James Moore: No one-way street with US regulators

It is clear that the US approach to regulatory reform is not entirely even-handed

Once again it seems that Wall Street has done the dirty on Main Street. Securities regulators in Massachusetts have fined and censured Morgan Stanley for conspiring to conceal some rather important facts about Facebook's finances ahead of the year's biggest and most hyped flotation from retail investors. Facts that they were careful to make known to analysts at the syndicate of banks underwriting the share offer. For this Morgan Stanley has agreed to pay the princely sum of $5m.

That might sound like a lot, but for a Wall Street bank it has about as much impact as a parking ticket does on most ordinary people. Rather less, in fact. That $5m probably won't even cover the annual bonus to the banker who handled the float and who is featured (but not named) in the regulators' statement.

The work of William Galvin, Massachusetts' chief securities watchdog, who imposed the fine, has drawn a certain amount of comment recently. It has been said he's taking a tough line on selective disclosure of information to analysts and he recouped $2m from Citigroup in October after filing similar charges. More parking tickets are promised.

Of course, Facebook was primarily handled by American banks. What would have happened if the lead underwriter had been Deutsche Bank, or Credit Suisse, or even Barclays? Another parking ticket? Or something more like wheel clamps?

It is already quite clear that the United States approach to regulatory reform in the wake of the financial crisis is not entirely even-handed. American regulators saw what Lehman Brothers did to its London subsidiary on the eve of its collapse, sweeping up all the available cash so that the Bank of England had to provide an emergency loan to handle redundancy payments. As a result they have imposed additional capital requirements on big foreign banks, such as Deutsche, so they can't do the same thing in reverse, putting them at a competitive disadvantage to the "home team".

It will be interesting to see if the fining behaviour of US regulators is similarly biased.

There's a certain nervousness among US banks that the (entirely justified) mega-penalties imposed on miscreant European banks by the US might spark retaliatory European strikes on them if any such bias is detected. Assuming, of course, that Europeans can dig up similar skeletons in their closets. You can probably bank on that.

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