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Court Told of \'Risk Seeking\' on UBS Desk

LONDON - The American manager of Kweku M. Adoboli, a former UBS trader, told a court here on Friday that he was surprised by the size of some of the positions on the bank's London trading floor.

“I think there was a lot of risk-taking happening in London that was of a proprietary nature,'' the manager, John DiBacco, said he had told investigators from the accounting firm of KPMG who were examining the huge losses at UBS's exchange traded-funds desk in November 2011. “There was a culture that was risk-seeking, and not risk-averse.''

His testimony came during the seventh day of the trial of Mr. Adoboli, 32, who faces four counts of fraud and false accounting in connection with a $2.3 billion loss at UBS. He has pleaded not guilty to the charges.

In Southwark Crown Court in London, the boyish-looking Mr. DiBacco was cross-examined for more than three hours by Mr. Adoboli's lawyer, Paul Garlick, whose questions appeared to be aimed at showing the Swiss bank was fully aware of his client's activities and that his trading was in line with the risk-taking culture in London.

Mr. DiBacco was the former global head of synthetic equity trading at UBS and Mr. Adoboli's boss before he was terminated in January 2012 for failure to supervise. Mr. DiBacco said he disagreed with UBS's assessment of his performance.

Earlier on Friday, a prosecutor, Sasha Wass, focused on the risk limits Mr. DiBacco placed on the London trading desk when he took it over in April 2011.

Mr. DiBacco, dressed in a blue pin-striped suit, pale blue shirt and red silk tie, testified that in late July 2011 he telephoned Mr. Adoboli while on vacation in Colorado and ordered him to cut the risk in his trading book.

Mr. DiBacco said he remembered the conversation with the trader “very clearly'' because he was speaking on the telephone in front of his girlfriend who was “not particularly pleased'' that he was talking about markets and r isk while on vacation.

“Shut everything down,'' Mr. DiBacco said he told Mr. Adoboli. “I want no risk.''

A few weeks later, in August, Mr. DiBacco said he was alerted by one of UBS's managers in the United State that a futures trade had not been booked. When he learned that the trade had been executed by the exchange-traded fund desk in London, Mr. DiBacco telephoned the desk. Failing to reach anyone, he called Mr. Adoboli on his cellphone.

“What the hell is going on?” he said he asked Mr. Adoboli.

The trader replied that he forgot, Mr. DiBacco said. At the time, London was being roiled by street riots, but Mr. DiBacco said he told Mr. Adoboli to return to the office that evening and book the trades.

At the end of the month, Mr. DiBacco said he visited the London office after he was troubled by his inability to get a clear handle on the E.T.F. desk's profits and losses. But it was only on Sept. 14, when Mr. Adoboli sent him an e-ma il that the prosecution has said outlined fictitious trading activities, that he realized what was happening, he said. Mr. DiBacco said he read the e-mail twice, because he couldn't believe it, before showing it on his BlackBerry to his own boss.

At a face-to-face meeting with Mr. Adoboli later that day, Mr. DiBacco said he learned that the trader's losses had spiraled up to $2 billion from $2 million in the span of a month. Mr. Adoboli, he said, had about $100 million in losses in July, which he had pared down to $2 million as the market rallied during the month. But the losses ballooned again in August. When Mr. DiBacco asked Mr. Adoboli at the meeting why he engaged in the fictitious trades, he said that Mr. Adoboli told him that wanted to make money for UBS.

During the cross-examination, Mr. Adoboli's lawyer asked about a reply Mr. DiBacco sent to a June 23 e-mail from Mr. Adoboli. In the e-mail, Mr. Adoboli said he was running a $200 million position, whi ch breached the desk's risk limits, but made a $6 million profit. Mr. DiBacco, who was in a meeting when he got the e-mail, replied: “Thanks for the update. Well done.''

That did not sound “very censorious,” the lawyer, Mr. Garlick said. “The culture of the bank at the time is if traders were making big profits you cast a blind eye over the risks.''

Mr. DiBacco said that he forwarded Mr. Adoboli's e-mail to his boss, Ricardo Honegger, which was a “pretty aggressive action'' and that he sent a subsequent e-mail a few minutes later to Mr. Adoboli saying: “When over $100 million and certainly over $200 million I need to know before, not after.''

The strain of the day-long testimony showed as Mr. DiBacco snapped at Mr. Garlick at one point. It didn't help that, as is the custom in London, Mr. DiBacco had to stand while giving testimony all day.



Lawmakers Lobbying, Bankers Retiring and Movements Fizzling

WEEK IN VERSE Regulators approved a reduced version of Universal's $1.9 billion takeover of EMI Music that includes David Guetta's “Money.”

Internal government documents showed lawmakers lobbying behind the scenes to mute the Volcker Rule. | Goldman Sachs introduced someone who may be the first of the next generation of leaders. | Andrew Ross Sorkin declared Occupy Wall Street a fad.

A look back on our reporting of the past week's highs and lows in finance.

BP Offers to Acquire Larger Stake in Rosneft | The British oil company has offered to acquire a bigger stake in the Russian state oil company if it can sell its interests in a private joint venture, Mr. Kramer reported. BP's chief made the offer in a meeting with President Vladimir V. Putin. DealBook '

The deal also holds the promise of reviving an ill-fated offshore exploration deal in the Russian Arctic that fell apart last year am id lawsuits, and more broadly tie BP's fate to Russia for years to come.

