Weekend that Wall St died

CEO decisions and negotiations, many previously unreported, show how they sought to avert death of their giant investment banks. Efforts culminated in round-the-clock weekend of secret negotiations and personal struggles to keep their firms afloat. Accounts based on documents, emails and interviews with executives, traders, regulators, investors and others. WSJ via The Plain Dealer

Goldman Eyes Dark Blocks | FINRA Looks to Kill OTC "Three Quote Rule"

Goldman Eyes Dark Blocks in Crowded Landscape | FINRA Looks to Kill OTC "Three Quote Rule" Charities Shine During Turbulent Times – Tough times haven't stopped a number of firms from donating a day's commissions to good causes.
More

Family?...Cohmad...Auditor AICPA Investigation

Family ruled out,Fortune reports Boston-based Cohmad Securities subpoenaed. 20% owned by Madoff and 80% by Maurice Cohn. Added insult to Madoff investors
What drove Madoff? Questions remain: Videos Untangling Madoff.

Can Mary Schapiro Save the S.E.C.?

Barack Obama introduces Mary Schapiro (left) to serve as chief of SEC, Gary Gensler (second from right) to head the CFTC and Daniel Tarullo (right) to fill an open seat on the Federal Reserve board.

WSJ NYT’s chief financial correspondent writes the choice should please those who hope the S.E.C. can recover from the worst year in its history. Can Mary S. Save the S.E.C.?

"Sleazy Stocks mag cover girl gets SEC nod" - Says Naked Shorts blog.

S.E.C. and Madoff Advice

Madoff SEC ties under a microscope this morning, Dealbook points out that in 2000, Madoff was part of the S.E.C.’s Advisory Committee on Market Information. SEC Meeting Minutes Gary Weiss notes that Chris Cox made it Unanimous in contravention of Arthur Levitt's comments - and moreover that Madoff was an 'Admirer' of Levitt's SEC.
Finally from Dealbreaker: If you are going to defraud, make sure you include personal places of worship of all the really good prosecuting authorities you can muster. Pictured near Apt-courtesy Cityfile.

Levitt: SEC Isn’t to Blame; So far: No Signs Family Aided Madoff

Arthur Levitt Jr., former SEC chairman told The NY Post.
“At this point, I don’t see any evidence that the S.E.C. dropped the ball,” Mr Levitt, now an adviser to Carlyle Group. Video interview: former NASDAQ chairman at 2007 roundtable discussion (33 minutes) with Josh (a Madoff Systems designer). You Tube Video/Link/Commentary from The Jewish Journal. So far, No Signs Family Aided Madoff but as details emerge of trading discrepancies and "Vast Options Game"

SEC Official Married into Family Madoff Boasted of Close SEC Relationship, "My Niece Even Married One" Video and More from ABC Investigative Team

Dealbreaker & Dealbook all over Madoff case, with pithy and other reader comments-RSS Feeds 24/7 Right here->

"There is no more Wall Street."

Alan “Ace” Greenberg, former Bear chief contends that the Street has changed forever with collapse of Lehman and the forced sale of his old firm and Merrill, destroying the investment banking model he helped create.
“That model just doesn’t work because it’s at the mercy of rumors”
In the end, Wall St was destroyed by the very tools Ace created. Greenberg career not over: he accepted a JPMorgan Chase position. Bloomberg reports he'll get a payout equal to 40% of commissions he generates. See Video from Bloomberg

Compliance Staffing Letters, Speeches/Letters from SEC

SEC issued a Letter to BDs, IAs,investment companies and transfer agents, to remind of the critical role played by their firms' compliance programs in assuring that operations comply with the law and rules and to ensure that clients are protected. The open letter follows SEC Chairman Cox's remarks at the SEC 11/13/08 CCOutreach National Seminar. SEC Links posted 12/2 http://www.sec.gov/news/press/2008/2008-283.htm

SEC approved measures to strengthen oversight of credit rating agencies. Video and more from SEC
Debt Watchdogs: Tamed or Caught Napping? Page 1 NYT Lured by profits during the housing boom, credit-rating agencies overlooked the risk of mortgage debt, critics say.

Wall Street Fire Sale

Page 6 has an upside to economic calamity? Schadenfreude. Take a gander at big-ticket items that super-rich Wall Streeters are selling as they feel the pocketbook pinch.
Need a Bailout? Here’s the Form. Companies queuing up for their share of the rescue pie. Others unsure how to get access to the government cash. For those unfortunate souls, Vanity Fair has a (mock) application, the EZ CASH form, that can help put “corporate scions” in the same stead as banks and, potentially, automakers.

More via NY Post. Pictured: Erin Callan: Once the highest- ranking woman on the Street, who rose to CFO at Lehman.

Wall Street Dismissals Benefit Small Financials

"There are still vacancies, more strategic, more selective" said Stuart Rosenthal, Recruiter (aka headhunter) with Legend Global Search. "We are asked for more accountants, lawyers or experts in the U.S. regulations.
This quote was in the French 'Wall St Journal' "Les Echos" in an article titled in French "Les licenciements de Wall Street profitent aux petites banques."
To read in a rough English translation please click here where the title appears as "The dismissals of Wall Street Banks Benefit Petites"

Morgan Stanley's Near-Fall \ Citi Saw No Red Flags

Extreme Makeover at Morgan Stanley-figuring out where to go from here


Rubin, Under Fire, Defends His Role at Citi DiscussionWSJ 11/29 UPDATE


Bailout now has a mission statement; you can read it here.

