After Inspecting Private Equity Funds, S.E.C. Examiners to Broaden Focus

Officials at the Securities and Exchange Commission have said they discovered numerous problems when examining private equity firms during a two-year review that ended recently. Now, a specialized group of examiners is set to train its focus on hedge funds and other funds that invest in illiquid products like real estate, timber and energy assets, an S.E.C. official said on Thursday. These new examinations will be more limited in scope than the examinations of private equity firms, taking a “thematic and systematic” approach, said the official, Igor Rozenblit, who leads the agency’s private funds unit. That unit, part of the agency’s office of compliance inspections and examinations, will conduct the new exams. More in the New York Times [...]

New Coalition Pushes For DOL Fiduciary Rule

The Consumer Federation of America and Americans for Financial Reform have joined together with the nation’s largest employment unions and the AARP to mount a public campaign supporting of the Department of Labor’s proposed fiduciary rule for advisors overseeing retirement plans. The rule would require advisors to act under a fiduciary standard, putting client interests ahead of all other considerations when making investment recommendations on accounts covered under the Employee Retierment Income Security Act. The group launched a website,, Thursday to educate investors on the issue and “mobilize” public support. More on [...]

SEC Moves Closer on Swap Rules

WASHINGTON—U.S. securities regulators are inching closer to completing postcrisis rules designed to bring more sunlight to the multitrillion-dollar swaps market. The Securities and Exchange Commission voted 3-2 Wednesday to complete a package of rules establishing data hubs to collect and store information on swaps trades for the portion of the market overseen by the agency. The data hubs are seen as crucial for monitoring potential risks in the swaps market. The agency also voted 3-2 to approve a framework of standards for the public reporting of the swaps transactions. More in the Wall Street Journal [...]

After 15 convictions, Madoff prosecutions appear to be over

Jan 14 (Reuters) – After more than five years and 15 convictions, the U.S. government’s criminal investigation of Bernard Madoff’s colossal Ponzi scheme may finally be coming to an end. In court filings on Tuesday and Wednesday, prosecutors in New York asked judges to schedule sentencing dates for key witnesses who pleaded guilty and agreed to help investigators, including Madoff’s right-hand man, Frank DiPascali. More on Reuters [...]

SEC Approves Rules Requiring Public Reporting of Swap Trades

U.S. regulators are poised to approve rules today that will require most swaps trades to be reported to the public, a response to lax derivatives oversight in the run-up to the financial crisis. The rules up for a vote at the Securities and Exchange Commission will specify what information has to be reported publicly as well as data intended for regulators who surveil the market. The regulations are the latest step in efforts by the SEC and Commodity Futures Trading Commission to increase transparency in the $691 trillion swaps market. The SEC’s rules come more than six years after the collapse of Lehman Brothers Holdings Inc. and government rescue of American International Group Inc. (AIG) that was rooted in part in unregulated swaps. By creating a record of swaps trades, regulators aim to monitor for systemic risk while giving investors a better idea of fair prices. More on Bloomberg [...]

Prosecutors challenge leniency for Madoff staffers

NEW YORK – Federal prosecutors are challenging the unexpectedly light prison terms for five former Bernard Madoff employees who were found guilty of aiding the Ponzi scheme mastermind’s massive fraud. The challenge, docketed by a federal appeals court Monday, ups the legal ante following an unusually pointed courtroom exchange between a prosecutor and the sentencing judge as the penalties were imposed during hearings in December. The notices of appeal filed by prosecutors confirm the government will challenge sentences that ranged from 2 1/2 years to 10 years for the five former co-workers. They were convicted last March for participating in and profiting from the plot that stole as much as $20 billion from thousands of average investors, charities, celebrities and financial funds. More on USA Today [...]

THE MADOFF FIVE: History’s Greatest Fraud Yields One Of The Greatest Legal Slugfests Of Our Time

When the first prison sentence was announced on December 8th, FBI agent Paul Takla spat out a breath of air in disgust. My eyes did a split-strike conversion, a Madoff trading method that the feds called a now-you-see-it-now-you-don’t fiction. Prosecutors sat stunned. So did defense lawyers, including a no-longer-frowning Larry Krantz, who rejoiced to a colleague: “This judge knows justice.” And by the time it was over, with the fifth and final defendant sentenced on the 15th, a New York federal judge named Laura Taylor Swain had upended her reputation as a harsh bequeather of punishments. The clock is ticking for the Madoff Five. In just a few minutes, it will be 2015—the year that the only employees of Bernard L. Madoff who have been convicted of crimes at trial will begin serving out their prison terms. These defendants weren’t ‘masters of the universe’ who could bring a nation’s currency down with the wave of their hands; they weren’t hedge fund managers straight out of Yale or derivatives managers with multiple degrees from MIT. They were the unseen trolls of Wall Street, the workers in the underworld that is the Metropolis of finance. They are the ones who make the Street work. These five, very much that world in microcosm, were on trial for making the Madoff Ponzi scheme work. More on Forbes [...]

U.S. prosecutors seek longer sentences for Madoff aides

NEW YORK (Reuters) – U.S. prosecutors plan to ask an appeals court to review the prison sentences given to five former employees of Bernard Madoff, after earlier questioning whether the sentences were too short, according to court filings. In filings late on Friday in U.S. District Court in Manhattan, prosecutors gave notice that they would be appealing the sentences to the 2nd U.S. Circuit Court of Appeals in New York but did not elaborate further. One of the five former employees, former portfolio manager JoAnn Crupi, filed a separate notice that she planned to appeal her conviction and her sentence. Read Reuters report [...]

FINRA’s holiday ‘CARDS’

Few Americans have even heard of the Financial Industry Regulatory Authority (FINRA), but the securities regulator is about to become intimately familiar with all Americans’ investment portfolios. FINRA recently proposed the Comprehensive Automated Risk Data System, known by the less scary-sounding shorthand “CARDS.” In the name of investor protection and investor confidence, FINRA plans to monitor all securities accounts and transactions. Investors should run from this kind of protection. FINRA is a quasi-governmental organization that oversees the brokerage industry. It derives its exclusive powers from, and is in limited measure accountable to, the Securities and Exchange Commission. FINRA sets its own agenda, salaries and budget and is governed by a board of directors, some of whom represent industry and the majority of whom purportedly represent the public. As a new working paper released by the Mercatus Center at George Mason University discusses, FINRA is not truly accountable to the public, the industry or government. This lack of accountability matters because FINRA’s influence and power are growing. FINRA has grand plans for CARDS. Brokerage firms will be required to transmit monthly to FINRA information about customer profiles, account transactions and holdings. FINRA will use these data to assess how well brokers are serving their customers and to watch for unusual customer behavior. More on The Hill [...]

SEC panel on high-frequency trading won’t include Stiglitz: report

WASHINGTON (MarketWatch) — The Securities and Exchange Commission is blocking Nobel Prize-winning economist Joseph Stiglitz from joining a panel advising regulators on high-frequency trading and dark pools, Bloomberg reported on Monday. Stiglitz is a high-profile critic of high-frequency trading (HFT), and his supporters are concerned the SEC panel won’t have enough critical voices. On the other hand, IEX Corp. Chief Executive Officer Brad Katsuyama, one of the most prominent opponents of HFT, is expected to be named to the group, Bloomberg said, citing unnamed sources familiar with the matter. More on MarketWatch [...]