Regulators

Regulatory Merger

By

Try to check you instincts to laugh aloud when you read this explanation for why having fewer regulators governed by a centralized authority will mean, somehow, better regulatory scutiny.

“When the new organization is in place and fully integrated, there will be one set of rules, one set of examiners and one enforcement staff,” Schapiro, who would head the combined organization under the proposed merger, said in a statement: “Duplicative and inconsistent regulation and overlapping jurisdiction will become a thing of the past.”

NASD, NYSE Say They Will Merge Their Regulatory Bodies [Washington Post]

    SEC Enforcer Promises More Protection For Millionaires

    By

    LindaThomsen2.jpgHere’s a good question: why should taxpayers be subsidizing the supervision of investment vehicles for the wealthy?
    The New York Post’s Roddy Boyd writes:

    The SEC’s Linda Thomsen, in a speech at a Securities Industry Association confab in Midtown, told attendees she expects the SEC will be filing an increasing number of claims against hedge funds for illegal trading and violating client trust. The SEC is “following the money,” she said.
    “These days, the money is in hedge funds, so the potential for abuse, the potential for securities law violations is there because there is so much money there,” Thomsen said

    .

    We Will Follow The Money     [New York Post]

      Feeling the Squeeze: SEC To Propose Tighter Asset Requirements, Funding For Fraud Investigations

      By

      Call it the Millionaire Protection Rule. The SEC will reportedly propose a higher bar for hedge fund investors when its commissioners meet in December. Current rules require “accredited investors” in hedge funds have at least $1 million in assets or have reported income above $200,000 for the past two years. Recently some lawmakers have said that increases in housing prices have upped the value of assets of many otherwise not-so rich Americans, making them eligible to invest—and possibly lose their savings—in hedge funds.
      Is this really a problem? We haven’t seen any statistics on how many of these millionaires-in-housing only are putting their life-savings into hedge funds, much less losing their life savings in recently collapsed hedge funds. Without evidence to the contrary, it’s hard not to suspect that this is a manufactured “crisis” cooked up by regulators and lawmakers.
      On a positive note, SEC commissioner Chris Cox’s proposal to up funding for investigating hedge fund fraud is probably a good idea. The secrecy of many hedge funds creates opportunities for fraud, and just the knowledge that the SEC is taking this seriously should provide some disincentives for would-be wrong-doers.
      SEC wants bigger bankrolls for hedge fund investors [Bloomberg in the Chicago Tribune]

        Bureaucrats Don’t Hate Hedge Funds, They Just Want Some Of That Money

        By

        That’s the gist of today’s Wall Street Journal editorial discussing the pressure coming for tighter regulations on hedge funds from, well, just about anywhere you look. There’s Senator Charles Grassley’s letter to regulators looking for suggestions on how to regulate hedge funds. (Our bet is that they’ll somehow come up with a couple!) And Connecticut’s Attorney General Richard Blumenthal’s mini-Spitzerism. And the noise from Germany about putting global regulations in place. (Look for more of this if Barney Frank gets control of the House Finance Committee.)
        You see, a regulated industry is an industry whose players need to make campaign donations in order to influence lawmakers. It’s a pretty simple formula: regulate an industry and you instantly politicize it. Which is another way of saying that you monetize the industry for politicians.
        But it’s not all about wringing donations from hedge fund managers. There’s also corporate managers who are tired of getting those pesky shareholder letters from hedge fund types, and worried they could lose their jobs as hedge funds buy up their shares. And those folks have lots of money to spend on campaign donations, as well. It’s a win-win if you’re a politician.
        All the other talk—about “systemic risk” or pension funds or low-liquidity real estate millionaires—is just the sound of a policy in search of a rationale. And that policy, of course, is the enrichment of politicians. That’s always the policy.
        Targeting Hedge Funds [Wall Street Journal]

          The Aguirre-Mack-Samberg-Pequot-Heller-Credit Suisse-Morgan Stanley-SEC-GAO-Grassley Scandal Goes Meta And Picks Up Two New Players

          By

          The New York Sun thinks that the allegations made against Pequot Capital and Morgan Stanley chief John Mack have been getting a little too much ink from the New York Times. And they think they know why.

