SEC Short Rule, HSBC Swiss Secrecy, JPMorgan-Germany: Compliance
(Bloomberg) — The U.S. Securities and Exchange Commission released a proposed rule Monday that would require companies to make public any policy allowing employees to use short sales, options, swaps or other transactions that enables them to profit if stock in their company falls.
The agency has taken more than four years to propose the rule amid opposition to broader disclosure requirements for executive pay by lawmakers and business lobby groups.
SEC Commissioners Daniel Gallagher and Michael Piwowar, both Republicans, voted for the proposal but said in a statement that they “remain quite concerned” about several aspects, including that the rule doesn’t exempt smaller companies and that it applies to employees who can’t affect a company’s share price.
Under the proposed rule, companies would disclose the policy in their annual proxy statements, which reveal the compensation provided to top executives and directors. The proposal, which is open for public comment for 60 days, covers all employees and would require disclosure of both permitted and prohibited hedging transactions.
Compliance Action
HSBC List Shows Variety of Clientele Used Swiss Secrecy
The private-banking unit of HSBC Holdings Plc made significant profits for years handling secret accounts whose holders included drug cartels, arms dealers, tax evaders and fugitive diamond merchants, according to a report released Sunday by an international news organization.
HSBC is among a handful of banks to face criminal prosecution in recent years for its role in a Swiss banking system that allowed depositors to conceal their identities. The report, prepared by the Washington-based International Consortium of Investigative Journalists, revealed for the first time the sweep of HSBC’s private-banking arm as of 2007, when it controlled $100 billion in assets and served a swath of wealthy depositors.
The report is based on a list of HSBC clients from around that time, which a onetime employee took from the bank and turned over to European officials, sparking tax investigations from Argentina to France, Belgium and Greece. While some of the list’s names have emerged before, Sunday’s report drew from a more comprehensive list of accounts associated with more than 100,000 people and legal entities from more than 200 nations, ranging from the legitimate to the illicit.
“These revelations confirm that banking secrecy has been used to avoid taxation,” Vanessa Mock, a European Union spokeswoman for tax affairs, said Monday.
HSBC, in a written response to the report, said its compliance efforts had been insufficient, and the bank has undergone “a radical transformation” in its reporting requirements since 2007 to ensure that its banking services are not used to evade taxes or launder money.
Courts
JPMorgan Bankers Charged in Germany Over Pforzheim Swap Sale
Two JPMorgan Chase & Co. employees were charged in Germany over the sale of swaps to the city of Pforzheim that resulted in 57 million euros ($64 million) of losses, prosecutors said.
The two men were charged with aiding in aggravated breach of trust for selling “highly speculative” swaps to the municipality, Mannheim prosecutors said in an e-mailed statement Monday. The indictment was filed two years after three city officials were charged over the deal.
In 2010, Pforzheim piled up losses of 57 million euros while JPMorgan earned 14.3 million euros. The city has settled a lawsuit against JPMorgan and recovered some of the losses, according to prosecutor spokesman Peter Lintz.
A spokeswoman for JPMorgan in Frankfurt and Armin Niedermeier, a Deutsche Bank spokesman, declined to comment.
A court in Mannheim now has to decide whether the charges can go to trial. The indictment against the three city officials has been pending for two years and judges still haven’t decided whether that case can proceed.
Delays in the case are due to crowded court dockets, Lintz said by telephone.
–With assistance from Karin Matussek in Berlin, David Kocieniewski in New York and Dave Michaels in Washington.
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 Andrew Dunn, David Glovin
