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Fed cracks down on top officials’ trading in bid to end ethics scandal

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October 21, 2021

By Howard Schneider and Ann Saphir

WASHINGTON (Reuters) -The Federal Reserve on Thursday banned individual stock purchases by its top officials and unveiled a broad set of other restrictions on their investing activities, taking action roughly six weeks after reports of active trading by some U.S. central bank policymakers triggered an ethics uproar.

The new rules will limit the types of financial securities the Fed’s top officials can own, including a ban on purchasing individual stocks or holding individual bonds and agency-backed securities. It also requires a 45-day advance notice and approval of any transaction and stipulates investments be held for at least a year.

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“These tough new rules raise the bar high in order to assure the public we serve that all of our senior officials maintain a single-minded focus on the public mission of the Federal Reserve,” Fed Chair Jerome Powell said in a statement.

In the statement, the Fed said the new rules were meant to “help guard against even the appearance of any conflict of interest in the timing of investment decisions.”

The new rules were announced after two of the 12 regional Fed bank presidents – the Boston Fed’s Eric Rosengren and the Dallas Fed’s Robert Kaplan – resigned after reports of their active trading in 2020 https://www.reuters.com/business/finance/boston-feds-rosengren-citing-worsening-kidney-condition-retire-sept-30-2021-09-27, when the central bank launched a massive effort to fight the economic impact of the COVID-19 pandemic. The Fed’s efforts helped buoy financial markets on a broad basis.

Active trading by top Fed officials will now be expressly prohibited, with purchases limited to investments like mutual funds, and all transactions vetted in advance by the central bank’s ethics officer.

Officials can continue to hold individual stocks that they owned when they took office, but would be subject to the one-year holding period and the advance notice of any sales.

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But the new rules will force officials, including Powell, who owns several state and county government-issued securities, to divest individual bonds that they hold.

In times of declared financial stress, such as occurred at the start of the coronavirus pandemic, all transactions will be prohibited.

Atlanta Fed President Raphael Bostic, speaking on CNBC, said he hoped the steps announced on Thursday would let the Fed put the ethics controversy to rest and refocus on coming policy debates.

“I am hopeful that swift action will put this behind us,” Bostic said.

To the Fed’s sharpest critics on the issue, however, the new rules were a start, but with more still needed in particular to understand whether trading through the pandemic year by different officials violated any laws.

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The new regulations are “a very important step forward in restoring the Fed’s reputation,” said Andrew Levin, a professor at Dartmouth College. But along with an existing investigation by the Fed’s inspector general of prior trading activity, he said the central bank should call on the U.S. Department of Justice and U.S. Securities and Exchange Commission to examine what happened.

Perhaps unique among U.S. government officials, Fed policymakers not only influence the fate of individual companies or economic sectors, like other regulators, but have the power to lift asset values far more broadly – a fact that made their trading last year a lightning rod.

Beyond the resignations of Rosengren and Kaplan, Powell and Fed Vice Chair Richard Clarida had been criticized for what, in other times, would have been treated as innocuous transactions involving, for example, stock index funds.

In the context of the economic crisis triggered by the pandemic, however, the disclosures drew demands from leaders in Congress for tougher oversight, and clouded Powell’s bid for a second term as Fed chief.

The new rules could head off those demands and dampen the criticism.

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When asked about the Fed’s new rules on trading, a White House spokeswoman said President Joe Biden’s administration respected the independence of the central bank and would not comment on recent developments.

“President Biden believes that all government agencies, and officials, including independent agencies, should be held to the highest ethical standards, including the avoidance … of any suggestions of conflicts of interest,” she said.

Gregory Daco, chief U.S. economist for Oxford Economics, said the quick toughening of ethics rules “work in his favor,” with the nomination still likely his to lose.

FOCUS ON REGIONAL BANKS

However, the issue is unlikely to fully fade, particularly with open questions about whether trading by Kaplan and Rosengren had been reviewed at all by ethics officers at their banks or at Fed’s Washington-based Board of Governors.

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The 12 regional Fed banks are quasi-private institutions, not subject for example to the federal Freedom of Information Act, and the selection and oversight of their presidents a subject of frequent calls for reform.

The ethics controversy has renewed those demands, as well as a call for a broader release of any documents detailing whether Kaplan, for example, had advance approval for his multiple sales and purchases of individual stocks.

“This should be the beginning of a comprehensive investigation in what’s going on at the board and the reserve banks, not the end,” said Aaron Klein, a senior fellow for the Brookings Institution.

A New York Times report earlier on Thursday said that ethics officials in March 2020 had cautioned Fed policymakers about personal securities trading as the central bank geared up for what became a massive and wide-ranging effort to battle the pandemic and keep the economy and asset markets from crashing.

The Times said it had confirmed the substance of a March 23 email from the Fed’s main ethics office, ultimately distributed through the system and to all the regional bank presidents, advising against what the newspaper characterized as unnecessary trading given the central bank’s developing crisis response.

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Over the weeks to come the Fed would launch programs that touched virtually every asset market and even offered credit to individual businesses.Following the Times story, U.S. Senator Elizabeth Warren, a Democrat, wrote to Powell asking that the correspondence from the ethics office be released. Warren has been among Powell’s harshest critics, and in a recent hearing dubbed him a “dangerous man” for what she regards as inadequate Fed oversight of the banking industry. She opposes his appointment to a second term as Fed chief.

(Reporting by Howard Schneider and Ann Saphir; Additional reporting by Jonnelle Marte and Karen PierogEditing by Howard Goller and Paul Simao)

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Tesla sold 52,859 China-made vehicles in November – CPCA

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December 8, 2021

BEIJING (Reuters) – U.S. electric vehicle maker Tesla Inc sold 52,859 China-made vehicles in November, including 21,127 for export, the China Passenger Car Association (CPCA) said on Wednesday.

Tesla, which is making Model 3 sedans and Model Y sport-utility vehicles in Shanghai, sold 54,391 China-made vehicles in October, including 40,666 that were exported.

Chinese EV makers Nio Inc 10,878 cars last month, a monthly record high, and Xpeng Inc delivered 15,613 vehicles. Volkswagen AG said it sold over 14,000 ID. series EVs in China in November.

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CPCA said passenger car sales in November in China totalled 1.85 million, down 12.5% from a year earlier.

(Reporting by Sophie Yu, Brenda Goh; editing by Jason Neely)

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Renault Zoe goes from hero to zero in European safety agency rating

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December 8, 2021

By Nick Carey

LONDON (Reuters) – French carmaker Renault on Wednesday received a blow for its popular Zoe electric model, as the European New Car Assessment Programme (NCAP) gave it a zero-star safety rating in tests that are standards for Europe.

The carmaker, which is cutting costs and working to turn around its performance after overstretching itself over years of ambitious global expansion, also received a one-star rating for its electric Dacia Spring model.

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Euro NCAP said the latest Zoe had a worse seat-mounted side airbag than earlier versions. Euro NCAP noted the Renault Laguna had been the first car ever to receive a five-star rating in 2001.

“Renault was once synonymous with safety,” Euro NCAP secretary general Michiel van Ratingen said in a statement. “But these disappointing results for the ZOE and the Dacia Spring show that safety has now become collateral damage in the group’s transition to electric cars.”

In the year through October, the Zoe was the third top-selling fully-electric car in Europe, behind Tesla’s Model 3 in top place and Volkswagen’s ID.3.

In a press release titled “Hero to Zero,” UK insurance group Thatcham Research noted the Zoe had initially received a five-star rating back in 2013.

“It’s a shame to see Renault threaten a safety pedigree built from the inception of the rating,” said Matthew Avery, Thatcham’s chief research strategy officer and a Euro NCAP board member.

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Eleven cars received ratings in Euro NCAP’s final round of tests for 2021, which did not include Tesla models.

A number of other vehicles received five-star ratings, including BMW’s electric iX, Daimler’s electric Mercedes-Benz EQS, Nissan’s Qashqai and Volkswagen’s VW Caddy.

(Reporting By Nick Carey; Editing by Bernadette Baum)

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Weibo shares close down 7.2% in Hong Kong debut

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December 8, 2021

By Scott Murdoch

HONG KONG (Reuters) -Chinese social media giant Weibo Corp’s shares closed 7.2% below their issue price in Hong Kong on Wednesday, as it became the latest U.S.-listed China stock to seek out a secondary listing closer to home.

The Hong Kong debut was in line with a fall in Weibo’s primary listing in New York after a torrid week for U.S.-listed China shares, which are facing greater U.S. regulatory scrutiny and also under pressure from Chinese authorities.

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Weibo, which raised $385 million for its Hong Kong listing, opened at $256.20 and closed at HK$253.2 after a volatile debut session.

The stock had been priced at HK$272.80 each in its secondary listing in which 11 million shares were sold.

“For Weibo, it’s a matter of timing. The Hong Kong market had started to rebound this week and now we are seeing some softness emerging in the market,” said Louis Tse, Wealthy Securities director in Hong Kong.

Weibo’s fall came as Hong Kong’s Hang Seng Index closed Wednesday up 0.06% while the Tech Index was 0.03% higher.

Some major stocks such as Alibaba Group Holdings, down 4.35%, were off sharply as sentiment towards tech majors remains fragile.

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“The listing market in Hong Kong is very lukewarm right now,” said Dickie Wong, Kingston Securities executive director.

“Plus, there is regulatory pressure from the (U.S. Securities and Exchange Commission) on Chinese companies to disclose basically everything within three years.

“So there is a major trend that most of the U.S.-listed Chinese companies will seek secondary or dual primary in Hong Kong so they can exit the U.S. market if they need to.”

Ride-hailing giant Didi Global decided last week to delist from New York https://www.reuters.com/technology/didi-global-start-work-delisting-new-york-pursue-ipo-hong-kong-2021-12-03, succumbing to pressure from Chinese regulators concerned about data security and denting sentiment toward Chinese stocks.

Hong Kong and China’s mainland STAR Market have attracted $15.2 billion worth of secondary listings from U.S. listed Chinese companies so far this year, according to Refinitiv data.

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“The moves are probably based on the increasing recognition that the U.S.-China decoupling will not stop and will proceed steadily,” said LightStream Research analyst Mio Kato, who publishes on Smartkarma.

“I would expect a continuous flow of listings from New York to Hong Kong over the next year or two.”

The U.S administration is progressing plans to delist Chinese companies if they do not meet the country’s auditing rules, which could affect more than 200 companies.

Chinese companies https://www.reuters.com/business/us-sec-mandates-foreign-companies-spell-out-ownership-structure-disclose-2021-12-02 that list on U.S. stock exchanges must disclose whether they are owned or controlled by a government entity, and provide evidence of their auditing inspections, the Securities and Exchange Commission (SEC) said last week.

(Reporting by Scott Murdoch and Donny Kwok; editing by Richard Pullin and Louise Heavens)

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