DealBook: British Regulator Plans New Rules for Payday Lenders

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DealBook: New Embarrassment for British Regulator

DealBook: Energy Regulator Details Case Against JPMorgan

European Regulator Finds Little Risk in Diabetes Drugs

Regulators in Europe have concluded that there was little evidence that widely used drugs to treat Type 2 diabetes could cause pancreatic inflammation or pancreatic cancer, a finding that might reassure patients while also removing a potential sales threat for Merck and some other drug companies.

“Presently available data do not confirm recent concerns over an increased risk of pancreatic adverse events with these medicines,” the European Medicines Agency said in a news release on Friday.

Both the European agency and its American counterpart, the Food and Drug Administration, have been reviewing the safety of a big class of drugs that includes Merck’s Januvia and the drugs Byetta, Bydureon and Onglyza, which are sold by Bristol-Myers Squibb and AstraZeneca.

The F.D.A. has not yet released its conclusions.

The concerns have been raised over the last few years mainly by Dr. Peter Butler, the chief of endocrinology at the University of California at Los Angeles. Dr. Butler has been hailed by some drug safety watchdogs as a hero for standing up to the drug companies but criticized by many diabetes experts as a zealot.

In his latest study, the one that triggered the reviews, Dr. Butler and colleagues examined the pancreases from 34 organ donors, some with diabetes and some without, who had died from causes other than diabetes. They found that the pancreases of the people who had used Januvia or Byetta tended to have more signs of inflammation and precancerous cellular changes than the pancreases from diabetics who had not taken those drugs and those from nondiabetics.

But the European Medicines Agency said Friday that the study had “a number of methodological limitations and potential sources of bias.” The donors who had taken Januvia or Byetta were older and had diabetes for far longer than the diabetics who had not taken the drugs, making it difficult to draw conclusions on the possible effects of the drugs.

The agency said the prescribing information for the drugs already contained warnings about pancreatic inflammation, known as pancreatitis. It said clinical trials had shown no increased risk of pancreatic cancer, though that the trials were too small to draw firm conclusions. It said “some uncertainties remain’’ regarding the long-term effects of the drugs, but much larger trials are under way to answer those questions.

The drugs involved, which the F.D.A. calls incretin mimetics and the European agency calls GLP-1-based therapies, effectively increase the body’s levels of a hormone called glucagon-, like peptide-1, which helps control blood sugar levels. Some of the drugs, known as GLP-1 agonists, mimic the effect of the hormone, while others, known as DPP-4 inhibitors, slow the breakdown of the body’s own hormone.

Collectively, the drugs had more than $9 billion in global sales last year, led by Merck’s Januvia and a related drug, Janumet, which together had sales of $5.7 billion. Other drugs include Victoza from Novo Nordisk and Tradjenta from Eli Lilly and Boehringer Ingelheim.

DealBook: Wall Street Regulator Ramps Up Enforcement

Alex Wong/Getty ImagesThe Commodity Futures Trading Commission is still pursuing a civil case against MF Global, the brokerage firm that was led by Jon S. Corzine.

Wall Street’s smallest watchdog is starting to show its fangs.

The Commodity Futures Trading Commission, once considered a toothless regulator, brought a record number of enforcement cases over the past year, as fines soared. In a statement on Friday, the agency said it levied $585 million in sanctions during its 2012 fiscal year, which ended Sept. 30, up from $450 million the year before.

The surge in fines is largely tied to one case. In June, the British bank Barclays agreed to pay $200 million to the agency for trying to manipulating a crucial interest rate.

“We pursue unlawful conduct to protect market participants and promote market integrity,” David Meister, the agency’s enforcement chief, said in a statement.

Under Mr. Meister, the agency’s enforcement unit has been revamped. It won broad new powers from the Dodd-Frank act, the regulatory overhaul law passed after the financial crisis, allowing the agency to police the previously unregulated swaps market. The law also lowered the burden of proof in court, making it easier to bring cases.

Dave Cross PhotographyDavid Meister, the enforcement chief for the Commodity Futures Trading Commission.

Armed with its new tools, the trading commission brought 102 enforcement actions during the last fiscal year, a best for the agency, which had a slight uptick over 2011 and a nearly 80 percent jump from two years ago. The agency also has a deep pipeline of potential cases, after the enforcement team opened more than 350 new investigations.

