For the S.E.C., an Important Trial

The government's campaign to punish Wall Street over risky investments sold before the financial crisis is culminating next week with the trial of Fabrice P. Tourre, a former midlevel employee at Goldman Sachs, in a rare case against an individual. For Goldman, a victory in court would be only belated consolation. But for the Securities and Exchange Commission, dogged by its failure to thwart the crisis, the trial is a defining moment that follows one courtroom disappointment after another, DealBook's Ben Protess and Susanne Craig write.

“Their reputation for trying cases hangs in the balance,” said Thomas A. Sporkin, who was a senior S.E.C. enforcement official until last year when he departed for the law firm Buckley Sandler. “This is their opportunity to show Wall Street that they can prevail against an individual at trial.”

The S.E.C. took steps to bolster its case against Mr. Tourre after a jury cleared a midlevel Citigroup employee in a mortgage-bond trial. The agency talked to a private jury consultant, people briefed on the matter said, though it is unclear whether the agency hired the firm. In addition, the head of the agency's trial team is leading the Goldman case himself, a surprising move. On Tuesday, the two sides were in court sparring over what the jury should - and should not - hear.

STIFFER PROPOSAL ON BANK CAPITAL  |  The Federal Deposit Insurance Corporation on Tuesday proposed stricter banking rules that, in a departure from a byzantine approach, aim for simplicity, DealBook's Peter Eavis writes. Focusing on capital, the financial cushion banks have to hold to absorb potential losses, the latest regulations raise that crucial requirement for the largest banks.

“This will increase the overall financial stability of the system,” said Thomas M. Hoenig, vice chairman of the F.D.I.C. “This is an advantage to the banks over the long run, and to the economy. I am confident of that.” But the latest push could meet fierce resistance. As outlined, the new capital requirements could be costly for the largest banks, which have 60 days to comment on the rules, Mr. Eavis says.

LIBOR'S NEW MASTER  | 
The parent company of the New York Stock Exchange won a contract on Tuesday to administer and improve the benchmark interest rate known as Libor, long run by the British Bankers' Association, handing the administration of a British institution to an American company. “The move is a symbolic blow to a British financial industry that has been rocked by scandals and forced to look to the outside for leadership,” Nathaniel Popper writes in DealBook. “The job of fixing Libor will not be an easy one. The benchmark is supposed to represent the rate at which banks lend money to each other on an unsecured basis. This is difficult given that banks have generally been unwilling to make unsecured loans to each other since the financial crisis.”

ON THE AGENDA  |  The Securities and Exchange Commission holds an open meeting at 10 a.m. to consider new rules about fund advertising that stem from the JOBS Act. Minutes from the recent meeting of the Federal Reserve's policy-making committee are released at 2 p.m. Yum Brands reports earnings after the market closes. Eliot Spitzer is on CNBC at 8:30 a.m. Laurence D. Fink of BlackRock is on Bloomberg TV at 10 a.m. John Legere, chief executive of T-Mobile USA, is on CNBC at 4:20 p.m. and on Bloomberg TV at 6 p.m.

EUROPEAN BANK PLAN, BUT GERMANY IS SKEPTICAL  |  “European Union officials are expected on Wednesday to unveil a detailed plan for dealing with failing banks, which will include centralized decision making and an emergency fund,” James Kanter writes in The New York Times. “But Germany's skepticism about giving authority to a group overseen by the European Commission, as well as other concerns, could bog the proposal down in months of rancorous negotiations.”

“On Wednesday, Michel Barnier, the commissioner overseeing financial services, is expected to call for consolidating decisions under a group supported by around 300 staff members and creating a pool of money funded by mandatory levies on banks. The system, which was described ahead of the formal announcement, would rely on the European Central Bank to signal when a financial institution in the euro area was facing severe difficulties.”

 

Mergers & Acquisitions '

Bumi Approaches a Deal to Split With Bakries  |  Bumi, “the Indonesian coal producer at the center of an ownership dispute, is close to completing a deal valued at more than $500 million to sever its ties with co-founders the Bakrie Group after relations soured,” Bloomberg News reports. BLOOMBERG NEWS

Kroger Buys Rival Grocer Harris Teeter, Citing Potential for Growth  |  Kroger, the nation's second-largest retailer, announced on Tuesday that it would buy Harris Teeter, an upscale grocer known for fresh foods and produce, in a deal valued at $2.5 billion. DealBook '

Investors Like Even Ho-Hum Mergers  |  The value of savings from combining Kroger and Harris Teeter equals about half the premium being paid. Yet investors added about $500 million to Kroger's market value, Robert Cyran of Reuters Breakingviews writes. REUTERS BREAKINGVIEWS

