Cost-Benefit Analysis Slows Dodd-Frank, Fair Lending Claims Against Wells Fargo, US Turns Profit From AIG Rescue: CompliancEX News In Brief 5/8/12
by The Compliance Exchange on May 8, 2012
Regulators Seek Plan B If SEC Doesn’t Act On Money Funds [WSJ] Federal regulators are increasingly worried that the Securities and Exchange Commission could fail to complete more-stringent rules on money-market mutual funds, forcing officials to confront how else to rein in the $2.6 trillion industry. While financial regulators would prefer the SEC to act on its own, some officials behind the scenes have started to investigate whether the Financial Stability Oversight Council, a special panel created by the 2010 Dodd-Frank financial overhaul, could act if the SEC can’t agree on a proposal to shore up funds or reduce risk, according to people familiar with the situation. No formal discussion of FSOC action has taken place, the people said.
Alleged Insider Trading Involves Santa Ana Firm [The Daily Titan]
Federal investigators in California are looking into a Goldman Sachs banker who allegedly passed along privileged information regarding the buyout of a Santa Ana company. The new investigation ties directly into a much larger case involving Galleon Group, a multibillion-dollar hedge fund. Raj Rajaratnam, the fund manager, received 11 years in federal prison for insider trading, the harshest penalty to date for that kind of crime. The day he was arrested, there was a massive sell-off of the hedge fund, and the firm folded within a month. Recently, the investigation implicates that a senior Goldman Sachs banker leaked information on a merger between Advanced Medical Optics (AMO) in Santa Ana and Abbott Laboratories, an international medical equipment and drug company.
German Authorities Probe Insider Trading On Rhoen-Klinikum Bid [WSJ] Germany’s financial-services watchdog on Monday said it is investigating whether massive insider trading preceded the takeover of private hospital operator Rhoen-Klinikum AG (RHK.XE) by health-care company Fresenius SE & Co. KGaA (FRE.XE). Although the stock of Rhoen-Klinikum itself didn’t show any major fluctuations prior to the offer, trading of Rhoen-Klinikum derivatives contracts jumped on an unprecedented scale days before the bid was made public, according to data based on transactions from stock market operator Deutsche Boerse AG’s (DB1.XE) clearing division Clearstream. Subscription warrants and leveraged certificates of Rhoen-Klinikum shares were traded on a large scale both on and off-market, according to the data.
Counting Costs Slows Dodd-Frank Rules After Wall Street Lawsuits [Bloomberg] Business lobbyists and Republican lawmakers who failed to stop the Dodd-Frank Act from becoming law have managed to put the brakes on many of its provisions a second way: cost-benefit analysis. A series of legal challenges from business groups against the U.S. Securities and Exchange Commission ended in a federal court ruling last year that the agency didn’t adequately analyze the cost of a new rule. In the months since, the agency’s rule- making has ground to a near-halt, with just 24 SEC economists working full-time to provide cost-benefit analyses for dozens of proposed policies, including 28 unfinished Dodd-Frank rules.
Inside The Beltway: Dodd-Frank=5,320 Pages [Washington Times] The rising cost of complying with [Dodd-Frank] threatens the nation’s small banks and financial institutions, prompting a House Financial Services subcommittee to call a hearing for Wednesday on the “regulatory onslaught.”More than 400 new rules ultimately will be imposed. Consider that regulators have written 185 of them — totaling 5,320 pages. The subcommittee on financial institutions and consumer credit predicts it will take the private sector some 24 million hours every year to comply with this first batch alone. It took a mere 20 million man hours to build the entire Panama Canal. See their research here: www.financialservices.house.gov/burdentracker
Wells Fargo May Face Fair Lending Claims [Reuters] Wells Fargo & Co (WFC.N) could face civil charges from the U.S. Department of Justice under laws that prohibit discrimination against minority homebuyers, the bank disclosed on Tuesday. The fourth-largest U.S. bank said in a securities filing it believes the charges should not be brought and said it is seeking to show the department that it is in compliance with fair lending laws. A bank spokeswoman declined to comment beyond the filing.
U.S. Profit From AIG Rescue: $15.1 Billion [WSJ] The U.S. government may wind up posting a profit of more than $15 billion from the rescue of American International Group Inc., according to an independent projection released Monday. The report by the Government Accountability Office, the investigative arm of Congress, highlighted how one of the most expensive and most unpopular bailouts of the 2008 financial crisis has turned out far better for the government than initially expected. The GAO said that, as several aid efforts for AIG wind down and the company’s finances improve, the government is likely to turn a substantial profit.