The proposals focus on the importance of the role of the Board (and specifically independent directors) and the need for directors to be equipped with the appropriate skills and have the commitment to oversee the operations of the financial institutions. Key proposals in the consultation paper include, but are not limited to:
(i) Continuous Development
Assessment of the current skills of the Board on an annual basis and establishment of a continuous development programme for its directors.
(ii) Director Independence
A director will be considered non-independent after he/she has served on the Board for a continuous period of nine years.
(iii) Composition of Board and Board Committees
To raise the number of independent directors on the Board, and major committees from one third to a majority.
(iv) Governance over Risk Management
The Board must establish a dedicated risk management committee and financial institutions must seek MAS’ approval for the appointment of the Chief Risk Officer.
Detailed proposals relating to the Regulations and Guidelines of the CG Framework are contained in the consultation paper.
Comments are due to MAS by 19 April 2010.
To view the press release from MAS please use the following link Corporate Governance Consultation Paper Press Release
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The court also granted orders disqualifying Cheung and Chou from being a company director or being involved in the management of any company, without leave of the court, for five years (except for a private company through which they continue to conduct a business). Lau, who consented to the orders, was disqualified for a period of four years.
The breaches centred on four investments entered into by the company or its subsidiaries between 2002 and 2005, resulting in Rontex suffering losses and damages of about $19 million
For further information please see SFC obtains court order to direct listed company to commence proceedings against former directors
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For further information please use the following link Directors Banned for failing in disclosure duty
]]>The directive has been roundly (and soundly) criticised as a piece of protectionist rubbish that seeks to diminish the importance of London as a financial centre.
Michel Barnier, the EU Commissioner for Financial Services, said he will not be swayed by Paris, London or Washington in taking the proposals forward.
The AIFM has now been rescheduled for discussion at a G20 summit next month.
With an election imminent, Prime Minister Brown needs to be seen to be supporting the financial sector in Britain.
But really it is not even quarter time in the football match that is EU Hedge Fund regulation. PM Brown scored this time, my money is still on the boys from Brussels to win by means fair or foul by full time.
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SFC suspends Mak Chi Leung for short selling breaches
The Securities and Futures Commission (SFC) has suspended Mr Mak Chi Leung, a responsible officer of KAB Asia Securities Ltd (Note 1), for six weeks from 17 March 2010 to 27 April 2010 for short selling breaches (Note 2).
An SFC investigation found that Mak placed orders for a client resulting in 100 short selling transactions between June and August 2008. Mak also conducted 23 short selling transactions in his own account during the same period.
The SFC found Mak guilty of misconduct. Mak accepted responsibility for his conduct, which earned him a reduction in penalty from two months to six weeks.
End
Notes:
March 17, 2010
Bank Agrees to Pay $160 Million
Wachovia Bank, N.A. (“Wachovia”), one of the largest banks in the United States, has entered into a deferred prosecution agreement with the U.S. Attorney’s Office in the Southern District of Florida and the Asset Forfeiture and Money Laundering Section of the Criminal Division of the Department of Justice to resolve charges that it willfully failed to establish an anti-money laundering program. Today’s agreement is the result of an investigation into Wachovia’s transactions with Mexican currency exchange houses, commonly known as “casas de cambio” (“CDCs”), announced Jeffrey H. Sloman, United States Attorney for the Southern District of Florida, Lanny A. Breuer, Assistant Attorney General for the Criminal Division of the Department of Justice, Mark R. Trouville, Special Agent in Charge, Drug Enforcement Administration (DEA), Miami Field Division, Daniel W. Auer, Special Agent in Charge, Internal Revenue Service, Criminal Investigation Division (“IRS-CID”), John C. Dugan, Comptroller of the Currency, Office of the Comptroller of the Currency (OCC), and James H. Freis, Jr., Director, Financial Crimes Enforcement Network (FinCEN). The agreement also resolves Wachovia’s admitted failure to identify, detect, and report suspicious transactions in third-party payment processor accounts.
A criminal information, filed March 12, 2010 and unsealed today, charges Wachovia with willfully failing to maintain an anti-money laundering program from May 2003 through June 2008, in violation of the Bank Secrecy Act (“BSA”). According to the information and other documents filed with the court today, including a detailed Factual Statement and a Deferred Prosecution Agreement (“the Agreement”), Wachovia failed to effectively monitor for potential money laundering activity more than $420 billion in financial transactions with the CDCs.
