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Vol
3: Issue No.12 : December, 2003 |
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| Hony.
Editor |
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Dr.
Bindi Mehta
(Director,
Research at ICSI - CCRT, Formerly, Chief economist, CRISIL)
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| SEC
Member Calls for Review of NYSE Regulatory Role |
A
top financial regulator in US has called for a review of the
self-regulatory status of the New York Stock Exchange, hours
after it announced unprecedented severe action against five
member firms it accused of improper stock trading activities.
Cynthia Glassman, a member of the Securities and Exchange
Commission, told a conference of securities traders that the
crisis of confidence surrounding the NYSE offered “a window
of opportunity” to review so-called SRO status, which many
US securities exchanges have. Her comments came after the
NYSE said it would seek “substantial fines” from five specialist
firms that control stock trading on the NYSE floor as part
of an investigation into trading activity between 2000 and
2002 that has shaken the 211-year-old institution. The NYSE
did not disclose how much it would seek in fines from LaBranche
& Co, Vander Moolen, Fleet Specialists, Goldman Sachs,
Spear Leeds & Kellogg, and Bear Wagner. But some observers
said it was a test case of whether the NYSE would retain its
SRO status after a damaging row in recent weeks over corporate
governance.
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| For
Goldman Executives, Public Companies’ Boards are Forbidden Territory |
Investment
bank Goldman Sachs Group has barred senior management from sitting
on the boards of public companies, a policy enacted as regulators
tighten scrutiny of possible conflicts of interest.
Biotechnology
company Human Genome Sciences said Robert Hormats, Vice-Chairman
of Goldman’s International unit, stepped down from its board
because of a recent Goldman policy barring senior management
from serving as directors of publicly traded companies. The
policy comes as regulators put corporate boards under new scrutiny
to remain independent from senior management. It also comes
as Wall Street firms have come under fire for conflicts of interest
between their bankers and their clients. Hormats’ resignation
is part of a broader policy affecting Goldman’s 1,125 managing
directors - the firm’s highest-ranking employees. Goldman CEO
Henry Paulson is not a board member on any public companies.
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| BARCLAYS
Chief’s Promotion a Test Case of Governance |
Top
shareholders are seizing upon the elevation of Barclays’ chief
executive Matt Barrett to chairman of the banking group as the
first test case for new corporate governance guidelines. The
Association of British Insurers, which represents some of Britain’s
largest shareholders, has written to Sir Peter Middleton, Chairman
of Barclays, demanding a “full, clear and public” explanation
of why the bank chose to deviate from one of the core recommendations
of Derek Higgs, a former investment banker, appointed by the
Government to review corporate governance standards.
The
Higgs recommendations do allow companies to explain why they
have chosen not to comply with best practice. But Mr. Montagnon
said : “It is very important to the operation of the Higgs code
that this is not a perfunctory explanation because the credibility
of the code will be seriously damaged if it is perfunctory”.
Barclays said : “We understand the comments they are making
and we take these comments seriously. We do intend to publish
an explanation which will be fully Higgs-complaint if not beyond
that”.
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| Major
shake-up in NYSE board likely |
A
proposal to end Wall Street executives’ 200-year lock in the
New York Stock Exchange boardroom is likely to be approved by
its membership on Tuesday.
The
plan, proposed by Interim NYSE Chairman John Reed, will then
be subject to approval by regulators who gave it a cool reception
when it was unveiled two weeks ago. Mr. Reed has called for
the resignation of two dozen directors – virtually the entire
board. Half of these are form Wall Street firms that the NYSE
regulates. Only two existing directors are set to remain, to
be joined by six fresh faces nominated by Mr Reed. Under his
plan, the board in the future can range in size from six to
12 members. Mr. Reedy’s package of proposals, which include
making the NYSE regulatory arm report directly to a board committee,
requires approval by a majority of the 1,366 members, the holders
of NYSE “seats” who own the exchange.
(19th
November, Reuters)
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CEO
Black, 2 others to quit Hollinger
Outright Sale of Co Or Units on Cards |
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Newspaper publisher Hollinger International
said on Monday Chief Executive Conrad Black and other top officials
will step down after the company found unauthorized payments
to Black and other executives.
Mr.
Hollinger, whose newspapers include the Daily and Sunday Telegraph
in Britain, the Chicago Sun-Times and the Jerusalem Post, said
it has hired Lazard to evaluate strategic alternatives, including
a possible sale of the company or a sale of one or more of its
major properties.