The agency’s cases traditionally took aim at little-known brokerage firms and traders suspected of manipulating commodity prices or orchestrating Ponzi schemes. But the agency raised the stakes this year as it dug into some of Wall Street’s most prominent blowups, including the downfall of MF Global and the multibillion-dollar trading loss at JPMorgan Chase.

Still, the agency faces steep challenges. Congress, for example, is crusading to cut its budget.

The MF Global case, more than any other Wall Street transgression, also hangs heavy over the agency. When the brokerage firm collapsed in October last year, its customers saw more than $1 billion of their money disappear. A criminal investigation turned up no evidence of wrongdoing among the firm’s top executives, but the trading commission is still pursuing a civil case.

The rate-rigging investigation appears more promising. After a four-year investigation, the agency scored a settlement with Barclays in June, producing the largest fine in the trading commission’s nearly 40-year history.

The case is the first of several expected actions against some of the world’s biggest banks. The banks are suspected of manipulating the London interbank offered rate, or Libor, to squeeze out extra profits and deflect concerns about their health during the financial crisis.

Mr. Meister on Friday praised his team’s progress. “I applaud the staff for their hard work and dedication to the task, and am honored to work alongside them,” he said.

DealBook: British Regulator Unveils Libor Overhaul

Carl Court/Agence France-Presse — Getty ImagesMartin Wheatley, managing director of Britain’s Financial Services Authority, said London’s reputation as a global center for financial services had been tarnished by the Libor scandal.

LONDON – A leading British regulator officially unveiled the government’s plan to overhaul the rate at the center of the manipulation scandal, but conceded that problems could still persist.

On Friday, Martin Wheatley, the managing director of the Britain’s Financial Services Authority, the British regulator, acknowledged that regulators should have stepped in sooner to fix the problems with the London interbank offered rate, or Libor. He also confirmed the broad strokes of the proposal, which came after a three-month review.
British authorities, which will provide more oversight, want to make it a criminal offense to alter the rate for financial gain. They also plan to implement new auditing systems to ensure traders cannot unfairly profit from small changes to Libor.

“There’s always a possibility for collusion,” Mr. Wheatley told an audience at Mansion House, the 260-year-old home to the lord mayor of London that is adorned with gilded statues and chandeliers. “But under the new regulatory structure, people would be taking a high risk.”

The proposed changes come amid an investigation into potential rate-rigging at big global banks like HSBC, UBS and JPMorgan Chase. In June, the British bank Barclays agreed to pay $450 million to settle allegations that some of its traders tried to manipulate Libor for financial gain. The firm was also accused of understating its rates submissions to make the bank appear healthier during the financial crisis.

Mr. Wheatley, who will lead the Financial Conduct Authority, a new British regulator that will become part of the Bank of England next year, said London’s reputation as a global center for financial services had been tarnished by the recent scandal.

In response, the country’s authorities have stripped the British Bankers’ Association, the London-based trade body that currently oversees Libor, from its powers to control the rate. A new administrator will be appointed over the next 12 months.

Organizations will be able to start pitching for the position next week. The data providers Bloomberg and Thomson Reuters, which collects the daily Libor submissions on behalf of the British Bankers’ Association, as well as NYSE Euronext have expressed interest in taking on the role. Users of Libor will still pay for the financial information, Mr. Wheatley said on Friday.

Regulators are aiming to improve the accuracy and reliability of Libor, which measures the rate at which banks lend to each other. To do so, they want banks to base the rate submission on actual market transactions whenever possible.

As part of that effort, authorities are planning to focus on fewer markets that are the most liquid. Five of the current 10 currencies, including the Swedish krona and Canadian dollar, will be removed over the next 12 months. The number of rates also will be reduced to 20, from 150.

British regulators will take a more hands-on approach with the rate. They plan to audit banks’ daily Libor submissions to avoid rate manipulation.

Even so, Libor will not be immune to manipulation. Because of limited interbank lending activity, Mr. Wheatley said, sometimes the rates would have to be based on a level of judgment from banks on what interest rates they would be able to secure from other firms.

“There’s still a risk,” he said.