Health Management Said to Attract Prospective Buyers  |  Reuters reports: “Health Management Associates Inc. has attracted interest from Community Health Systems Inc. and other rivals about buying the $4 billion hospital operator, three people familiar with the matter said on Tuesday.” REUTERS

Barnes & Noble's Fork in the Road  |  With the departure of the chief executive, William Lynch, Barnes & Noble is left “without a clear path forward, reviving fears among publishers, authors and agents - who are deeply dependent on a viable Barnes & Noble - about its future,” The New York Times writes. NEW YORK TIMES

Shell's Choice for C.E.O. Surprises Investors  |  Royal Dutch Shell named Ben van Beurden to succeed Peter Voser as chief executive on Jan. 1, passing over some better-known candidates, The New York Times writes. NEW YORK TIMES

BlackBerry Chief Says Release of Phones in U.S. Was Flawed  | 
NEW YORK TIMES

INVESTMENT BANKING '

JPMorgan Review Said to Find Errors in Debt-Collection Suits  |  An internal review at JPMorgan Chase showed that “errors occurred as the bank sued its credit-card users for the delinquent amounts,” The Wall Street Journal reports. “The bank studied roughly 1,000 lawsuits and found mistakes in 9 percent of the cases, said people familiar with the review.” WALL STREET JOURNAL

A.I.G. and GE Capital Deemed ‘Systemically Important'  |  After the American International Group and GE Capital chose not to appeal the designation, the companies will now be subject to greater oversight. BLOOMBERG NEWS

With Assets Rising, UBS Reaches a Milestone  |  UBS is once again the largest private bank in the world, according to the wealth management consultant Scorpio Partnership, Reuters reports. REUTERS

Fannie Mae Said to Be Selling $1 Billion of Mortgage Bonds  |  Fannie Mae plans to sell home mortgage bonds without government backing, according to Bloomberg News. BLOOMBERG NEWS

Investors Continue to Withdraw Money From Municipal Bond Funds  | 
WALL STREET JOURNAL

PRIVATE EQUITY '

K.K.R. Raises $6 Billion Asian Fund  |  The private equity group's second regional fund ranks as the largest such fund to date and will seek to capitalize on rising demand among Asian consumers. DealBook '

HEDGE FUNDS '

A Label for Activist Investors That No Longer Fits  |  Studies have shown that “short-term” hedge funds can actually create long-term value for a company, Steven M. Davidoff writes in the Deal Professor column. Deal Professor '

F.B.I. Nominee Nods to Former Employer, Bridgewater  |  James B. Comey, President Obama's nominee for F.B.I. director, said he would “carry those values” from the hedge fund Bridgewater Associates, including transparency, and “try and spread them as far as I can within” the F.B.I., HedgeFund Intelligence reports. HEDGEFUND INTELLIGENCE

A Rough Month for Hedge Funds  | 
ABSOLUTE RETURN

I.P.O./OFFERINGS '

A Rush to Go Public in Japan  |  Even as I.P.O.'s slow down elsewhere in Asia, Japanese companies are coming to market in large numbers, spurred by the policies of Prime Minister Shinzo Abe that have fueled gains in the stock market, The Wall Street Journal writes. WALL STREET JOURNAL

VENTURE CAPITAL '

Flipkart, an Indian E-Commerce Site, Raises $200 Million  |  Flipkart raised the money from its existing investors, including Tiger Gobal and Accel Partners, The Economic Times reports. ECONOMIC TIMES

Satellite Antenna Company Raises $50 Million  |  Kymeta raised the financing round from investors including Bill Gates and Lux Capital, VentureBeat reports. VENTUREBEAT

Path Expands Use of Stickers, With Eye on Revenue  | 
CNET

LEGAL/REGULATORY '

Cyprus Currency Controls Stoke Worries About Euro System  |  “Tangled in restrictions imposed in March as part of a bailout for the country's ailing banks, a euro in Cyprus is no longer the same as one in France, Germany or Greece,” The New York Times writes. NEW YORK TIMES

U.S. Vows to Battle Abusive Debt Collectors  |  Federal regulators are cracking down on some of the nation's biggest banks and other lenders, accusing them of aggressive practices like hounding debtors with repeated phone calls. DealBook '

Lawyers in SAC Case Question Coverage of News Media  |  Lawyers for Michael S. Steinberg, a former portfolio manager at SAC Capital Advisors accused of insider trading, said coverage of the case had been extensive and biased, which they said raised the question of whether Mr. Steinberg could get a fair trial. DealBook '

The Unseen Costs of Cutting Law School Faculty  |  Cutting untenured faculty positions is shortsighted and encroaches on academic freedom, Victor Fleischer writes in the Standard Deduction column. DealBook '