Watchdog: Auditors' tests of internal controls are inadequate | Accounting's Big 4 is called into question in U.K., China | U.S. Treasury will sell its last shares of AIG
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11 December 2012
CFA Institute: Financial NewsBrief
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Watchdog: Auditors' tests of internal controls are inadequate
The Public Company Accounting Oversight Board said it discovered that Big Four and second-tier audit firms are failing to adequately test companies' internal financial controls in some audits. The U.S. government's audit watchdog said it found the problem more often in 2011 than in 2010. Reuters (10 Dec.)
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Accounting's Big 4 is called into question in U.K., China
Controversies in the U.K. and China raise troubling questions about the practice of mixing accounting, auditing and consulting by the Big Four accounting firms, according to The Economist. "The Big Four claim that their global scale and multidisciplinary scope are good things," the magazine notes. "...But the events of the past few weeks show there are perils, too, in trying to have the best of all worlds." The Economist (free content) (08 Dec.)
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U.S. Treasury will sell its last shares of AIG
The U.S. Treasury Department plans to sell its remaining 15.9% equity stake in American International Group. After selling 234 million shares, the government will still hold an undisclosed number of warrants but will cease to be an owner of the company. The transaction closes the books on one of the largest and most fiercely criticized bailouts of the financial crisis. Los Angeles Times (tiered subscription model) (11 Dec.), Bloomberg (10 Dec.)
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Aides: Deal to avert "fiscal cliff" starts to take shape
President Barack Obama and U.S. House Speaker John Boehner have proposals on the table to avert the "fiscal cliff" and the broad outlines of a possible compromise are emerging. New tax revenues would be raised from the wealthy and cuts to health and retirement programs would reduce spending, senior aides said. Across-the-board cuts to federal agency spending would provide additional savings, they said. The Washington Post (tiered subscription model) (10 Dec.), Reuters (11 Dec.), The Hill/On The Money blog (10 Dec.), San Jose Mercury News (Calif.) (free registration)/The Associated Press (10 Dec.)
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Prosecutors reportedly expand insider-trading inquiry
Prosecutors and securities regulators are broadening investigations into corporate executives' trading of their own companies' shares, a person familiar with the matter says. The Manhattan U.S. Attorney's Office is looking into whether seven executives mentioned in a Wall Street Journal story engaged in improper trading. The Securities and Exchange Commission is reviewing trading by VeriFone Systems CEO Douglas Bergeron. The Wall Street Journal (tiered subscription model) (10 Dec.)
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"Fiscal cliff" uncertainty leaves Asian-Pacific markets mixed
Stock markets were mixed Tuesday in Asia-Pacific as "fiscal cliff" talks in the U.S. encouraged traders. Japan's Nikkei 225 was nearly flat. Hong Kong's Hang Seng Index edged up 0.2%. China's Shanghai Composite declined 0.4%. Australia's S&P/ASX 200 climbed 0.4%. India's Sensex slipped 0.1%. The Economic Times (India) (26 Feb.), The Wall Street Journal (tiered subscription model) (11 Dec.)
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Political upheaval drives down Italian bonds and stocks
Prices of Italian stocks and bonds declined Monday as investors, fearing more political instability, dumped holdings. Some of the biggest declines came from major banks, which have large holdings of government debt. The New York Times (tiered subscription model) (10 Dec.), Bloomberg (10 Dec.)
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Economics
U.S. will become No. 2 economy by 2030, study says
U.S. dominance in the world will end before 2030 -- the nation will become the second-biggest economy, behind China -- but the country will benefit from energy independence, according to a study by the National Intelligence Council. "There will not be any hegemonic power," the report says. "Power will shift to networks and coalitions in a multipolar world." The New York Times (tiered subscription model) (10 Dec.), Politico (Washington, D.C.) (10 Dec.), CNN/Security Clearance blog (10 Dec.)
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U.K. and U.S. growth is picking up, OECD says
Economic expansion is accelerating in the U.K. and the U.S., and growth might pick up in Italy and China, according to the Organization for Economic Cooperation and Development. The OECD expects weak growth in Germany, France and the broader eurozone, as well as Canada, Japan and Russia. Reuters (10 Dec.)
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Economic imbalance could trigger currency wars, King says
Bank of England Governor Mervyn King warned that failure to balance economies could lead to countries devaluing currencies to increase growth. "The need to rebalance is not confined to those countries that had large trade deficits," he said. "The contrast between the deficit and surplus countries is one overshadowing us all." The Telegraph (London) (tiered subscription model) (11 Dec.)
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Chinese bank lending falls short of forecasts
Yuan-denominated loan origination last month in China fell short of economists' expectations. The People's Bank of China says banks issued $84 billion in loans. Economists surveyed by Bloomberg News had expected $88 billion. Bloomberg (11 Dec.), Reuters (11 Dec.)
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Clients want advisers to utilize "Medicaid planning"
Financial advisers are increasingly getting requests from clients to transfer assets to children so they can qualify for Medicaid, a health program by the U.S. government. Of 500 advisers surveyed by Nationwide Financial, half have a client considering "Medicaid planning." Reuters (07 Dec.), InvestmentNews (free registration) (07 Dec.)
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Geopolitical/Regulatory
ECB bank-supervision plan is adjusted to address German objections
In a proposed compromise to assuage German concerns, only eurozone banks with assets exceeding €30 billion would fall under daily supervision of the European Central Bank. The offer, from EU president Cyprus, aims to smooth the way for agreement by leaders meeting this week on an initial step toward a banking union. The proposal, however, would allow the ECB to intervene in smaller banks under some circumstances. Reuters (10 Dec.)
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ASIC continues investigating October trading spike
The Australian Securities and Investments Commission is trying to determine whether a trading spike in October was caused by market manipulation. The commission has ruled out a faulty algorithm or an accidental, "fat finger" trade. The Sydney Morning Herald (Australia) (11 Dec.)
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Financial Products
SSgA readies 2 low-volatility index ETFs
State Street Global Advisers filed with the Securities and Exchange Commission to launch two exchange-traded funds linked to indexes of low-volatility stocks. The SPDR Russell 1000 Low Volatility ETF would be linked to an index about 200 low-volatility equities, and the SPDR Russell 2000 Low Volatility ETF would track an index of about 400 low-volatility stocks. IndexUniverse.com (07 Dec.)
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Ethics
HSBC settles U.S. money-laundering case for $1.9B
U.S. state and federal authorities announced that HSBC Holdings will pay $1.9 billion to settle allegations of large-scale money laundering, including sending funds to Iran and allowing Mexican drug cartels to transfer money through American affiliates. The U.K. banking giant was not indicted to avoid destabilization of the global financial system. The New York Times (tiered subscription model)/DealBook blog (10 Dec.), The Guardian (London) (10 Dec.), Bloomberg (10 Dec.)
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