UBS, Nomura Sued, Athena Capital, Canada Activism: Compliance
Oct. 17 (Bloomberg) — UBS AG and Nomura Holdings Inc. were sued by a Japanese school operator for 8.8 billion yen ($83 million) in compensation for losses on derivative transactions.
Nanzan School Corp. sued in the Tokyo District Court, the Nagoya-based company said yesterday in a statement on its website. It’s seeking 6.7 billion yen from UBS’s Japanese brokerage unit and 2.1 billion yen from Nomura Securities Co., arguing that the companies failed to explain risks of the transactions.
The school operator is among Japanese companies and universities that lost money from investing in structured products during the global financial crisis that triggered the bankruptcy of Lehman Brothers Holdings Inc. in 2008.
Nanzan lost 22.9 billion yen from derivative transactions with six brokerages, including UBS and Nomura, from 2005 to 2012, Okajima said. The products included swaps tied to currencies, interest rates, and collateralized debt obligations. The company had two transactions with UBS from 2006 to 2011 and 11 with Nomura from 2006 to 2012, he said.
UBS will contest the action in court, Eiko Noda, a Tokyo- based spokeswoman for the Swiss bank, said by phone. Kenji Yamashita, a spokesman for Nomura in Tokyo, declined to comment.
The operator of Nanzan University is investigating the transactions with other brokerages and will decide whether to file lawsuits against them, it said in the statement, without identifying the firms.
Compliance Action
Athena to Pay $1 Million in First SEC HFT Manipulation Case
Athena Capital Research LLC agreed to pay $1 million to settle allegations that it tried to influence closing share prices in the U.S. Securities and Exchange Commission’s first market-manipulation case against a high-frequency trading firm.
The New York-based firm used an algorithm code named “Gravy” to place “aggressive, rapid-fire trades” in the last two seconds of nearly every trading day over a six-month period to manipulate the closing prices of thousands of publicly traded stocks, the SEC said in a statement yesterday.
The trading occurred from June 2009 to December 2009 and affected thinly traded equities on the Nasdaq Stock Market, the SEC said. Athena didn’t admit or deny any wrongdoing in settling the case.
Athena didn’t immediately return a phone call seeking comment. Nasdaq spokesman Robert Madden declined to comment.
Interviews/Commentary
Ackman Calls Canada Friendlier to Investor Activists Than U.S.
Bill Ackman, chief executive officer of Pershing Square Capital Management LP; Sharon Geraghty, a partner at Torys LLP; and Roberta Karmel, a professor at Brooklyn Law School, participated in a panel discussion about corporate governance and the value of shareholder activism at the Ontario Securities Commission’s OSC Dialogue 2014 in Toronto.
Howard Wetston, chairman of the OSC, moderated.
For the video, click here.
Bullard Says Banks Need Size Limits to Make System More Stable
Federal Reserve Bank of St. Louis President James Bullard said he favors size limits for financial institutions to help improve stability.
Steps U.S. regulators are taking don’t “fully arrest the problem of too-big-to-fail” and a better solution would be to “limit the size of these institutions,” Bullard said in an interview with Bloomberg News yesterday. He acknowledged that regulators “haven’t really gone in that direction” and said he didn’t have specific limits in mind because “I’ve never been able to get the debate to get serious about this.”
Size limits would reduce “economies of scale” for large banks while making the financial system “more stable,” Bullard said in Washington. “It seems to me like that might be a good trade to make.”
–With assistance from Takahiko Hyuga and Takako Taniguchi in Tokyo, Ian Katz in Washington and Keri Geiger in New York.
To contact the reporter on this story: Carla Main in New York at cmain2@bloomberg.net To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net Charles Carter, Andrew Dunn
