The FSA has been busy. With all of the excitement surrounding the fine and resignation of JP Morgan Cazenove Capital Markets Chairman Ian Hannam on Tuesday, another arrest maybe didn’t get the attention it deserved.
From the FSA’s press release: Read more
Okay, it’s a cliche to call Coutts & Co “HM Bank,” although Her Majesty does indeed bank there.
Which makes this instant news: Read more
Summary: Credit Suisse bond salesman Nicholas Kyprios goofs around with clients ahead of a bond issue. No suspect trading is undertaken, there are no suspicious price movements, and in any case most of the bonds that might have been affected do not fall under the FSA market abuse regime.
No matter: Read more
Meeting the public clamour for “action” on the British banking shambles that left half the sector a ward of the state, the FSA has published a “censure” against Bank of Scotland for the failings of its corporate division between January 2006 and December 2008.
Here’s the final notice, which runs to 37 pages… Read more
DAVID EINHORN: Oh, you’re — you’re — you’re getting more than — than I could help with anyway. So, this is good.
PUNCH CEO: Okay. That’s fair enough. Well, one day we’ll get you a round on a pub crawl around some English pubs. Read more
The bill to revamp City regulation includes a “gaping hole” that could prevent important warnings from reaching the chancellor of the exchequer , Ed Balls, Labour’s shadow chancellor, has told the FT. Mr Balls – an architect of the current regulatory system which dispersed power between the Treasury, the Bank and Financial Services Authority – criticised the extensive powers the bill would grant to the governor of the Bank of England, Sir Mervyn King, saying the new structure could stifle dissenting voices in the run-up to another crisis. Read more
Extraordinary, this — so we’ll just slam up the details from the FSA:
The Financial Services Authority (FSA) has today fined Ravi Shankar Sinha £2.867 million for fraudulently obtaining £1.367 million for himself from a company owned by a private equity fund advised by JC Flowers by means of a fictitious invoicing scheme. The financial penalty consists of £1.367 million disgorgement and a punitive element of £1.5 million. Sinha is also prohibited from performing any function in relation to any regulated activity in the financial services industry. Read more
British and Swiss regulators are likely to begin enforcement proceedings against UBS for shortcomings that allowed a London trader to make unauthorised trades last year, the WSJ says, citing people familiar with the situation. In September, UBS disclosed that an employee on its London-based equity desk allegedly made unauthorised trades, and police subsequently arrested Kweku Adoboli in connection with the case. The scandal led to the resignation of chief executive Oswald Grübel shortly thereafter. A joint probe by the FSA and Switzerland’s Finma, that until now had been seen largely as a fact-finding mission to determine what went wrong, is now expected to result in regulators penalising the bank for gaps in oversight that allegedly allowed Mr Adoboli to make the trades without authorisation. Unlike the FSA, Finma does not have power to fine banks, but can force a bank to make changes such as to personnel. Read more
UK regulators are seeking to fine a former Bank of America Merrill Lynch broker about £350,000 for his role in hedge fund manager David Einhorn’s improper trading ahead of the 2009 equity raising by Punch Taverns, reports the FT. Andrew Osborne, who resigned from the bank late last year, is considering whether to appeal against the fine to a tribunal. The reports cites people familiar with his views as saying Mr Osborne, who served as corporate broker for the UK pubs company, consulted lawyers throughout his June 2009 interactions with Mr Einhorn and does not believe he gave the hedge fund executive inside information. The case highlights a gulf between US and UK regulators on insider trading, says the FT separately. The WSJ says corporate broking in the UK is coming under increased regulatory scrutiny. Read more
Some of the most substantial changes to the UK listing rules since the current regime came into force 12 years ago are underway. Here’s the FSA consultation doc:
David Einhorn’s personal £3.6m ($5.6m) fine from the UK’s FSA for market abuse amounts to the second largest individual penalty for in the regulator’s history, and finally gives it a high-profile scalp, the FT says. Few US hedge fund managers come more high-profile than Einhorn, who often seeks publicity for controversial shorts, reports the WSJ. In a conference call with investors in his Greenlight Capital fund, Einhorn disputed the FSA’s ruling. “This is like a traffic cop with a quota at the end of the month, with a faulty radar detector,” he said, according to Dealbreaker. Read more
