By Nate Raymond

NEW YORK (Reuters) - Two former hedge fund managers persuaded a U.S. appeals court on Tuesday to allow them to remain free on bail as they seek to have their insider-trading convictions thrown out.

Todd Newman, a former portfolio manager at hedge fund Diamondback Capital Management, and Anthony Chiasson, co-founder of hedge fund Level Global Investors, had been set to begin prison sentences later this summer.

The two were convicted in December of illegally trading in Dell Inc and Nvidia Corp stock based on non-public information supplied by research analysts.

After a hearing on Tuesday, the 2nd U.S. Circuit Court of Appeals in New York granted their request to remain free on bail while they pursued their appeal, which they argued raised substantial issues under the law.

Chiasson, 48, and Newman, 45, have been free on $2.5 million and $3 million bonds, respectively, since their arrests in January 2012.

Newman was scheduled to begin serving his sentence on July 8 after a judge gave him a 4-1/2-year prison term in May. Chiasson was set to begin serving on August 13 after being sentenced to 6-1/2 years in prison.

The case raises legal issues of whether prosecutors at trial must prove a recipient of a tip knew that the person who provided the illegal information did so for a personal benefit.

Judges have disagreed on this point in recent cases.

Lawyers for Chiasson and Newman argued that in their case, U.S. District Judge Richard Sullivan declined to instruct the jury that the two men had to have knowledge of the alleged benefit received by the tipper.

Mark Pomerantz, a lawyer for Chiasson, said the jury was improperly instructed, affecting how the trial was conducted.

"The trial would have assumed an entirely different dynamic," he said.

The same legal issue was recently raised in the case of Michael Steinberg, a fund manager at SAC Capital Advisors who was indicted in March on insider trading charges.

Steinberg, who is set to face trial on November 18, sought unsuccessfully to reassign his case to a judge other than Sullivan on the basis of his ruling on the issue of tip recipients in the Newman and Chiasson case.

In granting Newman and Chiasson's bail motion on Tuesday, Circuit Judge Jose Cabranes said the appeals court would send their case back to Sullivan for any bail modifications that become necessary.

A spokeswoman for Manhattan U.S. Attorney Preet Bharara declined comment.

The case is US v. Newman et al, 2nd U.S. Circuit Court of Appeals, No. 13-1837.

(Editing by Matthew Lewis)

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By Jennifer Saba

(Reuters) - Facebook Inc said on Tuesday it now has 1 million active advertisers globally who used the platform in the last 28 days, a milestone for the company that is seeking to revive its revenue growth.

A vast majority of those advertisers are small business owners who have flocked to the world's No. 1 social network.

Facebook executives are hoping to net even more small advertisers since 16 million local businesses, ranging from jewelry sellers to clothing stores, set up free pages on the network.

While pinpointing how much money small advertisers spend only online is difficult, in total they spent approximately $32 billion during 2012 in the United States, according to market research firm eMarketer.

"Most small business owners start off as Facebook users, then migrate to become page owners, and from there migrate to become advertisers," said Dan Levy, Facebook director of small business.

He said that Facebook does not plan to start charging businesses to set up pages.

Advertising accounts for 85 percent of Facebook's revenue - which also includes dollars from the world's largest brands and advertising agencies. But the company is trying to spark its ad growth following a sharp slowdown last year.

Last quarter, Facebook reported first-quarter revenue of $1.46 billion. Advertising revenue rose 43 percent, the fastest growth rate since the end of 2011.

Facebook declined to break out how much ad revenue comes from small businesses and did not indicate how long it took to reach the 1 million milestone.

It has introduced several initiatives to help boost growth, including an overhaul of its newsfeed and changes to how advertisers buy ads on the network in order to simplify the process.

Small business owners are "critical" to Facebook's success, said Brian Wieser, an analyst with Pivotal Research Group.

"Once they launched new ad products targeted to small businesses in the middle of last year, they were able to significantly accelerate their revenue growth," he said.

Kim Caulfield, a small business owner in Orange County, California who sells custom jewelry made from horse tail hair, started using Facebook advertising to reach more customers for her company Tail Spin.

