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Battle-scarred Goldman CEO unveils safeguards to avoid mistakes
After dozens of meetings with executives and regulators, 100,000 hours of employee training and an immeasurable amount of public grief, Goldman Sachs CEO Lloyd Blankfein is claiming a victory in getting his bank, and his legacy, back on track. At Goldman Sachs Group Inc's annual meeting on Thursday, Blankfein announced the culmination of a three-year review and overhaul of the bank's practices following high-profile missteps that tarnished its reputation in the aftermath of the financial crisis. In the past, Goldman sales staff and bankers could sell clients almost anything they wanted to buy. Under the reforms, they must now run transactions through what the bank calls technological matrixes - and sometimes get top-level approval - to make sure deals are appropriate. In a video to be released on Goldman's website on Thursday, Blankfein tells a group of employees not to be afraid to call him if a problem erupts, because the risk of reputational damage outweighs the cost of possibly
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CFTC issues guidance on deceptive trading practices but questions remain about enforcement
The CFTC has issued industry-sought guidance clarifying trading violations it intends to monitor in the swaps and futures markets, but agency officials have expressed concern about its enforcement ability. The document, or interpretive statement, gives more detail about the deceptive trading practices that are banned under section 747 of the Dodd-Frank Act. Under Dodd-Frank, it is unlawful for individuals to violate a bid or offer price. It is also unlawful for individuals to demonstrate "reckless disregard" for the "orderly execution of transactions during the closing period. Reckless conduct, according to the CFTC's division of enforcement, is partly determined by what the individual knew at the time of the trade. Lastly, Dodd-Frank bans "spoofing", which is when an individual bids or offers on a stock with no intention to cancel the bid or offer before the trade is executed. To determine that spoofing is taking place, David Meister, the head of enforcement at the CFTC,
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Obama nominates Senate aides to serve as SEC commissioners
President Barack Obama nominated two U.S. Senate aides on Thursday to serve as members of the Securities and Exchange Commission, the agency tasked with policing Wall Street. Obama said Kara Stein, an aide to Rhode Island Democratic Senator Jack Reed, would replace SEC Democratic Commissioner Elisse Walter. Michael Piwowar, an economist who works for the Senate Banking Committee, would replace SEC Republican Commissioner Troy Paredes, whose term is set to expire in June. The Senate must approve the nominations. "Both of their experiences will serve them well as they work to fulfill the SEC's mission of protecting investors and ensuring a fair marketplace," Senate Banking Committee Chairman Tim Johnson of South Dakota said in a statement. For months, Stein and Piwowar have been mentioned as likely successors to Walter and Paredes. Obama's decision to nominate them roughly one month after SEC Chairwoman Mary Jo White was sworn in signals the administration is anxious to ensure
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U.S. Treasury expands Iran sanctions, potential impact on foreign banks
The U.S. Treasury Department on Thursday sanctioned 20 people and entities for their suspected roles in Iran's nuclear and missile programs and Tehran's efforts to circumvent sanctions. It said it hoped the move – which also will force foreign banks to rethink relationships with the newly blacklisted parties -- will increase pressure on Iran by further targeting its energy sector and exposing its supporters. "As long as Iran continues to pursue a nuclear and ballistic missile program in defiance of multiple UN Security Council Resolutions, the U.S. will target and disrupt those involved in Iran's illicit activities,” said Treasury Under Secretary for Terrorism and Financial Intelligence David Cohen. "We will continue to work with our international partners to intensify this pressure and tighten sanctions on Iran’s energy sector as it provides much needed financial support for the Iranian regime’s proliferation activity." Iran denies international concerns that it is seeking to
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Former Goldman banker settles SEC 'pay-to-play' charges
