Tag Archives: Regulation

JPMorgan’s Teflon CEO Glides Past Reputation Hits

What does it take for investors and other supporters of a popular public company to finally decide the firm has gone too far in breaking the rules?

If you’re JPMorgan Chase & Co., it apparently takes more than a $6.2 billion trading blunder, a really embarrassing hearing before a Senate investigations committee, and a report that 8 federal agencies are circling you with probes.

In my column today for Bloomberg View, I write about the stunning ability of “The World’s Most-Admired Bank” to wallow in credit for all its good news, but slip by when the bad stuff happens.

“Steel City Re, a Pittsburgh-based firm that measures corporate reputations, ranks the bank in the 90th percentile among 50 financial conglomerates…Little wonder, I suppose, that earlier this year, JPMorgan topped the Fortune magazine list of most-admired banks in the world for the second year in a row. Are the bank’s admirers living in some parallel universe where black marks just don’t register?”

 

How does JPMorgan do it? You can read my column here.

Are you a lowly Main Street investor? Well, nobody cares what you think about financial reform

It’s never a great time to be a lowly member of the investing public looking for protection from the sharks of finance. But today? Well, try to lower your expectations a tad more.

Deep-pocketed banks are dominating the process of writing the new financial rules mandated by the Dodd-Frank Act. It isn’t that there’s nobody advocating for small investors. It’s just that the few organizations that make a case for the public are outgunned by the well-funded financial industry.

“Despite a significant expansion in the number of foot soldiers out there working in the public interest on these financial issues, we are still completely overwhelmed by the industry lobbyists,” Dennis Kelleher, chief executive officer of Better Markets, told me.

I wrote about the lopsided battle to influence the new financial rules in my Bloomberg View column tonight. You can read it here.

 

 

Getting a little vertigo from the regulatory revolving door?

There’s been a lot of attention to the government-to-private practice “revolving door” since President Barack Obama nominated white-collar defense lawyer Mary Jo White to be chairman of the Securities and Exchange Commission.

Investor advocates say we should be worried when lawyers shuffle back and forth between jobs as regulators and lucrative spots defending banks and brokerage firms. But the lawyers who move in and out of government jobs say they can handle the conflicts just fine.

The New York City Bar Association had a panel to discuss “The Financial Crisis and the Regulatory Revolving Door” on Feb. 12 and moderator Scott Cohn of CNBC posed the question “Which is it?” Is it spinning out of control or is it non-existent?”

I was one of the six panelists, and cited a few gems from a just-released report by The Project on Government Oversight (POGO) that illustrated the close connection between the SEC and its alumni who’d moved on to represent the institutions the SEC regulates.

In an item about the panel on Feb. 19, POGO said “White’s nomination highlights the challenge that the SEC and many agencies face when senior officials have tangled ties to the industry they’re supposed to be regulating.” You can read the POGO post here.

I wrote about Mary Jo White’s conflicts in a recent column for Bloomberg View.

Your thoughts on the debate? Let me know at @antillaview or susan.antilla15@gmail.com.

 

 

 

Mary Jo White’s Past and the Future of the SEC

Have you been buying into the sales pitch for President Obama’s nominee for chair of the Securities and Exchange Commission?

Mary Jo White’s supporters say she was tough as U.S. attorney for the Southern District of New York, where she prosecuted mobsters and terrorists. From my column for Bloomberg View today:

She spent the past 10 years representing Wall Street, so she knows something about the legerdemain of banksters. And — insert violin solo here — she is a patriot, willing to give up millions of dollars in income as chairman of the litigation department at Debevoise & Plimpton LLP for a lousy government salary.”

Of course, the addition of “former SEC chairman” can only enhance her resume if and when she decides to go back to private practice. As for the idea that she might somehow be able to use her experience working for Wall Street to help crack cases as a regulator, I’m not buying it.

The SEC and Justice Department have had former defense lawyers checking in and out of top spots for years, and it hasn’t led to any big-bank carnage among the people who orchestrated flakey derivatives, self-destructing collateralized-debt obligations or other outrages. When was the last time you saw anyone from a well-known bank doing a perp walk for his role in the financial crisis?

You can read the full column here.

As always, I’m happy to hear from readers via Twitter or at susan.antilla15@gmail.com.

 

Best investment advice: Vet brokers yourself, because regulators aren’t doing it for you

Just because a stock broker has a license to do business doesn’t mean they’ve received a meaningful stamp of approval from regulators. Next time some financial person is pitching you for business, go back and read the stunning coverage of Mark C. Hotton, a guy who allegedly was fleecing investors for years as regulators sat back and ignored a stream of red flags.

