Democrats and Republicans have resolved their
differences to agree on the new laws.
The legislation is being hurried through to tackle
the crisis in investor confidence ahead of congressional elections in
It is crucial to reassure investors in the
trustworthiness of corporate America, with stock markets suffering heavy
losses in recent weeks.
The US Senate and House of Representatives have now
reached an agreement on the legislation.
And it is now expected to win final approval from
Congress later this week.
The White House has already signalled that President
George W. Bush will sign the agreement.
Once approved, a Public Company Accounting Oversight
Board will be established to oversee auditors of public companies.
Maximum jail sentences for wire and mail fraud will
increase to 20 years.
And a new crime on securities fraud will carry a 25
year maximum sentence.
The tightening of controls comes after a series of
scandals which include energy giant Enron, accountants Andersen and
telecoms firm WorldCom.
The latest stock market falls are due to fears that
America's two largest banks deliberately helped Enron dupe investors.
But there is already some discontent about the depth
of the reforms.
"People have lost their pensions, their
retirement," said Democratic Whip Nancy Pelosi.
"In the name of corporate reform they [the House
of Representatives] continue to pursue cosmetic rather than real
TRADE WORRIES FOR JAPAN'S RECOVERY
Japan's exports, the traditional motor of the
country's sputtering economy, slipped slightly in June, sparking renewed
worries about the fragile recovery.
For the first time in six months, June's figures
showed Japan exported less — 3.9% less — than the month before.
While the figures still showed an 8.9% gain on the
same month last year, the fear is that the steadily weakening dollar —
not to mention the relentless slide of world stock markets and the
near-panic about corporate governance in some quarters of the US — are
combining to torpedo the turnaround from ten years of decline.
A slide in imports of 5.1% year on year is
compounding the concern, because it indicates that Japanese consumers
are still nowhere near ready to take up the slack if the rest of the
Japan's trade surplus — the excess it exports over
what it imports — has historically been huge compared to the rest of
The country's breakneck growth from the Second World
War till the end of the 1980s was fed by exports, first of steel and
other hardware and later by consumer electronics, cars and computers.
And even now on a year-by year basis the trend is for
increasing surplus, thanks to last year's dismal showing, with June's
figure of 1.3 trillion yen ($11.1bn; £7.1bn) marking a 71.6% rise over
the same month in 2001.
But the surge in the yen from below 130 to the dollar
to around 115 in the past couple of months is making exports more
expensive to overseas customers.
Although the effects so far are marginal, observers
say the impact is likely to be felt later in the year, when Japan's
current growth — an impressive 5.7% if the January-March performance
were continued for 12 months will probably evaporate.
""We're probably not going to get any of
the bad effects from either the strengthening of the yen or the
potential slowdown in overseas growth until the second half of the
year," said Lehman Brothers Japan's Matthew Poggi.
WORLDCOM FILES FOR BANKRUPTCY
Telecom giant WorldCom filed for bankruptcy
protection to become the largest US business failure after shenanigans
for which CEO John Sidgmore said the company is "very sorry."
WorldCom executives scrambled over the weekend to
cover overwhelming debt, Sidgmore said.
The Clinton, Mississippi-based company filed late
Sunday for protection under Chapter 11 of the US bankruptcy code, which
allows it to continue operating while it works out a plan to pay its
The failure is twice as large as the record-breaking
bankruptcy filed by Enron in December. In the bankruptcy petition,
WorldCom listed assets of $107 billion as of March 31, against
liabilities of $41 billion.
By comparison, Enron listed $63.4 billion in assets
when it sought bankruptcy protection, sinking in a morass of accounting
MARKETS FACE FRESH UNCERTAINTY
Analysts are waiting to see how the markets in Europe
will react to news from America that the world's largest media group,
AOL Time Warner, is to be investigated by the financial regulators.
The Securities and Exchange Commission is examining
accounting procedures at the group's internet service provider, America
The news came too late for the American markets where
share prices had recorded their second-ever largest gain, buoyed by an
agreement on new laws to prevent corruption.
But in Asia shares have gained, though not sharply,
as the AOL inquiry weighed on traders' sentiment.
Asia's failure to soar on the back of the Dow Jones
index's strength further dampened the cheer ahead of the trading day in
the UK and Europe.
News of the Securities and Exchange Commission's
investigation into AOL-Time Warner's accounts was formally released only
after the US markets had closed.
SIX TOP SOUTH KOREAN FIRMS INVESTIGATED
South Korea's antitrust authority has launched a
series of investigations into accusations that the country's six leading
conglomerates have been involved in insider trading.
The investigations were launched after the
government's Financial Supervisory Service found that 37.6% of the total
sales of the country's four leading conglomerates, or chaebols, was made
up of internal dealings.
The investigations involve 80 subsidiaries of the top
six conglomerates, Samsung, LG, SK, Hyundai Motor, Hyundai Heavy
Industries and Hyundai.
South Korea's Fair Trade Commission has asked all of
them to hand over information about their internal transactions.
ENRON-TAINTED BANK REASSURES INVESTORS
Shares in giant US investment bank JP Morga Chase
closed 16% higher after its chief executive spoke out in defence of its
role towards collapsed energy firm Enron.
STOCK ALSO RECOVERED, RISING BY 10%.
JP Morgan and Citigroup have been accused by US
congressional investigators of helping disgraced energy firm Enron, and
at least ten other companies, hide billions in debt.