French Carmaker May Sell Logistics Arm | Struggling to stay afloat in the faltering European car market, PSA Peugeot Citroën has entered exclusive negotiations with J.S.C. Russian Railways to sell 75 percent of Gefco for 800 million euros, or about $1 billion, David Jolly and Andrew E. Kramer reported. DealBook '

The French automaker is reeling from its heavy exposure to the European market and its dependence on relatively low-margin models. New passenger car registrations were down 7.1 percent this year in Europe. With the euro zone in recession and the future of the currency itself uncertain, analysts were not predicting a quick turnaround.

Anschutz Is Said to Consider Sale of Its Entertainment Division | The parent company, owned by the billionaire Philip Anschutz, expects to reap billions of dollars from any sale of the sports and entertainmen t juggernaut that owns stakes in teams like the Los Angeles Lakers and the Los Angeles Kings, Michael J. de la Merced reported. DealBook '

The company is in the midst of pushing for approval to build a $1.2 billion stadium in downtown Los Angeles in an effort to draw in a professional football team to the city for the first time since the Rams decamped for St. Louis in 1995.

Lowe's Ends Effort to Acquire Rona, Its Canadian Rival | The home improvement retailer abandoned its $1.8 billion hostile bid, a move that avoids a political showdown with the government in Quebec, Ian Austen reported. DealBook '

In a rare point of agreement, both the Liberal Party, which lost an election this month in Quebec, and the separatist Parti Québécois, which will form the province's next government, spoke out strongly against the deal despite commitments from Lowe's to maintain a Canadian head office in Quebec and to cultivate Canadian su ppliers.

Russia to Raise $5 Billion in Sberbank Stake Sale | The Russian government announced that it would sell a 7.6 percent stake in the country's largest lender, in a rights offering that could raise around $5.1 billion, Mark Scott reported. DealBook '

The move would be one of Russia's largest share sales in recent years as the government aims to reduce its stakes in a number of the country's largest companies.

Investors have long awaited the announcement of Sberbank's rights offering, which had been hampered by volatility in global financial markets and the recent depressed performance of Russian stocks.

Executive at Goldman Is Retiring | Goldman Sachs introduced what may be the first of the next generation of leaders to run the storied Wall Street firm, Peter Lattman reported. The bank's longtime chief financial officer, David A. Viniar, will retire at the end of January and be replaced by Harvey M. Schwartz , a 48-year-old executive. DealBook '

Analysts said the departure of Mr. Viniar, who was viewed by analysts and investors as a source of stability for Goldman, indicated that the bank's leadership believed it had put one of the most challenging times in its history behind it. And it will likely spur further speculation about who will replace Mr. Blankfein, Goldman's chief executive since 2006. Mr. Blankfein, who will turn 58 on Thursday, has said he has no plans to retire.

Deal Professor: Behind Goldman Sachs's Success, a Focus on Survival | Steven M. Davidoff says that “Goldman is becoming the last pure-play, big investment bank. In a world where business consultants preach that a focus on your best business lines is necessary to success, Goldman is likely to have an advantage over the banking conglomerates.” DealBook '

It wasn't long ago that Goldman Sachs was painted as an outsize villain of the financial crisis, and its future seemed hazy. Today, however, Goldman Sachs has retained its clients and its dominance. And recent missteps by its competitors are putting the investment bank in pole position to profit when a recovery comes.

In Buyback Deal, Alibaba Gets Half of Yahoo's Stake | Yahoo got $3 billion to return to its shareholders, Mr. de la Merced reported. Some investors had fretted that the company's new chief executive, Marissa Mayer, would decide against doling proceeds from the sale to shareholders, including the hedge fund manager Daniel S. Loeb. DealBook '

Big Stock Offering by Japan Airlines Is Overshadowed by China's Anti-Japanese Protests | JAL's share price was weighed down by investor jitters over t he airline's prospects in a cutthroat industry, Hiroko Tabuchi reported. DealBook '

JAL has also become a far smaller airline with a more limited global reach and capacity that may be ill positioned to tap into growth, especially in Asia, where the aviation industry is most likely to have its fastest gains.

Standard Chartered Signs Pact With New York Regulator | The British bank agreed last month to pay $340 million to settle claims of illegally funneling money for Iranian banks and corporations. Until Friday, though, the final details were not hashed out, Jessica Silver-Greenberg reported. DealBook '

Federal authorities, including the Manhattan district attorney and the Justice Department, have their own investigations into Standard Chartered's activities. The bank is expected to resolve any criminal allegations with the Manhattan district attorney's office by next week, according to law enforcement officials.

Behind Scenes, Some Lawmakers Push to Change the Volcker Rule | More than 100 lawmakers have lobbied the Federal Reserve and other authorities, Ben Protess reported. E-mails between the Federal Reserve's top lawyer and an aide to Senator Scott Brown provide a glimpse of the partisan fight. DealBook '

“I have a very urgent request,” Nathaniel Hoopes, Mr. Brown's aide, wrote in an April 2011 e-mail. Seeking to fine-tune an exemption, he argued that a broad range of bank customers should be allowed to invest with hedge funds under the Volcker Rule. “My boss has been hearing it from constituents,” he added, referring to the rule's impact on Massachusetts-based financial firms.

In a first draft of the rule released last fall, regulators agreed with that broad definition.

