SEC

Sayeth SAC: Read more »

Poor guy:

The Securities and Exchange Commission overruled its own enforcement division’s decision to settle a civil case with the high-flying money manager Philip A. Falcone and his flagship hedge fund, a rare reversal that signals a broader crackdown by the agency. … While the deal also included at least a two-year ban from raising new capital, a potential death knell to a hedge fund manager, that punishment came with a number of caveats. And in a a moral victory for Mr. Falcone, the deal also omitted a common provision that prohibits defendants from committing future violations with fraudulent intent.

Apparently SEC Chairman Mary Jo White killed the deal:

White, a former Wall Street defense lawyer, and Democrats Luis A. Aguilar and Elisse B. Walter, in a 3-to-1 vote, were concerned that Falcone wasn’t barred from serving as officer or director of a public company, said the people, asking not to be named because the deliberations aren’t public. The SEC informed Falcone’s Harbinger Capital Partners LLC of the decision yesterday, according to a filing from Harbinger Group Inc.1

Man it’s hard to be the SEC. Presumably they employ a lot of people who do, like, actual work. Read more »

The decision to call former Goldman saleswoman Gail Kreitman out of order comes a day after a combative back and forth between the SEC and one of its top witnesses: Paolo Pellegrini, a former lieutenant to billionaire hedge-fund manager John Paulson. Her testimony is important because she may be the first witness to link Mr. Tourre to statements made to ACA Financial Guaranty Corp., which acted as the portfolio-selection agent on the transaction. The SEC has alleged that Mr. Tourre hid from ACA that Mr. Paulson’s hedge fund, Paulson & Co., planned to bet against the deal. As part of her testimony, the SEC is expected to play a tape recorded by ACA’s phone system in which Ms. Kreitman reportedly says that Paulson was taking a “hundred percent of the equity” in the deal, implying it was betting the instrument’s value would rise, not fall…Matthew Martens, a SEC lawyer, said Thursday that the regulator decided to change the order of its witnesses in an effort to speed the presentation of its case. The SEC is considering limiting the testimony of or not calling at all David Gerst, one of Mr. Tourre’s closest colleagues at Goldman, Mr. Martens said. Mr. Gerst had been expected to testify as early as Thursday. The late notice didn’t make the defense happy: they said the parties had reached a handshake agreement to give the other side 48 hours notice before a witness was called. [WSJ]

Labaton Sucharow is a law firm whose business consists of getting disgruntled financial industry employees to sue their employees for various bits of naughtiness, and taking a cut of whatever money those disgruntled employees can get from a lawsuit or settlement. One of their clever marketing techniques is to hire a survey firm to identify financial services employees willing to talk shit about their employers on the internet,1 because those employees are a promising source of money for Labaton Sucharow. In fact only about a quarter of those employees actually have anything negative to report, and presumably not all of that is lawsuit-worthy, but marketing is hard and you shouldn’t expect a particularly high hit rate. The trick is to just get a lot of at-bats and something will eventually pan out.

Also the PR is amazing? Here is an Andrew Ross Sorkin column titled “On Wall St., a Culture of Greed Won’t Let Go” that sort of takes this survey as a fact about the world rather than a marketing document, so is all like “oh you and your greed, Wall Street!” Read more »

“The U.S. Securities and Exchange Commission did not properly vet as many as 70 contractors with possible criminal records, including one man who later assaulted his girlfriend in a lobby at SEC headquarters, the agency’s internal watchdog has found…SEC spokesman John Nester said the agency has implemented numerous changes since the report was completed, from installing additional physical security barriers to putting the SEC’s security staff in charge of criminal background checks instead of human resources.” [Reuters]

We don’t make the law, folks, we just help you follow it. Comply with your regulatory requirements right here.

Or I guess you could read Dan Primack’s summary of the SEC’s vote to allow general solicitations for private placements, but don’t take him too seriously when he says “Issuers do not need to generally solicit. They may continue to do business the old way, which many of the top-performing fund managers are likely to do.” You may not be absolutely required to advertise on Dealbreaker, technically speaking, but sources at the SEC assure me that it’s sort of an informal best-practices requirement. Certainly the safer course is to buy a banner ad today.

One thing about the new rules is that they’re not really rules about hedge funds. At their core, they let people with cockamamie money-making schemes publicly advertise to raise money from “accredited investors” – rich people – without going through the bother of SEC registration and being a public company. One particular category of cockamamie money-making scheme is running an investment fund exempt from the requirements of the Investment Company Act of 1940, but there’s an infinity of other schemes. The SEC’s vote comes too late for Great Idea Corp., which has already filed to go public, but presumably the next entrepreneur with a Great Idea and a burning desire not to tell his investors what it is will avail himself of the new general solicitation rules.

Also though: people with legitimate businesses? Read more »

Fabulous Fab Tourre is on his way to trial in the SEC’s securities-fraud lawsuit over the Abacus synthetic CDO he built at Goldman Sachs for John Paulson, and Andrew Ross Sorkin has a column today about all the things that the SEC doesn’t want him to be allowed to say to the jury. You should read it, it’s enraging, though who you get enraged at is entirely up to you.1 But I’ll give you a quick and tendentious summary, which is:

  • The SEC’s main argument is that Fab deceived ACA, the “portfolio selection agent” on the Abacus deal, and
  • ACA were sort of stupid scumbags, and
  • the SEC understandably doesn’t want the jury to find that out.

Right? The SEC’s suit accuses Tourre of two things: Read more »