Monday, December 28, 2009

Madoff Christmas Gift

Should you have missed the Christmas Eve news, Bernie Madoff landed in the hospital. Official account says that he "fell out of bed." Local TV station reported, "Madoff came to Duke with facial fractures, broken ribs and a collapsed lung."

Gary Weiss noted you don't get that from 'falling out of the bunk' or from "high blood pressure."

Tuesday, December 22, 2009

Outsize Fees Provide Funhouse-Mirror Distortion

Wall Street is seeing a special kind of payday. Outsize fees are even providing a bit of funhouse-mirror distortion to so-called league tables, which rank banks based on the size of the deals they handle each quarter. Banks that were in such bad shape that they needed the government’s aid are now getting bragging rights from raising money to replace the capital they have returned to the government.

Citi, Wells Fargo and Bank of America have now returned their federal bailout money and raised new capital to replace it. More than $50 billion of new capital was raised as part of the effort by the biggest banks to repay TARP and get out from under the thumb — and pay caps — of Washington. All told, December was the biggest month in history for offerings.

See more in the NY Times’ latest DealBook column.

Saturday, December 19, 2009

Shrunken Compliance, Internal Audit Staff / ICAP, 5 RRs Settle SEC Charges for Displaying Fictitious Trades and Misleading Customers

Compliance and internal audit were not spared layoffs. According to a poll by Deloitte Financial Advisory Services, 27% of executives reported reductions in these areas in the past 18 months, despite the fact that compliance experts and internal auditors were heavily recruited just a few years ago, in the wake of the Sarbanes-Oxley Act.

As reported by CFO Magazine, for compliance staffers left behind, the role becomes more daunting. Particularly as companies cut travel budgets, the ability to do thorough site visits is limited, says Francis. "How does internal audit now execute their responsibilities?" she asks. "How can they be more strategic in their review and monitoring? There are lots of challenges facing the remaining personnel." More than ever, close coordination among internal audit, legal, and compliance personnel "is critical," she says.

Despite the reduction in compliance personnel, 50% of respondents to the Deloitte survey, who included CFOs, CEOs, board members, and middle managers in finance and risk management, said their compliance and ethics programs are strong. Another 36% said they are adequate. Many public companies and some private companies invested significantly in their compliance programs after the passage of Sarbox in 2002, notes Francis, and they may now feel confident that those programs are effective even with a reduced staff. But that confidence may not always be justified. "What seems to be slipping is the actual testing or review or active monitoring of transactions or behaviors," she points out. "That's the risk."

Meanwhile on Dec. 18 the SEC and the U.S. subsidiary of the world's largest inter-dealer broker, U.K.-based ICAP plc,settled fraud charges that alleged deceptive activity and material misrepresentations to customers concerning its trading activities. ICAP agreed to settle the SEC's charges by, among other things, paying $25 million in disgorgement and penalties. SEC additionally charged five ICAP brokers for aiding and abetting the firm's fraudulent conduct and two senior executives for failing reasonably to supervise the brokers. The individuals have each agreed to pay penalties to settle the SEC's charges.

Link to SEC ORDER INSTITUTING ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS vs ICAP and Ronald A. Purpora, Gregory F. Murphy, Peter M. Agola, Ronald Boccio, Kevin Cunningham, Donald E. Hoffman, Jr., and Anthony Parisi

Saturday, December 12, 2009

Job Search "Nightmare" for Madoff Employees

Bernie Madoff's former assistant, Eleanor Squillari (pictured) hopes to begin a new career in cosmetology. She knows she'll 'never get a job in finance.'

Madoff sons and other employees are frequently confronted with the notoriety, shame and anger synonymous with a firm that seemed to hum along quietly and profitably until a year ago. Even workers with no suspected connection to the Ponzi scheme say their careers there have come back to haunt them, with no end in sight.

"I'll never get a job in finance, and I'm one of the lucky ones," says Squillari. She went to beauty school this summer and plans to look for work at a hair salon while selling her handmade jewelry.

Mark Madoff recently met with a group of Wall Street contacts to get opinions on whether he could find another job in finance: He talked about working on a trading desk or in trading technology, asking to be kept in mind any openings.
More from WSJ via Google News.

Tuesday, December 8, 2009

Geithner criticizes regulators over Regulatory Overhaul - Compliance Opportunities loom

In an unusual meeting involving Fed Chairman Ben Bernanke, FDIC. Chairwoman Sheila Bair and SEC Chairwoman Mary Schapiro, Treasury Secretary Timothy Geithner said "enough is enough" as he criticized the regulators for hindering progress of the financial regulatory overhaul, sources said. Although the revamp is a top priority for President Barack Obama, regulators and the financial-services industry have criticized the proposal. The Wall Street Journal

To explore Bank Regulatory Compliance opportunities. go to or contact
Not posted - current need is: Regulatory Reporting/Call Report experts ASAP: up to Director-level Opportunities for those with Bank Holding Company Regulatory and Basel reporting experience.

Tuesday, December 1, 2009

Bank Regulatory Compliance Advice Needed with the Fed, OCC or OTS

In anticipation and based on actual assignments, experience with a Federal Banking agency such as the Federal Reserve, Office of the Comptroller of the Currency, Office of Thrift Supervision is now needed for full-time employment with one prestigious Client of Rosenthal Recruiting. Responsibilities of these Positions include:
•Advising clients on a variety of regulatory advisory services that help meet bank holding company and banking compliance requirements.
•Analyzing policies, procedures, people, processes, and systems used by financial institutions to meet bank regulatory requirements and expectations.
•Designing and implementing quality, practical business approaches.
•Researching emerging trends, regulatory guidance, and best practices

Experience required includes 6+ years of experience with the Fed, OCC or OTS. Candidates with a minimum of 1 year of relevant experience with federal banking agency may apply for a less senior position.
Click here to read more and apply. These positions will be based at the Advisor's midtown office and will require travel up to 40% during the year.

Monday, November 30, 2009

Trader and Investment Banker Big Bonus Expectations

WSJ Reports today that Art Dealers say bonus expectations are stoking strong bidding. Andy Warhol painting "200 One Dollar Bills" fetched $43.7 million at Sotheby's this month is pictured. Go to WSJ article via Google. Flight Options Inc., which sells blocks of flight time on private planes starting at $97,000, says sales are up sharply in the past month. One popular route: the three-hour flight from NJ's Teterboro Airport, a short ride from Manhattan, to Palm Beach International, near second-home hotspots. A senior investment banker at a major Wall Street firm recently planned to impress clients with front-row World Series tickets. The company, a recipient of U.S. government aid, nixed the plans, citing potentially bad publicity. The investment banker wound up schmoozing his clients about 20 rows behind third base at Yankees Stadium.

"We have to be cognizant of the fact that we will be judged in the court of public opinion," Citigroup CEO Vikram Pandit told a gathering of employees this month. Christmas parties normally paid for by Citigroup bankers and traders out of their own pockets are being canceled due to the hostile political environment this year.

Wednesday, November 25, 2009

Calpers Investigates Hedge Fund Oversight, Legal & Financial Risk

The California Public Employees’ Retirement System, the nation’s biggest pension fund with $200 billion, has launched an internal investigation into its own oversight of hedge fund deals, The Los Angeles Times reported.

Calpers found that it had paid $36 million to two hedge fund advisors who were working without contracts, exposing the fund to legal and financial risk. The head of its hedge fund portfolio, which manages $5.8 billion in assets, was temporarily placed on leave and fined, The Times said, citing people briefed on the matter.

Calpers told the newspaper that it was investigating its ties to two hedge fund advisers, Paamco and a unit of Swiss banking giant UBS. Both firms had contracts with Calpers, but they lapsed two years ago, The Times said.