"You only can invite so many of your friends over and most of them don't own horses," she said.

She now spends approximately $25 a day with Facebook on advertisements directed to horse enthusiasts with the potential of reaching over 5 million people.

Facebook also reaches out to local businesses order to help them through the process. Dallas-area clothing boutique owner Lucy Huang said she was part of a Facebook incubator program to mentor businesses and walk them through the ad buying process.

Huang said she spends roughly $50 a month advertising Accents retail stores with Facebook, saying it is cheaper and more effective than print or online rivals like Yelp.

More than 50 percent of small business owners use Facebook pages to promote their products, but only 16 percent use Facebook ads, according to BIA Kelsey, a research firm specializing in local advertising.

(Reporting by Jennifer Saba in New York; Editing by Nick Zieminski)

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By Karen Freifeld

NEW YORK (Reuters) - A financial advisory unit of Deloitte LLP has agreed to pay $10 million and accept other New York state penalties to settle accusations of misconduct related to an investigation of money laundering at Standard Chartered Bank.

Deloitte Financial Advisory Services also agreed to a one-year ban on doing consulting work for financial institutions regulated by New York state, and to reforms designed to address conflicts of interest, the state Department of Financial Services said on Tuesday.

The head of the state regulator said the case was just the start of a crackdown "investigating and reforming the consulting industry."

The agreement only applies to Deloitte's financial services advisory group, which is separate from its auditing arm.

In August, Standard Chartered agreed to pay New York $340 million for breaking U.S. sanctions against Iran and other countries. Last December, it agreed to another $327 million to resolve similar allegations by other U.S. agencies.

Deloitte, which was working as a consultant to Standard Chartered, omitted critical information in a report to regulators on its independent review of the bank, the Department of Financial Services said. The department oversees New York banks and New York branches of foreign banks.

The agency said Deloitte also violated New York banking law giving Standard Chartered confidential reports involving suspicious activity the firm had prepared for other client banks.

The settlement agreement said the regulator found no evidence the consultant intentionally helped or conspired with the bank to launder money. In August, it had said the unlawful conduct by Standard Chartered was "apparently aided" by Deloitte.

Deloitte said it was pleased the agency found no evidence it "knew of, or aided, abetted or concealed any alleged violation of law" by Standard Chartered.

Benjamin Lawsky, superintendent of the state banking regulator, said the action against Deloitte was the agency's opening salvo against monitors and consultants hired by banks at the behest of the agency.

He said the reforms could also serve as a template for other government agencies that retain independent consultants for regulatory work.

"Today we are taking an important step in helping ensure that consultants are independent voices - rather than beholden to the largest institutions that pay their fees," Lawsky said in a statement. "Our aggressive work investigating and reforming the consulting industry is far from over."

In the Standard Chartered case, Deloitte had been retained as part of a 2004 agreement between the bank's New York branch and banking regulators following other compliance failures involving anti-money laundering policies.

At one point, Standard Chartered asked Deloitte to delete from its draft report a recommendation that discussed how wire messages on transactions could be manipulated by banks to evade money-laundering controls, the agency found.

In an email about the draft report cited by Lawsky last summer, a Deloitte partner said "we agreed" to the request because "this is too much and too politically sensitive for both Standard Chartered Bank and Deloitte. That is why I drafted the watered-down version."

As part of its reforms, Deloitte agreed to certain safeguards when it is engaged by a financial institution as part of an agreement with the New York regulator.

The firm said it would disclose all work done for the institution for the past three years, sign an engagement letter requiring it to exercise independent judgment, hold monthly meetings between the monitor and the regulator, and provide a list of those who review its findings.

According to the agreement, the agency could agree to an early termination of the firm's suspension after six months.

Senate Democrats in April urged federal regulators to rethink the way they use outside consultants to help fix problems at banks, after consultants reaped $2 billion in fees for conducting botched reviews of home foreclosures.

An official at the Office of the Comptroller of the Currency also said in April the federal agency was evaluating its use of independent consultants and exploring ways to improve the process.

(Reporting By Karen Freifeld; additional reporting by Dena Aubin and Emily Stephenson; Editing by David Gregorio)

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