The Financial Services Authority was so concerned about the UK operations of Dresdner Kleinwort at the height of the banking crisis in 2008 that they were placed on a watchlist for vulnerable companies, the High Court has heard. The FT reports on the opening day of a case in which 104 investment bankers formerly employed by Dresdner Kleinwort are suing over €50m ($65m) of unpaid bonuses, the court was told of events leading up to the takeover of Dresdner by Commerzbank in 2009. Andrew Hochhauser QC, representing the bankers, said that by May 2008 the financial regulator had become “very concerned” about a possible exodus of key staff at Dresdner, and as a result, the FSA placed the bank’s UK divisions on its watchlist of institutions “considered to pose the greatest risks” to its statutory objectives. The case centres on allegations that Dresdner created a “guaranteed minimum bonus pool of €400m” at the height of the credit crunch to avoid a mass staff exodus. Read more
David Einhorn, one of the world’s highest profile hedge fund managers, and his firm, Greenlight Capital, have been fined £7.2m by UK regulators for trading ahead of a 2009 equity fundraising by Punch Taverns, the FT reports. Mr Einhorn, who will personally pay £3.6m, is the most prominent figure to be ensnared by the UK Financial Services Authority, which has traditionally lagged behind US enforcers in tackling market abuse. His fine is the second largest ever handed down by the FSA to an individual for market abuse and will send a chill through the City. The case is a key step in the FSA’s campaign to hold market professionals to account and to tackle the high rates of suspicious trading ahead of mergers and rights issues. The WSJ says it represents a rare instance when a hedge-fund manager is personally held responsible for allegedly improper trading.
Or, the UK’s FSA slaps a £7.2m fine on David Einhorn and Greenlight Capital over trading in Punch Taverns shares in 2009. First, the case from the FSA:
On 9 June 2009, Einhorn was a party to a telephone conference in which it was disclosed to him by a corporate broker acting on behalf of Punch Taverns Plc that Punch was at an advanced stage of the process towards a significant equity fundraising. This was inside information and Einhorn should have appreciated this. Read more
This document had previously passed this correspondent by: DP12/1 - Implementation of the Alternative Investment Fund Managers Directive. H/T Sarah Butcher.
In Part 1, FT Alphaville discussed the recent resurgence of so-called “BISTRO-type” securitisation deals. These allow banks to lower their capital requirements and defer losses by buying protection on portfolios of assets.
The Basel Committee issued a letter about such securitisation deals in December, effectively warning banks that over-engineering purely to reap regulatory capital benefits would not be tolerated. More recently, the head of the Financial Stability Board has called for the shadow banking sector, where the risk from such deals is offloaded, to be dragged into the harsh light of day. Read more
Hostile bank takeovers should be outlawed as part of a package of reforms needed to avoid a repeat of the catastrophic failings at RBS, the chairman of the Financial Services Authority has urged after releasing a long-delayed report into the the bank’s collapse. “[They] should either be completely banned or the regulator should have the power to block them,” Lord Turner told the FT. The report itself recommends that to ensure against a similar disaster, UK laws be changed to allow directors at failed banks to be automatically banned, fined and stripped of their remuneration. Read more
Alternative title: The bull that got away.
Everyone else has got it in the neck for the failure of RBS, so it’s only right that we remember those who masterminded the disastrous acquisition of ABN Amro. Read more
Britain’s financial regulator has called for UK laws to be changed to ban and fine executives of failed banks, in its 500-page report into the 2008 collapse of RBS, the FT reports. The FSA’s review focused on the bank’s disastrous acquisition of ABN Amro in 2007, at the time the biggest banking takeover ever. RBS required a $71bn taxpayer rescue a year later. The FSA blamed “multiple poor decisions” for the ABN Amro debacle, the WSJ says, though conceded that it did not do enough to make RBS raise capital in early 2008, adds Bloomberg. Read more
The FSA’s report into the failure of RBS is out.