Go to Article from The LA Times »

Thursday, November 19, 2009

FINRA Examiners: More Time in Member offices

"We need to become more nimble and faster about doing our cases," Finra Chief of Enforcement Susan Merrill said. She said she's taken to reciting the nursery rhyme "Jack be nimble, Jack be quick" around the office.

As reported by Dow Jones FINRA is likely to spend more time in broker-dealer offices. On-site inspections and examinations are "something we're going to use a lot more going forward," Merrill said at an industry conference Wednesday. "Announced on-site inspections, I think, will become more common."
Unannounced visits from the regulators are rare, she added.

Finra staff can more quickly request and receive information when they're in a broker-dealer's office, Merrill said. Several major auction-rate cases are still under investigation, she added. Enforcement division investigations, which are focused on potential wrongdoing, are separate from the ongoing exams conducted by Finra's member regulation division.

Ponzi schemes have become a priority for the regulators this year, Merrill said. Enforcement division is also looking at due diligence practices around the sale of private placements.

Additionally, it's looking into Stock Lending from retail accounts to short sellers and disclosures made to those customers. Finra's enforcement division is looking broadly at the way it operates and has made some changes - big and small and structural and philosophical, Merrill said. These include this spring's creation of a whistleblower office and this autumn's formation of an overarching fraud detection and market intelligence unit to oversee all fraud-related issues. Finra must be more diligent about its coordination with the SEC, Merrill said, adding that Finra is also focused on how it identifies new enforcement cases.

Tuesday, November 10, 2009

Should HFs buy and sell what they buy and sell for clients?

With hedge fund now the target of insider trading allegations, the alternative investments industry is again in the eye of a storm: PMs in handcuffs and wiretaps, cash payments in briefcases and 007 code names are tantalizing the public. Ron Resnick, of financial consulting firm CounselWorks, contends there is a smarter way to regulate hedge funds.

Resnick writes that there is a way to address common misconceptions and encourage productive public dialogue about hedge fund practices. The smarter way to address public policy concerns about fraud on investors, conflicts of interests and the risks of hedge funds is the opposite of the S.E.C. philosophy that portfolio managers should separate their personal investing from client investing.

S.E.C. holds the view that it is a conflict if a manager buys or sells for himself what he buys or sells for his clients.

Rather than separating managers’ personal investing from their client investing, the S.E.C. should require all managers to buy and sell precisely what they buy and sell for their clients. Read More » from NYT Dealbook.

Monday, November 9, 2009

Don’t Throw the Baby out with the Bath Water

Financial regulatory reform is poised to emerge in a form that risks being just more of the same, if clear segmentation of oversight duties is not set-out in bright line separation of duties. Says Pat O’Mara, CEO of New York’s Cardinal Compliance Services (, “Instead of more ambiguity there must be a clear road-map for industry professionals to follow, outlining all specific regulatory responsibilities.”

The broker-dealer and managed funds regulatory world should continue to follow an SEC rule making methodology that garners industry consensus (because the honest brokers and managers will always seek a level playing field), and self regulation is effective, as long as rules are rigorously applied and vigorously enforced. Congress should ensure that in its approach to hedge fund advisers, broker-dealers and money-managers, at all levels, they all fall under the SEC’s jurisdiction. From a regulatory standpoint, parsing the securities community based on size or product would only fragment a regulatory system that already suffers from a lack of communication among the existing departmental silos that have set-up, by mandate. SEC enforcement should, if anything, be given more range (i.e., of everything securities related, perhaps even more insurance products) along with a staff and a budget that would make all of the Madoff want-a-be’s cringe and cower at the thought. Few ever successfully challenge an SEC enforcement action. As for honest capital markets professionals, we should all be concerned with the morass of banking reform legislation, seek that it not pervert capital markets legislation, and welcome the leveling-of-the-field-of-play with a beefed-up SEC and FINRA.

Wednesday, November 4, 2009

SEC Registration Bill Advances, But Now What ? Practical Advice on How to Prepare

Following last week's House Committee on Financial Services clearing a bill that would require most alternative investment fund managers to register with the SEC you may wish to read an overview of how and what to do to prepare your Firm for Registration.

In a column late this summer Thomson's BuyoutsNews prodded buyout shops to take a stronger stand against proposed legislation requiring them to register as investments advisers with the SEC. That article was titled "Will Industry Accept SEC Registration Without A Fight?" In it you can read how many firms may be tempted to tap a CFO or other partner as chief compliance officer, rather than hiring a full-time CCO. But that could prove short-sighted, given the complexity of the job, and the fact the SEC tends to stop by for examinations every two to four years. "One of the ways to get into big trouble is to adopt policies and procedures off-the-shelf and not to follow them," cautioned a Partner at Ropes & Gray.

Registering as investment advisers, following the compliance policies and procedures, dealing with regular inspections-all these activities absorb yet more time and energy. These are among the main areas that firms would likely need to change how they do things and you can read below on what and how to do it. Read more.
To see all DRAFTS of the Financial Regulatory Reform now being considered by the House Financial Services Committee click here Click here to write to your Representative about issues relating to the Financial Services Committee.

Sunday, November 1, 2009

SEC may raise RIA threshold to $100M, moving many under state regulation

Some 4,200 advisory firms can expect more oversight and higher costs under legislation that would remove them from SEC oversight and place them under state regulation. Investor Protection Act of 2009, which the House Financial Services Committee is expected to approve this week, contains an amendment by Rep. Barney Frank (photo), that would raise the threshold for SEC registration of investment advisory firms to $100 million, from $25 million.

That would result in state regulators' gaining oversight of about 4,200 of the 11,300firms now registered with the SEC. The act also contains new rules to harmonize regulations between broker-dealers and investment advisers.

Under the amendment, “examinations could happen more frequently and more rigorously” for firms moving to state regulation as well as for larger firms remaining under the SEC. The SEC examines about 9% of its regulated advisory firms annually.

If it is able to concentrate on larger firms, the SEC will have more time to conduct exams, states currently examine advisory firms more frequently than the SEC does. The bill also contains provisions to more than double funding for the SEC, raising the budget to $2.25 billion and authorizing the commission to impose fees on investment advisory firms to cover the cost of inspecting and examining firms for which the agency retains jurisdiction.

For firms moving from SEC to state registration, regulation would likely become more complicated and expensive. Many of those firms would have to register with more than one state.

Currently, SEC-registered firms need not register in states in which they have few clients. State-registered firms with locations in more than one state will find themselves subject to different state requirements concerning custody rules, capital requirements, advisory contracts and privacy regulations.

Although some think it will be more costly to them, some advisers said that they think that state regulators are easier to deal with than the SEC. More at Investment News.

S.E.C.'s Madoff Investigation Exhibits

S.E.C. inspector general, H. David Kotz concluded in his full report that inexperienced and sometimes incompetent staff members had failed to adequately investigate numerous warnings and tips about the enormous Ponzi scheme.

New exhibits consist of 6,157 pages of interviews, letters, e-mail messages, telephone records and other background material gathered during a 10-month investigation of how the commission handled, and mishandled, numerous tips and warnings it received about Madoff over the years. His full report,released last month, found the agency had received six substantive complaints since 1992 — and botched the investigation of every one of them. He found no evidence of any bribery, collusion or deliberate sabotage of those investigations.

Among the exhibits are transcripts or reports on more than 160 other interviews conducted during the extensive internal investigation, including conversations with four former S.E.C. chairmen, a number of former top officials at the agency and dozens of current and former staff members involved in the various botched investigations examined in the original report.

