Archive for the ‘MiFID’ Category

MSNBC wrote: A former top executive at a $1 billion hedge fund investment firm was sentenced to more than two years in prison Friday in the first sentencing to result from what prosecutors have called the largest hedge fund insider trading case in history.

Mark Kurland, 61, of Mount Kisco, N.Y., was sentenced Friday to two years and three months in prison and ordered to forfeit the $900,000 he made through illegal trades by a judge who blamed the attitudes of people like Kurland on the country’s financial collapse two years ago.

U.S. District Judge Victor Marrero said Kurland, a co-founder of New Castle Partners hedge fund in Manhattan, “frankly should have known better” than to join an inside trading scheme that led to the arrests of top executives including one-time billionaire Raj Rajaratnam.

“He had a choice as a leader of the financial industry. He could have led by example. Instead, he chose to follow. He became a joiner, surrendering to the spree of the financial market’s virtual mob mentality that nearly brought down this country’s financial industry in the quest for ever bigger and faster gains,” Marrero said.

Kurland, who had pleaded guilty to conspiracy to commit securities fraud and securities fraud, was among 11 people who have pleaded guilty in the case. Many of the others had agreed to cooperate with the government, a step which delays their sentencing.

Rajaratnam, the portfolio manager for the Galleon Group hedge fund, has pleaded not guilty and disputed government claims that he pocketed as much as $50 million through a network of cheating executives at financial firms and companies privy to inside information.

The judge criticized pleas for leniency on Kurland’s behalf on the grounds that he had a minimal role, that he did not benefit much financially, that others were more at fault and that there was no real harm to the markets.

Read the whole story >

BalticBusinessNews writes that Swedbank employee suspected of insider trading. Anton Uustalu, 27-year-old former employee of client relations department of Swedbank, is one of the suspects in insider trading scheme with Eesti Telekom stock.

Priit Perens, general manager of Swedbank Eesti, said that he could not comment the case and suggested that Äripäev asked the prosecution for comment. “Uustalu left on the mutual agreement,” was all that Perens said, without elaborating why Uustalu’s employment contract was terminated.

New York Times wrote that Estonian prosecutors charged Dmitri Vassiljev, a former analyst at SEB Enskilda, with using inside information to trade shares and options of the Baltic telecommunications companiess Eesti Telekom and TEO.

Mr. Vassiljev used information on TeliaSonera’s offer to buy out minority shareholders in the two companies to which he had access to before it was made public, the Tallinn-based state prosecutor’s office and Financial Supervisory Authority said Thursday in separate statements. Eesti Telekom rose 23 percent and TEO jumped 30 percent after the offer was announced
August 24th.

Comments from CSA Partners:

This case highlights the importance of proper systems and controls that investment banks and advisors should have in place in order safeguard inside information from their customers.

In particular:

• every member of the staff should be exposed to the information only on a need to know basis;
• flow of inside information should be rigorously controlled and list of insiders, with exact date and time when information was received, maintained;
• each employee who has obtained the access to the information, should be alerted about the fact that the information received, is inside information;
• adequate personal account dealing controls (e.g. list of restricted instruments) should prohibit members of the staff from making transactions (directly or via related persons) with securities issued by the customer.

CESR reports today on the progress made under the protocol for the supervision of branches in the context of the Markets in Financial Instruments Directive (MiFID).

In the months since the implementation of MiFID on 1 November 2007, 16 agreements for cooperation on the supervision of branches have been concluded between CESR Members. This progress is an important step in order to achieve effective and transparent supervision and to enhance co-operation amongst supervisors.

Further information can be found in the CESR press release published today.

XinHuaNet writes that employees of financial institutes who take advantage of non-public information for personal gains in trading will face criminal prosecution, according to the draft amendment to the Criminal Law submitted to China’s top legislature Monday. Employees of fund management companies, securities firms, commercial banks and other financial establishments could be jailed for up to 10 years and fined up to five times of their illegal gains, if they seek, or advise others, to profit from non-public information, the draft says.