A mystery is how even relatively strong firms like Morgan Stanley were battered so quickly. According to The Wall Street Journal, it appears that a confluence of events combined to deliver a huge blow to the blue-chip investment firm. Active buying in the market for credit default swaps, increased short selling by hedge funds and whispers in clients’ ears by rival banks all increased during the time that Morgan Stanley’s stock plummeted to new lows.

Journal says that it’s hard to prove that anything untoward was done, especially in the opaque credit default swaps market. But it quotes memos from Morgan Stanley officials that suggest executives from the company suspected that some traders were doing just that.

Citigroup Saw No Red Flags as It Made Bolder Bets

Citi and the U.S. government in talks to create a "bad bank" to remove toxic from Citi's balance sheet. WSJ Online article

September 2007, Citigroup CEO, Charles Prince learned for the first time that the bank owned about $43 billion in mortgage-related assets. Asked Citi Tradin head Thomas Maheras whether everything was OK and Maheras told his boss that no big losses were looming. Normally, a big bank would never allow the word of just one executive to carry so much weight. Instead, it would have its risk managers aggressively look over any shoulder and guard against trading or lending excesses.

Citi insiders say the bank’s risk managers never investigated deeply enough. Because of longstanding ties that clouded their judgment, the very people charged with overseeing deal makers eager to increase short-term earnings — and executives’ multimillion-dollar bonuses — failed to rein them in, these insiders say.
Citigroup’s woes are emblematic of the haphazard management and rush to riches that enveloped all of Wall Street. Summary and link to Full Article

Compliance HQ: Who's Worse, Mark Cuban or the SEC?

Compliance HQ: Who's Worse, Mark Cuban or the SEC?

A Maverick Exchange: The Emails Between Mark Cuban and Jeffrey Norris

Who's Worse, Mark Cuban or the SEC?

Gary Weiss writes that it's a close question. Joe Nocera makes the point that the SEC, by pursuing this "boorish" billionaire while not giving a damn about, for instance, Overstock restatement of financials, proves that the SEC is sinking into irrelevance.

Interdealer 'Swap' Brokers | Wall St END Is Here

Spotlight Shines on Swap Brokers-latest focus of regulators is interdealer brokers...comments from Lutnick of Cantor which owns BGC. Subpoenas include Phoenix Partners Group, ICAP, GFI, IDX Capital, Tullett Prebon, BGC, Creditex and Standard Credit Securities Inc. WSJ

Wall Street's End Is Finally Here - Michael Lewis, author of "Liar's Poker" and "Moneyball" lengthy story for Portfolio

Hedge Fund Sued by Compliance Officer

NY hedgie dragged into court for firing of CCO for raising questions about trading activity. Joseph Sullivan, former top internal cop, sued Peconic Partners’s William Harnisch, alleging wrongful termination.

Cross-Border Private Banking: UBS Indictments

Tax evasion legal in Switzerland, not in US, this difference that has UBS at odds with regulators and authorities. UBS no longer offers, what it calls Cross-Border Private Banking services for US clients.
NY Times Wash Post and all other articles

U.S. Does Not Support a Global Crisis Regulator

“meeting is not about discarding market principles or about moving to a single global market regulator” Summit Nov. 14-15 has White House and President-elect in awkward spot. Leaders of 20 countries to assemble in Washington. Bush administration discouraged suggestions to create a new international market regulator with cross-border authority, The New York Times’s Mark Landler reported.
Obama campaign did not respond to inquiries about whether it was invited.

Compliance Jobs and Bonuses Resilient...Regulatory Climate change

WSJ today "Business Braces for Cooler Climate" more on this and Obamanomics below.

Compliance Jobs and Bonuses Resilient
"It depends on the firm, but we're hearing that bonuses at some bulge bracket firms might be better than initially expected," adds Stuart Rosenthal, vice president of compliance recruiting at Legend Global Search, a New York-based firm that specializes in placing compliance and legal professionals. "The bonuses may be down 25 percent or 30 percent from last year. They're not earth shattering, but in some cases they could be fairly good."
At least one sector of finance is experiencing continued demand and relative security in total compensation: compliance. Compliance professionals at all levels will likely be "somewhat insulated."

According to Rosenthal, a typical mid-level compliance officer at a large or medium-sized institution probably makes a salary in the "mid-100s," and can expect a bonus in a good year of about 100 percent of salary. In this market environment, it won't be 100 percent. While compliance professionals at the hardest-hit firms - like Morgan Stanley or Merrill Lynch, or the Lehman employees who were retained by Barclays - don't expect much, Rosenthal says those at other firms may fare reasonably well.

"There are even open positions in compliance," says Rosenthal, noting there are numerous active searches. He sees a number of top firms hiring where they have "special needs." Some firms with open positions are waiting to fill them or being very discriminating, looking at a wide number of candidates in an effort to fill the roles at compensation levels under stated budgets.

Job openings exist in range of compliance specializations, including hedge funds, funds of funds, portfolio compliance and bank compliance. More at EFinancial

Washington likely to usher in more than just tighter financial regulation.

WSJ today "Business Braces for Cooler Climate"...GE, with interests in a wide array of sectors, including financial, energy, electronics and health care, could be hurt by government efforts to exert more control over commerce. It also could be helped by more regulations. "If you think we won't get more regulation in places other than financial services, you're nuts," GE CEO Jeffrey Immelt told students at Columbia last month. "We'll get more regulation in health care, energy and other areas."Mr. Immelt says the heightened regulation "could be a catalyst for positive change....It doesn't have to be a negative."