A former Goldman Sachs Group Inc. investment banker has agreed to a five-year securities industry ban and a record fine to settle U.S. Securities and Exchange Commission charges that he broke rules against influence peddling to win bond underwriting business in Massachusetts. Without admitting or denying wrongdoing, Neil Morrison, 38, accepted what the SEC said was the first industry ban for violating "pay-to-play" rules governing the $3.7 trillion municipal bond market. He also agreed to a $100,000 civil fine, which the SEC called the largest individual penalty in such a case. Thursday's settlement was announced eight months after Goldman struck its own $12 million settlement with the SEC over the case, which involved contributions to the 2010 gubernatorial campaign of then-Massachusetts State Treasurer Timothy Cahill. Pay-to-play refers to the providing of cash or other contributions to public officials in exchange for political favors or the awarding of contracts. "These
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Proxy advisory firm settles SEC charges over data breach
Institutional Shareholder Services has settled civil charges by U.S. regulators that an employee of the prominent proxy advisory firm shared nonpublic voting data in exchange for meals and concert tickets. The Securities and Exchange Commission said on Thursday that ISS, a unit of MSCI Inc, will pay a $300,000 penalty and hire an independent compliance consultant. In settling, ISS neither admitted nor denied the SEC allegations that it violated financial adviser rules designed to prevent misuse of material non-public customer information. Mutual funds, pension organizations and other institutional investors hire firms such as ISS to advise them on how to vote on important corporate issue such as executive compensation and board appointments. The SEC alleged that, from 2007 through early 2012, an ISS employee provided a proxy solicitor, a firm that gathers shareholder votes, with nonpublic information revealing how more than 100 ISS clients were voting their proxy ballots. Cheryl
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U.S. SEC charges former LPL adviser with $2 million civil fraud
The top U.S. securities regulator on Thursday filed civil fraud charges against a former LPL Financial LLC adviser, charging he diverted some $2 million of client funds to use for personal expenses. The Securities and Exchange Commission said Blake Richards of Buford, Georgia, scammed at least six clients after promising to invest their funds in investment vehicles he ran outside LPL, according to a complaint filed in U.S. District Court for the Northern District of Georgia. LPL is a unit of LPL Financial Holdings Inc. The SEC said Richards, between 2009 and 2013, directed the clients to write checks to his investment business, instead of LPL. But many of the investments he claimed to have made - everything from a life insurance product to fixed-income securities - were fictitious, the agency said. Most of the funds came from clients' retirement savings or life insurance proceeds, the SEC said. On at least one occasion, Richards gave a fake financial statement
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U.S. options clearer moves to end trade type dominated by Nasdaq
The clearinghouse for all U.S. stock options said Thursday it will adopt a policy aimed at abolishing a dividend-linked trading strategy that critics say could destabilize markets if left unchecked. The change at Chicago-based OCC is likely to hurt market share at Nasdaq OMX Group Inc's biggest options venue, where nearly all of U.S. dividend-linked options trading takes place. "The new policy will likely result in a significant reduction in dividend plays," OCC said in a statement. Gary Katz, who runs Nasdaq rival the International Securities Exchange and is a longtime critic of the practice, was more direct, calling the policy "the beginning of the end for dividend trades in the U.S. options industry." Dividend plays account for about 8 percent of all U.S. options trades, OCC said. They account for as much as a quarter of trading at Nasdaq-owned PHLX, ISE estimates, although official figures from OCC are not available. The policy change comes after years of lobbying by
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AIG eyes new director with regulatory experience
American International Group Inc's AIG.N board is looking for a new director with regulatory experience, as the insurer readies for the government to classify it as big enough to merit greater scrutiny, according to two sources familiar with the situation. AIG, which is already regulated by the U.S. Federal Reserve, expects more oversight if it is declared a "systemically important financial institution," or SIFI. The designation is widely expected after the U.S. Financial Stability Oversight Council told the company in October that it may do so. AIG's board is looking at candidates who have run regulated financial institutions as well as former regulators, according to the sources. There is no specific time frame or deadline for a new director to be named, the sources said. The names of potential candidates could not be learned. AIG spokesman Matt Gallagher declined to comment on Wednesday. AIG has been reshaping its board since repaying the government’s crisis-era bailout.
