Regulators eye broker rule, interest rate rigging, big banks

(Bloomberg) — U.S. Securities and Exchange Commission Chair Mary Jo White said the agency will develop stricter rules for brokers, wading into a battle between Wall Street and the White House, which has said biased financial advice is costing investors billions of dollars.

White’s comments Tuesday at a securities industry conference in Phoenix follow a move by the Labor Department to make brokers put the interests of retirement savers ahead of their own, a so-called fiduciary duty. The SEC, which oversees the brokerage industry, has studied the issue for years without taking any regulatory action.

The financial industry has been watching closely for White’s position, which would break a standoff between the two Democratic and two Republican commissioners. White said she will begin talking with the other commissioners about the outlines of new rules. She said getting a balance is “absolutely essential.”

DOJ targets currency manipulation

U.S. prosecutors investigating currency manipulation are considering revoking years-old settlements and prosecuting banks for rigging interest rates, according to people familiar with the matter.

The Justice Department is weighing whether evidence of wrongdoing in currency trading means banks violated old deals resolving probes into the rigging of benchmark interest rates that included promises they wouldn’t break the law, said two people, who asked not to be identified because final decisions haven’t been made.

The Justice Department can tear up the deals if it finds the banks committed any crime after they were negotiated. The agreements, which are similar to putting banks on probation, leave the institutions exposed to criminal charges if they are revoked.

Deferred-prosecution and non-prosecution agreements, as they are called, have been widely used by the Justice Department in recent years in investigations ranging from sanctions violations to market manipulation. A decision to revoke such a deal with a bank appears to be unprecedented.

Such settlements require the banks to admit responsibility and cooperate with ongoing investigations. Justice Department spokesman Peter Carr declined to comment.

Critics, including Securities and Exchange Commission Chair Mary Jo White, who pioneered such agreements, argue the deals have been overused and don’t curb misconduct. The Justice Department defends the settlements, saying they force banks to correct wrongdoing and allow oversight.

Compliance policy

The European Parliament’s lead lawmaker on draft rules for breaking up the bloc’s biggest banks said he’s seeking a compromise that would ban proprietary trading while leaving other key decisions in the hands of supervisors.