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As expected, the SEC, as directed by the JOBS Act, did away with an 80-year-old ban on advertising by alternative investment vehicles and start-ups, a move that over the long-term might have a lasting effect on the way issuers raise private funds. It is not expected to have a major impact immediately, however. Certainly, hedge funds and private equity funds will take a go-slow stance in terms of figuring out whether mass advertising makes sense for them.

One issue that cropped up immediately, however, is the likelihood of fraud. The lifting of the advertising ban has drawn some criticism for its perceived lack of investor protection.

Luis Aguilar, the only SEC commissioner who did not vote in favor of the move, called the adoption of the rule reckless. "The record is clear that general solicitation will make fraud easier by allowing fraudsters to cast a wider net for victims," Aguilar was quoted by the New York Times.

Senator Carl Levin criticized the rule and the SEC's new chairwoman, Mary Jo White. "Proceeding today with this flawed rule will ultimately damage the investing public and investor confidence in U.S. markets," Levin said in a statement. "I am disappointed that Mary Jo White, who knows what it's like to combat financial fraud, let this rule go with so few investor protections." Several state regulators also denounced the rule.

The issues revolve mainly around accredited investors and how they might be definitively identified by an entity raising money. A bad actor might be able to market broadly, ensnaring lots of unsuspecting and unaccredited investors looking for a big kill.

Despite the criticism of regulators, some think there are adequate safeguards built in. "Today, the SEC confirmed that issuers must take reasonable measures to verify the accredited status of investors. One of the measures through which intermediaries can perform reasonable measures is through reliance upon a third-party service that verifies accredited investor status. In other words, issuers can protect against rescission liability by relying upon a third-party verification service to verify accredited status rather than merely relying upon self-certification or doing the diligence themselves," says Bob Carbone, CEO of CrowdBouncer, to FierceFinance.

Read more about: Hedge Funds, advertising
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Today's Top News

1. Carl Icahn moves on appraisal strategy

By Jim Kim

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2. Senators urge prepaid pay card scrutiny

Carl Icahn is not going quietly into the night. At this point, Michael Dell remains the favorite to prevail in the Dell leverage buyout sweepstakes. Ahead of the July 18 special vote on the proposal, he has picked up some major endorsements, and the PC market continues to weaken, making his $13.65 a share offer look all the better.

Icahn remains just as convinced, however, that the offer undervalues the company, and as expected, he's preparing to go to war in court to force an appraisal.

"We are in the process of perfecting our right to seek appraisal of our Dell shares and we believe that you should also perfect your appraisal rights. Under Delaware law if a merger occurs and you did not vote for it, you are entitled, through appraisal, to the fair value of your shares as determined by a Delaware court. We have done a great deal of due diligence concerning the value of Dell, and as we have said in the past, we believe the $13.65 merger price substantially undervalues your Dell shares, and we believe if you seek appraisal, you will receive more," he writes in a letter to shareholders.

"BUT WHAT IS MOST IMPORTANT ABOUT SEEKING APPRAISAL IS THAT YOU CAN CHANGE YOUR MIND ABOUT APPRAISAL UP TO 60 DAYS AFTER THE MERGER AND STILL TAKE THE $13.65 PER SHARE. During the 'free 60 day period' we believe Dell may wish to negotiate with those that sought appraisal and possibly pay a premium over $13.65 to get them to settle and drop their appraisal claims, as explained below. To add a new twist to an old saying, 'you can have your cake and eat it too'."

This may strike some as a Hail Mary. He seems interested less in an actual appraisal fight that could take many years than in forcing some sort of settlement the board.

The Deal Professor notes that there are risks with Icahn's gambit. For one thing, if the PC market continues to sour, there is the possibility that the appraisal will come in less than the $13.65 offer on the table.

That said, the professor thinks that Icahn may have a later strategy worked out.