Hotton is the fellow who fooled the Broadway producers of “Rebecca: The Musical” into thinking he’d raised millions of dollars in financing for them. The producers of Rebecca only lost $60,000 doing business with Hotton. Others haven’t been so lucky.

Hotton is in jail today, and it’s a joke when you consider that, after years of alleged stealing of millions from investors, he finally got caught because he fleeced a few big-shots from show-biz. It’s even more of a joke that U.S. prosecutors took a deep bow for their “lightning speed” sleuthing after catching Hotton 22 years after his first crime — which should have been a reason to keep him out of the brokerage business altogether.

I wrote about Hotton’s capers in a recent Bloomberg column. A week after that story, I wrote a second one, this time for TheStreet.com, about a fresh complaint against (the now-incarcerated) Hotton filed by Finra, which is the Wall-Street-funded regulator that is overseen by the Securities and Exchange Commission. There really ought to be a special judicial forum where the public can bring complaints against regulators who are utterly clueless.

‘Dumb Money’ Is Staring Most of Us in the Face

Americans are pretty much illiterate when it comes to finance. They don’t know how to read a stock trade confirmation and have problems figuring out how much commission they’re paying their brokers on a mutual fund sale.

For years, professionals on Wall Street have sneered at the public as “the dumb money.” Well, they may not be geniuses on Wall Street, either. But they’re right that retail investors could use some serious coaching.

A recent report by the Securities and Exchange Commission mapped out in 182 painful pages how little the public understands about finance (which suits some people on Wall Street just fine, by the way). I talk about the grim details in my latest Bloomberg View column:

 “Consider the profile of the 4,800 investors surveyed for the report, which concluded that they “lack basic financial literacy.” More than half had full-time jobs, 11 percent had part-time jobs, 70 percent had at least a two-year college degree and 63 percent had annual income of more than $50,000. We’re not talking about Mitt Romney’s indolent moochers here. The dumb money could be your neighbor. Or you.”

The results have inspired calls for financial literacy programs starting even in elementary school, but let’s get real. From the looks of things, school administrators don’t even have the resources for plain-vanilla literacy programs, let alone special classes in personal investing.

An alternative to new programs: At least get the public smarter about avoiding fraud. I have some ideas about that that you can read here.

Vetting a Stock Broker? Pay Attention to Who’s Supplying the Records

Investors are spending more time checking on the backgrounds of the financial types who pitch for their business, and that — mostly — is a good thing.

The public used a regulatory database to check the records of 14.2 million stockbrokers and advisers last year, according to the Financial Industry Regulatory Authority, known as Finra, a self-regulatory group that’s financed by Wall Street. That’s more than double the 6.7 million searches in 2007, the year before the financial crisis began.

Nothing wrong with investors getting more vigilant, of course. But there are some important caveats about what investors get when they check in with a broker-vetting site.

Finra’s records don’t include lawsuits against brokers that aren’t considered “investment-related.” That means that a lot of brokers who are exposed to the possibility of big judgments have official records that say nothing about that exposure.

And then there’s the issue of the freebie websites popping up to help investors vet brokers. Check the fine print, and you learn that some of those sites get their revenues from advisors who pay to be featured. If you get it for free, and the broker pays to get his or her name in front of you on the site, can it really be investor-friendly?

I took a look at the broker background-checking business in my latest column for Bloomberg View. Read article.

And Another Word on Justice and Goldman Sachs

Over at wallstreetonparade.com, editor Pamela Martens has more to say about the lopsided priorities of prosecutors who won’t quit in pursuing Sergey Aleynikov, a small fish who has been arrested yet again on charges he stole data from Goldman Sachs. The most recent Aleynikov arraignment was on the same day that we learned that prosecutors will not be charging Goldman with any crimes related to a scathing government report on how the firm treated its customers in the period leading up to the financial crisis.

Aleynikov was tried and found guilty of stealing computer code from Goldman, but an appeals court reversed that on April 11, saying that prosecutors hadn’t properly applied corporate espionage laws. Martens writes:

“Then, on Thursday, August 9, 2012, the unthinkable happened.  Aleynikov was arrested and charged based on the same set of facts by Cyrus Vance of the Manhattan District Attorney’s office. Under the Fifth Amendment to the U.S. Constitution, an individual is not permitted to be tried twice for the same crime.  But when you take from Wall Street, all bets are off apparently.” Read article.