Both banks' shares had lost almost a fifth of their
value after a Congressional hearing on Monday.
JP Morgan chief executive William Harrison said his
bank did not knowingly help Enron hide debt.
"We acted properly and with integrity in all the
Enron matters," he said, criticising a "political media frenzy
that is quite extraordinary".
He said all his bank's dealings with Enron had been
fully entered into JP Morgan's own accounts, which complied with audit
US GAINS GIVE MARKETS HOPE
The US top shares index, the Dow Jones, has surged by
nearly 500 points or 6.5% — its biggest one day gain in almost 15
And preliminary figures suggest that the US stock
markets had their busiest ever day of trading.
The strong rise of US share prices dragged European
indexes higher at the end of their trading day, and sparked renewed
hopes of a market recovery.
Germany's Dax, which had lost more than 6% earlier in
the day, had dragged itself back into positive territory by late
afternoon trade, before closing 3.3% higher.
The FTSE, which had been over 200 points lower during
the day, closed 81 lower at 3,777.
Pharmaceuticals giant GlaxoSmithKline (GSK) said on
Wednesday that pre-tax profits for the three months to late June rose 7%
on the year to £1.8bn, in line with analysts' forecasts.
SIEMENS RETURNS TO PROFIT
Siemens said it made net profits of 725m euros
($719m; £458m) in the three months to 30 June. This contrasts with a
loss of 705m euros in the same period of last year.
BANKING CRISIS LOOMS OVER ARGENTINA TALKS
Argentina's fragile banking system has dominated the
agenda at meetings between an International Monetary Fund (IMF)
delegation, the Argentine government and financiers.
The IMF has appointed a group of four top
international bankers to act as middlemen in its talks with the South
"They are experienced and will certainly help
Argentina find a solution to its financial problems," said the
Argentine president's chief of staff, Alfredo Atanasof, ahead of their
meeting with his boss.
Argentina hopes to unlock $9.5bn ($6bn) of IMF funds
which have been frozen since it the country defaulted on huge
international loans in December.
WORLD BANK WELCOMES MALAGASY REFORMS
The World Bank has welcomed the plan of Madagascar's
new president to cut corruption by giving government ministers a
ten-fold wage rise.
"The government can afford the increase the
president has announced, the impact on the budget is not that
huge," Hafez Ghanem, the World Bank's country director, told the
BBC's World Business Report.
"If a minister is being pay $300 per month, the
incentive for dishonesty is very high," he said.
Ministers are now expected to earn as much as $3,500
per month, almost 10 times more than they were paid under the previous
SOUTH AFRICA HIT BY 'BRAIN-DRAIN'
Thousands of skilled young South Africans are
continuing to emigrate in search of a better life, draining the country
of much-needed economic resources.
Up to 100,000 people are believed to have left South
Africa over the last three years, and 70% of skilled South Africans
still in the country say they are considering emigrating, despite
government calls for them to stay and help their country.
Most give fear of crime as the reason behind their
decision to go, but the Aids epidemic and unemployment are also cited in
a recent study carried out by the University of South Africa (Unisa).
South Africa is only one of the many countries in
Africa affected by brain drain, which has deprived the continent of a
third of its skilled professionals in recent decades, strangling growth.
IMF PUSHES BANGLADESH TO FLOAT CURRENCY
Bangladesh has accused the International Monetary
Fund (IMF) of pressuring it to float its currency on the foreign
Finance Minister M. Saifur Rahman told reporters on
Tuesday that Bangladesh might allow its currency, the taka, to float
freely in mid-November if the country's reserves reach more than $2bn.
"We cannot allow a free floating currency at the
moment when the (foreign currency) reserves are low," Mr Rahman
Ministry officials later confirmed that Bangladesh
was under pressure from the IMF to float its exchange rate.
In February, the IMF refused Bangladesh an emergency
loan when reserves dipped below $1bn unless it cut public spending and
closed down loss-making state-run industries.
Mr Rahman said the country's current foreign exchange
reserves of about $1.6bn were too low to float the currency.
DIAGEO AGREES BURGER KING SALE
Drinks group Diageo has confirmed it will sell its
Burger King chain of fast-food outlets to a US consortium.
The fast-food chain is being sold for $2.26bn to a
group made up of US venture capitalist firms Texas Pacific and Bain
Capital, together with private equity group Goldman Sachs Capital
SELL-OFF ON BANK OF CHINA
Investors have rushed to buy shares in Bank of
China's Hong Kong operations, and then to sell them again, pushing them
4.7% below the offer price on their first day of trading.
Small investors, who got the shares at a discount,
rushed to cash in, making a quick profit in the toughest market
conditions for years, traders said.
Operating profits soared to almost 52bn yen (£284m;
$447m) from just 3bn yen a year earlier while net profits doubled to
almost 60bn yen.
CHINA'S CHILDREN TRADE STOCKS
Parents in China are encouraging their children to
play the stock market during school summer holidays, the official
Shanghai Evening Post has reported.
Some parents believe trading stocks teaches their
children skills, gets them used to taking risks and introduces them to
the world of finance, the paper says.
SAA RETURNS TO PROFIT
South African Airlines (SAA) has returned to profits
during one of the toughest years for the global airline industry.
SAA posted profits of 553m rand ($99.8m; £34.4m) for
the 12 months to 31 March 2002, compared with a loss of 998m rand in the
previous financial year.