Obamanomics: After pouring money into Obama campaign, what can hedge funds and their executives expect from the new president? Article from FINAlternatives>> In victory speech, Obama again suggested that Wall Street fortunes strayed too far from the rest of the country’s.

Obama’s Treasury Secretary Another Goldman alum?

Did you vote? Would Obama’s Treasury Secretary Be Another Goldman alum? According to The Deal.com, chatter is about NJ Governor Corzine...Go to Article from The Deal.com

Beware of Geeks...Bearing Formulas

WSJ looks at AIG risk-management operations. Raises questions about the run-up to the financial crisis: Did firms like AIG put too much faith in computer models? Warren Buffett sounding the alarm for years, recently, he told PBS' Charlie Rose: "All I can say is, beware of geeks...bearing formulas." Portfolio.com WSJ via The Australian

Lazard Settles with SEC Involving Gifts to Fidelity

SEC settled charges that Lazard failed to supervise three employees who collectively spent more than $600K while entertaining Fidelity traders. SEC also charged three employees and a supervisor for roles in securities laws violations by Fidelity traders. Earlier this year, the SEC charged Fidelity and employees for improperly accepting lavish gifts provided by brokers.

SEC found that former head of Lazard’s U.S. sales and trading and former RRs took trips to such destinations as Europe, Bahamas, Caribbean, Fla, and Napa Valley, CA, often by private plane, and paying for meals and lodging at high-end restaurants and hotels. According to SEC, Fidelity's head Trader Bruderman was provided with race car driving lessons, adult entertainment* and expensive wine, and that approximately $50K was contributed toward his bachelor party.

The Commission found failure to supervise at Lazard who agreed to pay $1,817,629 plus interest of $429,379.04, and penalty of $600K. More at Securities Law Prof Blog

*Blog on Bruderman Party and "typical debauchery"

Street Needs New, Not More, Regulation

Street officials argued on Tuesday that we need a new and different kind of regulation, rather than more of it. Nearly a thousand Wall Streeters braved rain and plunging stocks to attend the SIFMA annual meeting. Among others NY Mayor Bloomberg and former SEC Chair Pitt called for streamlined regulation. NYT/Reuters

IPO Tech Settlement Near (Banks denied any wrongdoing in the past)

Moscow On the Hudson - Wall Street Journal Vid

Click for the latest WSJ Video.

Custody Banks Tout Roles

Bank of NY, State St to Serve as Custodians. State Street Net Rises 33%: Infusion affirms Bailout role Boston Globe

Wall St Versus America

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Regulator Rehab...Root Out Corruption?

McCain assertion that he will "fight corruption" on The Street. Palin said she and McCain would "get rid of the greed and corruption on Wall Street." Can someone point to specific proposals on how this will be carried out?

ProPublica says no specific proposals. Obama flailing away at "eight years of deregulation" under W. Is he being modest? NYT on Greenspan ( points out, deregulation also strong under Clinton.
Credit to


Regulators in Need of Rehab - Paulson on 7/20/08: "It's a safe banking system, a sound banking system. Our regulators are on top of it. This is a very manageable situation." May 16: "Looking forward, I expect that financial markets will be driven less by the recent turmoil and more by broader economic conditions."
Who will decide which banks receive help and which won’t? What standards will be used? Apparently decisions fall to Neel Kashkari, assistant Treasury secy for financial stability, 35, six years out of B-school.

Bankrupt and Severance? Can you say Fraud?

Commentary: Take garbage out on Wall St. Enough with propriety. Demand full disclosure?

Severance pre-bankruptcy? Fraud charges looming.
Fuld and other Lehman execs facing inquiries statements about the bank’s position amounted to fraud. Fuld confronted with 6/8/08 internal memo including warnings about Lehman’s condition and asked the question, “Why did we allow ourselves to be so exposed?” Fuld said, “This does not look familiar to me.” Upset at exorbitant severance packages as Lehman headed to bankruptcy? “People in my block in Baltimore, if they perform poorly, they get fired, they certainly don’t get a bonus.”

Bloomberg today has the real causes of Bear demise. Bear traders used pricing models for mortgage securities that ``rarely mentioned'' default risk - SEC report excerpt posted on website of Sen. Grassley. Links

Paulson Taps 35 Y.O. GS Alum to Run Rescue

Treasury to Tap GS Alum to Run Rescue Program Neel Kashkari to oversee $700 billion program to buy distressed assets. Kashkari, 35 years old, a Treasury asst secy for international affairs and former Goldman banker, to be named interim head of Treasury's new Office of Financial Stability.
Who is Neel Kashkari,$700B man?

Membership in Dark Pool Club Exposed

Wondering how many dark pools there are? 32. SEC released a list of ATSs. In addition to ITG's POSIT, Liquidnet and Pipeline, the big pools are from GS, CS, UBS, MS.

Short-Selling on States Pays Off; Net Captial revisited

Trading records suggest that in the panicked days when exotic derivatives were bringing the AIG to its knees, traders were using the same kinds of derivatives, called credit-default swaps, to profit from New Jersey's rising tide of red ink.

If you think you are the first to determine that New York’s budget is going to suffer because of the financial crisis, then you, too, can wager on it.

