Harris Associates Lp

Event Detail: 1. ONE COUNT 2. FELONY 3. NOT GUILTY 4. N/A - CHARGE RELATES TO AN ISSUER PRESS RELEASE Status: On Appeal Disposition: (A) CONVICTED (B) 05/07/2024 (C) FINE (D) N/A (E) N/A (F) 2,000,000 EUROS (APPROXIMATELY $2.17 MILLION) FINE ON APPEAL AND JUST UNDER 2,000,000 EUROS (APPROXIMATELY $2.39 MILLION) IN PRIVATE CIVIL DAMAGES. (G) N/A. PAYMENT OF THE CRIMINAL FINE IS NOT DUE UNTIL THE APPEAL PROCESS IS COMPLETED. Summary: ON JUNE 24, 2021, NATIXIS SA ("NATIXIS"), THE FRENCH BANK THAT OWNS OUR PARENT COMPANY, WAS FOUND GUILTY BY A FRENCH CRIMINAL COURT (TRIBUNAL CORRECTIONNEL DE PARIS) OF COMMUNICATING MISLEADING INFORMATION TO THE PUBLIC, BASED ON LANGUAGE REGARDING NATIXIS' EXPOSURE TO THE SUB-PRIME CRISIS IN A 2007 PRESS RELEASE. THE FRENCH COURT HAS ORDERED NATIXIS TO PAY A FINE OF 7.5 MILLION EUROS. IN ADDITION, THE COURT AWARDED JUST UNDER 2 MILLION EUROS TO CERTAIN PLAINTIFFS THAT HAD IN 2009 REQUESTED THE OPENING OF THE CRIMINAL INVESTIGATION. NO OFFICERS, DIRECTORS OR EMPLOYEES OF NATIXIS OR OF ITS AFFILIATES WERE CHARGED IN CONNECTION WITH THE PROCEEDING. ON JUNE 25, 2021, NATIXIS FILED A TIMELY APPEAL TO THE PARIS COURT OF APPEAL (COUR D'APPEL DE PARIS). UNDER APPEAL, THE CASE WAS ENTIRELY REEXAMINED ON MATTERS OF BOTH FACTS AND LAW. ON MAY 7, 2024, NATIXIS WAS FOUND GUILTY BY THE PARIS COURT APPEAL. THE COURT REDUCED THE CRIMINAL FINE AGAINST NATIXIS TO 2 MILLION EUROS. THE COURT AWARDED APPROXIMATELY 2 MILLION EUROS IN PRIVATE CIVIL DAMAGES TO CERTAIN PLAINTIFFS, THE MAJORITY OF WHICH HAD ALREADY BEEN PAID BY NATIXIS AFTER THE FIRST INSTANCE DECISION. THE PRESS RELEASE IN QUESTION WAS ISSUED BY NATIXIS IN NOVEMBER 2007 AT THE START OF THE FINANCIAL CRISIS. AT ISSUE IN THE CRIMINAL PROCEEDING WAS A SHORT PARAGRAPH OF THE PRESS RELEASE, RELATING TO NATIXIS' EXPOSURE TO THE SUBPRIME CRISIS AND RELATED RISKS. NEITHER THE PREVIOUS NOR THE SUBSEQUENT COMMUNICATIONS OF THE ISSUER RELATING TO THE SUBPRIME CRISIS WERE FOUND TO BE MISLEADING BY THE PARIS COURT OF APPEAL. THE CONVICTION RESULTED FROM AN INVESTIGATION LAUNCHED IN 2009 BY THE PARIS PUBLIC PROSECUTOR'S OFFICE INTO A COMPLAINT FILED BY CERTAIN MINORITY SHAREHOLDERS OF NATIXIS COORDINATED BY THE ASSOCIATION TO DEFEND MINORITY SHAREHOLDERS RIGHTS (ASSOCIATION DE DÉFENSE DES ACTIONNAIRES MINORITAIRES - ADAM), WHICH ARE THE PLAINTIFFS THAT RECEIVED THE APPROXIMATELY 2 MILLION EURO AWARD REFERENCED ABOVE. THE ASPECTS OF THE PRESS RELEASE CONSIDERED BY THE CRIMINAL COURT HAD BEEN INDEPENDENTLY ASSESSED BY NATIXIS' PRIMARY REGULATOR, THE FRENCH FINANCIAL MARKETS AUTHORITY (THE AUTORITÉ DES MARCHÉS FINANCIERS OR "AMF"), WHICH DECLINED TO TAKE ANY ACTION AGAINST NATIXIS. THE PRESS RELEASE IN QUESTION DID NOT RELATE TO ANY OF NATIXIS' SUDSIDIARY BUSINESSES ENGAGED IN ADVISORY OR BROKER-DEALER ACTIVITIES. NATIXIS CONTINUES TO MAINTAIN THAT THE INFORMATION IT DISSEMINATED IN THE PRESS RELEASE IN QUESTION WAS APPROPRIATE TO THE SITUATION. THE PRESS RELEASE WAS ISSUED AT THE BEGINNING OF THE SUBPRIME CRISIS WHEN THE EXTENT AND CONSEQUENCES OF THE CRISIS WERE NOT YET WIDELY UNDERSTOOD EITHER BY MARKET PARTICIPANTS OR BY REGULATORS. MOREOVER, AT THE TIME OF THE PRESS RELEASE, NATIXIS WAS VERY RECENTLY CREATED AND STILL IN THE COURSE OF A MERGER. THE COURT OF APPEAL RECOGNIZED SUCH DIFFICULT CONTEXT AS A FACTOR REDUCING THE BANK'S LIABILITY. NATIXIS HAS FILED AN APPEAL BEFORE THE FRENCH SUPREME COURT (COUR DE CASSATION). PURSUANT TO THE APPEAL, THE CASE WILL BE REEXAMINED ON MATTERS OF LAW. UNDER FRENCH LAW, OTHER THAN THE IMPOSITION OF THE MONETARY FINE, THERE ARE NO LEGAL CONSEQUENCES TO NATIXIS OR ITS AFFILIATES FOR A GUILTY VERDICT IN THIS CASE.

Allegations: AN ENTITY IS REQUIRED TO FILE A NOTIFICATION WITH THE GERMAN FEDERAL FINANCIAL SUPERVISORY AUTHORITY ("BAFIN") WHEN THE ENTITY'S SHAREHOLDINGS OF A SECURITY (LISTED IN AN EEA COUNTRY AND HOME MEMBER STATE IS GERMANY) REACH, EXCEED OR FALL BELOW PRESCRIBED LIMITS. THE BAFIN ALLEGED THAT HARRIS' NOTIFICATIONS FOR CERTAIN SECURITIES DID NOT ADEQUATELY IDENTIFY THE CORPORATE ENTITIES DEEMED TO OWN THE SECURITIES PURSUANT TO BAFIN REQUIREMENTS. WHILE THE NOTIFICATIONS HAD INITIALLY BEEN TIMELY MADE, HARRIS SUBSEQUENTLY SUBMITTED CORRECTED NOTIFICATIONS WHICH WERE DEEMED TO BE LATE. Status: Final Sanction Detail: PAYMENT OF FINE: EUR 50,000 AND COSTS OF PROCEEDINGS: EUR 2,500. HARRIS SENT PAYMENT IN THE AMOUNT OF $63,252 USD ON DECEMBER 19, 2017. Summary: BAFIN AND HARRIS AGREED TO SETTLE THE MATTER THROUGH HARRIS' PAYMENT OF AN ADMINISTRATIVE FINE AND THE COSTS OF THE PROCEEDINGS, EUR 52,500 (APPROXIMATELY $63,252 AS OF DECEMBER 19, 2017).

