New rules against benchmark manipulation

In connection with investigations into possible rate fixing by banks, the European Commission has amended its proposals for regulation on insider trading and market manipulation. Manipulation of benchmarks such as LIBOR and EURIBOR will be explicitly prohibited and subject to sanctions. The EU's justice ministers agreed to the Commission's amended proposals in December 2012 and the European Parliament is expected to discuss the proposals in May 2013.

ESMA and EBA have drawn up the following draft guidelines for the setting of EURIBOR and for the supervision of banks involved in the setting process:

  • Report on the administration and management of EURIBOR
  • Principles for Benchmarks-Setting Processes in the EU
  • EBA Recommendations on supervisory oversight of activities related to banks' participation in the EURIBOR panel

IOSCO is holding a consultation until 11 February 2013 on rules for and supervision of financial benchmark setting.

Former CEO and CFO of Porsche prosecuted for market manipulation

The German justice department has charged the former CEO and CFO of Porsche with market manipulation. They are alleged to have publicly denied that in the period from March through October 2008 Porsche was interested in a takeover of Volkswagen, while preparations for this takeover had already started. This inaccurate information caused severe losses to traders speculating on a lower share price on the basis of the public statements, according to the authorities.

Four banks found guilty of fraud in Italy

A court in Milan, on 9 January 2013, found Deutsche Bank, JPMorgan Chase, UBS and Depfa Bank guilty of fraud. Employees of these banks sold derivatives to the city of Milan in 2005, reportedly lying about the risks of the transactions and causing the city to incur significant losses. The Public Prosecutor demanded prison sentences of up to 12 months for nine bankers. The Italian court handed down sentences of 15 days to eight months. In addition, each bank was fined EUR 1 million. Earlier this year, the four banks reached a civil settlement of EUR 1.7 billion with the city of Milan. 

Ex-SAC analyst given two years probationary sentence

A former technology analyst at SAC Capital subsidiary Sigma Capital cooperated with an US government's investigation of insider trading. He was sentenced by a US federal court to a two-year probationary sentence for passing on non-public information regarding Cisco Systems. The analyst pleaded guilty last year to tipping a former Sigma Capital portfolio manager and the founder of Whitman Capital LLC hedge fund. In cooperating with the investigation he incriminated 20 other people in insider trading.

Former CFO Xilinx Inc. charged with insider trading

The Galleon case has proven to be a major case for the US authorities (as previously reported in our RCE Newsletters April 2012 and July 2012). The founder of Galleon Group, who is serving an 11-year prison sentence, has already paid USD 63.8 million in criminal penalties and was also ordered to pay a fine of USD 92.8 million to the Securities Exchange Commission ("SEC"), recently agreed to pay a disgorgement of about USD 1.5 million in a civil lawsuit that was filed by the SEC. In addition, the former CFO of Xilinx Inc., a former associate of the Galleon Group, was charged by the SEC for allegedly providing inside information from internal company reports in December 2006. The former CFO has agreed to pay a USD 1.75 million fine to the SEC to settle the charges.

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