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Thursday, May 31, 2012
Personal Finance Daily: Moves to make if the U.S. gets downgraded
Thursday's Stock Market Report from UK-Analyst: featuring Tate & Lyle, Thomas Cook and Transense Technology
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Oilbarrel Newsletter 31st May 2012
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| 05.31.12 | BlackBerry's future on Wall Street
Today's Top Stories Also Noted: OpenText News From the Fierce Network:
Today's Top News1. Advisors now want Finra as regulator
The debate about how to regulate investment advisors and traditional brokers has been simmering for at least two years now. As of right now, it seems that the idea of having Finra, long accused of having a wirehouse-like regulatory mentality, regulate registered investment advisors may be gaining more support, according to DealBook. The idea was once anathema to advisors, many of whom would prefer the status quo or even a new SRO. But it looks increasingly like the SEC just doesn't have the resources to adequately police most advisors and like a new SRO would be prohibitively expensive and risky. One prominent lobbying group, the Financial Services Institute, is now on board with the idea of Finra as advisors SRO, arguing that it is not ideal but that it is the most workable. Finra is the "devil we know," one proponent argues. The first order of business for any regulator will be to resolve the biggest issue facing the retail wealth management industry: Should regulators agree to a common standard governing interactions with clients? Should traditional Series 7 brokers be forced to adhere to more than the current suitability standard? Would a common fiduciary standard be in the best interests of all? How should such a standard be developed? If the regulator, whoever it might be, can resolve this issue to the liking of all, it would generate a lot of credibility early. It would bode well for long-term success. For more:
Read more about: FINRA, RIAs
2. Citigroup to beef up wealth management
Three years ago, strapped for cash, Citigroup agreed to sell Smith Barney to Morgan Stanley for $2.7 billion cash, plus a 49 percent stake in the joint venture Morgan Stanley Smith Barney. At the time, Smith Barney generated $8.5 billion in annual revenue and $1.7 billion in profit. Morgan Stanley retains an option to purchase more of the JV ahead of time and has said it is eager to bring it all under its umbrella. I fully expect that to happen sooner rather than later. It could happen within a year or so, even though it might take binding arbitration to make it happen. But the sale will not leave Citigroup without a high-end retail wealth management offering. Reuters reports that the bank is building up its Goldbank brand, which is active abroad, especially in Asia. The bank has just hired former Merrill Lynch brokerage executive John Cummings as chief operating officer of Citigold Wealth Management. The bank also hired Frank Consalo from PNC Financial Services. The idea is to build up a system that can upsell more services via bank branches, which may be easier than upselling though entrenched brokers in separate offices. Banks have a mixed record when it comes to wealth management for high net worth customers. We'll see if Citigold brings anything new to the table. For more: Related articles: Read more about: Citigroup, stockbrokers 3. Whistleblower makes millions
Whistleblowers have had a field day with the financial crisis, as plenty of employees of troubled banks have proved willing to step up and provide information incriminating their employer. Such activity was hot and heavy even before Dodd-Frank turned up the incentives for whistleblowers and generated lots of media. The most recent example: Former Countrywide appraisal manager Kyle Lagow, who claimed that Countrywide inflated the value of homes to support bigger loans, according to Bloomberg. "Lagow's information helped prompt a $1 billion settlement of Federal Housing Administration claims announced by Bank of America in February. Lagow's take: $14.5 million. To be sure, not every whistleblower hits the jackpot. The personal toll can be high. But there are enough winners that the pipeline will remain full. Recall that Sherry Hunt made $31 million for her whistleblowing activities at Citigroup, where she remains employed. Two JPMorgan whistleblowers will share $11.7 million. We're seeing more law firms move to institutionalize the whistleblowing business. Many of the biggest payouts have come from whistleblowing suits brought under the False Claims Act. The rewards are potentially rich, but you will have to work for it. Here's a guy who could be in line for a big payout for his extensive efforts against BNY Mellon. For more: Related articles:
Read more about: banks, Whistleblowers
When the jurors start yawning, you know you have a problem as a judge. Judge Jed Rakoff, who has been doing his best to keep the trial of former Goldman Sachs director Rajat Gupta lively, implored the defense and the prosecution: "Counsels, I am in awe of our jury because they have managed to remain attentive even though the vast bulk of the day could be described as 'Mr. Witness, I show you document X. Let's put it up on the screen,' " he said. "The notion that the jury is going to peruse carefully several thousand documents shows a naïveté," as noted by DealBook. The trial has featured a lot of mind-numbing evidence walk-throughs and lots of negotiating beyond the earshot of jurors, who seem to be having trouble staying alert. Two jurors have already been replaced, but not out of boredom. They both had family issues. As for the evidence, the main show recently was former Galleon trader Michael Cardillo, who has plead guilty to insider trading and is now cooperating with prosecutors. He testified that Raj Rajaratnam's brother told him that some information about P&G was from an inside source, "Raj's guy at P&G." Whether the jury will buy that the "guy" was Gupta is the big issue. Just how persuasive is all the circumstantial evidence? For jurors, hopefully it will get more interesting soon. For more: Related articles: Read more about: insider trading, trial 5. BlackBerry's future on Wall Street
The BlackBerry was once the ultimate status symbol on Wall Street, which did perhaps more than any other industry to make the smartphone de rigueur as a "cool" workplace tool. Those days seem so long ago. The BlackBerry has been fighting a losing war for several years, battling in vain against Android phones and of course the iPhone and iPad. In the minds of many, the battle is all but over, as Apple and Google have definitively wrested the crown away from the tired, aging has-been. So it's no surprise that BlackBerry-maker RIM has hired JPMorgan and RBC--RIM is based in Canada after all--to conduct a strategic review. "These advisers have been tasked to help us with the strategic review we referenced on our year-end financial results conference call and to evaluate the relative merits and feasibility of various financial strategies, including opportunities to leverage the BlackBerry platform through partnerships, licensing opportunities and strategic business model alternatives," RIM says. It's clear that the company is pretty much out of time. The question is who at this point would want to buy the firm and for how much. The eventual price may be shockingly low. The company has just surprised people by saying it will post a quarterly loss in June. In hiring JPMorgan, RIM has hired a company that embarked on an effort in 2010 to make it easier for employees to move away from the BlackBerry and to the iPhone. For more: Related articles: Read more about: BlackBerry, Smartphones Also Noted
SPOTLIGHT ON... Hedge funds bet against Eurozone bonds Hedge funds are buying up credit default swaps linked to the credit of countries that were previously considered relatively safe. Spreads on CDSs for German and France have widened a bit as some hedge funds think they offer better returns in the face of lingering eurozone uncertainty than CDSs linked to countries like Greek and Spain, whose bonds have already been hit hard. Article Company News: Industry News: Regulatory News: And Finally…Facebook building a smartphone. Article
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