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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.

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