History: S.E.C. 2004 Ruling Let Banks Pile Up New Risk

How the SEC (And Media) Failed Abysmally: The Times a blow-by-blow account of how the SEC knuckled under to pressure from major investment banks and threw capital requirements out the window -- planting the seeds for the ongoing financial meltdown. An unanswered question, only briefly dealt with in the article, is this: where was the financial press?

CJR Audit asks that same question: "Where was this story years ago?" The answer is "right in front of us." After all, the Times article was based on the public record, including open SEC meetings that were not covered by the media.

April 2004 - Five SEC members met in a basement hearing room to consider an urgent plea by big investment banks. The unanimous decision, changing what was known as the net capital rule, was completed and published in The Federal Register a few months later. I-banks asked for exemption from regulations that limited the amount of debt they could take on. One commissioner questioned the staff about the consequences of the proposed exemption and was told this would be only available for the largest firms—those with assets greater than $5 billion. None of the major media outlets covered this 2004 Proceeding. Last Friday, SEC ended the 2004 program acknowledging that it had failed to anticipate the problems at Bear and other major investment banks. Discussion can now be heard on SEC and NYT Web sites.

Who Owns Your Money? DTCC?

This is a primer on DTCC - if you need - it via Seeking Alpha. Biggest bank in the world that many have never heard of. Registered owner of 99% of all paper (stocks, bonds, securities, etc.). Scary? Perfectly good reason for it - with electronic trading, it is impossible to make timely changes to registered ownership of paper.

SEC Ends Voluntary Regulation Program

SEC Ends Voluntary Regulation Program for Inv Bks
After Bailout Deal, the Focus Will Shift to Regulation

Housing collapse often cited as having caused the crisis, but for AIG which first waded into derivatives it sold interest rate swaps and this was the beginning of its end. Then, JPM Derivatives specialists proposed that AIG should try writing insurance on packages Collateralized Debt Obligations aka CDOs."

Director Operations - Risk and Control needed for a large Broker-Dealer.

Rescue Plan Stirs Calls for Deeper Regulation

"regulatory hole that must be immediately addressed" WSJ article says, the spate of bailouts and takeovers is pushing Washington into unfamiliar turf.

Wall St. Era Ends; Death of I-Banks

The Death of the Investment Bank Street.com
Scraping Wall Street Model - WSJ
Wall St. Era Ends Fed, GS, MS press releases
Both banks may have to shed some assets to come into compliance with the rules that govern bank holding companies. For instance, they may have to sell commodity production facilities like power plants that they have owned in the past. But they will have up to five years to dispose of the assets and may be able to keep them in private equity subsidiaries.


How?Why? Merrill Was Saved and Lehman Lost

SEC Halts Shorting Financials and is Bashed

'Mind Blowing Stupidity' Update: Whither the Uptick Rule? Journalist Gary Weiss usually gets the right perspective as he probes the underside of the Street. "What makes the SEC action mind-blowingly stupid is that this: if there was abusive shorting of the financials--and there's no evidence of any, not that it matters--it was because the SEC allowed it, by revoking the uptick rule." More at The idiocy of the US Fed, the SEC and the rest of them
9/23 NYPost: HFs considering legal challenge.

In concert with U.K. FSA SEC took temporary action to prohibit shorting to 'protect the integrity and quality of the market and strengthen investor confidence.' Applies to 799 financials effective immediately. SEC bashed over short-selling ban Managed Funds Association seeking exemptions and a rewrite of the shorting ban. Hasn't ruled out legal action.

Asia Rethinks / Fed: Investor of Last Resort / Morgan Stanley Weighs Deal

Tremors leading many to question the wisdom of investing in the US to
the tune of trillions of dollars: Asian investors were starting to show
hesitation even before last week. Now...


Even Morgan Stanley and Goldman, the two left standing no
longer immune. MS considering possibility of merger with Wachovia
or another. Links to CNBC and the rest

New Role for the Fed: Investor of Last Resort
Federal Reserve is being stretched to its limits, both in the range of
problems it is being asked to fix and in its financial firepower. The
central bank has also transformed itself almost overnight into the Fed
Inc. by essentially taking over AIG

SEC New Short-Sale Rules

Traders Mag Early reviews are in

MER, LEH, BoA AIG Weekend Aftermath

Lawyering/Dealing Merrill/BoA, Lehman, AIG More Financial Blogs with the latest

Anniversary

Annual Tribute in Light at 7:11pm
NJ-based writer recalls in Esquire

Job Security: Bulge Bracket, Largest Hedgies, Insurance and PE players

Mack Retools Morgan Stanley CEO in an office near research analysts is a sign of the many places the Street is looking to make money with times so tough.

Long-Term Capital shocked and could've been replete with lessons, but these were ignored. NYT Essay for more

Lehman: Blackstone & KKR Looking To Buy Assets If needed you should just keep a list of who isn't buying Lehman Click here for All LEH News All The Time KKR IPO:What Does Henry Kravis Want?

AIG's Greenberg Faces Fine Maurice R. "Hank" could be fined at least $100 million.

Tracing the Misfortunes of Citadel’s Russell Do you have job security? Citadel Investment Group executive, who helped lead the $2.55 billion investment in E*Trade, has given notice at the firm. The 37 % drop in E*Trade shares since November may be a factor: E*Trade play is one of many attempts at what Wall Street calls “catching a falling knife,” or the act of investing in a troubled company in the hopes that its bad luck has stopped. Many foreign and PE firms that have invested in US financials ranging from Citi to WAMU, for example, have been wounded.

Regulators lock horns w/ MFs re: Credit Ratings

SEC plan is to scrap requirements that money market funds hold investment-grade securities.