E-mail messages, letters, memoranda, telephone records and other bits of evidence are also included in the Madoff trove were posted on the agency’s Web site

While the exhibits add no new charges to Mr. Kotz’s unofficial indictment of the nation’s top market regulators — the worst documented failure in the 75-year history of the S.E.C. — they do provide a vivid sense of the tensions, confusions and petty squabbles that derailed each failed inquiry.

The paperwork gathered from the agency’s files also tell a tale of unseasoned, poorly managed people who were uncertain about what to do and unwilling to ask for help. In numerous instances, employees would share their doubts about Mr. Madoff in notes or e-mail messages, but then never take steps to press for more information.

In a memo from March 2004, several senior S.E.C. staff members reported that “it seems clear” that Mr. Madoff had “absolute discretion” over the accounts of his clients. Nevertheless, they said, “Bernard Madoff himself has categorically denied being an investment adviser.”

Go to Madoff Exhibits from the S.E.C.
Article from NY Times

Thursday, October 29, 2009

FINRA Calls for Surveillance by “Unified Single Regulator” & Studying Facebook

Rick Ketchum, FINRA chairman and CEO called for the creation of a single repository of data on all trades on all markets so that the financial industry could be “surveilled by a unified single regulator.” A single regulator can “bring the best technology, the best people, and a unified set of rules” to bear on markets. He called his proposal “somewhat daunting” but “a significant undertaking and a baby step” at the same time.

Sure as with other updated and proposed Reguatory matters the primary goal is enhanced Regulation - but SRO mergers like any other will produce headcount reduction to achieve resultant cost-cutting.

Ketchum said FINRA “would do a good job” at creating and surveilling a single data base. But there are alternatives, he told Securities Industry News.

“If you don’t, things will fall through” the cracks, he said in comments delivered at SIFMA's annual meeting. The problem that the single database and the single “surveilling” body would respond to is increasing “fragmentation we see in the markets and the increasing number of genuine liquidity centers, and what these do to the ability of regulators to oversee the markets,’’ said Ketchum. Ketchum is a former regulator of multiple markets at NYSE Regulation. A decade ago, a single market – the NYSE – dominated trading and that made surveillance relatively easy. But, in 2009, the majority of trading is occurring on electronic networks and dark pools. The exchanges have been empowered to police trading and activities, but that is getting more difficult, Ketchum said, as market activity disperses.

In another regulatory news, FINRA has set up a task force of to explore how regulation can embrace technology advancements to improve the flow of information between firms and customers without compromising investor protection. Bankers and analysts increasingly want to use social networking to connect and interact with customers. Ketchum said Social networking sites like Facebook and LinkedIn raise "serious new challenges."

Most firms prohibit their employees from using sites like Facebook for business, partly because of the difficulties they pose for firms' ability to meet supervision and record-keeping requirements. Ketchum said "Nevertheless, interest in these sites is inevitable and will not go unabated," he said.

Mark Zuckerberg (pictured) founder and CEO of Facebook, delivers a keynote address at the company's annual conference on July 23, 2008.

Tuesday, October 27, 2009

Registration Bill Includes One-Year ‘Transition,’ Requires Compliance Officers

Hedge fund registration in the U.S. again approaching. House Committee yesterday approved a bill that includes a one-year transition period before registration with the S.E.C is mandatory. The bill’s author, Rep. Susan Kosmas (picture from FinAlternatives) said the delay is needed to allow both sides to get their ducks in a row.

“The SEC will need time to prepare for the additional responsibilities that will come from the registration of potentially thousands of new managers,” Kosmas claimed, despite the fact the SEC has itself imposed mandatory registration of hedge funds four years ago before that rule was tossed by the courts. Kosmas also said that hedge funds needed time to set up the infrastructure for registration and the inspections that will follow it: Among other things, the bill would require hedge funds to hire chief compliance officers.

The head of the agency charged with overseeing hedge funds threw her support behind requiring the hedge fund managers to register. Speaking at the 2009 SIFMA Annual Meeting, Mary Schapiro said that hedge funds “have flown under the radar for far too long” and that she “will work with Congress to avoid creating broad new carve-outs or exceptions that could come back to haunt investors in later years.”

When you need a Partner to staff for Compliance, be sure to contact Rosenthal Recruiting at (973) 826-0537, via
Facebook Page ,Website or LinkedIn.

Goldman Meets and Makes its Case to SEC: Dark Pools, Short Sales Help Cut Costs

“Dark Pools” benefit both institutional and retail trading by bringing down transaction costs, Goldman Sachs said in a memo to the S.E.C.

Last week the S.E.C. voted to make dark pools more transparent, such as revealing electronic trading messages that are sent to a limited group of market participants.

Tiny Memo URL is
From: Smeeta Ramarathnam, Office of Commissioner Aguilar
Date: October 22, 2009
Re: Meeting with Representatives from Goldman Sachs

On September 24, 2009, Smeeta Ramarathnam and Zak May, Counsels to Commissioner Aguilar, met with the following representatives from Goldman Sachs: Paul Russo, Managing Director, Equities Division; William Conley, Managing Director, Global Securities Lending, and C. Annette Kelton, Managing Director, Associate General Counsel to discuss issues involving market structure including short selling, dark pools and Reg ATS, high frequency trading and exchange co-location, sponsored access, flash trading and IOIs. The representatives provided the attached materials entitled, “Market Structure Overview.”Bloomberg Article

Monday, October 19, 2009

The Wall Street Employment Scene

Q&A w/Bill Singer:Do you think we've seen the worst?

Rosenthal: Although improved since the Bear and Lehman crises, I don't think we will ever return to the staffing levels of the last bull market, at least, not for this generation. We are still adjusting to the new world order.

Singer: What are the chances of Wall Street embarking upon the rehiring of the tens of thousands of folks who have been laid off during the Great Recession? Read more at Bill Singer's

Saturday, October 17, 2009

“This should serve as a wake-up call for Wall Street”

Insider trading case brought against Raj Rajaratnam, self-made billionaire who founded the Galleon Group

Case is fascinating on multiple levels. Sheer size of the purported network, with unnamed co-conspirators and tipsters, is tantalizing. Who was the unnamed investor-relations employee who allegedly illegally spilled the beans on Google earnings? Who was the Akamai executive who did the same? Moody’s analyst who divulged that Hilton Hotels was about to be acquired by the Blackstone Group ahead of the formal announcement?

Shown above are Danielle Chiesi, former Bear Stearns executive who played a major role in the purported scheme; Robert Moffat of I.B.M. who fed information into the network; Mark Kurland, Ms. Chiesi’s colleague hedge fund New Castle Partners; and Anil Kumar, a McKinsey & Company executive who also tipped the insider traders. The fifth named defendant is Rajiv Goel, an Intel executive.

“This case should serve as a wake-up call for Wall Street,” Preet Bharara, US attorney, said at a news conference. “These people were privy to inside information, but they didn’t know one secret, that we were listening.” Click to go to NYT Recap.

Prosecutors were quick to point to the development as a sign of how seriously they took white-collar crime, using techniques employed in investigations of the Mafia and drug cartels. That they intended today’s case as a shot across the bow of hedge funds is unmistakeable.

Who is Raj Rajaratnam ? As of early 2009 the richest Sri Lankan-born person in the world. He studied engineering at the University of Sussex in England. Rajaratnam moved to the US in 1981 and earned an M.B.A. from Wharton.

Rajaratnam started his career as an analyst at Needham & Co.. Promoted to president in 1991 then launched Galleon six years later. He says his best ideas come from frequent visits with companies and conversations with execs who invest in his fund. Hatip Wikipedia.

