Accounting Rules, Ex-AIG Chief Suit, FCA: Compliance

May 30, 2014 7:41 am ET

(Updates with Citigroup Mexico probe in Compliance Action. To be sent this column daily, click SALT COMPRPT.)

May 30 (Bloomberg) -- Companies worldwide will be asked to meet a unified accounting standard that will change the way some firms recognize revenue under a new rule.

The overseers of U.S. and worldwide accounting rules announced their coordinated approach May 28, saying it should give investors more confidence they are reading comparable revenue figures.

The rule replaces separate standards for the U.S. and other countries and will provide companies with common principles for booking revenue regardless of their industry.

Software, wireless and real-estate companies will probably report revenue earlier when the approach becomes effective in 2017, said Russell G. Golden, chairman of the Financial Accounting Standards Board, the U.S. standard setter. Asset managers will recognize some revenue later under the model, Golden said.

Compliance Policy

Singapore Companies to Apply International Reporting Framework

Companies listed on the Singapore Exchange will apply a new financial reporting framework identical to the International Financial Reporting Standards beginning in 2018, Singapore’s Accounting Standards Council said in a statement on its website.

The Singapore Exchange is expected to work closely with the council to engage Singapore-listed companies in the transition to the framework, according to the statement.

Compliance Action

Citigroup Mexico Probe Focuses on Changes to Loans Before Fraud

Mexican authorities are probing why Citigroup Inc.’s local unit boosted the size and length of loans to an oil-services firm in the months leading up to the discovery of a $400 million fraud, the nation’s chief banking regulator said.

Officials are examining a change Banamex made around September 2012 to extend due dates to about three months instead of three weeks, Jaime Gonzalez, head of the regulatory agency CNBV, said in an interview. He’s also looking into the decision by bank executives a year later to raise credit limits for Oceanografia SA, the oil-services firm at the center of the investigation, he said.

Mexico carried out an arrest warrant yesterday for Oceanografia Chief Executive Officer Amado Yanez in connection with the probe.

A Citigroup spokesman declined to comment on Gonzalez’s description of events. Yanez, reached by mobile phone, said he can’t discuss the case and declined to provide the name of an attorney representing him. There was no response to a message left for an investor-relations official at Oceanografia. Mexico’s Finance Ministry’s Asset Transfer and Administration Service took over supervision of that firm in February. A press office official there referred questions back to the bank regulator.

Courts

Ex-AIG Chief Greenberg Must Face N.Y. Suit Seeking Industry Ban

Maurice “Hank” Greenberg, the former chairman of American International Group Inc., lost a bid to throw out the New York attorney general’s 2005 lawsuit over alleged sham transactions from 2000 and 2001 intended to inflate the insurer’s financial health.

Former Attorney General Eliot Spitzer’s pursuit of the matter forced Greenberg to step down from AIG in 2005. Manhattan Supreme Court Justice Charles Ramos ruled May 28 that the case can proceed to trial.

Greenberg, 89, argued that the lawsuit was invalid after a court approved the $115 million settlement of a shareholder class action against him and former AIG Chief Financial Officer Howard Smith, and the state attorney general’s office subsequently dropped a claim for damages in its suit.

Greenberg and Smith sought dismissal on the grounds that the state’s case had changed too much.

New York’s current attorney general, Eric Schneiderman, is still seeking to have the men barred from the securities industry or serving as directors or officers of a public company.

Lawyers for Greenberg and Smith said they will appeal the ruling.

The case is State of New York v. Greenberg, 401720-2005, New York State Supreme Court, New York County (Manhattan).

Interviews/Studies

FCA’s Wheatley Says Scandals Must Not Blight Innovation

Martin Wheatley, chief executive officer of the U.K.’s Financial Conduct Authority, discussed trading-activity regulation, rate rigging, bank bonuses and the British economy.

He spoke with Guy Johnson and Olivia Sterns on Bloomberg Television’s “The Pulse.”

For the video, click here.

Exchanges Can Ruin High-Speed Trading Benefits, Study Finds

Exchanges risk making it harder for investors to get the best price by facilitating ever-faster trading, according to academics who examined Nasdaq OMX Group Inc. venues.

When Nasdaq sped up its markets in Copenhagen, Helsinki and Stockholm in 2010 by introducing its INET software platform, it spurred a race for profits among high-frequency traders, according to the report from VU University Amsterdam’s Albert Menkveld and his student, Marius Zoican. That competition reduced earnings. To compensate, the traders widened the spread between prices they were willing to pay to buy and sell shares, making it more expensive for most investors to trade stocks.

Peter Nabicht, a spokesman for the Modern Markets Initiative, a lobbying group made up of high-frequency traders, said in March that the industry lowers the cost of trading.

A spokesman for Nasdaq OMX declined to comment on the study.

--With assistance from Christie Smythe in Brooklyn, Dave Michaels in Washington, Khalid Qayum in Singapore, Jonathan Morgan in Frankfurt, Dakin Campbell in New York and Ben Bain in Mexico City.