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Sunday was the fifth Anniversary of the demise of Lehman Brothers. Here we are, five years after the onset of the financial crisis, caused in large part by reckless lending and risk-taking in major financial institutions. And still, not one executive has been charged or imprisoned! This stands in stark contrast to the savings and loan debacle in the 1980’s, where prosecutors sent more than 800 bank officials to jail. In the wake of such fraud and corruption, how is it possible there are still no criminal indictments? Punishment is not the only way to modify behavior, but it works. Instead, executives now realize that they face virtually no consequences for reckless lending, exotic investments and fraud. Thus, these actions continue. For five years, we have heard about a grand, covert, financial scam that collapsed America’s entire economy, starting with the housing industry. And for just as long, we wait for one of the fraudsters to go to jail. While we wait, the architects of America’s economic collapse are still sitting comfortably in their penthouses and mansions, planning their next moves. More in the Huffington Post [...]
After a wait of almost 18 months, the acronym-friendly Jump-start Our Business Start-ups Act (or JOBS Act for short) will go into effect on Monday, September 23. When President Barack Obama originally signed the law in April 2012, most observers took the new law at face value. Supporters insisted that it would undo many of the impediments to initial public offerings (IPOs) that were the direct consequences of the Sarbanes-Oxley Act, originally passed in 2002, and would significantly revamp the way in which private capital is raised in the United States, thereby creating jobs and fostering growth. After much delay and procrastination, the Securities and Exchange Commission (SEC) finally adopted rules in July to implement these changes, months after the Congressional-imposed deadline had past. Experts, however, began feverishly focusing on another group of beneficiaries to the JOBS Act liberalizations – namely, alternative investment vehicles, such as hedge funds and private equity funds. More in Forbes [...]
Startup companies that celebrated the passage of a U.S. law allowing them to solicit investors more openly say regulators may undercut that move by requiring detailed disclosures of their fundraising. An 80-year-old ban on advertising private investments ends today, allowing businesses to make public pitches to certain investors. At the same time, the Securities and Exchange Commission is weighing whether to require companies to file advance disclosures of those efforts. Failing to file could trigger a one-year disqualification from selling shares. More on Bloomberg [...]
The Financial Industry Regulatory Authority, the self-funded securities industry watchdog, on Thursday issued a framework to aid its staff in analyzing the costs and benefits of its rules and provide a public a roadmap of its process. FINRA’s framework is part of a “broader objective” to ensure that its rules “continue to be relevant and appropriately designed,” according to a statement on its website. The framework is the most recent development following a push by the U.S. Securities and Exchange Commission to provide more details about the economic aspects of rule proposals FINRA submits to the agency for approval. The SEC supervises FINRA and must review and approve all of its rule changes. More on Reuters [...]
When JPMorgan Chase agreed to pay $920 million in fines Thursday, the financial goliath also handed federal regulators a significant symbolic victory by admitting that its handling of the disastrous “London Whale” trading losses violated securities law. The admission came as part of the bank’s settlement with the Securities and Exchange Commission, which recently vowed to break from its routine practice of allowing defendants to pay fines without acknowledging liability. In the past few months, the agency has wrung admissions from a hedge-fund billionaire and now JPMorgan. More in the Washington Post [...]
Securities regulators proposed requiring that companies disclose the pay gap between chief executives and their employees, a move that is breathing new life into the executive-compensation debate and could give activist investors more ammunition to curb pay. On Wednesday, a divided Securities and Exchange Commission voted 3-2 to float a controversial rule that union pension funds and other supporters say they will seize on to slow pay increases at firms where they consider CEO compensation to be excessive. The SEC’s plan, a requirement of the 2010 Dodd-Frank law, would give investors more information about pay disparities. It would require firms to disclose median worker pay and compare it with CEO compensation. The SEC said it is acting because Congress told it to, adding “the objectives or intended benefits” of the rule aren’t clear. More in the Wall Street Journal [...]
As the U.S. government remains under pressure to hold individuals accountable for the financial crisis, a federal commission is launching a review that could actually reduce sentences for white-collar criminals. Those pushing for lighter sentences for white-collar offenses such as securities, healthcare and mortgage fraud include not only the American Bar Association, the nation’s largest trade group for lawyers, but also a growing number of federal judges. The judges’ position could have particular weight, since they are the ones who turn to the advisory guidelines in imposing sentences. More on Reuters [...]
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The Securities and Exchange Commission, which has actively pursued actions by American banks and other financial institutions overseas, is broadening its reach by asserting its purview to foreign hedge fund managers. Agency employees are set to fan out across upscale Mayfair, home to some of London’s biggest hedge funds, this week, paying visits to more than a dozen hedge fund managers registered with the S.E.C. to determine whether they are in compliance with American regulations. More in the New York Times [...]
JPMorgan Chase has agreed to pay about $800 million to a host of government agencies in Washington and London — and make a groundbreaking admission of wrongdoing — to settle allegations stemming from a multibillion-dollar trading loss, people briefed on the matter said. The settlements, expected this week, will help the nation’s biggest bank move beyond last year’s $6 billion blunder and mend frayed relationships with regulators. Senior JPMorgan executives also avoided charges in the case, another victory for the bank, despite initial questions about whether they misled investors about the risk of the trades. Even so, it seems unlikely that the bank will be able to close the chapter on the case known as the London Whale just yet. More in the New York Times [...]
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