Wednesday, October 14, 2009

OVER 20% Of Hedge Funds Misrepresent Something To Clients

More than one in five hedge fund managers are lying to their investors, according to a new report.

The study, conducted by a quartet of academics, founded that 21% of hedge funds misrepresent past legal or regulatory problems, while nearly three in 10 offer incorrect or unverifiable information about other topics, including assets under management and performance, the study shows.

The study looked at 444 due-diligence reports on 403 different hedge fund managers commissioned by investors between 2003 and 2008, and found that 42% contained “verification problems.”

Of that 42%, half are cases where “the manager verbally stated incorrect information.” This was reported by FINalternatives.

Monday, October 12, 2009

Wall St. on Trial: E-mail-Heavy Case Could Benefit The Defense

Several former prosecutors say that the coming criminal trial of former Bear Stearns hedge fund managers Ralph Cioffi and Matthew Tannin, brought up on fraud charges in connection with the implosion of two funds, is far from a slam dunk. And they say that any attempt by the government to build a case based on anti-Wall Street sentiment could backfire.

For the blood-thirsty, there’s the specter of retribution for an act that some believe tipped the first domino in the global financial crisis. For those who think bailout-happy Washington has taken it too easy on the financial sector, the prosecution of two hedge fund managers, ­ the era’s shadowy and iconic Wall Street players, ­ represents the first instance of government pushing back. And then there’s the legal community, eager to see whether an indictment so rich in seemingly damning e-mail messages will in fact yield guilty verdicts. NYT has a former litigator's analysis of the coming trial.

Thursday, October 8, 2009

Next-Gen NYSE Trading Floor: Hybrid of Live and Electronic

NYSE redesign, already under way at the Big Board's main trading room, is part of a broader strategic shift at the exchange. The exchange wants to lure more electronic traders directly to the floor, creating a hybrid world where they can take in the person-to-person "buzz" of live traders while still executing trades by computer.

The changes could bring about another big cultural change: traders will be able to sit at stations similar to desks used throughout Wall Street, instead of standing or perching on stools, as is Big Board custom. WSJ has more and provides rendering from Perkins Eastman Architects. The Architects, who also designed newly renovated Times Square half-price Broadway ticket booth, said the plan could "bring back some of the excitement" to the room. "We're taking out the blocky booths and replacing them with something nice," said Lou Pastina, EVP of NYSE operations.

Wednesday, October 7, 2009

Third of Wall St Expects Bigger 2009 Bonus

Bloomberg reports on survey from a leading Career website: “This finding may rile regulators who have concluded that compensation arrangements often created incentives for risk- taking with insufficient regard to longer-term risks.” Of the quarter of respondents who anticipate a smaller bonus, 54% attribute it to their firm’s performance and 20% to a change in pay structure. Citi, Morgan Stanley and UBS increased salaries for some while adjusting bonus policies.

Monday, October 5, 2009

How Private Equity Can Win While Their Companies Lose

Private equity firms, former executives and Investment Banks profited as the Simmons Bedding Company fell into bankruptcy, devastating its bondholders and employees.

Presidents have slumbered on its mattresses aboard Air Force One. Dignitaries have slept on them in the Lincoln Bedroom. Its advertisements have featured Henry Ford and H. G. Wells. Eleanor Roosevelt extolled the virtues of the Simmons Beautyrest mattress, and the brand was immortalized on Broadway in Cole Porter’s song “Anything Goes.”

Its recent history has been notable, too, but for a different reason.

Simmons says it will soon file for bankruptcy protection, as part of an agreement by its current owners to sell the company — the seventh time it has been sold in a little more than two decades — all after being owned for short periods by a parade of different investment groups, known as private equity firms, which try to buy undervalued companies, mostly with borrowed money.

Thomas H. Lee Partners of Boston has not only escaped unscathed, it made a profit. THL bought Simmons in 2003, pocketed around $77 million in profit, collected hundreds of millions of dollars from the company in the form of special dividends. It also paid itself millions more in fees, first for buying the company, then for helping run it. Last year, the firm even gave itself a small raise.

Prior to this, investment banks also cashed in. A succession of private equity buyers came and went. Merrill Lynch Capital Partners bought Simmons in 1991 for $32 million for a 60 percent stake in the company and the assumption of its debt. Merrill sold it to Investcorp, an investment group based in Bahrain, for $265 million in 1996. Two years later, Investcorp sold the company to Fenway Partners for $513 million. Go to Full NYT article.

MORE to SEEA Video look at how private equity dealmakers can win while their companies, like Simmons Bedding, lose.

Wednesday, September 30, 2009

Calls for "One Uber-Regulator"

Last week, the Group of 20 announced that they had agreed to a far-reaching effort to revamp the economic system, which, if carried out by governments, would lead to much tighter regulation over financial institutions, complex financial instruments and executive pay. They could also lead to big changes and more outside scrutiny over the economic strategies of individual countries including the US.

Meanwhile, the U.S. House and the Senate now reviewing the Obama administration plan to overhaul financial regulations in hopes of preventing another crisis. Morgan Stanley CEO John Mack, who's stepping down at the end of the year, is calling for a single regulator to oversee financial institutions worldwide. “A better system would be one uber-regulator,” Mack told Bloomberg in an interview. “We do need an overall systemic-risk management that everyone buys into. It’s not a U.S. systemic boundary — it’s a global systemic risk manager.”

Wednesday, September 23, 2009

White House abandons and House Divided on Financial Reform

Obama administration on Wednesday abandoned a significant provision in the face of widespread political and industry opposition. It dropped a requirement for financial services companies to offer “plain vanilla” products, like 30-year fixed mortgages and low-interest, low-fee credit cards. NYT discusses political cave-in. and that unity from the darkest days of the crisis have dissolved. The acrimony could further delay or dilute the administration plans to rewrite rules for the financial system.

Monday, September 21, 2009

Front-Running Hedge Fund Disclosure - Something about Mary

Chairwoman Mary Schapiro said on Friday that the S.E.C. will probably require “some level of public reporting,” as it currently does for mutual funds. She said the agency was “very aware of the tension” involved in requiring more disclosure because hedge funds don't want competitors to “front-run.”

Monday, September 14, 2009

New Kids on the Prime-Brokerage Block

Bulge Bracket trading and other services to hedge funds scaled back last year as their clients posted losses or closed. Prime-brokerage businesses, including some just launched in 2009, competing fiercely to attract hedge funds as clients. Some of the newer and lesser-known players: Cantor, FBR Capital Markets, Jefferies, Merlin, Conifer Securities. Merlin plans to announce a partnership with Northern Trust, to allow Merlin clients seamlessly to "custody" (hold in safekeeping) assets at NT. 9/15 WSJ for more.

Friday, September 11, 2009

Inspection of Wall Street’s New Pecking Order

Economists debate cause and effect of Lehman Brothers' collapse a year ago and politicians and the public seem to blame the financial crisis on the banking sector. Furor has died down, some banks proving to be surprisingly resilient, yet Wall Street still faces increased regulation and political pressure. Update from "Wall Street's new shape" leads off: AT THE press of a button, double doors sweep open: Welcome to the office of Lloyd Blankfein, chief executive of Goldman Sachs.

Sunday, September 6, 2009

Credit Suisse, Goldman Want to Buy Life Insurance from Sick and Old for Cash, Package as Bonds to Trade

Credit Rating agency DBRS is reviewing nine proposals for life-insurance securitizations including from Credit Suisse. Goldman Sachs has developed a trading index of life settlements, so traders/investors can bet whether people will live longer than expected or die sooner than planned. The index is similar to stock indices that allow investors to bet on the direction of the market without buying individual stocks. Moody's has been approached about securitizing life settlements, but has yet to see a portfolio that meets its standards.