FLOOR BROKER USE OF PORTABLE PHONES

Information Memos 8-40 and 41 are about NYSE approval of cell phones on the floor for off-floor communications.

More Cuts, Blood on the Street, Blatant plagiarism

Lehman Cuts May Presage More Bloodletting MORE »
Commerzbank Close to Dresdner Deal FT
NYT on Lehman plagiarism. Lifted directly from Sanford Bernstein. More

Fidelity incentives from Goldman to peddle ARS?

Relationship is probed in connection with the discount broker's sales of auction-rate securities. All GS-Fido news

Dark Pool Checklist

Buyside traders don't know enough of what goes on within dark pools they use. Traders Mag link Related Nasdaq Plans to Pay for Dark Orders

The Fed, more on Rumors, Lehman

Fed Acted on Lehman Rumor, urged CS to keep ties 50% of LEH almost sold to Chinese or Koreans FTsecret talks

Goldman Hires Lobbyist

Experienced, influential and from DC, will work on/with foreign investors.
Article from The Hill »
Politico.com »

Street’s Woes, Year Later; Brokers Balk

Investment Dealer’s Digest looks at last 12 months.
“This is the worst I have ever seen,” former Salomon exec said. IDD has numbers: IPO volume and merger deals way down, and securitization deals at level not seen in over a decade.

ARS: Brokerages Balk as Banks Settle: JPM, Merrill, Citi, MS, UBS agreed. Fidelity and others? Boston Globe and WSJ links

FDIC Presses Bank Regulators To Be Warier WSJ : disagreement centers on the Camels rating

10 Exchanges Agree to Stronger Oversight

NYSE and FINRA more power for insider trading.
MORE »

Auction-Rate Blowback Continues: Wachovia buy back of billions sold to retail. Cuomo and Merrill Still At Odds Inquiry Turns to Discounters Schwab, Fido, TD

If Elected Pres. Rivals Differ (a Bit) on Financial Market Rules

Did It Help to Curb Short Sales? Naked Speculators? Rethinking Research ?

NYT Columnist writes about the temp. rule that made it harder to short some financials — may have helped raise prices and reduce volume. Rule expired Tuesday.

Reining in CDS market - Rising Priority for Regulators. NYT columnist writes, one positive of heightened regulatory interest is a push to make participants more scrupulous about assigning proper values to credit insurance stakes. Rude awakening for many players?

Rethinking Research on Wall St: Citi moving research out of Smith Barney. Chinese Walls from Spitzer settlement will still be in place and analysts will not be reporting to banking heads. Frank Quatrone weighs in.Breakingviews article for more

Fed shores up financial system, slashing short-term interest

HEARD ON THE STREET today Pressing the Street into tens of billions of dollars worth of Auction-Rate-Securities (ARS) settlements, NY Attorney General Cuomo now a financial-markets cop in ways not planned.

Fed Keeps Window Open; Short Extension

Also late yesterday SEC announced an extension for its emergency ban on naked short sales in 19 financials, noting this will be the last extension of the rules. Get Shorty at FOXBusiness and All news on Shorts today.

Barron's editorial on SEC naked short rule "Swatting an Imaginary Fly,"


SEC Naked Short Sale Plans Could Transform Stock Loan Game? LocateStock.com one of a few organizations positioned to cash in.

Who Will Watch Investment Banks?

SEC chairman told House Committee that interconnected markets make it necessary to keep closer watch. Links to CNBC Video, Reuters, NYT, Bloomberg, House Financial Services Hearing Page

SEC Alerts Compliance Officers

New ComplianceAlert letter identifies common deficiencies that SEC examiners recently found during examinations of registered firms.
Areas include: Personal Trading, Soft Dollars, proxy votes, valuation and collateral, BD affiliated insurance, mortgage financing as credit for securities, Supervisory and compliance controls over OSJs and Transfer agent practices.

Bank-Broker Stocks post- Rumor, Bloomberg

Short Sale Rule Could Spur More CDS Shorts
New rules on naked short sales may push more use of Credit Default Swaps. Hedge Funds and others use CDS in place or in addition to using equity shorts. Move could also move more transactions offshore: derivatives can be put on to fly under radar. SEC emergency order to curb improper shorts in financials effective Mon.7/21-should exclude Market Makers acc. to WSJ.

Bulge Bracket Questioned Over Rumors

Subpoenas also sent to more than 50 hedge funds, “a new front in the broadest U.S. investigation of Wall Street trading since state and federal regulators targeted mutual-fund abuses in 2003.” Links to WSJ (Subscription Req'd) and Bloomberg

Plan to Shore Up Fannie, Freddie | Argument for Clear Capital Rules, not Fed

WSJ includes article and video link on why Washington and Fed decided to shore up confidence in mortgage buyers Fannie Mae and Freddie Mac.
Cox Testifies on Regulatory Responses to Financial Markets
Argument for Clearer Capital Rules, Not a Fed Role In WSJ, Carnegie Mellon professor and author of “A History of the Federal Reserve,” intones, “Investment banks don’t need the Fed to regulate them. Some clear rules on capitalization would suffice.”

Promotions at Legend

Stuart Rosenthal Vice President, Compliance joined Legend following a successful career in compliance. Stuart has developed a vast database of contacts in the compliance business over 20 years. He has successfully leveraged his network over this last year and as a result, is building a reputation as a top industry talent. Stuart has introduced Legend to numerous and creative marketing techniques including Legend's blog which provides current news, all in one place, about the world of compliance and which is updated routinely. Stuart is ready and willing to help and is a pleasure to work with.