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Goldman Sachs banker settles SEC 'pay-to-play' charges
Former Goldman Sachsbanker Neil Morrison agreed to pay $100,000 to settle charges for his role in a pay-to-play scheme involving a Massachusetts gubernatorial campaign, the largest such penalty paid by an individual, the U.S. Securities and Exchange Commission said on Thursday. Morrison also was barred from the securities industry for five years in the first industry ban for violating municipal bond market rules on "pay-to-play," or the making of campaign donations in exchange for political favors, the SEC said. Thomas Kiley, a lawyer for Morrison, had no immediate comment. "These tough sanctions against Morrison show that we take abuses of the pay-to-play rules in the municipal securities industry very seriously and will hold individuals accountable for their violations," said Elaine Greenberg, chief of the Municipal Securities and Public Pensions Unit, in the SEC Enforcement Division. Goldman Sachs settled charges relating to the case in September, paying
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U.S. auditor watchdog finds fault with Ernst & Young
The U.S. regulator of corporate auditors said on Thursday that the U.S. arm of global accounting firm Ernst & Young failed to fix quality control problems found in earlier reviews. The report from the Public Company Accounting Oversight Board is a blow for the firm, which markets itself as a global leader in audit quality. It followed the PCAOB's 2009 inspection of 58 Ernst & Young audits. The inspection led the watchdog to criticize how the firm audited clients' estimates of numbers key to the accuracy of their clients' financial statements. Problems were found with Ernst & Young's evaluation of the accuracy of clients' estimates of asset impairment and the size of reserves companies took against issues such as environmental problems and expired inventory, among other things. The PCAOB also raised concerns about the supervision of auditors, their professional skepticism, and Ernst & Young's evaluation of areas posing fraud risk. An Ernst & Young
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Colorado doctor admits overprescribing painkiller and laundering proceeds
A Colorado physician on Thursday pleaded guilty to charges that he illegally distributed a prescription painkiller and laundered the proceeds, federal prosecutors in Denver said. Dr. Kevin Clemmer, 59, of Evergreen, Colorado, dispensed the painkiller oxycodone "outside the scope of professional practice and not for legitimate medical purposes," the indictment filed in the case said. His customers included one undercover officer and a man who died in 2010 as a result of his use of oxycodone. In May 2010 Clemmer used more than $10,000 in cash proceeds generated by his scheme to buy a Lincoln Continental. That transaction earned him a money laundering conviction pursuant to Title 18, US Code, Section 1957. Clemmer agreed to forfeit the car along with $300,000 in assets, including crime proceeds held in several bank accounts and gold and silver coins. When sentenced, he faces up to 30 years in prison. This case was investigated by the Drug Enforcement Administration and
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Canadian bank regulator says aggressive Basel III implementation supports banks' bottom line
The head of Canada's banking regulator has defended the country's aggressive and fast-paced approach to Basel III implementation, saying that supervisory vigilance supported bank profitability. Superintendent Julie Dickson said this week that the Office of the Superintendent of Financial Institutions' (OSFI) Basel III programme had placed the country's banking system at the forefront of global regulatory reforms. Basel III is the latest version of the Basel Accords on capital adequacy for financial institutions, a global regulatory regime aimed at improving the resilience of the international banking system. Issued in response to the recent global financial crisis, the new standards imposed tougher requirements on the amount, type and quality of capital that banks must set aside to protect them from financial shocks. Basel III also addressed governance, risk management, stress testing and systemically important financial institutions. Dickson noted that the OSFI had demanded the
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Asia risks being dragged along with West's regulatory drive, former HSBC chairman Eldon tells conference
Asia risks being caught up in the regulatory push present in the U.S. and Europe, said David Eldon, senior adviser to PwC and former HSBC chairman, at a Hong Kong conference on Thursday. He warned that financial reforms in Asia that copied the West were often undertaken "without consideration to differences in this region [Asia] such as regulatory sophistication, economic maturity and financial development". "There is always the risk that regulators and policymakers in Asia will feel the need to keep up or worse yet, get dragged along," he said. "The Dodd-Frank Act, it's 'Volcker Rule', Basel III, plus different global regulators with different priorities … all taken together potentially add up to unintended consequences and [possible] regulatory arbitrage. The 'onslaught of reform' may push financial activities into less regulated places," said Eldon. He was also critical of a proposal by U.S. Senators Sherrod Brown and David Vitter for new regulations specifically targeting
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UK regulator fines JPMorgan £3 million