The Trade: Distortion in Tax Code Makes Debt More Attractive to Banks | Jesse Eisinger of ProPublica says that banks pay a lot less taxes thanks to the tax code's favoring of debt over equity, a distortion that makes the financial system and the economy more fragile, prone to bankruptcies and runs. DealBook '

The system we have subsidizes the middleman to create dubious products. Those products help the middlemen - the banks - but they make the financial system more fragile. So the tax code distortion doesn't just lead to more debt in corporate America and more leveraged banks. It also helps create a finance-heavy economy where the banking sector accounts for a bigger proportion of gross domestic product and corporate profits than it otherwise would. Granted, the tax code is far from the only force in American society that creates a larger financial sector or overleveraged corporations. But it's one of the least recognized.

DealBook Column: Occupy Wall Street: A Frenzy That Fizzled | Andrew Ross Sorkin says that “now, 12 months later, it can and should be said that Occupy Wall Street was - perhaps this is going to sound indelicate - a fad.” DealBook '

Has the debate over breaking up the banks that were too big to fail, save for a change of heart by the former chairman of Citigroup, Sanford I. Weill, really changed or picked up steam as a result of Occupy Wall Street? No. Have any new regulations for banks or businesses been enacted as a result of Occupy Wall Street? No. Has there been any new meaningful push to put Wall Street executives behind bars as a result of Occupy Wall Street? No.



Lawmakers Lobbying, Bankers Retiring and Movements Fizzling

WEEK IN VERSE Regulators approved a reduced version of Universal's $1.9 billion takeover of EMI Music that includes David Guetta's “Money.”

Internal government documents showed lawmakers lobbying behind the scenes to mute the Volcker Rule. | Goldman Sachs introduced someone who may be the first of the next generation of leaders. | Andrew Ross Sorkin declared Occupy Wall Street a fad.

A look back on our reporting of the past week's highs and lows in finance.

BP Offers to Acquire Larger Stake in Rosneft | The British oil company has offered to acquire a bigger stake in the Russian state oil company if it can sell its interests in a private joint venture, Mr. Kramer reported. BP's chief made the offer in a meeting with President Vladimir V. Putin. DealBook '

The deal also holds the promise of reviving an ill-fated offshore exploration deal in the Russian Arctic that fell apart last year am id lawsuits, and more broadly tie BP's fate to Russia for years to come.

French Carmaker May Sell Logistics Arm | Struggling to stay afloat in the faltering European car market, PSA Peugeot Citroën has entered exclusive negotiations with J.S.C. Russian Railways to sell 75 percent of Gefco for 800 million euros, or about $1 billion, David Jolly and Andrew E. Kramer reported. DealBook '

The French automaker is reeling from its heavy exposure to the European market and its dependence on relatively low-margin models. New passenger car registrations were down 7.1 percent this year in Europe. With the euro zone in recession and the future of the currency itself uncertain, analysts were not predicting a quick turnaround.

Anschutz Is Said to Consider Sale of Its Entertainment Division | The parent company, owned by the billionaire Philip Anschutz, expects to reap billions of dollars from any sale of the sports and entertainmen t juggernaut that owns stakes in teams like the Los Angeles Lakers and the Los Angeles Kings, Michael J. de la Merced reported. DealBook '

The company is in the midst of pushing for approval to build a $1.2 billion stadium in downtown Los Angeles in an effort to draw in a professional football team to the city for the first time since the Rams decamped for St. Louis in 1995.

Lowe's Ends Effort to Acquire Rona, Its Canadian Rival | The home improvement retailer abandoned its $1.8 billion hostile bid, a move that avoids a political showdown with the government in Quebec, Ian Austen reported. DealBook '

In a rare point of agreement, both the Liberal Party, which lost an election this month in Quebec, and the separatist Parti Québécois, which will form the province's next government, spoke out strongly against the deal despite commitments from Lowe's to maintain a Canadian head office in Quebec and to cultivate Canadian su ppliers.

Russia to Raise $5 Billion in Sberbank Stake Sale | The Russian government announced that it would sell a 7.6 percent stake in the country's largest lender, in a rights offering that could raise around $5.1 billion, Mark Scott reported. DealBook '

The move would be one of Russia's largest share sales in recent years as the government aims to reduce its stakes in a number of the country's largest companies.

Investors have long awaited the announcement of Sberbank's rights offering, which had been hampered by volatility in global financial markets and the recent depressed performance of Russian stocks.

Executive at Goldman Is Retiring | Goldman Sachs introduced what may be the first of the next generation of leaders to run the storied Wall Street firm, Peter Lattman reported. The bank's longtime chief financial officer, David A. Viniar, will retire at the end of January and be replaced by Harvey M. Schwartz , a 48-year-old executive. DealBook '

Analysts said the departure of Mr. Viniar, who was viewed by analysts and investors as a source of stability for Goldman, indicated that the bank's leadership believed it had put one of the most challenging times in its history behind it. And it will likely spur further speculation about who will replace Mr. Blankfein, Goldman's chief executive since 2006. Mr. Blankfein, who will turn 58 on Thursday, has said he has no plans to retire.

Deal Professor: Behind Goldman Sachs's Success, a Focus on Survival | Steven M. Davidoff says that “Goldman is becoming the last pure-play, big investment bank. In a world where business consultants preach that a focus on your best business lines is necessary to success, Goldman is likely to have an advantage over the banking conglomerates.” DealBook '

It wasn't long ago that Goldman Sachs was painted as an outsize villain of the financial crisis, and its future seemed hazy. Today, however, Goldman Sachs has retained its clients and its dominance. And recent missteps by its competitors are putting the investment bank in pole position to profit when a recovery comes.

