March Update: Essential News

20/20 hindsight
Texan cricket mogul Robert Allen Stanford has been charged by the Securities and Exchange Commission with perpetrating an $8bn fraudulent investment program. Selling ‘certificates of deposit’ to investors, Stanford “promised improbable and unsubstantiaObama stimuted high interest rates" supposedly earned through Antigua-based Stanford International Bank’s investment strategy which, it claimed, garnered double-digit returns for the past 15 years. Stanford ran the Stanford 20/20 Tournament in 2008, offering $20m – the highest team prize ever for a single sporting match. James Davis, chief financial officer of SIB, and Laura Pendergest-Holt, chief investment officer of Stanford Financial Group, have also been charged.

Survivors?
Shares in Barclays moved north a touch on the day it announced its 2008 full-year, pre-tax profits had shrunk by 14% to just over £6bn. It says it took a hit of £5.4bn on charges relating to bad debt such as sub-prime mortgages. Chief executive John Varley says Barclays executive directors will not receive any bonuses. “For 2009 and beyond, we are reviewing our compensation," he says.

New FSA COO
The Financial Services Authority hired Mark Norris as its new chief operating officer, with responsibility for all aspects of finance, planning, HR and project management, facilities and information systems. He was previously head of European operations for Deutsche Bank's asset management business in London and replaces David Kenmir. Norris’s early career included audit services roles at KMG Thomson McLintock (now KPMG) and Price Waterhouse (PwC).

Shouldn't have gone to Iceland
Baugur Group secured a moratorium allowing it a period of review with temporary suspension of payments, until 4 March 2009. The process enables the company to facilitate a financial and operational restructuring in co-operation with its c reditors in order to protect the interests of shareholders and the value of the company’s assets. PricewaterhouseCoopers has been appointed administrator of its UK holding company, BG Holdings, which holds its stakes in several high-profile UK holdings, including Iceland, Hamley’s and House of Fraser.

Suppliers dropping clients
Almost one-third of companies have dropped their highest-risk supply contracts to protect themselves from possible insolvencies. According to a study by Ernst & Young, 31% said they had cancelled contracts with high-risk customers, while 46% say they have had to narrow their supplier base to obtain more favourable terms – and 42% have broadened their supplier base to reduce the impact of the failure of an individual supplier, E&Y said.

US adds Zeroes
President Barack Obama got his $789.5bn economic stimulus package approved by Congress and signed it into law. Obama’s additional $2 trillion plan to buy up so-called toxic assets from banks and jumpstart the credit markets, unveiled in mid-February, is yet to receive congressional approval, but was said by The Wall Street Journal to have been badly received by the investor community because of its lack of detail.

TECHNICAL UPDATE
Pensions
The Pensions Regulator responded to employer worries about the pressures they are under to make up final salary scheme deficits at a time when businesses are already under pressure. In a statement that has been welcomed by PricewaterhouseCoopers and the National Association of Pension Funds, TPR said that “there is potential to renegotiate previously agreed plans to repair scheme deficits”, adding that trustees should be in a position to understand what is reasonably affordable.

Financial reporting
The International Public Sector Accounting Standards Board issued a consultation paper on the conceptual framework for financial reporting by public sector entities. The UK Accounting Standards Board commented that it was concerned at the “very broad view of the boundaries of financial reporting” but agreed with the notion that “accountability” should form part of the objective.

Corporate governance
The government has asked Sir David Walker to examine corporate governance in the UK banking sector and, in particular, board-level risk management, including the link between remuneration and risk. In 2008, Walker, a senior adviser at Morgan Stanley, reported on standards of disclosure in the private equity sector.