Barclays Plc, Bank of America Corp., and Citigroup Inc., have been drawn into the growing U.S. regulatory investigation into whether firms manipulated the setting of the London interbank offered rate.  All told 16 banks have been subpoenaed, including UBS (named earlier this week), along with Germany's WestLB AG and London-based Lloyds Banking Group Plc.  The investigation is being conducted by the SEC and the Department of Justice. 

"The SEC's focus is entirely about whether the banks' disclosure to the market may have been misleading, and what impact did those disclosures have on their broader reporting."  - - Jacob Frenkel, former SEC lawyer specializing in fraud and stock manipulation cases.

    Setting Libor Rates.    Libor is set daily by the British Bankers' Association, based on data it gets from a panel of banks on what it would cost them to borrow money for various periods of time and in different currencies.  Libor, the benchmark for more than $350 trillion of derivatives and corporate bonds, was questioned during the credit crisis as banks became wary of lending to one another because of mounting losses.

    SEC's Angle in the Case.   The SEC may examine whether banks misled their investors with misstatements regarding the benchmark, said George Washington Law professor Arthur Wilmarth.  During the financial crisis, investors tracked firms' ability to borrow money and remain liquid.

"The thing the government must be investigating is whether they agreed with one another to use the data in the same way, to report the same way, to rely on it in price making.  The all-important thing would be the agreement." -- Iowa Law professor Herb Hovenkamp, who authored "Antitrust Law."   [Bloomberg, 3/18]