In Buyback Deal, Alibaba Gets Half of Yahoo's Stake | Yahoo got $3 billion to return to its shareholders, Mr. de la Merced reported. Some investors had fretted that the company's new chief executive, Marissa Mayer, would decide against doling proceeds from the sale to shareholders, including the hedge fund manager Daniel S. Loeb. DealBook '

Big Stock Offering by Japan Airlines Is Overshadowed by China's Anti-Japanese Protests | JAL's share price was weighed down by investor jitters over t he airline's prospects in a cutthroat industry, Hiroko Tabuchi reported. DealBook '

JAL has also become a far smaller airline with a more limited global reach and capacity that may be ill positioned to tap into growth, especially in Asia, where the aviation industry is most likely to have its fastest gains.

Standard Chartered Signs Pact With New York Regulator | The British bank agreed last month to pay $340 million to settle claims of illegally funneling money for Iranian banks and corporations. Until Friday, though, the final details were not hashed out, Jessica Silver-Greenberg reported. DealBook '

Federal authorities, including the Manhattan district attorney and the Justice Department, have their own investigations into Standard Chartered's activities. The bank is expected to resolve any criminal allegations with the Manhattan district attorney's office by next week, according to law enforcement officials.

Behind Scenes, Some Lawmakers Push to Change the Volcker Rule | More than 100 lawmakers have lobbied the Federal Reserve and other authorities, Ben Protess reported. E-mails between the Federal Reserve's top lawyer and an aide to Senator Scott Brown provide a glimpse of the partisan fight. DealBook '

“I have a very urgent request,” Nathaniel Hoopes, Mr. Brown's aide, wrote in an April 2011 e-mail. Seeking to fine-tune an exemption, he argued that a broad range of bank customers should be allowed to invest with hedge funds under the Volcker Rule. “My boss has been hearing it from constituents,” he added, referring to the rule's impact on Massachusetts-based financial firms.

In a first draft of the rule released last fall, regulators agreed with that broad definition.

The Trade: Distortion in Tax Code Makes Debt More Attractive to Banks | Jesse Eisinger of ProPublica says that banks pay a lot less taxes thanks to the tax code's favoring of debt over equity, a distortion that makes the financial system and the economy more fragile, prone to bankruptcies and runs. DealBook '

The system we have subsidizes the middleman to create dubious products. Those products help the middlemen - the banks - but they make the financial system more fragile. So the tax code distortion doesn't just lead to more debt in corporate America and more leveraged banks. It also helps create a finance-heavy economy where the banking sector accounts for a bigger proportion of gross domestic product and corporate profits than it otherwise would. Granted, the tax code is far from the only force in American society that creates a larger financial sector or overleveraged corporations. But it's one of the least recognized.

DealBook Column: Occupy Wall Street: A Frenzy That Fizzled | Andrew Ross Sorkin says that “now, 12 months later, it can and should be said that Occupy Wall Street was - perhaps this is going to sound indelicate - a fad.” DealBook '

Has the debate over breaking up the banks that were too big to fail, save for a change of heart by the former chairman of Citigroup, Sanford I. Weill, really changed or picked up steam as a result of Occupy Wall Street? No. Have any new regulations for banks or businesses been enacted as a result of Occupy Wall Street? No. Has there been any new meaningful push to put Wall Street executives behind bars as a result of Occupy Wall Street? No.



BP Offers to Acquire Larger Stake in Rosneft

MOSCOW â€" BP has offered to acquire a bigger stake in the Russian state oil company Rosneft if it can sell its interests in a private joint venture here, the president of Rosneft said on Friday.

Such a move would make BP the largest single outside investor in the Russia's state oil company.

The deal also holds the promise of reviving an ill-fated offshore exploration deal in the Russian Arctic that fell apart last year amid lawsuits, and more broadly tie BP's fate to Russia for years to come.

BP's chief executive, Robert W. Dudley, made the offer on Tuesday in a meeting with President Vladimir V. Putin at a Russian government retreat in the Black Sea resort town of Sochi, Rosneft's president, Igor I. Sechin, said Friday.

BP and Rosneft executives met with Mr. Putin as BP continued trying to extricate itself from a nine-year-old partnership called TNK-BP, but none of the parties provided many details about the discussions until now.

Such a dea l that will be extraordinarily important for BP, which pumps about a quarter of its global oil output from Russia. Rosneft, for its part, had already intended to sell shares to reduce the government's holding in the company.

“This proposal seems to be very interesting,” Mr. Sechin said in remarks carried by Russian news services and confirmed by Rosneft's media office.

The precise structure of the deal is still unclear, Mr. Sechin said. BP is also negotiating to sell its stake in the venture to its oligarch partners, and must continue these talks until mid-October under the terms of its shareholder agreement in TNK-BP.

Mr. Sechin confirmed that Rosneft was in talks with banks to raise $10 billion to $15 billion for a deal. The rest is likely to come as shares in Rosneft.

“BP aims to be an investor in Russia for many decades to come. BP is considering further investment in Russia regardless of who we sell our stake to,” the company said in a st atement. “Therefore if we are successful in selling our stake in TNK-BP then we would be interested in investing some of the proceeds in buying shares in Rosneft.”

The deal could well become a payday for BP shareholders, who are growing impatient with Mr. Dudley's leadership in turning the company around after the Gulf of Mexico spill.

BP would be paid in cash and shares in Rosneft. BP's statement suggested a portion of the cash could be reinvested to keep a foothold in Russia, possibly with a revival of the Arctic deal, said Ildar Davletshin, an oil and gas analyst at Renaissance. With the rest, BP could buy additional Rosneft shares and pay a special dividend to shareholders, Mr. Davletshin said.

