they have implemented statutorily required mitigation procedures such as the ‘notice and take-down’ policy. Pursuant to this policy, online service providers are required to implement internal controls to remove infringing content once the company receives a formal complaint or notice. A major criticism of the Bill is that it focuses too much on online service provider liability and does not adequately address P2P piracy. In late July, the International Federation of the Phonographic Industry (IFPI) submitted comments regarding provisions of the Bill. The industry group strongly urged the Hong Kong government to introduce regulation to address all forms of online piracy. On the safe harbor provisions, the IFPI expressed that the regime should be pared down to make it effective, suggesting that the current proposed regime is too broad to be practical. The Copyright (Amendment) Bill 2011 is expected to come into effect during the 2011/2012 legislative year.

CHINA | REUTERS, AUGUST 11

Authorities in China's southwestern city of Kunming have identified another 22 unauthorised Apple retailers weeks after a fake of the company's store in the city sparked an international storm. China's Administration for Industry and Commerce in the Yunnan provincial capital said the stores have been ordered to stop using Apple's logo after Apple China accused them of unfair competition and violating its registered trademark, state media said. The market watchdog agency said it would set up a complaint hotline and boost monitoring, the official Xinhua news agency reported. It did not say if the shops were selling knock-off Apple products or genuine but smuggled models.


Republicans named six members to a U.S. congressional deficit-reduction super committee that was set up to seek bipartisan agreement on taxes and government spending. The panel is known as the Joint Select Committee on Deficit Reduction and was established to find $1.5 trillion in additional budget savings over 10 years, but markets have been looking for signs that it may be able to do even more. Senators Jon Kyl, Rob Portman and Patrick Toomey were selected by Senate Republican Leader Mitch McConnell for inclusion on the high-profile 12-member panel. House of Representatives Speaker John Boehner, the top Republican in Congress, appointed Representatives Dave Camp, Jeb Hensarling and Fred Upton. Like a trio of Senate Democrats named to the panel, the six Republicans are a diverse group, ranging from Toomey, a favorite of the conservative Tea Party movement, to Portman, a budget expert. Senate Democrats were first out of the gate on August 9 with their appointments to the panel. They were Senators Max Baucus, John Kerry and Patty Murray, a trio that analysts said sent a mixed message about the panel's potential.

THAILAND | REUTERS, AUGUST 10

Thirachai Phuvanatnaranubala, head of Thailand's financial market regulator for eight years until he stepped down earlier in August, will be the country's finance minister in a new government. He is among a handful of outsiders in the cabinet of Prime Minister Yingluck Shinawatra, otherwise dominated by members of her Puea Thai Party, which won a landslide election victory on July 3. Thirachai, who was also said to be in the running for the central bank governor's job last year, would be welcomed by financial markets, analysts said.

AUGUST August - Final rule expected from Federal Reserve and the Federal Deposit Insurance Corp on the "living wills" banks and other large financial companies will have to write. The wills are suppose to provide a roadmap for how these institutions could be liquidated through bankruptcy or by the FDIC if they are about to fail. August 8 - Deadline for comments on CFTC's June 7 proposal on adapting regulations for swaps participants, proposals for protection of cleared swaps customer contracts and collateral, and conforming amendments to the commodity broker bankruptcy provisions August 8 - Deadline for comments on proposed amendments to rules for credit rating agencies registered with the SEC August 16 - House Financial Services Committee field hearing in Newnan, Ga., "Potential Mixed Messages: Is Guidance from Washington Being Implemented by Federal Bank Examiners?" August 16 - Public Company Accounting Oversight Board to consider mandatory auditor rotation and other reforms at a meeting

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