Scroll down/expand for the six key factors highlighted in the press release, or click the image to get to the landing page for the full report. Read more
The Financial Services Authority is tightening its oversight of commercial property lending and has ordered banks to improve the way their internal models measure risk or switch to more standardised calculations that could increase the cost of loans significantly, reports the FT. The Basel Committee on Banking Supervision and the European Banking Authority have promised to crack down but some national regulators are already intervening in areas that they consider particularly problematic. The FSA has started with commercial property lending, long an area of concern for Lord Turner, its chairman, who argues that poor loan choices in this area have been central to most recent financial crises. The FSA has told some banks to make their models for commercial property more robust by ensuring they include recent losses, or switch to the more standardised “slotting” calculation. Read more
Ah, the Stability and Growth Pact. You remember. Joining the SGP, members promised fiscal restraint, and in return were allowed to junk their soggy old currencies for a Deutschemark with a suntan. They all promised to keep the gap between revenue and spending to below 3 per cent of GDP, or if they weren’t quite there, they’d get there jolly soon, and never mind if they had to invent the numbers to do so.
So, your starter for 10: which country was the first to exceed the 3 per cent limit? No, not Greece, Italy, Spain, Portugal or Ireland, but Germany. Oddly, there were no calls for austerity measures in Berlin. A decade on, and the game’s up. Fiscal continence in the periphery is a distant dream, so to save the euro we’re promised the European Stability Mechanism and a new “fiscal compact”, which looks like the SGP, but without the growth or stability. Read more
Bank of England: Hey, FSA guys, don’t mean to tell how to do your job, but pssst! look at “collateral swaps” ok?
FSA: Collateral swaps? Do you mean “liquidity swaps”? We don’t think even Dodd-Frank looks at those..
Bank of England: Look at them anyway. We’ll be your overlords direct colleagues soon, so get on with it.
[several months pass]
FSA: We blocked some!! We blocked some!!
Alright, it probably didn’t go down like that, but FT Alphaville enjoys pretending it did. Read more
Banks and insurers have hit back at the UK regulator’s moves to block a new form of funding transaction between banks and insurers, the FT reports. The British Bankers’ Association criticised the approach of the Financial Services Authority to the deals as “completely inappropriate”. Phoenix Group and Lloyds Banking Group have each had transactions blocked, the FT says, citing people in the market. They are among about half a dozen deals that have been held up while the FSA considered these so-called liquidity swaps and launched a consultation on specific guidance for them. Liquidity swaps are designed to help hard-pressed lenders improve their funding base and the quality of assets on their balance sheets as they look to wean themselves off the liquidity support created by central banks during the crisis. Read more
The Financial Services Authority is examining multiple cases of possible improper or unauthorised trading at banks operating in London, the WSJ says, citing people familiar with the matter. The FSA is building cases against individuals suspected of engaging in improper trading, the report says, and is also considering potential actions against institutions that didn’t prevent the alleged trades from taking place. The regulator is working on at least four investigations involving alleged rogue-trading activities by bank employees, and at least three of those cases involve traders who previously had worked in their banks’ back offices, the sources said. Read more
Notice anything unusual about this press release hot off the regulatory press?
UBS trading losses: FSA and FINMA to launch investigation Read more
Vallares, Tony Hayward’s new investment vehicle, sounded out the Financial Services Authority about its $2.1bn deal to buy Genel Energy, the FT reports, to alleviate any corporate governance concerns. Rodney Chase, the non-executive chairman of the newly enlarged Vallares, which is expected to enter the FTSE 100, said he had talked to the FSA about the make-up of the board. Mehmet Sepil, Genel’s chief executive, was fined £967,000 ($1.5m) by the FSA last year for “market abuse” after buying shares in London-quoted Heritage Oil on the back of a positive drilling report before it had been released to the market. Read more
More on Tony Hayward’s first big oil deal at his new investment vehicle Vallares– the $2.1bn acquisition, via a reverse takeover, of Turkish E&P company Genel Energy.
We have already mused on whether Genel would be allowed to list in London given the share dealing misdemeanour’s of its executive team, which are detailed in this FSA release. Read more
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1Bird, plane, Abe
2The US collateral shortage lives on
3Alphachat: Lee Buchheit edition, featuring Lee Buchheit
4The (early) Lunch Wrap
5Re-setting ENRC (updated)
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