          Mystified New Yorkers were left wondering what could possibly explain the Times’s fascination with this story. Some might say it’s Mr. Mack’s connection to Mr. Bush, but it could just as easily be Mr. Mack’s connection to Morgan Stanley. That is the bank that, earlier this year, withheld its proxy votes for members of the board of the New York Times Co. to protest the Sulzberger family’s preferential voting status. A Morgan Stanley analyst complained at the time that the Times was underperforming as a business in large part because of the ossified management perpetuated by the ruling family’s use of super-voting shares to control the Times despite a relatively puny stake in the Times company.

          It’s a scandal about the scandal! And just insanely paranoid enough to possibly be true!
          ‘A Full Airing’ [New York Sun]
          [Disclaimer: John Carney has written for the New York Sun and the Times, and he's friendly with a couple of the girls at both papers. Morgan Stanley was a client on several deals he worked on. He's never met John Mack or anyone named Sulzberger. George Bush won't return his phone calls.]

            Spitzer vs. Grasso: It Is So Effin On!

            By

            Muhammad-Ali-vs-Forema.jpgBoth Eliot Spitzer and Dick Grasso are saying they won’t settle the case after yesterdays summary judgment opinion came down from State Supreme Court judge Charles Ramos. Charlie Gasparino reported this morning on CNBC that he’d spoken with Grasso, who told him that this was looking like a heavyweight title fight—a champion will be declared. We prefer the Terrordome analogy: two men enter, one man leaves. Meanwhile, Jim Cramer told CNBC that Spitzer has also ruled out a settlement. This thing isn’t going away, and its only going to get messier from here. We can’t wait.

              Hedge Funds, Private Equity Under International Pressure

              By

              globe1.jpgIt’s no secret that political pressure to regulate some of our more high-flying financiers has been mounting recently. From recent Senate hearings on hedge funds, a Justice Department investigation into private equity club deals, the Connecticut Attorney General’s hedge fund task force, the Connecticut banking regulators new hedge fund unit to legislation recently passed ordering a study into new federal hedge fund regulation, the writing has been on the wall. And hedge funds and private equity shops are starting to respond by forming their own advocacy groups to lobby regulators and lawmakers and launching law suits in US courts.
              That’s all well and good. It’s the normal process of American politics. Politicians, regulators and lobbyists were bound to respond to the opportunities presented by events like the Amaranth collapse to enhance their power and prestige. Public ignorance of financial markets and government operations would allow the fear-mongering exploitation by political jobbers. Some of the larger and wealthier financiers would sense an opportunity to burden smaller competition with ungainly regulatory costs. And, of course, enough money is being made in New York and Connecticut that eventually some of it is going to have to get siphoned off to campaign funds and lobbying groups. This is, after all, still a democracy.
              But what is the financial community going to do about the new pressure for regulation starting to emerge from international bodies? In the last two-days we’ve heard concerned noises about hedge funds and private equity from both the future head of the G8 economic group—Germany—and the United Nations. As it turns out, in many parts of the world the increase in foreign investment and cross-border deals isn’t seen as universally enhancing efficiency and spreading wealth. In Germany, for instance, private equity shops are affectionately known as “locusts.”
              So how do you lobby the G8 or the UN? Where do you go to court to get international regulations overturned on constitutional grounds? Who do you pay off to keep these political jobbers out of your coffers? Does the rise of global finance require the rise of some sort of global governance? There are (or will be) answer to these questions. Answers we all may be discovering soon enough.
              Private Equity Has Few Friends Abroad, Report Finds [DealBook]

              Germany Wants G8 Summit to Consider Hedge Funds               [DealBook]