Shareholders “need to see a sweetener,” he said.

When BP created the TNK-BP joint venture with the oligarch partners in 2003, the deal suggested a coming of age of Russian capitalism. It was the largest outside investment in Russia at the time.

< p>But soon after entering the deal, the oil industry landscape shifted under BP's feet. The following year, Mr. Putin imprisoned a wealthy, post-Soviet oil tycoon, Mikhail B. Khodorkovsky, and effectively nationalized Mr. Khodorkovsky's assets to form the core of the state company, Rosneft.

Shortly after that, BP had bought a 1.3 percent stake in Rosneft worth about $1 billion during the Russian oil company's I.P.O. in 2006.

For BP, the TNK-BP venture had signaled the future of Russian oil development would center on a state company â€" much as it does in Saudi Arabia and other major oil-exporting nations.

BP has since struggled to extricate itself from the private sector deal or create separate joint ventures with Russian state energy companies, either Rosneft or Gazprom.

Two previous attempts by BP to shift its footing in Russia - a partnership in 2007 with Gazprom and an Arctic exploration deal in 2011 with Rosneft - failed because the oligarch pa rtners, still influential in the Russian government, succeeded in foiling BP's plans.

In both cases, as now, Mr. Dudley, a lifelong oilman from Mississippi, had tried to form a counterintuitive alliance with hardline Russian government officials like Mr. Sechin, a proponent of resource nationalism, and against the private-sector partners.

The agreement Mr. Sechin outlined in comments at an economic forum in Sochi would accomplish much of what BP has been seeking for its Russian business.

Thane Gustafson, an expert on Russian oil at consultants IHS Cera said that Rosneft could use the technical and managerial help that BP could provide for its mission of developing the Arctic offshore and other frontier areas.

But he cautioned that Rosneft was already “a company with a great many obligations and commitments.”

BP, he said, would be joining three other strategic partners, ExxonMobil, Norway' s Statoil and Italy's ENI.

Stanley Reed contri buted reporting from London.



Business Day Live: A Manufacturing About-Face

Made in Brooklyn, but shipped to China. | Shrinking life expectancy for the least-educated whites.

Regulators Extend Deadline for Xstrata\'s Answer to Glencore

British regulators have granted Xstrata extra time to respond to Glencore's merger offer, as the mining giant weighs the sweetened bid.

Xstrata's board will now have until Oct. 1 to make a decision, according to a regulatory disclosure on Friday. The previous deadline was this Monday, Sept 24.

The two companies have faced a difficult path to a deal.

Earlier this year, Glencore, which owns 34 percent of Xstrata, offered to buy the remaining stake. As part of the deal, Glencore agreed to exchange 2.8 of its shares for each Xstrata shares.

But Qatar Holding, the sovereign wealth fund of the Persian Gulf nation, as well as other major investors, balked at the price. The investors threatened to block the deal unless Glencore raised its bid.

While Glencore was initially resistant to adjusting the terms, the commodities trading company increased the price just hours before shareholders were set to vote. Glencore is now offering 3.05 of its shares for each Xstrata share.

Although Xstrata agreed to the previous deal, the board has been more reticent this time. After the new proposal was annouced, Xstrata indicated the price might be too low. It also raised concerns about the revised management structure, which gave Glencore executives more power.

Xstrata shares were down 3 percent in late London trading. Glencore was off 1.5 percent.



Standard Chartered Set to Sign Pact With New York Regulator

Standard Chartered, the British bank at the center of accusations that it illegally funneled money for Iranian banks and corporations, is expected to sign a settlement on Friday with New York's top banking regulator.

While bank executives agreed last month to pay $340 million to settle claims that it moved hundreds of billions of dollars in tainted money and lied to regulators, the final details were not hashed out until Friday, according to several people with knowledge of the discussions.

The finalized agreement will allow the 150-year-old bank to move beyond its clash with Benjamin M. Lawsky and his 10-month old agency, the New York Department of Financial Services. The state regulator in August accused Standard Chartered of scheming for nearly a decade with Iran to hide from regulators 60,000 transactions worth $250 billion.

Federal authorities, including the Manhattan district attorney and the Justice Department, have their own investigations into Standard Chartered. The bank is expected to resolve any criminal allegations with the Manhattan district attorney's office by next week, according to law enforcement officials.

Standard Chartered has maintained that only $14 million of the $250 billion in transactions violated federal regulations. In a regulatory filing shortly after the settlement was announced, the bank said that “a formal agreement containing the detailed terms of the settlement is expected to be concluded shortly.”

A bank spokeswoman declined to comment.

The concluded settlement on Friday will be the final act in an international drama that pitted Mr. Lawsky against federal authorities who believed he was overreaching and British authorities who accused the regulator of hurting the reputation of their banks.



Influencing Dodd-Frank

Influencing Dodd-Frank  |  Two years after passing a spate of financial rules, lawmakers are still tinkering behind the scenes with Dodd-Frank. In a show of partisan haggling, more than 100 lawmakers have lobbied the Federal Reserve and other authorities over the Volcker Rule, writes Ben Protess of DealBook. A top aide to Senator Scott Brown, Republican of Massachusetts, has been reaching out to the Treasury Department and the Fed in an effort to limit the impact on local financial firms. While the Fed encouraged the aide to air his views publicly, internal government documents indicate some of the discussions took place in private. In a draft of the Volcker Rule, regulators adopted Mr. Brown's approach.