As part of the Agreement filed today, Wachovia has agreed to forfeit $110 million to the United States, which represents proceeds of illegal narcotics sales that were laundered through Wachovia. FinCEN also assessed a $110 million Civil Money Penalty that is deemed satisfied by the forfeiture to the U.S. government, for serious and systemic BSA violations. Moreover, pursuant to the terms of the Agreement and the OCC’s separate Cease and Desist and Civil Money Penalty Orders, Wachovia has agreed to pay an additional $50 million fine to the U.S. Treasury. The total sum of $160 million is due within five days from the date of the Agreement.
In light of Wachovia’s willingness to acknowledge responsibility for its actions and omissions, its cooperation and remedial actions to date, and its promised continued cooperation and remedial actions in the future, the government has agreed to defer prosecution of the criminal charge in the information for 12 months. If Wachovia fully complies with its obligations under the Agreement, the U.S. agrees to dismiss the criminal information at the end of the 12 months. Earlier today, the Agreement was accepted in federal court in Miami by U.S. District Judge Joan A. Lenard.
According to the documents filed with the court, Wachovia was aware, as early as 1996 and through 2004, of the high risk that drug money was being of laundered through the CDCs. Wachovia was also aware that other U.S. banks had stopped doing business with the CDCs because of these concerns. Wachovia, however, continued to expand its business with the CDCs. Indeed, from at least May 2004 through December 2007, Wachovia provided correspondent banking services to various Mexican CDCs, including wire transfer, bulk cash, and pouch and remote deposit capture services, among others.
According to the documents, Wachovia allowed CDCs to wire transfer funds through accounts at Wachovia to recipients throughout the world. Wachovia also offered a “bulk cash” service to CDCs, through which the CDCs collected large sums of dollars that would be physically transported to the United States for deposit. In addition, Wachovia offered a “pouch” deposit service and later, a “remote deposit capture” (“RDC”) service, which allowed the CDCs to deposit at Wachovia items drawn on U.S. banks, including checks and traveler's checks, presented by their Mexican customers. According to the documents filed today, Wachovia did not have an effective anti-money laundering policy or procedure to monitor these transactions to detect and report potential money laundering activity, as required by the BSA. As a result, from May 1, 2004 through May 31, 2007, at least $373 billion in wire transfers were made from the CDCs to Wachovia accounts; more than $4 billion in bulk cash was transported from the CDCs in Mexico to accounts at Wachovia; and approximately $47 billion was deposited at Wachovia accounts through the RDC service. These monies included millions of dollars that were subsequently used to purchase airplanes for narcotics trafficking operations. Ultimately, more than 20,000 kilograms of cocaine were seized from these airplanes.
According to court documents, Wachovia also maintained account relationships with certain third-party payment processors for the telemarketing industry from 2003 to 2008. These processors deposited more than $418 million using remotely-created checks into Wachovia accounts on behalf of the telemarketers. Remotely-created checks are created when the holder of a checking account authorizes a payee to draw a check on that account but does not actually sign the check. In place of the account-holder’s signature, the remotely-created check generally bears a statement that the customer authorized the check. These checks were often returned as “unauthorized” resulting in return rates that, in some cases, exceeded 40 percent of the deposited checks. Wachovia admitted that it failed to identify, detect, and report the suspicious transactions in the third-party payment processor accounts, as required by the BSA, due to deficiencies in its anti-money laundering program. Specifically, Wachovia failed to conduct appropriate customer due diligence by delegating most of this responsibility to business units instead of compliance personnel. Wachovia also failed to monitor high return rates for remotely-created checks and report suspicious wire transfer activity from the processors’ accounts.
U.S. Attorney Jeffrey H. Sloman stated, “On the heels of the UBS international banking case, in which we held accountable the largest bank in Switzerland, today we announce the deferred prosecution of Wachovia, one of the largest banks in the United States. Wachovia’s blatant disregard for our banking laws gave international cocaine cartels a virtual carte blanche to finance their operations by laundering at least $110 million in drug proceeds. Corporate citizens, no matter how big or powerful, must be held accountable for their actions. Today’s historic agreement makes it clear that such conduct will not be tolerated and imposes the largest penalty in any BSA case prosecuted to date.”
“As this case demonstrates, financial institutions - no matter how large - will be held accountable when they allow dirty money to pollute the U.S. banking system,” said Assistant Attorney General Lanny A. Breuer of the Criminal Division. “With billions of dollars flowing through our financial institutions each day, it is imperative that banks maintain robust anti-money laundering controls to identify possible illegal activity.”