Calls for Overhaul of Bank Regulations

Overview and Paulson video link To complement regulatory efforts, called for strong market discipline to reinforce the stability of markets. A tougher regulatory system can allow financial institutions to fail without wider turbulence. Paulson also said the Fed needs sweeping powers that would make it easier to get information — and intervene if necessary. Fed and SEC to Compare Notes, Hank Paulson Blesses Union- Dealbreaker


Global Regulations Need Bolstering, F.S.A. Chief Says “Throughout the world, regulation has been found wanting. In very many countries there have been examples of regulatory inadequacies.” Highlighted problems with risk management at Citi, SocGen and RBS.

Little Compliance Hiring in Chicago

Article on JobsintheMoney.com Little Compliance Hiring in Chicago
Summary: While compliance jobs abound in NY, San Fran and other parts of U.S., in Chicago the market remains sluggish. "Some (financial) firms are adding on the compliance side, but things are moving slower in Chicago," says Stuart Rosenthal of Legend Global Search, a New York-based recruiting firm which specializes in compliance and legal placement. Rosenthal, who does considerable business in Chicago, adds, "A lot of searches are getting put on hold."

Cox Pushes Change/SEC Exit Nears, New Citi CCO

SEC proposals, foreign trading restrictions and on credit ratings, in waning months of Bush administration. WSJ (reg req'd for full art.) Fed Steps Bolster Banks-Easier for private-equity to invest

Citigroup said Cindy Armine is its new CCO.
More From Dealbook
Fed took unprecedented step of barring it from “significant acquistions.” Citi’s image tarnished from Enron, WorldCom and conflicted research. Bond traders upset European regulators. Weak AML practices nearly got it booted from Japan. Bolstering compliance staff led to management bloat. Armine must find balance between policies and profit, also must work closely with legal and regulators, who stepped up scrutiny of risk after more than $40 billion in write-offs. Marisa Lago, who led compliance i-bank and alternative investments, left “to pursue other interests.”

Fed, SEC Deal to Redraw Regulation; Citi and Goldman Brace for Layoffs

FED-SEC information to be shared include data regarding settlements, trade and positions. Links to Reuters via NYT and WSJ(Subscription Needed)

Agreement could be announced this week, aim is to fill gaps and increase cooperation in wake of Bear. SEC will get information from Fed on bank short-term financing. Fed would be able to see investment bank trading positions, leverage and capital requirements. SEC chief under fire as Fed seeks bigger Wall St role WSJ link via Daily Herald

Hundreds of Citi investment bankers and traders, including many senior, expected to begin losing jobs as bank completes 2,000 layoffs announced in March.

Even Goldman acknowledging reality:Last wk began cutting bankers,expected to cut up to 10% of M&A and corporate fundraising staff. Banks swinging axe with harder force, total announced dismissals over 83,000 and more expected. It is unclear where the bottom of this market will be. History of Wall St Layoffs

Cox to Fast-Track Fund Regs

SEC's Cox thinking legacy as term winds down: Working on soft dollar interp guidance, 12b-1 fees and portfolio valuation. Also more streamlined SRO rule approval and new muni database. WSJ

Pasternak, Leighton cleared of SEC charges

Attorneys not involved in case said it's rare for SEC to lose a case it takes to trial. Attorney and former deputy chief counsel with NASD enforcement, said 90% of SEC enforcement actions settle. Fordham law prof said, "Going to trial is a crap shoot." Wall Street Journal Blogs and all 9 news articles » NITE

S.E.C. Proposes Tighter Credit-Rating Rules

6/25 WSJ article - Proposed rules that may diminish the longstanding importance of credit ratings across various markets - may make it possible for money-market funds to invest in short-term debt without regard to ratings put on those securities by firms such as Moody's and S&P.

Proposed new rules intended to stem conflicts of interest, expand disclosure for credit rating industry and flag ratings of more complex securities. Seeking to make ratings more open while also encouraging new firms enter. Three firms that dominate the $5 billion-a-year industry — S&P, Moody’s and Fitch—widely accused of failing to identify risks in subprime mortgage investments. AP via NYT»
WSJ: Plan Would Bring Greater Disclosure; Key Firms Back It

Supporters Of Fed Window Could Use Regulations To Gain Competitive Advantage-Dealbreaker

Front-Running Evidence, Financial Regulation Debate, BofA exits Prime Brokerage

Bank of America Bids Good-Bye to Prime Brokerage
Deal to sell to BNP Paribas. Not a premier player BA ranked in second or third tier, chasing Morgan Stanley and Goldman. Had about 500 hedge fund clients,nothing to sneeze at. With demise of Bear, landscape changing:opportunities for newcomer to carve niche. (Ex: Citi recently carved specialty as a stock lender). Identifying niche not easy, given competition.

More-FINalternatives article

Citi's Pandit Calls for Debate on Financial Regulations

Merrill Chief Campaigns for Reserve Window

Evidence of Front-Running on Wall St. at portfolio.com

N.Y. Fed Chief Calls for More Fed Authority

N.Y. Fed Chief Calls for More Fed Authority - Bloomberg via NY Sun

The president Federal Reserve Bank of New York, Timothy Geithner, called for greater central bank authority over banks so the financial system can better withstand shocks and recover from the credit crisis. the Fed's lending programs to commercial and investment banks will remain "until conditions in money and credit markets have improved substantially," Mr. Geithner wrote in an op-ed article for the Financial Times. His remarks were excerpted and adapted from a speech to be delivered yesterday in New York.

