John C. Bogle, the founder of
Vanguard Group Inc. who popularized index-based investing, said
proposed rules for money-market mutual funds don’t go far enough
to protect investors and the financial system.
The U.S Securities and Exchange Commission’s June 5
proposal to make only the riskiest money funds, known as prime
funds, adopt a floating share price is a “compromise” forced
by the fund industry’s resistance to reform, Bogle said
yesterday in remarks at the Morningstar Investment Conference in
Chicago. Regulators should force all money funds to float their
share price, he said.
“The fact is money-market fund net-asset values fluctuate
and they don’t want to let the world know,” Bogle said,
referring to fund-company executives.
Bogle, 84, has spent his career advocating for lower costs
and investor-friendly practices in the financial industry,
sometimes putting him at odds with the firm he founded in 1975.
Vanguard was among a group of firms including Fidelity
Investments and Charles Schwab Corp. (SCHW) that earlier this year
urged regulators to exempt retail-oriented money funds from
regulation and focus only on those prime funds that cater to
institutional clients.
U.S. regulators have debated how to make money funds safer
since the September 2008 collapse of the $62.5 billion Reserve
Primary Fund. Former SEC Chairman Mary Schapiro championed a
plan in late 2011 and 2012 that envisioned changing the
accounting standard for all money funds, including those that
invest only in government securities or municipal bonds. After
running into opposition from the fund industry, the SEC, now led
by Mary Jo White, approved a set of narrower proposals.
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Compliance Policy
EU Nations Broker Provisional Deal to Overhaul Markets Rulebook
European Union nations reached a provisional deal on a
sweeping overhaul of the bloc’s financial market rulebook that
would toughen oversight of high-frequency trading and push more
transactions onto regulated platforms.
Ambassadors from the EU’s 27 nations overcame obstacles to
an accord at meetings June 12 and yesterday in Brussels,
according to EU and national officials.
The draft plans, which must also be approved by the
European Parliament to take effect, are set to be detailed and
reviewed over the coming days so a deal can be confirmed
following talks on June 17, according to the two officials, who
can’t be cited by name, in line with their organizations’
policy.
Ireland, whose EU presidency runs out on June 30, urged
countries this month to accept “difficult compromises” for the
sake of an accord on the law, which triggered clashes between
the U.K. and Germany over provisions to boost competition in the
market for clearing derivatives trades. Ireland is targeting a
deal on the law next week, according to a spokeswoman for the
presidency, who can’t be identified under government rules.
EU Authorizes Exchange of Information With U.S. on Audit Probes
Audit regulators in the European Union won EU approval to
swap information with their U.S. counterparts in a step that
makes it easier for watchdogs to probe potential malpractice.
The U.S. Public Company Accounting Oversight Board and the
U.S. Securities and Exchange Commission have internal secrecy
and confidentiality rules that are sufficiently robust to allow
information sharing, the European Commission said in a statement
published in the EU’s Official Journal yesterday.
The decision means that EU regulators can share documents
seized during raids on audit firms, and also take part in joint
investigations, according to the statement, dated June 11.
Under earlier EU rules, audit regulators could only share
such data with a counterpart based outside the bloc with a
ruling by the commission. The new commission decision is valid
from Aug. 1, 2013, to July 31, 2016.
Compliance Action
Singapore Regulator Said to Plan Bank Rebuke on Rate Rigging
Singapore’s central bank plans to reprimand banks in the
city-state as early as today following an 11-month review into
how benchmark interest rates are set, five people with knowledge
of the matter said.
The Singapore Foreign Exchange Market Committee, which
includes the Monetary Authority of Singapore and banks, plans to
separately announce changes to the rate-setting process on the
same day, two of the people said June 12, asking not to be
identified before the announcements are made.
The island nation’s review into possible manipulation of
the Singapore interbank offered rate follows a global crackdown
on rigging of benchmark borrowing costs by banks and brokers.
Barclays Plc (BARC), UBS AG (UBSN) and Royal Bank of Scotland Group Plc were
fined $2.5 billion to settle claims with U.S. and U.K financial
regulators. A British markets supervisor is considering opening
a probe into potential manipulation in currency markets, another
person briefed on the matter said.
Sibor, used to price debt ranging from commercial term-loans to home mortgages, is calculated on behalf of the
Association of Banks in Singapore, based on submissions by banks
including London-based Standard Chartered Plc (STAN), Singapore’s DBS
Group Holdings Ltd. and New York-based JPMorgan Chase Co. (JPM)
Edinburgh-based RBS last year withdrew from the panel.