On Thursday evening, Mr. Brown faced off in a debate with his challenger for the Senate, the Harvard professor and consumer advocate Elizab eth Warren. Ms. Warren, a Democrat, has been a fierce supporter of regulations like the Volcker Rule. But the debate on Thursday focused on other issues, like Ms. Warren's ethnic heritage.

It's not just lawmakers trying to temper Wall Street regulation. The United States Court of Appeals for the District of Columbia is “now controlled by judicial activists who seem quite willing to negate, on technical grounds, any regulations they do not like,” writes Floyd Norris of The New York Times. Mr. Norris says the court “may yet be the institution that dooms many or even most of the Dodd-Frank financial reforms.”

Three states, Oklahoma, South Carolina and Michigan, announced on Thursday that they had joined a lawsuit challenging the constitutionality of the regulatory overhaul, bringing more visibility to a legal effort that began in June.

Crunch Time for Glencore and Xstrata  |  The mining giant has until Monday to decide whether to accept Glencore's sweetened merger offer. According to The Financial Times, the two companies were in last-minute meetings on Thursday to review the details of the deal.

Once Xstrata weighs in, Qatar Holding is likely to give its view. The sovereign wealth fund has been a vocal opponent of the deal, pushing for a higher price.

Mortgage Fraud Busters Get Ready  |  New York's attorney general, Eric T. Schneiderman, who runs a new task force on mortgage abuses, told Reuters: “We'll see actions being taken sooner rather than later.”

The group, which includes representatives of the Justice Department, the Securities and Exchange Commission, the Department of Housing and Urban Development and the Internal Revenue Service, is looking at mortgage deals that contributed to the financial crisis.

On the Agenda  |  A Democratic member of the Commodity Futures Trading Commission, Bart Chilton, is on CNBC at 11:20 a.m. Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, is speaking at 12:40 p.m. to the Atlanta Institute of Internal Auditors. Rajiv Goel, the witness whose testimony helped convict Raj Rajaratnam of insider trading, is scheduled to be sentenced at 12:30 p.m. The latest iPhone hits stores on Friday, with Apple stock trading just below $700 a share.

Friday is also a quadruple witching day, the quarterly expiration of options and futures contracts, which can cause an unusually high trading volume. Judging by history, the expiration could be positive for stocks, CNBC notes.

The Barclays Center, the new home of the Nets in Brooklyn, has its ribbon-cutting on Friday. The British bank, for which the center is named, already seems to have fallen victim to the stadium-naming curse.

Speed Before Safety?  |  Computers are ruling the market - and as we've been told, that may not be a good thing. A new report by the Federal Reserve Bank of Chicago, commissioned after market misses like the Facebook I.P.O. and the Knight Capital trading debacle, found that “out-of-control algorithms were more common than anticipated prior to the study and that there were no clear patterns as to their cause.”

Such market disruptions have come into focus this week. At a Senate hearing on Thursday, David Lauer, a former high-speed trader who now works for the advocacy group Better Markets, said the process these firms used to see prices a split second faster than other participants “reeks of non-public information,” The Wall Street Journal reports. Two experts at the hearing, Andy Brooks of T. Rowe Price and Larry Tabb of the res earch firm TabbGroup, disagreed over specific policy prescriptions but both said that something should be done to change the market, reports Nathaniel Popper in DealBook.

The Securities and Exchange Commission is hosting a roundtable on Oct. 2 to address these issues.

Mergers & Acquisitions '

Universal-EMI Merger Approved in Europe  |  The European Commission signed off on the $1.9 billion merger but said Universal would have to sell many of EMI's prized assets.
WALL STREET JOURNAL  |  NEW YORK TIMES

How Will the Universal Deal Affect Music?  |  The Huffington Post takes a look at some of the implications of the Universal-EMI tie-up , which could “make the company the gatekeeper for all sonic innovation, from Silicon Valley to Sweden.”
HUFFINGTON POST

Valuing What Anschutz Entertainment Might Be Worth  |  News that the Anschutz Entertainment Group is being put up for sale sent the sports and entertainment worlds buzzing. But what would any prospective buyer get?
DealBook '

Leaders of Germany and France to Discuss Aerospace Merger  |  But Angela Merkel and Francois Hollande “will not make any decisions” on the proposed merger between EADS and BAE, Reuters reports.
REUTERS

French Carmaker May Sell Logistics Arm  |  P SA Peugeot Citroën said that it was negotiating to sell its Gefco logistics business to J.S.C. Russian Railways as the company struggles to stay afloat in a faltering market.
DealBook '

INVESTMENT BANKING '

Ex-Barclays Compliance Official Finds a New Job  |  Stephen Morse, a Barclays compliance official who was warned in 2008 about potential rigging of Libor, is now the head of compliance for TD Bank, The Wall Street Journal reports.
WALL STREET JOURNAL

Jefferies Shares Fall on Tough 3rd-Quarter Results  |  Shares in the Jefferies Group plunged more than 6 percent on Thursday, as the firm reported earnings bolstered mostly by its new stake in the Knight Capital G roup.
DealBook '

Bankers Pin Hopes on Next Year  |  The market for deals has been lackluster so far this year, with global mergers and acquisitions volumes down 17 percent, Reuters reports.
REUTERS

Nomura Said to Cut Proprietary Traders  |  According to Bloomberg News, Nomura has “cut a team of London proprietary traders focused on stocks as Japan's largest brokerage scales back in Europe, said two people with knowledge of the matter.”
BLOOMBERG NEWS

