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

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 .

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, NJ.com 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.

"Although...in 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?

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.

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.

New NJ Securities Law Chief 'To Regulate Industry in Turmoil:' To Stand Up For Everyday Investor

Marc Minor is the new head of NJ's Securities Bureau.
It's Minor's job to referee a fight. As the state's new top cop for securities law, he is responsible for regulating an industry in historic turmoil. A low-key jazz lover who carefully chooses his words, describes the situation as "a unique point in history." HaTip/The Star-Ledger

BUFFETT Critical of Stress Tests/PARTNER: Regulators may curb Leverage

MONDAY UPDATE: On Sunday, Warren Buffett said Wells Fargo, U.S. Bancorp and a third Berkshire Bank holding, M&T, do not need more equity capital. “We would buy stock in any of the three banks at present prices.”

Buffett attacked government stress tests of 19 large banks, saying they failed to properly assess the industry’s health, but still said he would expand his company’s stakes in three big banks.


Berkshire Hathaway's Charles Munger goes through several books a week. Munger thinks regulators may significantly curb the amount of leverage, or borrowed money, that banks can use. That will drive down Wall Street pay, since traders won't be able to make as many big, leveraged bets. This could benefit Berkshire, with its cash hoard of $24.3 billion at the end of 2008. "There's going to be new rules in the game," he said. "For someone like us, that's going to be very interesting." More at WSJ Profile
Buffett says government is doing the right things (AP)

SEC Now Recruiting: Salaries up to $237K

SEC Offering Markets Experts Salaries up to $237K

SEC will immediately begin recruiting candidates with extensive experience in the financial markets, including but not limited to: equity and fixed income trading, structured products, complex derivatives, financial analysis and valuation, fund management, investment banking and financial services operations. Statement detailing the fellows' qualifications and duties is available on the SEC Web site. The SEC encourages qualified individuals to apply by June 1. Compliance-specific tenure not sought but might be valuable. The Program is open to different types of professionals, which may include attorneys, economists, accountants, risk professionals and other experts in the securities industry."It's a great way to bring in highly-seasoned financial experts who can help us keep pace with the practices of Wall Street and protect investors," said Chairman Mary Schapiro (pictured).

The new Program will help the agency expand its ability to oversee complex industry practices and products. Individuals who come to the agency through the program will also help familiarize SEC staff with industry practices and products.

Supreme Court hears arguments that could change Big Bank Regulation

Federal and state regulators squared off over which part of government should serve as the nation’s watchdog for national banks. Threat of action by the federal regulators, Office of the Comptroller of the Currency stated, is “a significant incentive for national banks to address any compliance issues before they become serious problems.” And when such gentle measures fail, the comptrollers wrote, the agency “does not hesitate to take aggressive enforcement action against national banks.” The role of states, they argued, is to pass along information about “possible problems,” leaving enforcement to the federal regulators. More via NYT.

Another Way To Axe Short Sellers

This take from courtesy of Dealbreaker about the news that a top European Union market regulator mulls new curb on short selling [Reuters]: Instead of banning short-selling outright, why not squeeze settlement times so tightly as to make it de facto impossible? Eddy Wymeersch, (in picture)chairman of the Committee of European Securities Regulators pointed out that moving settlement from the rough European (and just about everywhere else) standard of T+3 to T+0 "would largely enable us to eliminate short selling."

After Off Year, Wall Street Pay Bouncing Back

If pace set in first quarter continues average pay for bankers — much in bonuses — will rebound from lows of last year. As compensation has been put in the spotlight for being so high when many banks have received taxpayer help, six biggest banks set aside over $36 billion to pay employees, according to review of financial statements. Goldman stands out for setting aside most per person and set aside $4.7 billion for worker pay in the quarter. Would add up to average pay of $569,220 per worker — almost as much 2007, a record year. “We need to be able to pay our people,” said spokesman for Goldman. Hatip NYT.

Big U.S. Bank Judgment Day

Wall Street stressed out about stress tests. 19 largest banks start learning on Friday how they fared — and which will need another bailout. While many reported surprisingly strong first-quarter earnings, Banks are by no means out of the woods. A number likely to need more capital to weather a prolonged recession and losses that might accompany it. All Stressed Out news.

Wall Street Elite Head Back to School

Some Wall St elite have moved out of NY since onset of the credit crisis. Times past, they may have opened their own hedge fund or investment firm. Some now flocking Back to School - or to 'ivory towers' instead. Gregory Fleming, former Merrill president traded in wingtips and pinstripes to take a position at alma mater Yale Law School. Frank Yeary, Citi former M&A became a vice chancellor at University of California, Berkeley and his onetime boss, Michael Klein, left Citi investment banking to go to Princeton. Meanwhile, Edward Frost left as head of Goldman investment management to become Harvard EVP. They're leaving in perhaps the most uncertain time in banking in decades. Will a few will head back to finance at some point? Article from Time.