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2. Wealth management more alluring to top banks

When it comes to the probe of JPMorgan's hiring of so-called "princelings" in China, the conventional wisdom has been that the charges were not likely to be forthcoming. All banks hire the sons and daughters of influential people, the argument went. This is bound to add up to little.

But can it be that a smoking gun exists?

Bloomberg reports that the investigation so far has uncovered a very intriguing spreadsheet, "which links some hiring decisions to specific transactions pursued by the bank." If prosecutors can somehow show that hiring a princelings was a quid pro quo for a specific deal, they may be in business. The spreadsheet, though little is known about it, may help them in that area.

It's fair to say that the investigations are heating up. The Justice Department has joined the SEC in this effort, which has now expanded beyond Hong Kong and China to other Asian countries and other banks.

The SEC will hunt for evidence showing "these weren't real jobs, that they were only there because their father or mother were important public officials," one expert was quoted. "If the public official requested the job for the child, that would be a strong indication to the company that the official was seeking and receiving something of value."

You get the feeling that this is still a prosecutorial longshot. But you never know.

For more:
- here's the article

Read more about: jobs, Fcpa
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By Jim Kim

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3. Cozy world of Wall Street hiring at issue

It's no secret that several banks have decided to take some chips off the table in terms of capital markets activity and put more down on wealth management. UBS is a great example. So is Morgan Stanley.

What might Goldman Sachs be thinking?

The bank has not built out its wealth management capability aggressively, though it remains committed to the very high end. Charles Gasparino had this to say just recently:

"If you look at Morgan Stanley's stock price, it's doing very well. CEO James Gorman is convincing analysts that he has the right business model and it's a business model based less on risk and more on advice. And that advice comes through one of the biggest brokerage networks on Wall Street right now and that brokerage network is something that Gary Cohn – what sources are telling the FOX Business Network—has told people that he's very envious of. Now what's interesting, those statements that Gary Cohn has made are starting to get around the street and now fueling speculation that Goldman itself may sort of take a dive into retail brokerage."

It would be hard to discount the benefits of a strong wealth management unit.

For confirmation, we turn to Wells Fargo, which has plans to hire 5,200 to 5,500 people a year to staff its national growth in brokerage, private banking and retirement business, according to the San Francisco Business Times.

Of course, the bank is cutting back in other areas, like mortgage production. But it's good to know that its growing its wealth management business. It's a good time to be rich, as the competition for these dollars will only intensify.

For more:
- here's the article

Read more about: brokers, Advisors
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By Jim Kim

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4. Martoma faces the music for not cooperating

It would be surprising if the SEC's probe into the hiring of "princelings" in China will amount to much. The reality is that hiring the offspring of influential kids has been going on forever.

"Enlisting the relative of a top customer for a summer internship or an entry-level job is common to businesses worldwide, but it's especially rife in banking," according to Reuters. "The industry has held strong to a well-worn mechanism where clients will 'pass on' CVs or resumes of their relatives or friends to coverage bankers, whose role is to visit top executives of companies in a particular industry or sector and sell them the bank's services.The bankers, in turn, make sure those CVs reach the staff in charge of that year's intern list…. Client hires don't necessarily by-pass the usual battery of rigorous tests and interviews that other applicants must take."

It might not be impossible to prove that a specific hire was in fact a quid pro quo for a specific transaction, but it might be hard.

You cannot fault investigators for casting a new to see what turns. They just might find a smoking-gun email, along the lines of this: "All in all, this deal looks good. We are ready to move forward with you guys. All that remains is the matter of you hiring my daughter. I think she would work well at your bank. She works really hard, and is quite bright. What think?"

Even if such an email were to emerge, the practice of hiring the children of influential people will not likely stop. In China, however, banks would be wise to set up some processes whereby these sorts of hires are vetted, to make sure that they do not create an appearance of impropriety.

For more:
- here's the article

Read more about: hiring, jobs
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By Jim Kim

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5. Direct loan industry legitimized by banks?

It's fair to say that Mathew Martoma, by not agreeing to turn states evidence against Steven Cohen, has guaranteed very rough treatment from prosecutors.

If it's too late for him to flip, it will only heighten their resolve to make him an example. If he is found guilty at trial, the chances are great that he will do jail time. In fact, the trial would nothing less than a failure for the government if Martoma weren't sent to jail for many years.

To boost the pressure on Martoma, the government recently filed an updated indictment that includes new charges. The new indictment adds a claim that Martoma corrupted another, unnamed doctor, in addition to the elderly Dr. Sidney Gilman.

For a glimpse of just what Martoma faces, we turn to a Bloomberg Businessweek article that notes: The updated indictment demands that "Martoma should forfeit all property, 'real and personal, that constitutes or is derived from proceeds traceable to the commission of the securities fraud offenses.' The document lists $9.3 million, the amount of Martoma's SAC bonus for 2008; his home in Boca Raton, Fla.; $3.2 million in a bank account; $245,000 held under his wife Rosemary's name; and $934,897 under the Mathew and Rosemary Martoma Foundation."

Financial ruin plus jail time is a real possibility for him.

Martoma may yet regret the day he decided to take the fall. That said, it's possible he could prevail in court. Recent trials, however, make clear that a happy outcome for him is not likely. The odds as of now say he'll have plenty of time to mull his decisions in jail.

For more:
- here's the article

Read more about: insider trading, SAC Capital
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By Jim Kim

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