Today's Top Stories Also Noted: OpenText News From the Fierce Network:
Today's Top News1. Morgan Stanley's symbolic suit
You can't blame Morgan Stanley for being livid with Joseph "Chip" Skowron, the doctor who become a hedge funds stock picker. His career at FrontPoint, a company acquired by Morgan Stanley in 2006, ended in ignominy. He pleaded guilty in August to trading based on material inside information and was sentenced to five years in prison and ordered to forfeit $5 million. As if that wasn't enough, Morgan Stanley sued him as well, asking for $33 million that the bank says it paid to the SEC to settle insider trading charges. In total, Morgan Stanley has sought $45 million from Skowron over his fraud, according to Reuters. The bank claimed in court papers that, "Beyond the harm attendant to having one of its managing directors plead guilty to serious criminal conduct, the firm expended its own reputational capital by defending Skowron during the years it believed, based entirely on his misrepresentation, that he had not violated the law." The bank suffered a setback in March when a judge ruled that the bank was not entitled to recoup the $33 million SEC payment. Instead, the judge ordered Skowron to pay $10.2 million in restitution to his former employer. The issue has not been resolved, and Morgan Stanley apparently is still pursuing a larger payment. But all in all, it has to know that Skowron cannot possibly afford such a payment (unless the bank knows something others don't). The suit still services a symbolic purpose, a massive clawback attempt to let employees know that they will be pursued to the ends of hell if they cross the bank the way Skowron did. For more: Related article: Read more about: Morgan Stanley, insider trading
2. Reserve Primary Fund execs cleared of fraud
It was a seismic event when the Reserve Primary Fund broke the buck back in September 2008, thanks mainly to its holdings of Lehman Brothers bonds. When the money market fund completely collapsed, it quickly became an enforcement issues. Four years later, it stands as one of the most important efforts by the SEC to hold individuals accountable via civil charges for alleged wrongdoing in the financial crisis. The SEC took on a giant in the money market industry, Bruce Bent, and his son, the co-managers of the fund. As fate would have it, a federal jury cleared the two of charges that they fraudulently misled investors, regulators and trustees about their ability to keep the fund viable as clients exited, according to media reports. In a silver-lining victory, the jury found the younger Bent guilty on one claim of negligence for his role in interacting with investors. The jury also found that the fund's adviser, Reserve Management Co., guilty on two claims of fraud and one claim of negligence. The company's broker-dealer distribution arm was found guilty on one claim of fraud. The SEC was hoping for a more symbolic and clear-cut victory, but wasn't to be. Money market funds continue to be a huge issue in the industry, as regulators struggle to pass reforms that would make "break-the-buck" incidents less likely. The SEC suffered a setback when it became clear recently that its reform package did not have enough commissioner votes to pass. For more:
Read more about: Mutual Funds, money market funds 3. HSBC boosts reserves for litigation expenses
Not too long ago, the big question about big U.S. banks was whether they had adequately reserved against the many lawsuits and enforcement actions that were aimed at them. Now the same question is being asked of British banks, such as Barclays and HSBC. The latter has been in the spotlight for a host of dubious activities. The latest news is that regulators are actively looking into claims that laws might have been violated in its offshore center on the Channel Island of Jersey A whistleblower "secretly provided a detailed list of names, addresses and account balances earlier this week, according to The Telegraph. The paper says that, "among those identified on the list (of HSBC clients) are Daniel Bayes, a drug dealer who is now in Venezuela; Michael Lee, who was convicted of possessing more than 300 weapons at his house in Devon; three bankers facing major fraud allegations and a man once dubbed London's 'number two computer crook'. A series of other accounts containing six-figure deposits are also registered to modest addresses in relatively poor parts of the country." This comes on top of the bank's statement that expects a criminal indictment for various alleged AML lapses. On top of that, the Libor probe must still be resolved, and officials are looking into Iranian business dealings. The bank added $800 million in reserves recently, bringing its total reserves to $1.5 billion. At this point, even the bank is warning that more reserve additions will likely be necessary. For more: Related article: Read more about: HSBC, Reserves 4. After election, a big sell-off in residential MBS market