Mr.
Black is not the only executive leaving the company. The board
of directors accepted the resignation of Mr. David Radler as
president and chief operating officer and Mr Mark Kipnis as
corporate counsel, according the company.
The
moves come after a board committee determined that $32.15 million
in payments were made that were not authorized or approved by
either the audit committee or the full board of directors, the
company said.
Hollinger
said Mr. Balck, who is also the company’s main stockholder,
would resign from the post on November 21 but would remain as
non executive chairman and devote his time to pursuing strategic
alternatives for the group. Mr. Gordon Paris, currently a director,
has been elected interim CEO, according to a news release.
Media
groups such as the Washington Post and Britain’s Daily Mail
& General Trust are looking at assets of Hollinger, the
Times of London said.
(Reuters,
18th November, 2003)
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SEC
Vows to beef up market scrutiny
To create New Office of Risk Assessment & Improve Ability
to Detect Problems |
The top US
securities regulator on Tuesday vowed to step up scrutiny of
questionable market practices and said it was considering setting
a daily deadline for traders of mutual fund shares.
The
US Securities and Exchange Commission outlined reforms for the
$7 trillion mutual fund industry, which is facing a spreading
investigation spearheaded by New York Attorney General Eliot
Spitzer. The SEC has been criticized for its handling of the
scandal.
At
a congressional hearing, SEC Chairman William Donaldson told
lawmakers the commission will create a new office of risk assessment
to improve its ability to get early warnings about market problems
such as the current funds trading scandal. He also said the
commission will meet on 3 December to consider new fund trading
rules, including one that would prohibit trades of fund shares
after the shares are priced for the day.
“This
‘hard’ four o’clock cut-off would effectively eliminate the
potential for ‘late trading’ through intermediaries that sell
fund shares,” Mr Donaldson said in prepared testimony for a
Senate Banking Committee hearing. He said the commission will
also consider requiring funds to have specific procedures for
complying with their policies on “market timing” – rapid trading
in fund shares to profit from out-of-date prices. If a fund
publicly discourages market timing, it would have to spell out
exactly how it excludes market timers, he said. Congress is
considering its own measures to beef up penalties for mutual
fund fraud, amid concern the SEC was slow to act. “Whether due
to a lack of resources or other pressing priorities, mutual
fund abuses simply did not receive adequate attention from the
SEC,” said Sen. Richard Shelby, the Alabama Republican who chairs
the Senate Banking Committee.
Historically,
the agency has not looked at funds for late trading or market
timing, Mr. Donaldson said.
(Reuters,
19th Nov 2003)
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| NYSE
Okays governance changes |
| New
York Stock Exchange members on 18 November, 2003 approved governance
changes and a slate of eight directors proposed by interim NYSE
Chairman John Reed, the NYSE said, citing the vote’s preliminary
results
In
a statement, the exchange said its 1,366 seat holders had approved
the planned division of its current board into two halves –
one set of eight independent individuals who will oversee regulatory
and compensation matters, and another that will be responsible
for the NYSE’s market structure issues.
The
announcement on 27 August that Mr. Grasso, 57, had taken a $140
million payout sparked a public outcry. The figure astounded
many who viewed Mr. Grasso’s role as that of a regulator rather
than a highly paid Wall Street executive. Soon after that news,
the exchange dropped another bombshell, saying Mr. Grasso was
entitled to an additional $48 million.
(Reuters,
19th November, 2003)
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| FBI
sting nets 48 Wall St. pros |
FBI Agents on 17th November, 2003 arrested about 48 Wall Street
forex professionals in a sting targeting several top firms thought
to have defrauded retail investors of millions of dollars.
Federal
Bureau of Investigation officers swarmed on 2 World Financial
Centre and led out men in business suits, taking them away in
vans and cars. Some of the men covered their heads with overcoats
while others bowed their heads to hide from television cameras
and photographers.
“It
is currency fraud, securities fraud,” said one agent at the
scene of the arrests. “It is been a long investigation. The
arrests have been ongoing today.” A Madison Deane and Associates
employee, who asked not to be named, said the FBI arrested seven
people at his firm, which offers currency broker services.
“We
were just sitting there working, and they (FBI) just came in
and stormed the place,” the man said, adding that the FBI agents
took out three partners, three vice presidents and one broker
all in handcuffs. “They had guns. They came in with vests and
said “Nobody move,” the employee said.
(Reuters,
19th November, 2003)
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