Lenny Feder, chairman of the SFEMC and group head of
financial markets at London-based Standard Chartered, didn’t
return three calls to his mobile phone. John Lim, an external
spokesman for the Association of Banks, declined to comment.
The monetary authority isn’t planning to impose criminal
sanctions on the banks or any employees, said two of the people.
MAS will probably require some of the banks to set aside funds
as a deposit with the central bank for a period of time and
strengthen their internal controls, two people said.
Visa Europe’s Bid to End EU Card-Fee Probe Faces Market Test
European Union antitrust regulators invited comments on
Visa Europe Ltd.’s offer to cut “significantly” the fees it
sets for processing cross-border credit-card payments in a bid
to end an EU antitrust probe.
Visa Europe’s offer from last month would bring its fees
into line with those of its main competitor MasterCard Inc. (MA), the
European Commission said in an e-mailed statement yesterday. The
operator of the EU’s largest payment-card network has also
offered to overhaul its rules so that banks will be able to
apply a reduced interbank fee when they compete for clients
across borders.
“If the proposals address the commission’s competition
concerns, the commission may decide to make them legally binding
on Visa Europe” in exchange for ending the probe, the regulator
said.
The commission sent a formal complaint to Visa about the
interchange fees last year, as part of a broader campaign it has
waged against such charges. MasterCard has started a legal
challenge against a settlement it reached with the commission in
2009 to avoid a daily penalty of as much as 3.5 percent of
sales. The EU is also probing MasterCard’s bank fees on foreign
card payments such as when tourists go shopping in the 27-nation
bloc.
Visa Europe declined to comment beyond statements made when
the commitments were offered last month.
Courts
Ex-Bradford Bingley Banker May Be Fined in Secret FCA Case
Chris Willford, former group finance director at
nationalized lender Bradford Bingley Plc, may be fined as much
as 100,000 pounds ($157,000) for risk management failures after
losing a court appeal yesterday.
The U.K. Financial Conduct Authority’s predecessor properly
notified Willford of the fine in 2010, Judge Martin Moore-Bick
said. Willford’s identity had been secret throughout the three-year-old dispute until the court yesterday overturned
restrictions that limited the press to calling him “C.”
Bradford Bingley was rescued by the British government in
2008 after credit markets froze in the wake of Lehman Brothers
Holdings Inc.’s collapse. Willford didn’t do enough to warn the
board about its deteriorating financial position, FCA lawyer
Michael Brindle said at a February court hearing.
The FCA’s decision to fine Willford 100,000 pounds was
overturned by a judge in May 2012 because he ruled the
regulator, then known as the Financial Services Authority,
didn’t give proper reasons in the notice of its decision. The
court of appeal reversed that ruling.
The fine hasn’t been confirmed and Willford may still
challenge it at a higher tribunal that hears regulatory
disputes. Willford is now chief operating officer at online
storage company My Wealth Cloud.
Nikunj Kiri, his lawyer, declined to comment after the
ruling. Chris Hamilton, a spokesman for the FCA, also declined
to comment.
Judge Moore-Bick rejected Willford’s request for an
extension of the privacy order.
The case is The Queen on the Application of Christopher
Willford v. Financial Services Authority, Court of Appeal,
Queen’s Bench Division (Administrative Court) C1/2012/1551.
For more, click here.
Austrian Central Banker Charged on Syrian Money Bribe
Austrian prosecutors charged nine people, including the
vice-governor at the national bank, with bribery and money
laundering in connection with money-printing deals in Syria and
Azerbaijan.
Wolfgang Duchatczek, 63, and the unnamed co-defendants paid
14 million euros ($18.6 million), or as much as 20 percent of
order volumes, to win contracts, according to a statement from
Nina Bussek, a spokeswoman for the Vienna prosecutor.
The charges follow an 18-month investigation into
Oesterreichische Banknoten-und Sicherheitsdruck GmbH, the money-printing press owned by the central bank. Duchatczek headed the
unit’s supervisory board.
Duchatczek’s lawyer, Gabriel Lansky, said via telephone
that his client isn’t guilty. Duchatczek, whose term ends in
July, said when reached by mobile phone that he wouldn’t comment
before having the opportunity to study the indictment.
The central bank’s general council will hold a special
meeting June 18 to discuss the matter, according to a statement
from the Vienna-based institution.
To contact the reporter on this story:
Carla Main in New Jersey at
cmain2@bloomberg.net.
To contact the editor responsible for this report:
Michael Hytha at mhytha@bloomberg.net.
Bogle on Money Funds, Singapore Bank Rebuke, Visa: Compliance
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