One consequence of President Obama's reelection has been big changes at the Federal Financing Housing Agency, which oversees Fannie Mae and Freddie Mac. The administration has let it be known that it intends to replace Edward DeMarco, who had become something of a black sheep for the administration. He ended up frustrating the administration's efforts to use the two big housing GSEs to effect more principal reductions, arguing that the while taxpayers might ultimately win in such efforts, the overall benefits of the program did not outweigh the costs and risks. That made him something of a hero in the ABS market, in which "investors were paying up to 111 percent of face value for Fannie Mae-guaranteed MBS with a coupon of 6 per cent, in the belief that borrowers in the underlying pools of loans were largely trapped into their mortgages and unable to take advantage of rates on new loans that are at their lowest levels since the 1950s," according to the Financial Times. "The 6 per cent coupon MBS fell from 111 the day before the election to 110.34 at the end of last week, and 5.5 per cent coupon securities fell from 109.75 to 108.81, their largest price swing this year." But now that DeMarco is out, the market has sold off in a big way, taking massive haircuts on these securities in what has been dubbed the "DeMarco trade." The view is that whoever replaces him will work hard to effect more modifications, which are always rough on the MBS market. For more: Related article: Read more about: MBS, Modifications 5. Mutual fund bankruptcy comes amid industry woes
These aren't exactly the glory days for mutual funds. The days of the celebrity mutual fund manager have long passed. The industry's bread-and-butter, retail investors, still seem to be punishing the industry for the sins of Wall Street that came to light in the aftermath of the financial crisis. So what is the impact of Alethelia's bankruptcy filing? The company once managed more than $7 billion and boasted "one of the best long-term performance records for American growth stock funds," according to DealBook. The article noted that Aletheia, "attracted billions of dollars from large pension funds and foundations. It counted among its clients Michigan's state pension fund and Ewing Marion Kauffman Foundation in Kansas City. The firm had also attracted the brokerage units of Goldman Sachs, Morgan Stanley and Bank of America Merrill Lynch, all of which had had Aletheia on its list of recommended managers for its individual clients." But as of late, it seemed to slowly implode. It was accused by the SEC of maintaining deficient records. It's hired a new CEO, who quit in just months. It also experienced a wrongful termination suit by a former executive exposed all sorts of dubious activity, including the lavish lifestyle of the founder. It would be grossly unfair to call the Aletheia saga reflective of significant industry trends. The company certainly had unique problems. Still, institutional investors will be a lot less tolerant of shenanigans and internal strife these days, especially if performance has dried up. You really need to have your house in order to stand out these days. For more: Related articles:
Read more about: Mutual fund Also Noted
SPOTLIGHT ON... Glitches now under control at NYSE Given a string of recent software snafus, the market remains hyper-sensitive about glitches. But it seems to have weathered the glitch-storm that hit the NYSE earlier this week. "The problems began just after the start of trading on Monday as the exchange operator attempted to migrate the 216 stocks to new servers as part of an upgrade to its systems. Shortly after, exchanges run by BATS Global Markets and Nasdaq declared self-help against the Big Board, indicating to traders that an error had occurred at NYSE and that orders would be routed away from the exchange. The exchanges revoked the self-help status in the afternoon," the Financial Times reports, "A panicked day of alerts sent out by the exchange, which is owned by NYSE Euronext, to traders was capped off by a message in the late afternoon that blamed the outage on one of its order matching engines, which execute trades electronically." Article
Company News:
©2012 FierceMarkets This email was sent to kumaresan.selva.blogger@gmail.com as part of the FierceFinance email list which is administered by FierceMarkets, 1900 L Street NW, Suite 400, Washington, DC 20036, (202) 628-8778. Contact Us Editor: Jim Kim Advertise Advertising: Jack Fordi or call 202.824.5040 Email Management Unsubscribe from FierceFinance Explore our network of publications: | ||||||||||||||||||||||||||||||||||||||||||
Wednesday, November 14, 2012
| 11.14.12 | Morgan Stanley's symbolic suit
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment