Regulations
Consumers Win a Victory in Utah Open Records Case
TINA.org's wins an important battle to obtain complaints against Utah-based companies
 
Consumers received an important holiday present this year when the Utah State Records Committee ruled in favor of TINA.org’s request to obtain copies of consumer complaints filed with the state Department of Commerce against three e-cigarette companies that had been the subject of an agency enforcement action. 
 
There’s much to applaud in the State Records Committee ruling, most notably that it rejected the state’s assertions that the hundreds of complaints were protected records and could not be disclosed for a variety of reasons. And when I say variety, I mean the state made several different arguments as the case evolved.
 
First, the Utah Department of Commerce argued that it couldn’t release complaints filed with its Division of Consumer Protection because it considers complaints confidential investigatory records. Such was its argument in the first records case TINA.org appealed regarding efforts to obtain consumer complaints against Utah-based WakeUpNow. The Records Committee ruled in the agency’s favor on that one. But it seems the tide is turning.
 
In our second appeal regarding consumer complaints filed against the three e-cigarette companies –which had all been the subject of a TINA.org investigation — we pointed out that the companies’ names were released by the state when it announced citations against them this summer. Yet the state claimed it still could not release the consumer complaints that prompted the citations in the first place because the investigations of the three companies had not yet concluded and disclosing the complaints could interfere with a pending law enforcement proceeding.
 
When the state did reach final settlements with the companies in October, Assistant Attorney General Ché Arguello, arguing on behalf of the department, said that the state legislature never intended to release consumer complaints, and if it had it would have specifically listed consumer complaints as having to be included in the public files of enforcement actions. He also claimed that if the state released the consumer complaints it could be divulging private financial information about consumers who filed the complaint. Like what? That consumers had gotten their credit cards debited repeatedly without their consent, as was the case with the e-cigarette companies?
 
During the appeals hearing before the Records Committee, Arguello argued, “In the world my client (Department of Commerce) operates, complaints are evidence of nothing.”
 
When I requested the records, I didn’t feel we were asking for anything unusual. Indeed, most states disclose consumer complaints and some even post searchable online databases. Consumer complaints are also readily disclosed by the Federal Trade Commission.
 
We think complaints are important information consumers should be able to access in order to make informed decisions about doing business with a company. And we think it’s also important that the state disclose the complaints so its citizens can know whether state agencies are responding to them appropriately.
 
But Arguello took issue, telling the committee in the appeals hearing:
They insinuate there is something nefarious going on. I think that is inappropriate. I think that is dangerous and I think it is offensive….I think we need to dispel with that nonsense.
 
To be clear, TINA.org isn’t insinuating “that there are any nefarious activities going on,” Laura Smith, legal director of TINA.org told the committee, “but the issue is we’d have no way of knowing if there was.”
 
Committee member Holly Richardson, a citizen representative, took issue with the state’s presentation, saying she found it “offensive.” Said Richardson:
I, this month and last month, have found it to be disturbing and frustrating that the presentation made to our committee has been condescending and has been, I think from my perspective, an effort to jump through an incredible number of hoops to prevent the public to having access to records.
 
Specifically, several members of the committee were critical of the state’s assertion that when the state legislature wrote the government records management act it did not want consumer complaints disclosed. Richardson said:
I am very concerned with the absolute statement that the legislature deliberately omitted specific things when they passed the law. I do not believe that to be the case. Having been in the legislature, I can tell you that frequently there are, in fact almost always, laws passed that address a specific situation and not every single situation can possibly be contemplated and included or excluded in the law … I do not agree the law as written specifically precludes the department from releasing the information requested.
 
Tom Haraldsen, a journalist who is a member of the committee, said:
If the Division of Consumer Protection by name is designed to protect consumers…why isn’t the public allowed to know if you’ve received complaints?
 
Committee Chairwoman Patricia Smith-Mansfield when further and called into question whether a complaint is an investigatory record and thus exempt from disclosure.
 
I don’t view a complaint file necessarily as the investigation…. I don’t think complaint files are expressly identified as being anywhere included [in the statute] as being restricted access.
 
This view opens the door to the notion that consumer complaints are vital public records and that the state legislature never intended for them to remain secret. And that’s an important victory for consumers in Utah. 
 

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Years After Tobacco Deals Sold, SEC Says Rating Agencies Still Conflicted
The latest Securities and Exchange Commission examination of credit rating firms found problems similar to those documented in ProPublica's investigation of tobacco bonds
 
In our story last month about credit rating agencies and tobacco bonds, we detailed numerous instances in which bankers pressured Standard & Poor's, Fitch and Moody's to give favorable treatment to bond issues being put together on behalf of state and local governments.
 
Documents showed that the bankers brazenly played one firm against another to relax rating criteria and grade risker, longer-term tobacco bonds. These actions mostly pre-dated the 2008 financial crisis, in which the raters earned widespread criticism for giving high marks to bum mortgage securities packaged by Wall Street.
 
Now, a new report from the rating agencies' regulator, the Securities and Exchange Commission, found similar conflicts of interest at the firms, which are supposed to evaluate the riskiness of various debts at arm's length from the banks and issuers they serve.
 
The SEC's annual examination of the firms' business practices, published on the same day as ProPublica's ratings story, cited numerous examples of how the firms continued to compromise the objectivity of their rating process during the 2013 calendar year. For instance:
One of the top three rating firms changed its rating criteria "in a manner that addressed" concerns from business managers and proved advantageous to a trade group that had lobbied for the changes, the SEC said, concluding that "business and market-share concerns influenced the substance of the criteria." 
 
One of the top three rating firms took financial models that were developed by outside parties and used them for its credit rating process – without independently verifying their validity. It turned out that "errors in these third-party models resulted in changes to a substantial number" of the firm's outstanding ratings, the SEC said. 
 
The SEC also uncovered instances of analysts having access to business performance data, such as market share, which could influence their decision making when assigning ratings. The failure to separate analysts from business activity was particularly egregious at one smaller rating firm, which allowed an analytical supervisor to participate in sales and marketing activities for ratings while also participating in determining those ratings.
 
The SEC's report does not name specific credit rating firms, other than indicating whether they were the three largest firms, S&P, Moody's and Fitch, or their smaller competitors. The SEC also made recommendations for improving their procedures to avoid the problems identified in the report. In statements reacting to the SEC's report, S&P, Moody's and Fitch each said they continue to enhance their policies and procedures.
 
Rating criteria – the standards that agencies use to evaluate repayment risk across various types of debts – are not supposed to be negotiated for the sake of winning business. But ProPublica found evidence that criteria for tobacco bonds — debts backed by payments from a massive 1998 settlement with cigarette manufacturers — were heavily negotiated by bankers.
 
In marketing documents collected by ProPublica across 22 tobacco bond offerings, bankers for UBS, Bear Stearns, Citigroup and others repeatedly took credit for getting the firms to bend their criteria. The raters earn hefty fees if they're chosen to rate an issue.
 
"Bear Stearns is the ONLY firm in two years to have negotiated new rating criteria pertaining to stress tests and tobacco sector fundamentals," the now-defunct investment bank said in a 2005 marketing document typical of the firm's claims of influence over the rating process.
 
After our story published, Wisconsin responded to a ProPublica public records request with a disc containing dozens of tobacco bond records dating to 2001. They include more claims by bankers saying they had swayed the rating firms.
 
In 2008, bankers from Lehman Brothers told Wisconsin that S&P had agreed to hear arguments for rating the state's tobacco bonds "even if" the debt couldn't satisfy the firm's "newly-minted, more stringent" rating criteria, according to a proposal submitted by the bank three days after its historic Sept. 15, 2008, bankruptcy.
 
 
Courtesy: ProPublica
 

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Nifty, Sensex may make a major move – Tuesday closing report
Nifty will go down sharply if it closes below 8,250
 
In Monday’s closing report, we had mentioned that NSE’s CNX Nifty may go sideways. However, for the positive trend to continue the Indian benchmark has to stay above 8,270. The 50-share Nifty opened Tuesday in the positive and stayed in the green for major part of the session. Each time the index moved lower it took support at Monday’s close and bounced back. However after 2pm, the index witnessed a sharp fall, breaching the support and recovered to close marginally higher.
 
The S&P BSE Sensex opened at 27,612, while Nifty opened at 8,346. The benchmarks hit a high at 27,670 and 8,357, respectively. Sensex hit a low of 27,325 and closed at 27,426 (down 160 points or 0.58%), while Nifty hit a low of 8,268 and closed at 8,299 (down 24 points or 0.28%). India VIX rose 2.31% to close at 16.4825. NSE recorded a volume of 79.89 crore shares. The Nifty made several unsuccessful attempts to head higher but has been stuck around 8,300.  It is now ready to make a major move. If it closes below 8,250, the downfall will be sharp and quick. If not, it will struggle to move higher.
 
India's Index of industrial production (IIP) increased at five-months high pace of 3.8% in November 2014, recovering from the sharpest pace in three-years at 4.2% recorded in October 2014. The annual rate of inflation based on the combined consumer price indices (CPI) for urban and rural India rose to 5% in December 2014 from nine-year low of 4.4% in November 2014, while snapping consistent decline for last four sequential months.
 
The government will release data on WPI for December 2014 at 12 noon on Wednesday.
Finance Minister Arun Jaitely had said that the government has taken major steps to improve the investment climate in the last several months and it will continue to do so.
 
Oil prices continued to move lower on Tuesday with Brent crude and US WTI both falling to their lowest in almost six years as the global supply glut continued.
 
Emami (6.57%) was among the top two gainers in ‘A’ group on the BSE. The stock hit its 52-week high today. FIIs holding in the company fell from 17.23% to 16.47% as on December 2014, while DIIs holding and retail holding increased from 1.43% and 8.60% to 1.52% and 9.27% respectively.
 
Unitech (5.29%) was the top loser in ‘A’ group on the BSE. It was recently in news as CBI was considering the closure of Tata Realty-Unitech land deal case. The case was re-opened to probe into whether funds from the Rs1,700 crore Tata Realty-Unitech land deal were diverted for spectrum purchase. The case may soon be closed on the ground that the Supreme Court had not directed the agency to carry out more investigations into the matter.
 
Wipro (1.18%) was among the top two gainers in the Sensex 30 pack. There is a report that Rishad Premji, now the chief strategy officer of Wipro could assume the vice chairman's position in the coming months.
 
With the recent fall in the stock prices of PSU Coal India and ONGC, the finance ministry is learnt to be reconsidering sale of stake in these companies. ONGC (2.37%) was the top loser in the Sensex 30 stock.
 
On Monday, US indices closed deeply in the red after openly sharply higher. Asian indices showed mixed performance. KLSE Composite (0.80%) was the top gainer while Nikkei 225 (0.64%) was the top loser.
 
China's exports climbed more than estimated last month as stronger demand from abroad helps bolster growth. Overseas shipments rose 9.7% in December from a year earlier. Imports fell 2.4%, leaving a trade surplus of $49.61 billion, the customs administration said in Beijing.
European indices were trading higher. US Futures too were trading in green.
 

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