For more:
- here's the letter
- here's the article

Read more about: Leveraged Buyout, Dell
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By Jim Kim

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3. Wells Fargo beats second quarter estimates

The issue of prepaid pay cards, which have become popular with companies and banks, has been pushed onto the front burner by media coverage that raises questions about fees, specifically about transparency. In many ways, the issue was tailor made for the Consumer Financial Protection Bureau.

As it turns out, a group of Congressmen has gotten the jump. Sixteen senators have written to the CFPB, asking they take a close look at pay card practices, reports DealBook.

In their letter, the lawmakers noted reports that "some workers incur so many fees in the course of using their payroll cards that their net income ends up below the minimum wage." The letter also asked the regulators to examine whether workers understood the fees associated with the cards.

The most vexing aspect of the cards, the lawmakers said, was that employees might be "coerced or inappropriately pressured into using them." Employees, the letters says, "should have the right not to use such a card and to instead receive their pay via a paper check or direct deposit."

The industry needs to respond proactively. The Network Branded Prepaid Card Association has said it will urge members to clearly disclose any fees associated with the pay cards. The banking industry may have to do more. Banks are of course entitled to fees for services. But recent history has shown that the process of charging fees can quickly become controversial---and quite political.

Revenue is definitely at stake, again.

For more:
- here's the article

Read more about: Prepaid cards
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By Jim Kim

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4. New proposal would break up banks

Wells Fargo delivered a second dose of good earnings news. Following JPMorgan Chase's big news, the San Francisco-based consumer giant reported net income of $5.5 billion, or 98 cents a share, about 20 percent higher year over year. The second quarter results also beat analysts' expectations of about 93 cents a share. Revenue (21.4 billion) was only slightly higher than a year ago but still beat expectations.

The bank was able to boost its ROE to 14.02, compared with 12.86 a year ago. Asset quality seems to have improved markedly, as net charge-offs as a percent of average total loans fell to .58 from 1.15.

As for the NIM, it fell 3.46 percent from 3.91 a year ago and 3.48 a quarter ago. It's unclear how this will be interpreted going forward. The net impact of repricing and growth of the balance sheet this quarter boosted the NIM sequentially, largely due to higher securities income and reduced funding costs.

Consumer banking is always the biggest contributor to revenue at the bank. Net income was up 28 percent from a year ago. However, revenue fell 1 percent due to lower net interest income, mortgage banking revenue and other noninterest income.

As for wholesale banking, net income was up 7 percent, year over year, and revenue was up 0.3 percent, driven by business growth and strong loan and deposit growth.

All in all, the line item results from JPMorgan and Wells Fargo bodes well for Citigroup and Goldman Sachs, which report next week.

For more:
- here's the release

Read more about: earnings, Wells Fargo
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By Jim Kim

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5. JPMorgan posts a huge upside surprise

The majority of all bills introduced in Congress have almost zero chance of passing. The point is usually not passage but publicity and politics.

In the Capital, if you're not grandstanding for your causes and constituents, then you're not doing your job. At first blush, the 21st Century Glass-Steagall Act would appear to have little chance of passing. While the bill originated from an eclectic bipartisan group of Senators, it certainly does not enjoy wide backing from both parties. Indeed, the idea of breaking up banks along the lines of the old commercial bank/investment bank divide has failed to gain a lot of traction since the financial crisis. If it couldn't generate massive support then, it surely will have trouble now.

In the modern incarnation, the bill wouldn't divide commercial and investment banking so much as it would divorce FDIC-backed businesses from risky trading and other capital markets businesses.

To be sure, there's logic in the idea. And we've seen some surprising supporters, including former bankers such as Sandy Weill, a storied former bank executive. He raised brows when he argued in favor of some sort of bust-up on national television.

If the concept were to gain traction soon, it would still face a long road to passage. But even a small amount of momentum would spell good news for one group: bank lobbyists. Business is raining down upon them. Doing battle against the forces of modern Glass Steagall supporters would be another massive revenue source.

For more:
- here's the article

Read more about: banks, Bank break ups
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By Jim Kim

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