Hedge Funds and Private Placements May Soon Solicit Retail Investors
(Jul 2013)
According to the Wall Street Journal, the SEC will soon lift the ban on soliciting shares of hedge funds and other private placement investments to the general public, "a move that's expected to unleash a wave of ads touting such investments." We've been covering this story for some time, as the SEC has seemed reluctant to implement this new rule due to concerns from Congress and others over the lack of investor protections.
However, the SEC may have no choice. Lifting the ban was required by...
Reuters to Stop Sneak Peek of Consumer-Confidence Data
(Jul 2013)
Thomson Reuters will no longer be offering investors an early look at the results of the University of Michigan consumer-confidence survey, the NY Times reported yesterday and the Wall Street Journal is reporting this morning. The move was prompted by an investigation by the NY Attorney General and would likely be temporary while the investigation is ongoing.
We talked about this story a bit last week, emphasizing the in depth analysis conducted by Nanex, LLC on high frequency trading data...
Foreign Exchange Rate Fixing
(Jun 2013)
Bloomberg News recently reported that traders at some of the world's largest banks have been in the business of rigging foriegn exchange (FX) rates. An FX rate essentially tells you how much of one currency you can buy with another currency: for example, currently you can buy about 100 Japanese yen for each US dollar. The rates affect "trillions of dollars of investments" according to Bloomberg, since they are used for the valuation of portfolios, derivatives, and even equity and fixed...
Investors Returning to Capital-at-Risk Products
(May 2013)
Yakob Peterseil of Risk.net recently noted that "[b]anks are boosting issuance of leveraged notes linked to US equity indexes and notes that pay out when yield curves steepen." According to the article, reverse convertibles and buffered notes are seeing a resurgence as investors begin to be more optimistic about stock market growth. In addition, principal-protected structures like structured certificates of deposit and principal-protected notesare falling out of favor as attractive terms are...
Missouri Action Against Morgan Keegan Over Municipal Bond Issue Also Illustrates Markup Abuse
(May 2013)
On April 3, 2013 Missouri's Secretary of State of the State submitted a Petition for an Order to Cease and Desist and to Show Cause against Morgan Keegan over taxable municipal bonds Morgan underwrote for the City of Moberly in July 2010. The petition and the Offering Circular for the bonds are available to view online. The story has been picked up by The Bond Buyer and Law360.
Setting aside the Petition's allegations, the trading in this set of bonds highlights markup abuse we have found is...
Taking the Teeth out of the STOCK Act
(Apr 2013)
NPR reported earlier this week that Congress has quietly overhauled important provisions of the STOCK Act . For those that don't know, the STOCK ("Stop Trading on Congressional Knowledge") Act was signed into law in April 2012 and sought to prevent "Members of Congress and employees of Congress from using nonpublic information derived from their official positions for personal benefit, and for other purposes."
The STOCK Act was supposed to prevent Members and Congressional staff from trading...
CFTC Investigating Potential Manipulation in Interest Rate Swap Market
(Apr 2013)
Bloomberg's Matthew Leising is reporting that the Commodity Futures Trading Commission has issued subpoenas to current and former employees at swap brokerage firm ICAP (IAP) "and as many as 15 Wall Street banks" for alleged manipulation of a key benchmark price in the interest rate swap market.
The benchmark, known as ISDAfix, "provides average mid-market swap rates for six major currencies at selected maturities on a daily basis." Similar to LIBOR, the rates are set based on end-of-day...
Goldman Sachs Uses JOBS Act to Sidestep Volcker Rule
(Apr 2013)
Evan Weinberger at Law360 is reporting that Goldman Sachs may have found a way around the Volcker Rule--the ban on proprietary trading by banks, which also prohibits sponsoring hedge funds and private equity funds--by using another controversial regulatory measure, the 2012 JOBS Act (of which we have spoken before):
By setting up an independent business development company in which it will hold a minority stake and limited leverage exposures, Goldman will be able to engage in at least limited...
Stockton California May Proceed with Chapter 9 Bankruptcy
(Apr 2013)
Yesterday a federal judge in California ruled that, despite the objections of bondholders and bond insurers, the city of Stockton could proceed in the process of Chapter 9 bankruptcy. Stockton is a city of almost 300,000 located about 90 minutes east of SanFrancisco Stockton was hard hit by the housing bubble and saw a 16% decline (page 345 of the PDF) in general fund revenue from FY 2008-2009 to FY 2009-2010.
After facing "an immediate and severe fiscal crisis" in early 2012, Stockton became...