Andrew Terrell thinks securitized life policies have big potential, explaining that investors want to spread their risks and constantly looking for new investments that do not move in tandem with their other investments. Terrell was co-head of Bear Stearns's longevity and mortality desk - which traded unrated portfolios of life settlements - and later worked at Goldman on a trading platform for life settlements. "It's an interesting asset class because it's less correlated to the rest of the market than other asset classes".

Not quite a done deal: The insurance industry is girding for a fight: Just as all mortgage providers were tarred by subprime mortgages, so too is the concern for life insurance companies that they would be tarred with the brush of subprime life insurance settlements. Both Standard & Poor’s and Moody’s, which gave out many triple-A ratings for securitized subprime mortgages and later were burned, are approaching life settlements with greater caution.

“The securitization of life settlements adds another element of possible risk to an industry that is already in need of enhanced regulations, more transparency and consumer safeguards,” said Senator Herb Kohl, who is chairman of the Special Committee on Aging. More from NYT.

Tuesday, September 1, 2009

Accumulators? Dangerous Derivatives Return

Derivatives nicknamed “I kill you later” - Accumulators - making a comeback, Wall Street Journal reported today. Accumulators generated controversy after wiping out enormous sums among high net-worth individuals in Asia.

Monday, August 24, 2009

Senator Wants Broad SEC Market Review

There are now potential conflicts of interest on trading desks serving both retail and high-frequency trading clients: Delaware senator Ted Kaufman is asking the SEC to review stock market structures, part of a debate over the impact of computer-based trading. WSJ.

These days, about half of all the equity stocks traded in the US are handled by nimble computers. has a feature on Jersey City-based Direct Edge and notes how the NYSE plans to consolidate existing Secaucus and Brooklyn data centers in a huge Mahwah site. has photo of a Trader on the support desk at Direct Edge with a Glossary of terms such as • High frequency trading • Flash orders • Liquidity • Dark pools • Best bid and offer.

Wednesday, August 12, 2009

Guaranteed Bonuses Back and Face Scrutiny

WSJ 8/13 $100 Million for Mr. Hall?
As trading has been the main source of recent Bank profits, the biggest bonus commitments are being made to Bond Salesman, Currency and Derivatives Traders, and computer programmers and others who support those operations. “Is Wall Street again going to overpromise, and then when the market turns down, we’ll have another set of pay problems?” asked pay consultant Alan Johnson?

Guarantees are roughly a third smaller than at the 2007 market height, although they are bigger than last year, Johnson said. “The absolute levels are by historical standards moderate, but it is a big change from where we were at the beginning of the year”.
Summary of some well-known Employers:
Citi and B of A have offered guarantees, arguing that they are necessary to attract new employees and keep existinG. Foreign banks like Nomura (Japan), Credit Suisse (Switzerland) and Barclays (Britain) making guarantees in hopes of poaching talent.

Stronger banks that have repaid bailout money and not subject to restrictions — Goldman, JPMorgan Chase and Morgan Stanley — have also begun offering guarantees.

Former Goldman partner in London, signed a multimillion-dollar contract recently with B of A that she told former associates was worth $15 million a year for two years and included a guarantee, according to a person with knowledge of her pay.

In the last few months, Citi has lured several senior derivatives traders — including Dan Petherick, Rachel Lord and Stefanos Bitzakidis — away from MS with multimillion-dollar, multiyear guarantees. Citi spokesman said that attracting and retaining the best talent was “very important” to the success of Citi and all stakeholders, including taxpayers.

Morgan Stanley, after posting dismal second-quarter trading results, has been canvassing Wall Street trading desks. After picking off currency and rate traders at JPMorgan and Deutsche Bank, MS recently used one-year guarantees to hire three Citi traders and approached several more with similar offers.

Obama administration pay czar, Kenneth Feinberg
(pictured) is preparing to review how compensation should be structured at seven companies that received two or more federal bailouts. Resurgence of bonus guarantees underscores how difficult it is to control Wall Street pay, despite the public outcry over how taxpayer money is being spent. Feinberg amust decide how much overall compensation is too much, even when the pay is tied to performance, like the $100 million package that Citi promised to trader Andrew Hall. (See WSJ 8/13)

Companies must each submit 2009 compensation plans for their top 25 earners by Thursday, and Feinberg has 60 days to rule on them. He has the authority to single out any of those employees and adjust their pay packages. Some rivals of the bailed-out have already benefited from being out of reach of the government’s pay czar. Jeff Michaels, head of Citi’s US interest rate trading, found Nomura knocking with an offer that would guarantee him as much as $10 million for 2009 and 2010. That’s nearly twice the $6 million bonus he received last year when he joined Citi from Lehman.

Summary courtesy of Dealbook. Click for access to Full NYT article here to see 293 comments as of 8/10 August 10th 3:53 pm

Tuesday, August 11, 2009

SEC Says No More Messin’ Around

WSJ story: that you ain’t gonna have the SEC to kick around anymore — at least if Mary Schapiro (pictured smiling in a pearl necklace) has her way. Quotes Paul Weiss Attorney: Clearly the message going out is that the SEC is going to be much tougher with regard to settlement postures, in terms of penalties. They want to demonstrate there is a tough, new cop on the beat. Headline courtesy WSJ Law Blog.

Monday, August 3, 2009

Will Stockbrokers Exist After This Generation?

FINRA reports that registered reps have seen their job numbers dwindle. 25,810 reps have lost their jobs. Registered Rep magazine reports Smith Barney--now Morgan Stanley Smith Barney following its sale from Citigroup saw its number of financial advisers fall 17% 1Q 2009.

A broker can be a "mentor" for investors to guide them. Others hold out less hope for brokers. In a Forbes article, Bill Singer foresees stock brokers not existing after this generation and instead the market will have commission-paid phone operators who dole out information. If there are going to be brokers and other investment advisers in the future, Singer advocates each professional to take exams with more emphasis on product knowledge and CE than on one's ability to make cold calls. Since the retail investor doesn't often know the difference between a financial consultant and a financial adviser, Singer wants to eliminate those distinctions. More at Forbes' Intelligent Investing Panel.

Read here to see someone disagree: who writes to announce the death knell of the advice business is as ludicrous as saying there will no longer be a demand for teachers or doctors. Are educational or medical websites robust and helpful enough to do away with those professions? How about self-diagnosing and self-medicating in times of illness?
The Reformed Broker also tackles the claim that most investors will just do it themselves: "We were told that online brokerages would be the death of the full-service broker in 1999. Most of those online brokerages have since disappeared or have been swallowed up and the ones remaining now charge zero dollars or so for trade execution. Nice business model:E*Trade’s stock looks like Mickey Rourke’s face, currently hovering around a buck, with flies buzzing around it’s sunken eye sockets. Read more at The Reformed Broker.

Friday, July 31, 2009

CAPCO:Insurance Co. for Big-Money

Capco is virtually unknown even in financial circles, now thrust in spotlight. Creditors and former customers battling over who will get what and when from Lehman. Robert Menendez, Democrat of New Jersey, wrote the Treasury secretary, Timothy F. Geithner, in June to express his concern: “It has become clear that this entity is thinly capitalized,”

Pitch was that while Capco would not insure against investment losses, it would compensate them if firms failed. Capco provides virtually unlimited coverage above $500K offered by SIPC and British equivalent. Its members include Morgan Stanley and Goldman, JPMorgan Chase, Wells Fargo, Robert Baird, Edward Jones and Fido. Capco was initially registered in New York but later moved to Vermont, where state law enables it to operate without disclosing much. More than $32 billion of assets have been tied up in Lehman’s London prime brokerage unit. Untangling the mess could take years. Some former Lehman clients, which include big hedge funds, are looking to Capco for answers — and money. (Picture: Exploring Lehman 'Caves' in Great Basin National Park)

Monday, July 27, 2009

Schumer: Regulatory Flash Order Crackdown | Goldman: More Regulation, Lower Profits or Dimmer Glow?