Morgan Stanley Said to Be Paying Bonuses to Support Staff  |  Thousands of employees at Morgan Stanley Smith Barney who worked extra hours to solve technology problems can expect cash bonuses ranging from $1,500 to $5,000, The Wall Street Journal reports, citing unidentified people familiar with the situation.
WALL STREET JOURNAL

The Magic of Risk-Weighting  |  Jonathan Weil writes in a column in Bloomberg News that the way banks measure their balance sheets can allow assets “to vanish, making too-big-to-fail financial institutions seem leaner and safer than they are.”
BLOOMBERG NEWS

The Little Bank That Could  |  A bank in Queens called Amerasia had a 2 percent return on its $290 million in assets in the first half of the year, “a number that would be excellent even if times were good,” The Economist writes.
ECONOMIST < /span>

PRIVATE EQUITY '

S.E.C. Said to Examine Private Equity Payouts  |  According to Bloomberg News, the Securities and Exchange Commission is “seeking to determine whether some private-equity firms are taking more profits from investments than they should under agreements with fund clients, according to two people with knowledge of the matter.”
BLOOMBERG NEWS

Leveraged Buyouts Make a Comeback  |  With financing cheap, leveraged buyouts in the United States nearly doubled in the third quarter compared with a year earlier, reaching the highest levels since before the financial crisis, Reuters reports.
REUTERS

Goldman May Scale Back Fund-Raising Ambitions  |  The next buyout fund raised by Goldman Sachs's merchant banking division is likely to have a target of $7 billion to $10 billion, smaller than previous efforts, according to Richard Friedman, the unit's head, The Wall Street Journal reports.
WALL STREET JOURNAL

HEDGE FUNDS '

Former Regulator Joins Hedge Fund Lobby  |  Kathleen Casey, who stepped down last year as a Securities and Exchange Commission official, has been named chairman of the Alternative Investment Management Association, a London-based group representing hedge funds, Bloomberg News reports.
BLOOMBERG NEWS

Hedge Fund Clients Request More Money in September  |  Redemption requests in September reached their highest level this year, according to SS&C GlobeOp, Reuters reports.
REUTERS

Will There Be More Deals Between Funds of Funds?  | 
REUTERS

I.P.O./OFFERINGS '

Trulia Jumps 40% in Debut  |  Trulia, the real estate information site, rose 30 percent in its debut to open at roughly $22, defying the recent lackluster performance of newly public stocks.
DealBook '

Talanx Changes Its Mind  |  It's been a busy few weeks for the German insurer, which announced plans to go public earlier this month, and then shelved them, only to announce on Thursday it had revived those plans.
WALL STREET JOURNAL

VENTURE CAPITAL '

Online Community Sold to Its Members  |  The Salon Media Group said it sold the Well, a longtime online gathering place for cyber-thinkers and entrepreneurs, to a private investment group consisting of members of the community, the Bits blog reports.
NEW YORK TIMES BITS

Wind Power Industry Shrinks  |  On the top of weak demand and stiff competition, the industry now faces the Dec. 31 expiration of a federal tax credit, The New York Times reports.
NEW YORK TIMES

LEGAL/REGULATORY '

Pawlenty to Become Wall Street Lobbyist  |  Tim Pawlenty, the former Republican governor of Minnesota, was named chief executive of the Financial Services Roundtable on Thursday, replacing Steve Bartlett.
DealBook '

Cheap Loans Could Spell Long-Term Headaches  |  Low interest rates have led many corporations to load up on debt, but this could lead to a flood of bankruptcies once maturities hit, writes Stephen J. Lubben in the In Debt column.
DealBook '

A Strategy of Tattletales at the I.R.S.  |  Enforcement of tax laws requires finding a fair and ef fective way to overcome the information asymmetry between taxpayers and the I.R.S. But whistle-blowers are only one approach, writes Victor Fleischer in the Standard Deduction column.
DealBook '

Former Broker Accused of Insider Trading on Burger King Deal  | 
REUTERS

Spanish Debt Auction Meets With Strong Demand  | 
NEW YORK TIMES

California's Debt Found to Be Higher Than Thought  | 
NEW YORK TIMES



A Court vs. the S.E.C.

The second-most important court in the United States has three vacancies, one of which was created in 2005. It may yet be the institution that dooms many or even most of the Dodd-Frank financial reforms that Congress passed in 2010 and that regulatory agencies have been struggling to put in place since then.

In the area of regulatory law, that court, the United States Court of Appeals for the District of Columbia, reigns supreme, and it is now controlled by judicial activists who seem quite willing to negate, on technical grounds, any regulations they do not like. The has suffered a series of defeats there, defeats that it has chosen to accept rather than risk an appeal to the Supreme Court.

The judges have done that through the use of cost-benefit analysis - or more specifically by a willingness to find that the S.E.C. failed to do enough to quantify even minor costs.

In an article to be published in the Yale Journal on Regulation, Bruce R. Kraus, a partner in the New York law firm of Kelley Drye & Warren who was a senior member of the S.E.C. staff from 2008 to 2011, and Connor Raso, a lawyer for the Consumer Financial Protection Bureau, trace the history of that series of decisions, beginning with a 1993 ruling.

They argue that the commission should insist on its right “to discern and define the boundary between economic analysis and policy choice.” In an interview, Mr. Kraus said he thought the circuit court wrongly thought the S.E.C. had not tried to follow its previous rulings, because the judges were not fully aware of the work the staff had done in trying to comply, work that in some cases never became public because the commission did not choose to propose a revised rule. He said he was hopeful that the court would be favorably impressed when it considers future challenges to S.E.C. rules now being considered.