Charges of Insider Trading for Wall St. Luminary

Spent decades teaching at business schools and watching students parlay lessons into fortunes. Lectured at Goldman, DB and Merrill. Few people on or off Street moved in such rarefied circles.

Future of Financial Regulation?

Geithner Plan to Save the Financial System - NY Fed proposals to help shore up our “fragile” financial network: Greater capital and liquidity requirements; more supervision of derivatives; NYT/FT


Bear wipeout signals sea change-step in makeover. May 29 Fortune article "Bear wipeout signals sea change"

Fed and SEC Oversight Relationship debate ongoing. Paulson Blueprint would make Treasury the uber-financial regulator. SEC Chairman Cox advocated increased supervisory role over the major investment banks that it currently oversees through the Consolidated Supervised Entities (CSE) system. Washington Post explored how Fed and SEC are working out joint involvement in aftermath of Bear rescue. Fed staff members from both the bank supervision and markets groups accompanying SEC on visits to big I-Banks. Meanwhile SEC preparing a Memorandum of Understanding to formalize information-sharing and cooperative efforts. Fed Keeps Watch on Wall St. -- From the Inside.
SEC Chief to Press on Global Rules-WSJ

Knight's Pasternak, Leighton finally to pay piper?

Pasternak focused on federal courthouse in Trenton. He and other former Knight SEC sued Pasternak and John Leighton, defending against SEC civil fraud allegations, they stand accused of allowing improper trading. Already sanctioned, NASD fined each $100K for supervisory violations. Case involves Leighton's brother, Joe, former Knight sales trader who regulators said defrauded customers by overcharging them tens of millions of commission dollars. Joe paid more than $4 million to settle civil charges brought by the SEC and NASD.

Knight agreed in 2004 to pay more than $79 million to settle charges related to Joe's actions. NASD arbitration panel concluded Pasternak's response to "red flags of possible misconduct was woefully inadequate." Pasternak and John Leighton, who headed Knight's institutional trading desk, have insisted their actions were proper. Read Star Ledger

SEC to Rein in Wall St....Where Are They Now?

SEC Plans to Rein in Wall St.

SEC's Cox's response to Bear collapse is to call for greater agency oversight over the four remaining "consolidated supervised entities" -- Morgan Stanley, Goldman, Lehman and Merrill --- giant firms that do not have a bank that subjects them to Fed supervision. Cox has called for more disclosure about capital and liquidity and a reduction of short-term financing. WSJ Heard on the Street column questioned whether additional disclosure about capital and liquidity would be useful to investors. Reducing leverage might be useful, although Street will complain that SEC turning "pit bulls into poodles." A good thing? WSJ,5/9/08 The SEC's Show of Force.

Where Are They Now?
Link to Portfolio.com interactive feature...for notorious White Collar criminals

SEC Exams of Investment Advisers - Top 10 List

SEC Exams of Investment Advisers - Top 10 List [Posted by by howard@compliance-insights.com]

Everyone loves a Top 10 List, and OCIE Director Lori Richards (SEC's Office of Compliance Inspections and Examinations) did not disappoint. C-I outlines OCIE's current "Top 10 Areas of Focus" and provides a link to the details.

..... 1. Controls Over Valuation. A firm's controls for valuing or pricing securities, with particular emphasis on structured products, illiquid securities or other difficult-to-price securities.
..... 2. Controls Over Non-Public Information / Personal Trading / Code of Ethics. Instances of suspicious trading have increased, so the SEC was to review a firm's controls to prevent insider trading in client, prop or employee accounts. They'll look at the firm's own compliance and supervisory programs.
..... 3. Dealing with Senior Citizens. Examiners are looking at free lunches, marketing, sales and related supervisory processes. Need we say more - it's nothing you haven't heard before.
..... 4. Compliance and Supervision. A key area; examiners want to understand the IA's compliance program to see if it appears designed to capture and manage that particular adviser's compliance risks. Has the adviser conducted a risk-assessment and ID'd its own compliance risks and conflicts of interest, then crafted and implemented procedures to effectively mitigate those risks. Recent conflicts: new revenue-sharing payment streams from IAs to BDs, so as to get on "recommended adviser lists.
..... 5. Portfolio Management. Examiners want to see if securities recommendations and investments made for clients and funds are consistent with the adviser's disclosures and the client's investment objectives and restrictions.
..... 6. Brokerage Arrangements and Best Execution. Brokerage arrangements must be consistent with fiduciary obligations to clients, and that IAs seek best execution, whether it uses soft dollars consistent with its disclosures, and whether the adviser periodically and systematically evaluates the costs and benefits of its brokerage arrangements.
..... 7. Allocations of Trades. Has the adviser disclosed its policies with respect to how it will allocate trades? Examiners look out for "cherry picking" and favoritism in allocations.
..... 8. Performance Advertising, Marketing and Fund Distribution Activities. Claims about past investment performance, ... must contain accurate information, and required disclosures (like conflicts of interest) are included in materials, pitchbooks, etc.
..... 9. Safety of Clients and Funds' Assets. Safeguarding clients' assets from theft. loss and misuse - including custodian arrangements and whether an independent custodian sends account statements directly to clients.
..... 10. Information Processing and Protection. A firm's controls over books and records, disclosures and filings; including business continuity plans.