New York magazine looks at how Goldman is seen as the “ugly essence of capitalism at its most cynical,” and how it is handling so much attention. Includes a stroll through Goldman’s 50th-floor trading room in One New York Plaza, where Goldmanites are seen hovering over computer screens. Read summary via NYT and link to NY Magazine.

Flash orders allow certain members of Direct Edge, Nasdaq and BATS exchanges access (for a fee) to order information for milliseconds prior to that information being made available to the public. High-speed computer software can take advantage of that brief period to allow those members to trade ahead — at better prices — and therefore profit from advanced knowledge of buying and selling activity. ”If the S.E.C. fails to curb this practice, I plan to introduce legislation in the U.S. Senate to prohibit the use of flash orders,” Sen. Schumer said. Go to Article from AP via The NY Times

Friday, July 17, 2009

Cuban Victory Over S.E.C. "ceiling of the Sistine Chapel for securities lawyers."

Cuban backstory and links of the high-profile lawsuit, which lawyers said was an aggressive move by the agency. Cuban Lawyer said it "is the ceiling of the Sistine Chapel for securities lawyers." Others said implications limited because Cuban was judged not to have a fiduciary duty.

Cuban denied the allegations and played hard ball with the agency in statements on his blog and in court. For an extraordinary email exchange between Cuban and an SEC attorney from Fort Worth, click here.

Wednesday, July 15, 2009

Accused Goldman Code Swindler: Thief or Whistleblower?

Coverage of Sergey Aleynikov, arrested July 3 on charges of stealing proprietary trading code from Goldman Sachs as reported by Baristanet: Before you get yourself involved in a major espionage, it's a good idea to first get rid of embarrassing videos on YouTube.
Reuters has been on the Soprano-Sergey connection. Over the weekend, a Reuters reporter went to North Caldwell to take a look at Aleynikov's house. Aleynikov is being hailed by some not as a thief but as a whistleblower. On Facebook, there is now a Sergey Aleynikov Fan Club, thanking Aleynikov for giving "us all a priceless insight into the the dark side world of the mega market makers in the world of finance."

Saturday, July 11, 2009

Two Regulators Better Than One? CFTC/SEC Merger Debate Cont'd

More about merging the S.E.C. and C.F.T.C. in a hearing before two Congressional panels about regulatory changes to the derivatives market. When the Obama administration chose the new chair of the S.E.C., there was speculation that, because she was previously head of the C.F.T.C., she would push to combine the two. Last month, the White House announced its plan to overhaul the nation’s financial regulatory regime, there was no mention of such a move;some lawmakers just can’t seem to let the topic go.

“We should merge the S.E.C. and the Commodities Futures Trading Commission,” Walt Minnick, Democrat from Idaho, said before the House Financial Services Committee and the House Agricultural Committee. “Financial derivatives, whether they originate in a commodity, a security, or neither, like weather futures, are functionally identical and must traded, cleared and settled subject to the same rules. Bifurcated responsibility might be made to work temporarily but is a poor long term solution and discourage bold acting when crises arise.” “Just for clarification, the gentleman spent a lot of time looking at this, but Mr. Frank and I, at least the two of us, have come to the conclusion, that we are not going to be merging the S.E.C. and the C.F.T.C.,” Collin Peterson, Democrat from Minnesota who leads the agricultural committee, said right after Minnick’s remarks.

Widely speculated that a turf war between the two committees has kept the two agencies from merging, Barney Frank, head of the financial services committee, disputed that theory. “I want to begin with an apology to our friends in the media,” he said. “There is no fight to cover between these two committees.”He praised colleagues on both committees, however, he acknowledged that the current system less than ideal.

“I will say that if we were starting from scratch, I don’t think we would have the current organizational structure. But we’re not starting from scratch, and I don’t think it is practical to talk about making major changes.” Hearing’s only witness, Treasury Secretary Geithner, seemed to agree with Frank. When asked about his thoughts, he said the administration was more concerned with “bringing statutes and laws into conformity” rather than merging the agencies.
Summary above courtesy NYT Dealbook where you can also see Video of Geithner speaking about Regulating Derivatives.

Wednesday, July 8, 2009

Red Flags Rule - Could FINRA treat like AML & Patriot Act?

FINRA doesn't plan to give broker dealers more time than they've already had to deal with a Federal Trade Commission identity theft rule that's effective Aug. 1.

Guidance posted Monday by FINRA, about how to comply with the Red Flags Rule means it expects adherence from the onset. The rule will be a likely focus of upcoming Finra examinations and sweeps, say compliance consultants.

The FTC will require broker dealers to periodically reassess whether they offer or maintain certain types of accounts covered by the rule and, if so, have a written program for identity theft prevention. Such a program should include, at a minimum, policies and procedures to detect certain "red flags" that could indicate identity theft. Broker dealers would also have to update those policies in response to changing risks to customers.

The rule applies to financial institutions and creditors who offer or maintain certain types of accounts, which could include margin accounts. The rule initially caused widespread confusion among broker dealers and other industries about exactly who was affected, and as a result, the FTC extended the compliance deadline twice from its original Nov. 1, 2008 effective date.

As quoted in A DOW JONES COLUMN, Tim Pedregon, a Los Angeles-based compliance consultant and former FINRA examiner, says the self-regulator's interest in the Red Flags Rule mirrors activity beginning in 2002 related to a Patriot Act provision requiring financial institutions to establish money laundering procedures. The National Association of Securities Dealers included Patriot Act anti-money laundering compliance as a focus in its brokerage audits. It often imposed administrative fees for small infractions and, in more egregious cases, fines, he said. An enforcement sweep in about six months is also possible, says Pedregon.(Suzanne Barlyn writes Compliance Watch, a column that focuses on compliance and regulatory issues affecting financial advisers. She can be reached at 212-416-2230 or by email at

Monday, July 6, 2009

Be Ready For Your Close-Up and mindful of your Internet Footprints

You should always be ready for your close-up, that could be an Interview or Networking opportunity: have your resume polished when planning or considering a new position and if employed or not check out and be mindful of your Internet "Footprints." To learn more read this article about a job candidate who blogged and tweeted herself out of a job interview.

Hiring managers access Facebook, Twitter and LinkedIn through friends of friends. One is quoted "In the business of networking, people know people. You have to decide what you want your social media face to be. It's like talking in an elevator. You don't know who's listening." In an instance of reverse networking, one job applicant who became virtual friends with as many current employees as possible, thinking that would give him an in when interviewing. It had the opposite impact. Continue reading "Internet footprints follow you into real world"

Friday, July 3, 2009

SEC Blew Chance to Expose Madoff in '04 | Stern's 'Bernie' Near Miss

In 2004 an SEC staff attorney in Compliance, Inspections and Examinations (who previously worked at the American Stock Exchange and understood complicated trading strategies) figured out that there was something wrong with Madoff and submitted a list of detailed questions to her supervisor to pursue the investigation. However, her supervisor told her to turn her attention to mutual funds; at that time the SEC was feeling the heat because the NY Attorney General's market-timing investigations made SEC look bad. Madoff inquiry went nowhere, and the SEC attorney left the agency in 2006.WPost, Staffer at SEC Had Warned Of Madoff Lawyer Raised Alarm, Then Was Pointed Elsewhere.