Britain's Financial Conduct Authority (FCA) said it has fined a wealth management unit of U.S. bank JPMorgan Chase £3.08 million ($4.6 million) for being unable to show it was giving clients the right advice. The FCA said on Thursday the failings were not corrected until the watchdog brought them to the bank's attention in the course of its wider review of wealth management firms in Britain. "No matter who they are, customers of wealth managers should be able to expect the firm to keep complete, up to date client records so that they can give the right advice," the FCA's director of enforcement, Tracey McDermott, said in a statement. "In this case the firm did not have complete records, nor did its management have the information they needed to recognize this," she said. The FCA said the failings persisted over two years, exposing customers to the risk that they would be given the wrong advice and inappropriate investments though no actual harm to customers has been identified
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U.S. regulatory watchdog FINRA to oversee Direct Edge's surveillance
U.S. exchange operator Direct Edge has agreed to allow the Financial Industry Regulatory Authority to oversee surveillance of its two stock exchanges, expanding the watchdog regulator's oversight to more than 90 percent of U.S. equity markets. Direct Edge expects the agreement to become operative in the fourth quarter, when all of the exchange operator's third-party regulatory services will be consolidated with FINRA, the two firms said in a statement on Wednesday. FINRA already performs examination and disciplinary services on behalf of Direct Edge, which vies with BATS Global Markets as the third-largest U.S. exchange operator. BATS does its own surveillance and then makes referrals to the Chicago Board Options Exchange for further investigation, a BATS spokesman said. The expansion of FINRA's surveillance services for U.S. exchange operators, including NYSE Euronext and Nasdaq OMX, comes as their status as self-regulatory organizations has come under scrutiny. SROs are
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Fund manager suspended for failing to cooperate with regulatory examiners
The National Futures Association on Wednesday halted the operations of Light Tower Investments, Inc., a commodity pool operator and commodity trading advisor, and Klaus P. Weyers, a principal and associated person, for failing to cooperate fully during an attempted examination and investigation. The NFA order, which was issued within days of the alleged violations, shows that firms must be prepared for regulatory audits on short notice, and must cooperate fully in the audits. New NFA registrants that were not regulated or were overseen by other entities such as the Securities and Exchange Commission, the Commodity Futures Trading Commission and the Financial Industry Regulatory Authority should be aware of the potentially abbreviated time frames for NFA exams. The order prohibits Light Tower Investments, Weyers or anyone acting on their behalf from soliciting or accepting funds from customers, pool participants or investors, and from disbursing or transferring funds over which
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Investment firms sue U.S. exchanges in dispute on improper fee charges
A group of investment firms including Citadel Securities LLC sued the Chicago Board Options Exchange Inc and four other exchanges on Wednesday for improper charges on millions of options trades over a seven-year period. The lawsuit, filed in a state court in Illinois, said the exchanges had discovered last year that a prominent firm had been mismarking orders as originating from public customers when they were not. This resulted in an unknown amount of improper fees being assessed on market makers such as Citadel that the exchanges have refused to reimburse, according to the plaintiffs, which also include Group One Trading LP, Ronin Capital LLC and Susquehanna International Group, LLP. The firm that mismarked the trades is not named in the complaint. But the almost $6.39 million in fines assessed against the firm by the exchanges and listed in the complaint matches an amount paid last year to the five by Goldman Sachs Group Inc as part of a settlement. A Goldman Sachs spokesman
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SEC charges South Miami with fraud over debt deals
The city of South Miami, Florida, defrauded investors by not disclosing problems with the tax-exempt status of two bond deals, U.S. securities regulators said on Wednesday in their second municipal bond fraud enforcement action this month. The U.S. Securities and Exchange Commission said the Florida city had agreed to settle the fraud charges, involving debt sales totaling $12 million, and to hire an independent consultant to oversee its municipal bond disclosures. The SEC has limited authority over the municipal bond market, but in recent months has begun cracking down on issuers about providing bond buyers with accurate and timely information. The city settled without admitting or denying the allegations and did not have to pay a monetary penalty. No individuals were named in the case, as has been the case with all but one of the agency's recent string of rebukes of issuers in the $3.7 trillion U.S. municipal bond market. The SEC attributed the violation to poor communication
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AIG eyes new director with regulatory experience
American International Group Inc's board is looking for a new director with regulatory experience, as the insurer readies for the government to classify it as big enough to merit greater scrutiny, according to two sources familiar with the situation. AIG, which is already regulated by the U.S. Federal Reserve, expects more oversight if it is declared a "systemically important financial institution," or SIFI. The designation is widely expected after the U.S. Financial Stability Oversight Council told the company in October that it may do so. AIG's board is looking at candidates who have run regulated financial institutions as well as former regulators, according to the sources. There is no specific time frame or deadline for a new director to be named, the sources said. The names of potential candidates could not be learned. AIG spokesman Matt Gallagher declined to comment on Wednesday. AIG has been reshaping its board since repaying the government's crisis-era
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