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Today's Top News1. New standards set for bank consultants
Bank consultants, fairly or not, have been in the news lately, as people ponder the wisdom of their status as "shadow regulators." The likes of the Promontory Financial Group, Deloitte and PricewaterhouseCoopers "are required to offer a neutral assessment of a bank's problems, but the consultants are handpicked and paid by those same banks," notes DealBook. One of the most widely discussed controversies: the settlement-mandated review of millions of home foreclosures by Promontory and others. The consultants racked up about $2 billion in revenue while struggling to finish the reviews in a timely fashion, to the detriment of the banks and to the ire of government officials. Regulators are increasingly taking steps to ensure that consultants do not abuse their status. The OCC became the latest to weigh in. It has announced that it will impose new federal standards governing the use of consultants by banks. The standards details how the OCC will review and monitor consultant work. That follows a move by New York State financial regulators to open an investigation into whether consultants overlooked dubious behavior at the request of their clients. It has already acted against one consultant. The state censured Deloitte, accusing it of watering down a report about AML controls at the British bank Standard Chartered. Deloitte was fined $10 million and agreed to a bar on advising banks in New York for a year. Other actions may be coming. For more: Read more about: banks, Bank Consultants
2. Mayo finds more fault with Bank of America CEO
Brian Moynihan took on one of the toughest jobs in the industry when he became CEO of Bank of America in 2010. Since then, people have sporadically called for his job, as the bank's recovery took a twisting path and as consumer anger spiked over a proposed debit card fee increase. In general, most industry folks seemed to understand that the challenges imposed on him by his predecessor's 2007 purchase of Countrywide were extreme. A rising stock price of course can quiet most critics. On that issue, Moynihan has fared well. Bank of America's stock has rallied up 23 percent this year. It's up more than 50 percent from a year ago. Even better, third-quarter revenue was up 5.4 percent year over year. But that's not good enough for everyone, notably outspoken bank analyst Mike Mayo, who has had an ill-timed sell recommendation on the bank since April 2012. Moneybeat notes his main criticisms. Mayo "argues that the bank is offering a mixed message, talking about slimming down while bragging about its size and broad scope. And he sees Bank of America's retreat from the mortgage business as a mistake. He estimates the bank lost out on about $6 billion worth of revenue by pulling back in 2011, when it had 18 percent share of mortgage originations. The bank had a 5.2 percent market share at the end of the second quarter, according to industry publication Inside Mortgage Finance. "Other criticisms are more current. Mr. Mayo faults BofA for changing the metrics it uses to publicly evaluate its progress. Mr. Moynihan's annual letter to investors in 2012 included just five of the measures that were in the prior year's letter; seven others were dropped, and five new ones were added." As long as the stock price keeps rising, Moynihan's job is secure. That said, some of this criticism is worth reviewing. For more: Read more about: Bank of America, Mike Mayo 3. Goldman Sachs promotes 280 to MD
Goldman Sachs, as expected, announced the 2013 crop of managing directors, who have just taken a critical step toward partnership. The promotions take effect January 1. We noted recently that the 2013 crop might be a bit larger than normal. Indeed, 280 employees got the nod, according to Dow Jones. That compares with 266 who were promoted in 2012. Financially, the average salary for the group hovers at around $500,000, though many will make much more via their annual bonuses, even in a down year, such as 2013. The larger class size reflects in part the decision by the bank to promote people to managing director every two years, effective as of now. The bank says it needs more time to make evaluations, as more executives hang on for longer than expected. The bank's executive ranks had grown a bit top heavy, it would appear, even with the spate of departures once the credit crisis eased. Partners are already picked every two years, with the next crop to be announced in 2014. The composition of the newly minted managing directors held few surprises. Ninety-four came from the securities division and 51 came from investment banking. Investment management contributed 39 people, according to Dow Jones. About 56 percent of the group is based in the Americas, while 27 percent are from Europe, the Middle East and Africa, 15 percent from Asia- Pacific and 2 percent from India. For more: Read more about: Goldman Sachs, managing directors 4. JPMorgan Twitter Q&A plans blow up
Twitter represents a radical new form of online communication, and JPMorgan Chase was happy to be one of the lead underwriters on the company's recent IPO. But there are some downsides to the use of Twitter as an official corporate communications vehicle. The bank has just learned that lesson the hard way. The bank's marketing folks came up with an idea to make a top investment banker available to answer questions submitted via Twitter. "Jimmy Lee, one of the senior bankers that worked on Twitter's share sale, was set to take over JPMorgan's Twitter handle in an online marketing event on Thursday with the hashtag #AskJPM," according to the Financial Times. "But, by Wednesday afternoon, Twitter users had bombarded the #AskJPM hashtag of the Wall Street bank that has been in the spotlight over its $13bn settlement for mis-selling mortgage-backed securities and the $6bn London Whale trading losses." The bank quickly announced that it was cancelling the event, admitting it was a "bad idea." And that it was going "back to the drawing board." The FT suggests that this will go down as an example of what not to do when using social media for marketing communications purposes. According to one measure, at least two-thirds of the more than 8,000 tweets that were sent using the hashtag #AskJPM "displayed some type of negative comment." Comments ranged from "how many puppies have you murdered today" to "#askjpm do you feel bad about systematically undermining democracy? Do you know what fiduciary duty is?" and lots more. For more: Read more about: marketing, Twitter 5. JPMorgan's consulting contract figures in China probe
DealBook weighs in with an interesting scoop about JPMorgan Chase's strategic hiring practices in China. The bank apparently contracted with a consulting firm run by the sole daughter of Wen Jiabao, who at the time was China's prime minister, obviously a man of inordinate influence. She formed the consulting company under the pseudonym Lily Chang, though her real name was apparently known to bank executives and China officials. For Wen's consulting firm, Fullmark Consultants, "the JPMorgan deal was lucrative. While many Hong Kong investment bankers were earning as much as $250,000 a year, JPMorgan paid Ms. Wen's firm $900,000 annually from 2006 to 2008, records show, for a total of $1.8 million," the article notes. "JPMorgan appeared to benefit from the relationship as well. Fullmark claimed in a confidential letter to the bank that it "introduced and secured" business for JPMorgan from the state-run China Railway Group, a construction company that builds railways for the Chinese government. The bank was an underwriter in the company's 2007 initial public offering, which raised about $5 billion." It is not known if Wen's father played a role in any of the dealmaking. Prosecutors have embarked on an apparently wide-ranging probe that began with a look at the bank's hiring of offspring of important regulators and has quickly expanded. Some scoffed that this a case of prosecutors meddling in hiring practices. But as the Fullmark controversy shows, there may be some quite legitimate issues to be explored. For more: Read more about: Enforcement Action, Fcpa Also Noted
SPOTLIGHT ON... Accountant wins deferred prosecution The SEC granted a former accountant at Heppelwhite Fund a deferred prosecution agreement for his "voluntary and significant cooperation" that helped stop a fraud by the founder of the hedge fund firm. Scott Herckis served as the outsourced administrator for the Heppelwhite fund nearly two years until his September 2012 resignation. He then alerted investigators to the fraud, and produced "voluminous documents" to back up his claims, notes Reuters. Article Company News:
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Thursday, November 14, 2013
| 11.14.13 | Mayo finds more fault with Bank of America CEO
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