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.