Link: Speech by SEC Staff, 2/20
http://www.sec.gov/news/speech/2008/spch032008lar.htm?nl042408BLOG2

Lehman Opened Fed Spigot

Financial engineering helped get Wall Street into its current credit-market problems. Now, Lehman Brothers Holdings Inc. using a little engineering -- and some help from the U.S. Federal Reserve -- to bolster its finances. In recent weeks, Lehman moved $2.8 billion in loans, including some risky leveraged-buyout debt that has been difficult to sell, into a newly created investment vehicle it named "Freedom," which in turn issued debt securities backed by the loans. About $2.26 billion of the securities received investment-grade credit ratings from Moody's Investors Service and Standard & Poor's. Lehman then pledged some of the ...

Even beyond the credit crisis, the much-heralded Treasury secretary has failed to accomplish most of his own agenda. 5/12/08 Update from Portfolio.com The Problem with Paulson

Related Slideshow

Still demand for compliance and legal positions

Go to eFINANCIAL for this and other job news http://news.efinancialcareers.com/JOB_MARKET_ITEM/newsItemId-13201


Industry insiders say there is still demand for client service, investor relations, compliance and legal positions as firms work to keep existing clients from jumping ship during rocky economic times.

"The service side is still surprisingly active," says one senior executive with a top tier Chicago recruiting firm. In this volatile environment, he says, firms know they can't add new assets, so they're "over-delivering" on the service side. "Competitors are literally at the door, waiting to snap up the clients," says the recruiter. "You better have the right people in place to make the calls when you're down 30 percent."

Wide Demand

Service demand exists across asset management, from long-only institutional shops to hedge fund operations. Stuart Rosenthal, senior recruiter with Legend Global Search, sees healthy activity in legal and compliance, in addition to client service.

"We're seeing openings at some of the bulge bracket firms, as well as in the middle market," Rosenthal says. While firms are being "careful with budgets," they're adding attorneys, risk management, and service providers, he says. He also sees demand in the mid-salary range, and describes the market as competitive.

Somewhat Insulated

Even in the wake of Bear Stearns' meltdown, Chicago remains somewhat insulated from the market downturn compared to its coastal counterparts. Recruiters say asset management in Chicago is more diversified than in New York or on the West coast. While activity is slow, Windy City firms are not seeing a "deep dive" in asset management, as the head of one bank's institutional asset management sales force puts it.

"Chicago has been somewhat immune to layoffs," says Jim Geiger, vice president at Analytic Recruiting, which has a strong Chicago presence. "There's been a slowdown in hiring among MBAs and PhDs, but there is still hiring."

Seeking Experience

With so many layoffs, competition for jobs is at an all-time high, Rosenthal observes. Most firms are looking for people with strong backgrounds and experience. Even at the mid-salary levels, employers want someone who can hit the ground running.

"We're always looking at people with a track record," Rosenthal says. Geiger echoes that. "This is not a market where our clients are going to take a chance on someone who is new to the field," he says. "They want a track record or a specific niche."

Risk Management....Regulation, Net Capital Changes?

I am sure that you have seen the articles and are aware of the discussion on looming Regulatory changes. One battle is likely to be over risk-management and requiring higher cash reserves as a cushion against trading losses.

Fed Staff Monitor Investment Banks - Securities Law Prof Blog link and summary:
Federal Reserve staff onsite at five major investment banks to monitor their financial condition. Cox testified before Senate banking committee, amid inceased Congressional criticism of its performance. Senator Grassley asked SEC inspector general to review the 2005 investigation into Bear's pricing of mortgage-related assets, which SEC closed without filing charges.

WSJ, The Fed Hits the Street. Go to Securities Law Prof Blog w/wsj.com link
http://lawprofessors.typepad.com/securities/2008/04/fed-staff-monit.html

Did you know that in addition to the top Compliance and Legal talent in the marketplace, my network and database includes top Risk Management candidates?

Legend Global's proprietary database of contacts together with my own network built on a 20 year-Regulatory and Compliance career provides insight not available from anywhere else. Legend's website shows the breadth of our services including an overview of the types of jobs we fill: www.ComplianceHQ.com.
Please let me know how and when I can help and I will devote manpower to meet your need(s).

Stuart Rosenthal | Legend Global Search, Inc. | 212.293.8920 SRosenthal@ComplianceHQ.com

Links
http://online.wsj.com/article/SB120631764481458291.html?mod=rss_markets_main

In Washington, a Split Over Regulation of Wall Street http://www.nytimes.com/2008/03/23/business/23regulate.html?_r=1&ref=business&oref=slogin">

Regulatory Underkill: Arthur Levitt, former SEC Chair, calls for regulatory reforms in a Wall St. Journal op-ed piece including: How we can inject greater transparency into the markets and bring about a change in attitude on the part of business leaders and policy makers that puts the interests of investors first. This may require a more fundamental restructuring of how we regulate the markets -- for instance, merging the SEC and the CFTC to create a single securities regulator -- and giving that regulator the resources and the authority to do its job, something the SEC currently lacks.
WSJ Op-ED link http://online.wsj.com/article/SB120605716375753327.html?mod=todays_us_opinion

SEC Chair Cox last week sent letter to chairman of Basel Committee on Banking Supervision expressing strong support for planned updated guidance on liquidity management for banking organizations in light of the recent market turmoil. Chairman Cox Letter to Basel Committee in Support of New Guidance on Liquidity Management March 21, 2008 in SEC Action http://www.sec.gov/news/press/2008/2008-48.htm

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