Did Madoff miss out on a chance to be a part of Howard Stern’s Radio show? A frequent guest on the show nearly escaped with a gold-plated recording of Madoff’s sentencing before she was arrested inside the courtroom.
Ivy Supersonic was caught recording the Court proceeding by Federal Protective Service officers and her “recording device” was confiscated, according to an order signed by Judge Denny Chin. Federal court rules bar the public from recording court proceedings. Device was actually a BlackBerry that belonged to Stern sidekick Robin Quivers, according to Silberstein. Ivy was removed from courtroom before Madoff was officially sentenced.

The Federal Protective Service has deleted the recording but made a copy of it “in the event Supersonic (real name: Silberstein) wishes to assert any rights thereto,” according to the court order. Silberstein, who describes herself as a fashion designer, entertainer, publicist, event planner and animated character designer, told NY Times that the recording “could be worth $1 million.” More at NYT Dealbook.

Monday, June 29, 2009

Everything You Need to Know About Madoff Sentencing

WSJ Law Blog has Wayne State law professor who studied filings in advance of the Madoff sentencing slated for today. Click for an overview of how it’s likely to unfold. Also has earlier posts on filings from Ira Sorkin, Madoff lawyer, and government, respectively (each contains links to underlying filings).

Sunday, June 21, 2009

FINRA sank Attorney's job chances as Florida Regulator

FINRA sank his job chances, attorney says - reported by Investment News. A Florida attorney claims that FINRA derailed his bid to become the state's top watchdog in retaliation for a previous legal dispute he had with the regulator. Kevin Carreno maintains that he was on his way to being appointed commissioner of Florida's Office of Financial Regulation when FINRA sent his former employer a Wells notice alerting that he faced potential enforcement actions.
Shared via AddThis

Tuesday, June 16, 2009

Congressman Pushing S.E.C. for Madoff Report

Second day in a row, Rep. Paul Kanjorski has strongly urged the SEC to release its internal investigation into how the agency missed Madoff’s $65 billion Ponzi scheme before Congress votes on the new regulatory reform package.

Kanjorski, chairman of the House Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises, said in a letter that he wants the final reports on the Madoff investigation by the end of July because he intends to use them as a case study for reform of the financial system. (Read the full text at NYT Dealbook)

On Wednesday, Obama economic team expected to release proposals for new financial regulations. House and Senate expected to begin debating the proposals shortly thereafter.

The SEC inspector general responded to initial letter from Kanjorski on Monday urging him to provide an update on the results of the Madoff investigation. Said SEC intends to issue three reports “very shortly” detailing all of the investigations that the SEC conducted into Madoff-related entities since 1992 and the reasons why the agency failed to uncover the scheme.

Two other reports that will provide specific recommendations on for improvement of the SEC’s various divisions are targeted for Sept. 30.

“I would encourage you to complete your examinations and release your findings sooner, if at all possible, given the importance of these matters,” Mr. Kanjorski wrote in his latest letter to the S.E.C.

Thursday, June 11, 2009

SEC Survived, Schapiro Now Fights to Keep Regulatory Teeth

In late April, senior Securities and Exchange Commission enforcement lawyers met to discuss a shake-up that would place them into specialized groups. Some senior lawyers were skeptical.

SEC Chairman Mary Schapiro wasn't hearing it. According to several people present, she said lawmakers were harshly scrutinizing the agency and "we need to demonstrate that we're going to make changes." Then she warned, "If we don't get serious about this process, we may cease to exist." Schapiro, on the job since late January, is fighting two closely related battles: fixing a troubled agency and persuading Congress and the Obama administration that it deserves to survive.

Chairman Mary Schapiro, left, needs to convince Treasury Secretary Timothy Geithner, among others, the value of a strong SEC. Here, the two at a meeting on executive compensation in Washington on Wednesday. Now she is poised to notch her first victory. Printed in The Wall Street Journal, page M4 Write to Kara Scannell at

Friday, June 5, 2009

Wealth Management, High Net Worth, Hedge Fund Pickup?

Lazard, one of the world's preeminent financial advisory and asset management firms, announced that it is starting a private wealth management subsidiary to be managed by Thaddeus Shelly, formerly senior managing director and regional head of Bessemer Trust. Shelly spent eleven years at Bessemer, one of the oldest firms in the business of managing money for wealthy families, and before that he founded and led Legg Mason’s “ultra high net worth” private client services business. Lazard said it plans to offer a variety of services to its customers including tax planning, philanthropic advisory and investment management advice.

Why is this an important announcement? Well, for starters, it’s much more than some a hiring announcement by a prominent company. Frankly, I don’t need to tell you that this is a tough environment. On top of all the dismal economic news, there’s the daunting prospect of more financial regulation and the challenge of trying to anticipate new regulations by possibly new regulatory organizations. Clearly, these are not the times for the timid to undertake expansion.

At The Rosenthal Consulting Group we’re beginning to see signs that the wealth management and private client firms are getting up off the canvass and there’s even some sign of activity in for hedge funds. As such, we’re getting inquiries from those folks about hiring for new slots or re-filling vacant posts. My guess is that such interest will soon translate into hiring, maybe by newly established firms and those still standing. Once floodgates reopen at such firms, I’m guessing that more Law Firms and larger RIAs will soon follow. You can view our current list of employment opportunities at

PS A Regulatory trend and individual investor comfort: An organization of financial advisers says that a few reported rotten apples should not taint the entire group. Finding Financial Advice in an Age of Bad Behavior

Stuart Rosenthal
(973) 462-8766

Monday, June 1, 2009

What is the Right Amount of Regulation?

The looming fight over regulation is the beginning of a broader debate over the future of the financial industry. At the center of the argument: What is the right amount of regulation? Those who favor more regulation say it would offer early warning signals when companies take on too much risk and would help avert catastrophic surprises like the huge derivatives losses at AIG, which has so far received more than $170 billion in taxpayer commitments. Banks say too much regulation will stifle financial innovation and economic growth.

Debate about where derivatives will trade speaks to core concerns about the products: transparency and disclosure.

There are two distinct camps in this argument. One camp, which includes legislative leaders, is pushing for trading on an open exchange — much like stocks — where value and structure are visible and easily determined. Another camp, led by the banks, prefers that some of the products be traded in privately managed clearinghouses, with less disclosure.

Obama administration agrees that more regulation is needed. Proposal unveiled recently by Treasury Secretary Geithner won plaudits, according to the NY Times for trying to make derivatives trading less freewheeling and more accountable — a plan that hinges in part on using clearinghouses for the trades.

Critics in both the financial world and Congress say relying on clearinghouses would be problematic. There are 109 NY Times Reader Comments on this article
as of June 1. You can also enter comments at Compliance and Financial Oversight.

Friday, May 29, 2009

Unwinding Madoff Fraud, Fairly

“Cold, cold, cold,” one writer said of Irving Picard in a letter “Get off your false moral high ground and pay already,” another demanded, in comments posted on The NY Times Web site. Madoff victim Helen Davis Chaitman, a lawyer, complained that her clients “have been forced to go on welfare, use food stamps, and sell their homes for a fraction of what they are worth” because claims are paid too slowly.

“He’s standing in the middle of a whirlwind of emotion and has to act like Solomon,” said Kenneth Feinberg, who ran the compensation fund for 9/11 victims. On problematic claims, Picard may call in forensic experts at FTI Consulting to investigate whether an account is tied to Madoff family members or other insiders. Claim is also reviewed by SIPC (Picard is spending SIPC money).

Thursday, May 28, 2009

One Regulator to Oversee Banking Sector

Obama administration close to recommending a single regulator to oversee the banking sector. Also still under consideration is an agency to police consumer financial products and a new investor protection regulator See Marketwatch for Reader comments. "Is it getting better Or do you feel the same. Will it make it easier on you now
You got someone to blame?" Bono, U2 Video.