Allegations: THE COMMODITY FUTURES TRADING COMMISSION ISSUED AN ORDER FILING AND SETTLING CHARGES AGAINST NATIXIS, A GLOBAL BANK AND SWAP DEALER, FOR FAILURE TO DILIGENTLY SUPERVISE TWO TRADERS ON THE BANK'S NEW YORK-BASED INTEREST RATE DERIVATIVES DESK (IRD DESK) AND ITS EQUITY DERIVATIVES FLOW AND SOLUTION TRADING DESK (FAST DESK). THE TRADERS ON THE IRD DESK AND FAST DESK SEPARATELY ENGAGED IN MISCONDUCT BY MISMARKING THEIR POSITIONS FOR THE PURPOSE OF EITHER INFLATING PROFITS AND MINIMIZING LOSSES, OR TO "SMOOTH" OUT RETURNS, RESPECTIVELY. THE ORDER REQUIRES NATIXIS TO PAY A $2.8 MILLION CIVIL MONETARY PENALTY, CEASE AND DESIST FROM VIOLATING APPLICABLE PROVISIONS OF THE COMMODITY EXCHANGE ACT (CEA) AND CFTC REGULATIONS, AND COMPLY WITH CERTAIN CONDITIONS AND UNDERTAKINGS. CASE BACKGROUND: BETWEEN JANUARY 2015 AND AT LEAST APRIL 2018, A TRADER ON THE BANK'S IRD DESK SUBMITTED FALSE OR MISLEADING ENTRIES IN THE BANK'S INTERNAL RECORDKEEPING AND ACCOUNTING SYSTEM RELATING TO THE MARKING OF THE END-OF-DAY USD LIBOR FORWARD CURVE (CLOSING CURVE), FOR THE PURPOSE OF INFLATING THE UNREALIZED PROFIT AND LOSS (P&L) OF THE DESK HE MANAGED AND DISGUISING SIGNIFICANT TRADING LOSSES. SPECIFICALLY, THE TRADER ENGAGED IN A PATTERN OF MARKING THE CLOSING CURVE IN A MANNER THAT VARIED FROM OBSERVED BROKER MID PRICES AND IN A MANNER THAT ALIGNED WITH THE RISK POSITIONS OF THE IRD DESK, WHILE GENERALLY STAYING WITHIN THE LIMITS OF INTERNAL CONTROLS DESIGNED TO DETECT MISMARKING. ALTHOUGH NATIXIS MAINTAINED CERTAIN CONTROLS RELATING TO THE MARKING OF THE CLOSING CURVE, THOSE CONTROLS WERE INSUFFICIENT TO DETECT THE TRADER'S MISCONDUCT FOR OVER THREE YEARS. AT ITS PEAK IN EARLY 2018, THE TRADER'S MISMARKING OF THE CLOSING CURVE OVERSTATED THE P&L OF THE IRD DESK BY APPROXIMATELY $25 MILLION. IN ADDITION, THE ORDER FURTHER FINDS THAT NATIXIS FAILED TO DILIGENTLY SUPERVISE THE ACTIVITIES OF ITS FAST DESK. SPECIFICALLY, BETWEEN FEBRUARY 2017 AND NOVEMBER 2019, TRADERS ON THE FAST DESK MADE CERTAIN MANUAL ADJUSTMENTS TO THE BANK'S INTERNAL TRADE BOOKING SYSTEMS FOR THE PURPOSE OF "SMOOTHING" OR HIDING THE FAST DESK'S P&L AND LATER RELEASING THE P&L DURING DIFFICULT MARKET CONDITIONS. AT ITS PEAK, THE P&L SMOOTHING UNDERSTATED THE UNREALIZED P&L OF THE FAST DESK BY OVER $6 MILLION. THIS MISCONDUCT RENDERED THE BANK'S BOOKS AND RECORDS INACCURATE. IN ACCEPTING THE BANK'S OFFER OF SETTLEMENT, THE CFTC RECOGNIZED ITS SUBSTANTIAL COOPERATION DURING THE DIVISION OF ENFORCEMENT'S INVESTIGATION OF THIS MATTER. THE CFTC NOTED THAT THE BANK'S SUBSTANTIAL COOPERATION AND REMEDIATION ARE RECOGNIZED IN THE FORM OF A REDUCED CIVIL MONETARY PENALTY. Status: Final Sanction Detail: N/A Summary: SEE RESPONSE TO QUESTION 7. ALSO SEE: HTTPS://WWW.CFTC.GOV/PRESSROOM/PRESSRELEASES/8581-22