The MSRB Re-Writes History
(Mar 2014)
Kyle Glazier and Lynn Hume's story in the Bond Buyer last week, "Brokers Violate Puerto Rico OS, MSRB Rules with Retail Trades", about small denomination trades in the recent Puerto Rico bond offering in contravention of the offering document set off a firestorm. The Wall Street Journal's "Finra Examining Trading in Puerto Rico Bonds" and Bloomberg's "Finra Says It's Examining Trading in New Puerto Rico Bonds" both reported on Friday that FINRA was looking into the suspect trades.
What did...
Regulators Impose Record Fine for Brokerage Firm's Supervisory Failures
(Jul 2013)
Yesterday evening, the Wall Street Journal reported that FINRA and several US exchanges fined the brokerage firm Newedge USA, LLC $9.5 million over alleged failures to adequately restrict automated client trading activity that "sought to manipulate U.S. markets for nearly four years." The trading activity took place on several exchanges including NYSE Euronext, NASDAQ OMX, and BATS Global Markets according to the WSJ article. FINRA's press release can be found on the FINRA website.
Newedge...
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...
Barclays' Structured Product Linked to a Basket of ETFs and Indexes
(Mar 2013)
RISK.net recently posted an article entitled "IWM urges investors to think about risk-adjusted returns" in the structured products portion of their website. The article describes in detail a Barclays product for which Institute for WealthManagement, LLC (IWM) served as the basket selection agent. Interestingly, the basket is composed mostly of ETFs, which have been appearing in structured products more frequently as the ETF industry itself has become more mature. IWM's Matt Medeiros talked...
Back to the Future: Stock Prices Quoted with Fractions
(Nov 2012)
The Wall Street Journal recently reported that the SEC is considering reverting back to an old system in which stock prices were quoted using fractions. Using fractions for stock prices in the US has its roots in a Spanish colonial currency whose smallest denomination was 1/8 of a doubloon, hence prices were quoted in eights. The NYSE, founded in 1792 within the Buttonwood agreement, modeled their listing system off the Spanish system.
The largest number used for the denominator in the...
The JOBS Act and Private Placements [UPDATE]
(Aug 2012)
Both the New York Times and the Wall Street Journal are reporting that the SEC has proposed removing the restriction on general solicitation of hedge funds and other private placement investments as required by the JOBS Act of 2012. Last week we blogged about the implications of this action, and at that time there was concern that the SEC would impose further restrictions that would dampen the effects of the law. It now appears that the SEC will not impose any additional regulations.
The...
Buffered and Capped Closed-End Funds
(Jul 2012)
Last Friday the Wall Street Journal reported on a new product which combines features of both structured notes and closed-end funds. The eUnit 2 Year US Market Participation Trust IIwas first issued by Boston-based investment company Eaton Vance on May 30. This was the second offering by Eaton Vance of such a product: the first trust with identical name debuted on Jan 26.
Inessence, the eUnit Trust is like a structured note with capped upside potential and buffered downside loss. At the end...
Dealbreaker on the Hayes award and LCM VII CLO
(Feb 2012)
Matt Levine at Dealbreaker posted last night on our work regarding the Hayes award and the LCM VII CLO. He interpreted some of the facts of the case differently, but we think he did touch upon the key issue: the proper disclosure of the decline in the market price of collateral on the closing date. We wanted to directly address a couple points he raised.
To be clear, at least by the closing date the CLO did track the daily mark-to-market value of the loans in the LCM VII portfolio using...
In the News: Structured Notes
(Oct 2010)
Bloomberg issued a news release today reporting that the amount of sales and issuances of structured products had reached a record in 2010. The demand for higher yields and caution in investing in stock were factors which contributed to the growth in structured products. According to Bloomberg, a popular structured product was the step-up callable note, which is a callable note that increases ('steps up') its fixed rate over time.
This calls for active analysis of the merits of...