Perhaps he is right, but it might also help if there were some new blood on the court, something that Republican senators seem to have been able to prevent throughout the Obama presidency.

There are supposed to be 11 active judges on the court, but there now are three vacancies. One of them is recent, caused by the decision of Judge Douglas H. Ginsburg, the author of some of the decisions that have put the court in the position to decide which regulations it does not like, to assume senior status on the court. But the other two seats have been empty throughout the Obama administration.

The president has proposed nominees for two of those seats, but they are unlikely to go anywhere before the election. Even if the president wins re-election, Republicans seem likely to block any nominee who strikes them as even a little liberal.

Democrats were obstructionist when George W. Bush was in office, but he eventually prevailed in winning confirmation of three of his nominees. They included Brett M. Kavanaugh, a White House aide who had played a major role in finding conservatives to nominate for judicial openings. He also helped to write the Starr report that led to the attempt to remove Bill Clinton from office.

Mr. Kraus points to one way the vacancies influence appellants: When a three-judge panel of the court issues a ruling against the S.E.C., the commission could seek an “en banc” hearing of the entire court. But with only five other judges, and the need for a majority to gain a new hearing, that would require convincing all of the others that their three colleagues were wrong.

The government could appeal the court's decisions to the Supreme Court. Perhaps it should have done so in response to the latest ruling by Judge Ginsburg, in 2011, which threw out rules - specifically authorized by Congress in the Dodd-Frank law - allowing minority shareholders in very limited cases to get access to corporate proxies to propose candidates for director. But it did not.

The supremacy of the District of Columbia circuit court in this area of law is a result of laws that mandate that appeals related to regulations go directly to it. There is no district judge to hear cases and establish facts. Nor are there likely to be any differing opinions from other circuit courts, as there can be in other areas of the law. It is such differences that often lead to a Supreme Court decision to hear a case.



European Regulators Approve Universal\'s Purchase of EMI

European regulators on Friday approved a reduced version of Universal Music's  $1.9 billion takeover of EMI Music, allowing Universal to expand its dominance as the world's largest music company but significantly paring down its  ambitions.

To win the approval of the European  Commission, Universal agreed to divest  itself of about a third of the assets of  EMI, including most of Parlophone, its flagship label in Europe, along with a number of formerly independent labels and nine national subsidiaries of EMI across Europe. Universal will also sell a handful of its own assets, and it agreed to a set of market behavior controls that will govern how it handles contracts with digital music services.  

The divestments include global rights to release the music by the artists on those labels, which means that EMI will no longer release records by some of its biggest acts, including Coldplay, Pink Floyd, Kylie Minogue and David Guetta. One consolation for Universal is that it will not have to sell recording rights for the Beatles or Robbie Williams, one of EMI's biggest acts in Britain.

The commission, the executive arm of the European Union, said  in a statement that the asset sales allayed its concerns about the combined  group's market power, and that it paid particular attention to the merger's effect on the digital music market.

“Competition in the music business is  crucial to preserve choice, cultural diversity and innovation,” Joaquín  Almunia, the E.U. competition commissioner, said in the statement. “In this investigation, we have paid close attention  to digital innovation, which is changing  the way that people listen to music. ‘The very significant commitments  proposed by Universal will ensure that  competition in the music industry is preserved and that European consumers  continue to enjoy all its benefits.”The total value of the assets to be disposed of was unclear. They are said to generate about $450 million in annual revenue in Europe, but the global rights could add considerably more.

The deal, which has already been cleared in Australia, Canada, Japan and New Zealand, is being reviewed in the United States by the Federal Trade Commission, with a decision expected in the coming days. The F.T.C. could demand further divestments from Universal, but that is considered unlikely.

The takeover will advance the corporate consolidation of the music industry that has been under way for more than a decade. But for Universal and its parent company, the French media and telecommunications conglomerate Vivendi, the EMI ruling is a painful victory.

The negotiations with European regulators went on for months and were tense because of serious concerns that the deal would have allowed Universal to worsen the licensing terms it offers to digital platforms such as Spotify and those operated by Apple that sell music to consumers.

“This has been one of the most difficult discussions,” said Mr. Almunia, who said one of the main challenges he faced was preservation of cultural diversity and innovation amid a further consolidation of the music industry.

The difficulty for Universal was rooted in the unusual structure of the deal, which was struck with Citigroup in November: in it, Universal agreed to pay Citi the full price of EMI, regardless of regulatory approval. (Its first payment - about $1.75 billion, or 90 percent - was made earlier this month, and the balance is due when the deal closes.)

Citi seized EMI in early 2011 after the label's previous owner, the firm Terra Firma, defaulted on a $5.4 billion loan. In a parallel deal reached last November, an investor group led by Sony paid $2.2 billion for EMI's music publishing assets. That deal closed in June.

Universal's agreement with Citi put pressure on its executives to preserve as much of EMI as possible, since the company would face losses if it were forced to sell assets for less than it paid. In addition, Universal had estimated $160 million a year in savings by merging the two companies, but not all of those savings would be realized from a diminished EMI.

In late July, Universal offered to sell about two-thirds of EMI's holdings in Europe, including much of Parlophone and top acts like the D.J. David Guetta. Also included were the former independent labels Chrysalis, Mute and Ensign; EMI Classics and Virgin Classics; EMI's share of the profitable pop compilation series “Now That's What I Call Music!”; and EMI's subsidiary companies in Belgium, France, Sweden and other countries.

The divestment package that the European Commission agreed to will include those pieces with some additions, as well as global rights.



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