Also Noted: Spotlight On... Hillary Clinton, an industry favorite News From the Fierce Network:
Today's Top News1. FIRREA cases against banks to multiply
The guilty verdict delivered in the recent Bank of America trial over defective mortgages that were sold to the big housing GSEs was notable for its use of the FIRREA, which stands for the Financial Institutions Reform, Recovery and Enforcement Act, which was passed in 1989 in response to the thrift crisis. The obscure statute has exploded on the scene in a powerful way, as prosecutors have awoken to the law's charm, which is that it allows them to broadly build a civil case against financial institutions without having to prove it beyond a reasonable doubt. It has emerged as the prosecutorial took of choice. The law allows the Justice Department to pursue fraud charges affecting a federally insured institution and gives civil lawyers access to the grand jury and subpoena processes. It also has a 10-year statute of limitations, giving prosecutors much more time to bring charges. The Justice Department has tried to use the law in an array of cases since 2010. "It has used the statute to accuse Standard & Poor's of fraud in rating mortgage bonds, for example, and to go after First Bank of Delaware for allegedly processing withdrawals on behalf of fraudulent merchants," notes Reuters. We will undoubtedly see more cases brought in this manner. Banks of course should continue their fight to persuade judges that the law is being misused, though they haven't made a lot of headway so far. For more: Read more about: Enforcement Action
2. Dodd Frank effect: longer forex hours in London
When it comes to sweeping regulation, there are always unintended consequences. In the case of Dodd-Frank, there have been many. Few forex sales and trading employees, for example, would have thought they would be working longer hours for this reason: some clients are no longer allowed to deal with Citigroup colleagues in New York because of the law, Alex Jackson, head of European investor sales, foreign exchange and local markets, told Bloomberg. "That's because the Dodd-Frank Act prevents people in the U.S. from trading with counterparts who haven't agreed to International Swaps & Derivatives Association rules, Jackson said. European money managers and Brazilian hedge funds are among customers relying on the arrangements." He went on to say, "No non-compliant investor or client is able to trade with a U.S.-based salesperson or trader physically located in the U.S…. Any client who has not signed the ISDA protocol falls under this." Previously, the New York team would take over for the London team at about 5 p.m., a way to provide seamless coverage to clients. But those plans have been upended. Obviously, it would be easier if all clients were to sign on to the ISDA protocols. That may yet happen. Banks may end up encouraging clients to do as much. But losing the business is not really any option. Keeping employees on call until 9 p.m. doesn't seem like a big deal in that regard. For more: Read more about: Forex, Dodd Frank 3. SEC to shift enforcement focus to individuals
The SEC's goal of requiring more companies to admit to wrongdoing when settling fraud charges has been rightly hailed. Many see it as a long overdue change and a sign that new chairman Mary Jo White has the beleaguered agency on the right track. But there is an even more profound shift that might materialize soon. The agency is laying the groundwork to bring more charges against individuals rather than the companies that employ them. "I want to be sure we are looking first at the individual conduct and working out to the entity, rather than starting with the entity as a whole and working in," White was quoted recently by Bloomberg. "It is a subtle shift, but one that could bring more individuals into enforcement cases." It remains to be seen how all this will play out. It will be difficult to make an immediate shift, but the long-term implications are far-reaching. In the aftermath of the financial crisis, critics complained loudly about the lack of prosecutions against high-ranking executives of financial firms that engaged in shady practices. While there were plenty of enforcement actions brought against companies, very few executives were targeted, despite some tantalizing near misses, in the case of Lehman Brothers, for example. To be sure, you can't bring a case against an individual or a company if the evidence is not there. It's certainly not for lack of effort that prosecutors were unable to hand up personal charges. It may be that the financial services industry has become quite adroit at inoculating its top executives, giving them plausible deniability in many situations. For more:
Read more about: SEC, Enforcement Action
CNBC reports that federal prosecutors and SAC Capital, the embattled hedge fund founded by Steven Cohen, are ready to settle. A deal could be announced as early as this week. A settlement has been in the works for weeks, with both sides growing more optimistic that a deal could soon be finalized. The details apparently have been hammered out now. Prosecutors told SAC that any settlement deal would have to be completed before Nov. 18, which is when the federal trial against longtime SAC manager Michael Steinberg begins, according to CNBC. "Eyeing that date and aware of the firm's desire for resolution, SAC employees have been expecting a deal this week, according to someone who works there." SAC Capital is expected to admit to some kind of wrongdoing, but the wording of the admission has not been divulged. In the end, it may not matter greatly. The fund has already been effectively rendered a family office, as virtually all limited partners have pulled their investments. Even if the fund firm was to somehow win a reprieve and settle without admitting guilt, the on-going SEC case could still impose restrictions that would perhaps making managing other people's money all but impossible. For more: Read more about: SAC Capital, settlement 5. Goldman Sachs cafeteria and pricing incentives
CNBC's NetNet column offers an interesting look at Goldman Sachs' cafeteria pricing policy and the interesting social engineering efforts it employs to smooth out lunchtime traffic. The bank wants to reduce traffic at peak period and increase traffic in non-peak period, so why not use pricing to offer incentives? "The cafeteria has a set of timed discounts. If you show up in the cafeteria before 11:30 or after 1:30, you get a 25 percent discount on your food. Goldman incentivizes employees to avoid the rush hour." Not surprisingly, the incentives seem to be working. "As it turns out, Goldman folks are both especially attuned to economic incentives and ruthless about capital efficiency. There are some Goldman employees who take pride that they've never eaten lunch inside the 'cost penalty window,' as one trader referred to the two hours when the discount isn't in effect. "Others take it more casually. "If you find yourself in the cafeteria sometime around 1:20 pm, you'll notice that the lines at the pay registers are empty. So are many of the tables. "But the cafeteria area between where the food is collected and where you pay is quite crowded. The Goldman lunchers are chatting with each other, waiting for the final minutes to tick down until they can save a dollar or two. "There's a bit of an absurdity to the employees at one of the best-paying companies in America biding their time to save a couple of dollars. But it also makes perfect sense." Indeed, at least one pundit thinks restaurants should follow the bank's lead. So what other problems could be solved with pricing incentives? Gym use perhaps? One idea might be to offer reduced rates on car-service at the end of the day, perhaps to incent people to stay longer. Or what about some sort of pricing subsidy for people who get into work earlier? Would some staffers be willing to pay for private bathroom services? Other ideas? For more: Read more about: workplace Also NotedSPOTLIGHT ON... Hillary Clinton, an industry favorite Say what you want about Democrats and their views on Wall Street policies, especially on big issues like private equity carried interest taxes. The fact remains that Hillary Clinton is a favorite speaker at corporate events. Among the companies willing to pay her $200,000 speaker's fee: KKR, Carlyle Group and soon Goldman Sachs. She was scheduled to appear with CEO Lloyd Blankfein at a conference this week. Article Company News:
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Tuesday, October 29, 2013
| 10.29.13 | SAC Capital to settle soon
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