“A narcotics investigation always involves two things: drugs and money,” said Mark R. Trouville, Special Agent in Charge, Drug Enforcement Administration, Miami Field Division. “DEA Agents and our law enforcement partners investigating a multi-national drug trafficking organization were able to seize drugs and identify the associated financial trail. Diligent investigative work exposed how this organization capitalized on weak anti-money laundering practices at Wachovia to further their drug trafficking abilities.”
Daniel W. Auer, Special Agent in Charge of the IRS-CID in Miami, stated, “The law requires all banks, including Wachovia, to notify the Department of Treasury when they detect suspicious activity. By failing to maintain an adequate anti-money laundering program, Wachovia disregarded numerous financial transactions that should have raised "red flags" and caused their bank to act a as conduit to launder money.”
“The practices targeted by today’s enforcement actions reflect a totally unacceptable breakdown in the standards expected of banks’ anti-money laundering systems and compliance. Today’s actions by the OCC and other agencies demonstrate our firm commitment to the highest standards of compliance in this arena and the success of continued coordinated efforts by the Department of Justice, OCC, and FinCEN to ensure compliance with the requirements of the Bank Secrecy Act,” said John C. Dugan, Comptroller of the Currency. “Financial institutions must maintain anti-money laundering compliance programs and policies that are adequate to identify, analyze and report suspicious activity and are commensurate with the risks being undertaken. With these actions, we are sending another strong message that we will not tolerate use of the U.S. financial system to launder illegal monies.”
“In the recent past, Wachovia was the fourth largest commercial bank in the United States, and held itself out as a global leader in correspondent banking,” said James H. Freis, Jr., FinCEN Director. “During FinCEN’s joint investigation with our law enforcement and regulatory agency partners, it became evident that, despite such a prominent role in the domestic and international banking sectors and accompanying resources, Wachovia did not institute systems, controls and other measures to manage risk commensurate with the scope and magnitude of its products, services and business lines, particularly foreign correspondent banking.”
Wachovia Bank will merge into Wells Fargo Bank later this month. The Agreement binds Wells Fargo, as Wachovia’s successor, to continue to implement remedial measures to fully bring Wachovia into BSA compliance.
The CDC-portion of this matter was investigated by the DEA’s Miami Field Division, IRS-CID’s Miami Office, FinCEN, and OCC. The case is being prosecuted by Assistant U.S. Attorneys Andrea G. Hoffman and Jared E. Dwyer of the U.S. Attorney’s Office for the Southern District of Florida. The investigation of the third-party payment processors was prosecuted by Trial Attorneys Constantine Lizas and Matthew Haslinger of the Criminal Division's Asset Forfeiture and Money Laundering Section. This portion of the case was investigated by the Internal Revenue Service Criminal Investigation, Philadelphia Field Office and the U.S. Postal Inspection Service, Philadelphia Division.
Attachments:
Information (PDF)
Agreement (PDF)
Statement (PDF)
In May 2009 the SFC decided to ban Hung from the industry for life for breaching General Principle 1 of the Code of Conduct after finding he had fraudulently persuaded a client to invest and defrauded other clients using fabricated IPO subscriptions. Hung appealed to the SFAT.
The SFAT appeal was heard before The Honourable Mr Justice Saunders on 5 March 2010.
The SFAT affirmed the SFC's decision and stated that Hung's appeal was "utterly devoid of any merit whatsoever" and that "the investing public deserves to be fully protected from people like Mr Hung and the only way that can be done is to ensure that he should never enter this industry again."
For more details please see Hung SFAT Decision
0-42AD Short position reporting
Friday 5 March 2010
ASIC today has announced decisions made in relation to the following provisions introduced in the Corporations Amendment Regulations 2009 (No 8) (SR No 327 of 2009) (Short Selling Regulations):
The change in the commencement of the short seller’s obligation to report its short positions will allow short sellers more time to ensure they have the appropriate systems in place to meet their reporting obligations.
ASIC will facilitate an industry-wide pilot test to allow short sellers access to the new reporting infrastructure from 10 May 2010.
Additional information
To assist short sellers and systems developers adequately prepare for the new reporting requirements, ASIC has also revised Information Sheet 98, now titled Short selling: Short position reporting (INFO 98).
INFO 98 includes key tasks and practical information which stakeholders must be aware of prior to the revised start date for the reporting requirements. INFO 98 also contains details relating to the threshold for short position reporting and other technical amendments, as well as information about the FIX Rules of Engagement. In the period leading up to implementation, ASIC will regularly update INFO 98.
ASIC will shortly publish a revised Regulatory Guide 196 Short selling (RG 196). This document will contain more details about the decisions described above. Other updates in this document will reflect recent changes in the law, some exemptions provided to allow for certain naked short selling and guidance in relation to the disclosure and reporting requirements that apply.
Questions about short position reporting can be directed to shortpositionreporting@asic.gov.au or visit www.asic.gov.au/shortselling. for further information.
And in Germany:
Bloomberg Europe reports that "Germany’s financial regulator Bafin published rules requiring disclosure of short selling in stocks of banks and insurance companies including Deutsche Bank AG, Commerzbank AG, and Allianz SE, partially implementing a Europe- wide regulatory proposal."
These new developments follow on from the announcement in Hong Kong earlier in the week but more importantly from the announcement of its report into Hedge Fund Systemic Risk reporting by IOSCO.
]]>SFC to adopt new short-position reporting regime
In a set of consultation conclusions released today, the Securities and Futures Commission (SFC) announced that after taking into account industry feedback and the domestic market situation, it will introduce a short-position reporting regime to enhance transparency of short-selling activities in Hong Kong.
The SFC received 21 responses from market participants to its 31 July 2009 consultation paper on increasing short-selling transparency which discussed two possible approaches: enhancing the existing transactional reporting regime and implementing a new short-position reporting model.
“A build-up of large short positions may be potentially disruptive to market stability,” said the SFC’s Chief Executive Officer Mr Martin Wheatley. “A short-position reporting regime will not only complement Hong Kong’s robust short-selling regulatory framework but will also provide a more complete picture of short-selling activities in our market.”
Under the proposed regime, the reporting obligation will be triggered if a short position is equal to or exceeds, 0.02% of the issued share capital of a listed company, or a market value of $30 million, whichever is lower. Weekly reports must be submitted to the SFC until the short position falls below both trigger levels. The SFC will publish aggregated short positions of each stock on an anonymous basis a week later.
The proposed short-position reporting regime will only be applicable to constituent stocks of the Hang Seng Index, the H-shares Index, financial stocks and other stocks specified by the SFC. Derivatives will not be included.
The new reporting model will be implemented by a new subsidiary legislation, on which the SFC will be consulting the public in due course.
The consultation paper conclusions reached by the SFC are sad in that they really did not address the issue of the cost of the information that is going to be provided and whether that cost will be of any benefit to Hong Kong. If the rules were in place tomorrow a short position of more than HK16m (just over US2m) in Esprit Holdings (essentially a fashion brand) would need to be reported each week to the HK SFC. The SFC would aggregate the reports and publish them after on an aggregated basis.
The world will clearly be a much safer place with well known fashion brands safe from nasty short sellers and industry participants will pay a tax on their operations to report positions and keep our world peachy.
It must be remembered that Hong Kong already has a strong and functioning short selling process and short selling was not an issue that effected Hong Kong in any adverse way during the financial crisis.
This is not the SFC's finest hour and we hope that future changes are given a bit more thought than this one.
Legislation will be needed and it will take time for that to be drafted and passed.
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Innospec Limited, a UK subsidiary of Innospec Inc, a US NASDAQ listed company, has appeared before District Judge Timothy Workman at City of Westminster Magistrates’ Court in response to a summons from the court on an application from the Serious Fraud Office alleging conspiracy to corrupt, contrary to Section 1 of the Criminal Law Act 1977. This case concerns bribery on a significant scale by Innospec and its agents in Indonesia.
The charge relates to Innospec Limited, that between 14 February 2002 and 31 December 2006, conspired with certain of its directors, executives, employees and agents to give or agree to give corrupt payments [contrary to section 1 of the Prevention of Corruption Act 1906] to public officials and other agents of the Government of Indonesia as inducements to secure, or as rewards for having secured, contracts from the Government of Indonesia for the supply of Tetraethyl Lead (“TEL”) to the said Government of Indonesia by Innospec Limited.
The case was transferred to Southwark Crown Court pursuant to section 51 Crime & Disorder Act 1998 where Innospec Ltd will appear next on 4 March 2010. Details of the alleged offences will be available at that time Innospec Limited of Oil Sites Road, Ellesmere Port, Cheshire manufactures an anti knock fuel additive called TEL.
The case is very interesting and the nagging feeling that the writer has is pot calls kettle black. Major UK business interests have had a long history in Indonesia. Indonesia has a long and notorious history of corrupt practices, embezzlement, graft and fraud.
While we have no views or knowledge on the merits or otherwise of this particular case under the UK laws that exist today, counsel for the defence may wish to consider the extent to which Her Majesty's servants in Indonesia were a part of the problem in the first place.
The UK company's address is Oil Sites Road. Oil is a good place to start.
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