Friday, May 22, 2009

Schapiro V. Obama: New Consumer Agency Proposed

SEC will not easily give up regulatory authority. SEC Chairman Schapiro responded to reports that Obama administration is considering a new regulatory commission to focus on consumer financial products, including credit cards, mortgages and mutual funds. Schapiro thinks the SEC should continue to regulate mutual funds. Proposal gaining traction and some say a welcome sign that regulatory reforms may yet address consumer needs. (Hatip Securities Law Prof Blog, WPost) As U.S. Weighs New Consumer Agency, SEC Stakes Out Regulatory Turf. More on potential massive regulatory turf war.

Thursday, May 21, 2009

Penny Stock - Redux: (Alleged) Racketeering

Over a Dozen Wall Street Brokers Charged With Fraud ? A couple of the names rang a bell.

Manhattan DA Morgenthau announced indictment of sixteen people--including owners Sorbara and Markowitz--at Joseph Stevens & Co. Morgenthau said that they ran a racketeering enterprise from 2001 - 2005 that raked in $6.2 million in illegal commissions.

Just my personal recollection but all along whenever I saw this Firm's name I thought it was AS Goldmen/Stuart Winkler/Marciano Brother - related and glancing at the defendant list that is confirmed. A couple articles mention the DH Blair/Goldmen prior registrations.
These matters take so long to uncover, would you say Wheels of Justice? Or just a matter of playing catch up or what did someone call it? Due Process? Robert Brennan built and owned the prestigious Due Process Stable Golf Club in Colts Neck, NJ - where he lived until his arrest in 2001. Do you remember First Jersey, the Helicopter TV Commercials and "come grow with us"? Old Blue Eyes in B&W COME FLY WITH ME

More reminiscing? It was 1988 when then 27-year-old Anthony Marchiano opened a brokerage firm with twin brother Salvatore in NY with $50,000 cash. Named the firm A.S. Goldmen & Co., initials for Anthony and Salvatore, the men who make gold. Gold they made. Marchiano was accused of running a corrupt enterprise that prosecutors say cheated thousands of investors out of nearly $100 million in 10 stock manipulation schemes, among them a failed Naples, FL golf arena. Stories on the A.S. Goldmen case

Monday, May 18, 2009

Will Government Reject TARP Payments? Handful get green light.

Go to State Street Slide Show via SEC showing how the Offering POSITIONS STATE STREET TO REDEEM TARP INVESTMENT. Goldman (HQ pictured),Morgans Move to Repay. Will The Government Reject TARP Payments? Handful get green light. Up-to-the-minute TARP NEWS.

Thursday, May 14, 2009

S.E.C. Plans Surprise Exams of Investment Advisers

The Commission voted 5-0 to open the proposal to public comment for 60 days, AP reports. S.E.C. chairwoman Schapiro said this is a response to Madoff and other schemes where View Video investment managers controlled client money directly or through affiliates, giving them power to withdraw it.

Annual surprise examinations would allow independent accountants to peer into a fund’s books and verify that the money is actually there providing ”another set of eyes on client assets,” Schapiro said. Fund managers would know an exam was coming every year, not when. For investment funds not using independent firms to hold client assets, proposal would require the investment adviser to obtain a report by a registered public accounting firm.

Full-Court Press Behind Bank Bailout

Judicial Watch has obtained documents that show how the Bush administration forced our nine largest banks to accept $125 billion in bailout money in exchange for equity stakes. Long known that Henry Paulson had insisted that the banks’ top executives accept government money, documents provide details of the full-court press at Paulson’s meeting with them on Oct. 13 and how the bankers had no choice. Go to Statement from Judicial Watch and Links to All Documents »Go to E-Mail from the Treasury Chief of Staff via Judicial Watch

Wednesday, May 13, 2009

Compensation Guidelines | Financial Literacy via Video Games?

Obama administration wants to change compensation practices across the financial-services industry. WSJ Reports. Under consideration incorporating compensation as a “safety and soundness” concern on Bank examinations as well as expanding SEC and Fed powers. MORE
Dealbreaker notes: Work for a bank that took any TARP money or not? Senior hire? Low man on totem pole? Fed will "ask or tell banks to structure their compensation, not just at the very top level but down much further." HAVE YOUR KIDS READ THIS:
Financial literacy through video games? Former legislator/entrepreneur hit the road to tout his venture for building financial literacy among teens through video games. View photos You can always play a Video game at bottom of Compliance and Financial Oversight .

Monday, May 11, 2009

Inside the Fall of Bear | New Job Hunt Wrinkle?

Did you see this on weekend in the Journal? Pictures and more of investment bank turned from healthy to nearly insolvent.

From "Street Fighters: The Last 72 Hours of Bear Stearns, the Toughest Firm on Wall Street" by Kate Kelly.

If you missed "Desperate Housewives" on Sunday, fills you on a new Job Hunting Wrinkle. Brian Glatt, left, a plastic surgeon in Morristown, consults with Lou Capolino, who decided to spruce up his image after a lack of success in his job search. "I'm a man of about 60. I'm competing against people who are younger," said Capolino.

Sunday, May 10, 2009

" compliance my service is being mischaracterized as improper"

NY Fed Board Chairman Stephen Friedman resigned amid controversy he owned stock and served as a Goldman director. From resignation letter: "…although I have been in compliance with the rules, my public service motivated continuation on the Reserve Bank Board is being mischaracterized as improper." William Black, professor of Economics and Law University of Missouri: It's a clear conflict of interest for private banks to own an arm of the Fed, much less individual regulators to own stakes in entities they're overseeing. Friedman case highlighted unusual role of Fed’s 12 regional banks that serve both private and public interests. The solution?

Wednesday, May 6, 2009

Broke And Broker Welcomes Rosenthal Consulting Group

Please visit this link for Broker And Broker which is the announcement that "BrokeAndBroker Welcomes Rosenthal Consulting Group to its list of professional service providers."

You may prefer to read or click through the May 6 message which includes an AC/DC-Stones video and can be accessed here:

We wobbled and our knees buckled, but we're in the center of the ring for this next round. Bruised. Battered. But still here. Rock me baby! We're going to get through this. Go ahead, like I said: Rock me baby! I can take it.

Just imagine AC/DC and the Rolling Stones, together, on our side, playing the soundtrack of our lives

SEC Shorting Roundtable, Stress Test Worry

Yesterday was the SEC Short Selling Roundtable. Read Chairman Schapiro's written comments. And the Treasury is expected to announce today that banks must show that they can issue debt without government subsidies before they are allowed to exit TARP. As Investors Circle Ailing Banks, Fed Sets Limits:
Seeing opportunity in struggling banking system, private equity firms lobbying to change federal rules that limit their control.
as we Pre-Opening wait for Bank Stress Tests Pump & Dump!SEC hits 2 Attys and CA Corp.->LegalTimes.

Monday, May 4, 2009

Boutique Buzz May Be Over

Proclaiming a golden era for boutique investment banks and trading, Bankers at bulge brackets firms were streaming to boutiques, driven by the view that they would be able to make more money there than at a TARP-ridden bank. But banking powerhouses may pay back funds quicker than assumed. And, there are a lot of boutiques out there--like Ondra and Stone Key-to compete with more established Lazard, Perella Weinberg and Greenhill. Breakingviews wonders if there will be enough business to go around. At the same time, the bulge bracket will fight tooth and nail to defend its turf. So the bloom may be off the rose already. The key will be to have a niche, like Banking for KBW.

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