|
 Kara Stein, a Democratic SEC commissioner who has recently demanded
more accountability for big banks who break the law, was the sole
dissenting vote on Monday on the temporary waiver, according to a
document made public this week.
BNP's application was granted the same day that BNP, France's
largest bank, pleaded guilty to criminal charges it violated U.S.
sanctions and agreed to pay a $9 billion penalty.
The temporary waiver will become permanent, unless an "interested
person" in the matter is granted a hearing. The deadline for
requesting a hearing is July 25.
The New York state banking regulator, Benjamin Lawsky, on Monday
separately decided not to pull BNP's banking license in the state,
in spite of its criminal guilty plea, partly because of the risk it
could put BNP out of business.
Stein's dissenting vote is part of a larger pushback among some
enforcement authorities and lawmakers who have increasingly
questioned whether big financial firms are getting off too easily
for their misdeeds, especially those who are repeat offenders.
In recent months, financial penalties against banks have soared into
the multi-billions of dollars, and authorities are experimenting
with unprecedented penalties, such as a temporary ban that was
placed on BNP's dollar-clearing operations. A spokeswoman for BNP
Paribas declined to comment on the dissenting vote by Stein because
the application for a permanent waiver is still pending.
BNP argued in an SEC filling why the waiver should be granted.
Regarding its Hawaii-based advisory firm, BNP said it is a
"relatively small state" where its 12 employees would experience
"great difficulty" finding new jobs. Denying the waiver would force
the advisers to end relationships with third-party funds and hurt
the expansion of its business, disrupting "highly valued long-term
client relationships," the bank said.
Federal securities laws contain so-called "bad actor" provisions
which automatically disqualify companies and individuals from
participating in certain activities, such as raising private capital
or acting as an investment adviser.
Companies who trigger the bad actor provisions, however, are
generally allowed to apply to the SEC for a variety of waivers to
avoid disrupting their business.
The type of waiver that BNP is seeking -- to keep operating three
investment advisers it owns or has a stake in -- is rarely denied by
the SEC, because such a move could risk destabilizing financial
firms.
Robert Plaze, a former deputy director with the SEC's investment
management division who is now a partner with Stroock & Stroock &
Lavan LLP in Washington, said failing to grant these kinds of
waivers would be like a "nuclear weapon" because it would send
mutual funds scrambling to find new investment advisers.
It is a "death sentence to a fund manager with implications for the
fund investors," Plaze said.
VOCAL CRITIC
Stein did not offer any explanation for her vote and declined to
comment to Reuters. However, she has become a vocal critic in recent
months about how the SEC has in general doled out a variety of
regulatory waivers to big banks that have broken the law. In April,
Stein dissented over a different kind of waiver granted to the Royal
Bank of Scotland Group Plc, after one of its units pleaded guilty to
manipulating the Libor benchmark interest rate.
[to top of second column] |
That waiver allowed the bank to keep its status as a "well-known
seasoned issuer" or WKSI -- a tag that lets companies more easily
raise additional capital without seeking SEC approval first.
Stein has said the SEC has made it a habit to grant waivers, a
pattern that may be enshrining a new policy "that some firms are
just too big to bar." Her criticism has since touched a nerve among
some Democratic lawmakers who have called on the SEC to stop being
so quick to grant waivers.
It's highly unlikely that the SEC will do an about-face and deny BNP
a permanent waiver, Plaze said.
Although there is the opportunity for a hearing, Plaze said such
hearings are rarely even granted, either because the entity pursuing
the hearing doesn’t have standing, or because the issues raised are
not germane.
The SEC defines "interested person" as someone who has an ownership
interest in the company applying for the waiver and who can show it
is likely to be harmed if the waiver is granted.
Trade associations could potentially meet the definition, though
interest groups face a steep hurdle.
In a late ‘90s case involving the Chase Manhattan Bank and Chemical
Bank, for instance, a group called the Inner City Press/Community on
the Move requested a hearing on a waiver application.
The group alleged that the bank had made misleading public
statements about its merger, but the SEC denied the request because
it "failed to demonstrate" it was an interested person.
The three investment advisers that BNP owns or has a financial stake
in are Fischer Francis Trees & Watts, Bishop Street Capital
Management Corp and Impax Asset Management Ltd.
According to data from Lipper, a unit of Thomson Reuters, Bishop
Street advises about half a dozen mutual funds including the Bishop
Street Hawaii Municipal Bond Fund and the Bishop Street Dividend
Value Fund.
Some of the other entities, such as Impax, serve as sub-advisers to
mutual funds, which are typically hired to oversee day-to-day
portfolio management. Impax is a sub-adviser for PAX World Global
Environmental Markets Fund, which has about $186 million under
management, according to Lipper.
[© 2014 Thomson Reuters. All rights
reserved.] Copyright
2014 Reuters. All rights reserved. This material may not be
published, broadcast, rewritten or redistributed. |