The draft amendment, submitted to the Standing Committee of the National People’s Congress (NPC) for its first hearing, marks the country’s latest initiative to crack down on insider trading.

The existing Criminal Law bans individuals with access to classified information from trading in related stocks and securities. The prohibition did not include other non-public information such as the fund flow information of the company’s trusted funds

    The amendment came after an insider trading case involving TangJian, a fund manager at the Shanghai-based China International Fund Management Co., in which JP Morgan Asset Management (UK) Limited holds a 49-percent stake.

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FT.com writes that the City regulator has told banks and other financial institutions that they will have to tape telephone conversations and keep the files for six months if client orders are involved.
The Financial Services Authority said yesterday that from March next year all calls relating to client orders for stocks, bonds, commodities and derivatives will have to be held for at least half a year, and longer if the regulator specifically demanded it.

The decision is related to the FSA’s efforts to combat market abuse, specifically insider dealing, a crime it
claims is linked to up to a quarter of all takeover deals, but which it has had little success in tackling
because of problems in gathering sufficiently strong evidence.

“Telephone taping” covers electronic communications, from e-mail to instant messaging, as well as phone
calls. Many businesses currently record calls involving clients with the aim of using them to help settle
disputes. Mobile calls are exempted for now, although this will be reviewed in 18 months’ time. Technology to eliably record and store the calls is still relatively untested.

The six-month requirement is a sharp climbdown from the FSA’s original proposal of three years. This
was watered down after extensive consultation with companies, which warned the costs would be far
higher than the initial £4.5m set-up fee and £4m yearly costs the FSA envisaged. Yesterday its proposal estimated that the six-month storage demand would cost as much as £14m to set up and between £6m and £11m a year after that.

John Ewan, director at the British Bankers Association, said: “We understand that the FSA needs time to ut together a case and [assess] how useful the recordings might be, but they often know far sooner
which records they could be interested in – and we’re happy to keep those.”

Banks were also believed to have been worried about a lack of clarity about their exact obligations. Some
were concerned they risked censure from the regulator if they failed to have adequate back-up and could
not produce a specified recording.

The rules introduced by MiFID impose complex requirements on banks’ and investment firms’ organizational governance and internal compliance management.

CSA Partners is delighted to announce the release of the new INSIDeR Professional Edition, a complete internal compliance procedures and records management solution designed to meet the most challenging requirements on organizational governance of MiFID-firms.

INSIDeR Professional Edition is web-based special-purpose compliance management application designed for the implementation of high quality internal control procedures and workflows by MiFID-firms when, among other things, dealing with the following organizational requirements:

• Administration of the list of relevant persons and persons and corporations with close links to relevant persons
• Applying pre-trade clearance regime and keeping records on permissions with regard to personal account dealings (personal transactions) by relevant persons
• Keeping records on personal transactions
• Controlling and reducing the risks of Market Abuse
• Controlling and reducing the risks of conflict of interest
• Ensuring that relevant persons are aware of their obligations
• All the above available on the basis of self-service-model to multiply the efficiency of compliance procedures management across the organization.

INSIDeR Professional will be available on the basis of software-as-a-service model where CSA Partners provides the hosting, support and management of the solution for MiFID firms. That relieves firms from the burden and cost of maintaining and updating in-house systems and IT infrastructure. INSIDeR Professional Edition is available also per in-house installation model, should internal policies rule out software-as-a-service option.

“The Market in Financial Instruments Directive (MiFID) represents the most extensive reform ever seen by the European financial services industry. Key objectives of the MiFID include an increased level of investor protection and the integrity of markets throughout the European Union. These objectives have warranted the introduction of a range of organizational requirements and procedures for MiFID-firms. INSIDeR Professional is our response to help MiFID-firms’ compliance teams to deal with the most challenging of them, says Martin Villig, Managing Director of CSA Partners.”