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.

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