As Fortune CEOs Take Unequivocable Stand -This BD Bids On

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August 15 2017-A Special Editorial from BrokerDealer.com: Most Fortune CEOs, as well as leaders of Investment Banks and Broker-Dealers (aka BD) are typically loathe to take a political stand. For the former, making pronouncements that will raise the ire of the current president are likely to be met by “injury by twitter,” or worse still, federal agency scrutiny of the company, which could prove devastating for public company shareholders. For the universe of corporate leaders with a conscience and also recognized thought-leaders, only a few have yet to prove unequivocal when reacting to the equivocal comment made by President Trump when framing his first view of what US Attorney General Sessions labeled as a”domestic terror event.” We’re referring to the white supremacist rally that led to 3 deaths and multiple injuries in Charlottesville, VA this past weekend.

For investment banks and broker-dealers, let’s face it-politics and business mix best with each other when done over cocktails or discrete ‘off-site’ meetings to discuss new capital market initiatives, deal issuance and/or asset management mandates. After all, most traditional broker-dealers eschew taking a political stand that opposes the federal government administration, simply out of fear that the long lips of the current WH CEO will whisper to administration-appointed SEC bureaucrats with a message akin to ‘the right industry regulator might want to make this [firm] go away..” Most, but not all is the catchphrase that compels a re-distribution of a capital markets desk commentary that focuses on fixed income markets and along with a smidgen of geopolitical observations and delivered to a captive group of leading Fortune 500 corporate treasurers, as well as a select group of sell-side syndicate desk ‘book-runners’.  Here’s the extract of the day’s piece, titled Risk On, Risk Off, US-NOKO Tensions Subside; Ugly Heads of Racism Take Top Headline

Investment Grade Corporate Debt New Issue Re-Cap – A View About Charlottesville and the Aftermath

Risk was clearly back on in the financial markets today, as U.S./NOKO tensions fell to the wayside.  Unfortunately prejudice and racism reared their ugly heads in the Charlottesville, Virginia riot over the weekend.  On Monday, Fortune 500 thought leaders Ken Frazier, CEO of Merck & C0., Brian Krzanich, CEO of Intel, and Kevin Plank, CEO of Under Armour each took a stand by protesting the ‘equivocal’ comments made by President Trump in his first response to the domestic terrorism acts in Charlottesvile, which were advanced by self-proclaimed alt-right and white supremacist neo-Nazis.  Our firm  stands with every corporate executive who stays true to their own right-minded beliefs and their company’s dedication to doing right and doing good, many of whom also maintain proactive Diversity & Inclusion initiatives. For those corporate executives who spent all of their undergrad time in finance and accounting classes, and perhaps not as familiar with the history of the United States as they could be, racism and bigotry are diseases, and cancers that every generation of this country has been working to eradicate.

To the above point, one only need to re-read the Constitution and the Bill of Rights to appreciate that D&I is actually part of our country’s DNA. It is also part of the cultural foundation of many Fortune 500 corporations, including Intel, including Merck, including Under Armour and including many others! D&I means respect for and appreciation of differences in ethnicity, gender, age, national origin, disability, sexual orientation, education, and religion. But it’s more than this. We all bring with us diverse perspectives, work experiences, life styles and cultures and we presumably all share a disdain for anyone and any group that attempts to dismantle, disrupt and or destroy. Kudos to Mssrs. Frazier, Krzanich and Plank for putting themselves in harm’s way and risk of “injury by Twitter” for being true leaders and staying true to their convictions and their constituents. Kudos also to the many Fortune executives who have raised their own voices and to those who, like Jamie Dimon, have opted to protest by remaining that much more proactive in the WH-appointed roles in which they serve as volunteers.

Today’s VIX closed 3 bps tighter versus Friday’s close. Also a reminder that tomorrow is August 15th – “mid-August” – that’s when North Korea’s illustrious “bad boy” proclaimed that he’d have his master plan ready to bomb Guam developed by.  One week from today on Monday, August 21st begin joint U.S-South Korean military exercises referred to as Ulchi-Freedom Guardian. The exercise began in our Bicentennial year of 1976. North Korea has annually perceived the joint exercise as “preparation for war.” It is the world’s largest computerized command control implementation. Up to 80,000 American and South Korean troops have participated in this exercise in the recent past.  The game will go on for two weeks before concluding on Thursday August 31st.  Enjoy the show Mr. Jong-Un. You’ll have front row seats though I recommend binoculars. Here’s lookin’ at you kid!

If you ask me this is the perfect time for corporations to issue bonds. Not a bad thing will really happen, risk is back on and summer vacations are quickly approaching. My prediction – expect Amazon to the hit the tapes first thing tomorrow morning.  Free market enterprise at work. Ya gotta love it!

Today’s IG Corporate dollar DCM finished with 5 issuers that priced 7 tranches between them totaling $4.10b

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Private Placement Offering Memorandum Experts: Over-Subscribed!

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Private Placement Offerings Surge as Demand for Offering Memorandum Document Experts Follows Along

Whether due to improving economic conditions in the US as well as various other parts of the world, or due to technology advancements that serve as the catalyst to innovative products and services that solve legacy business challenges, the global private placement marketplace is surging. With this new era of entrepreneurship, the need for investor offering memorandum experts is likewise cascading. In Wall Street parlance, the demand for such experts is nearly “over-subscribed,” meaning the supply of capable professionals who specialize in preparing fully-compliant investor offering documents is being stretched thin. But, at least one firm within the professional services sector is addressing the investor documentation needs of forward-thinking business enterprises and they are situated neatly within the “curl of the wave”-all you need to find them is a search engine and the right key words/phrases.

Operating under the web banner OfferingMemorandum.com, the firm behind this portal is NY-based Broker Dealer LLC and with footprints in various cities across the global financial services ecosystem, they are leading the pack by making it simple and easy for broker-dealers*, captive business advisors and corporate lawyers for companies of any size and located in nearly every geographic location of the world to engage local securities law professionals and investor offering document experts who specialize in preparing preliminary offering memorandums, red herrings and final offering prospectus documents that conform to financial industry best practices and comply with local regulatory guidelines that govern investor solicitations. (*For various reasons, registered broker-dealers do not prepare the investor offering memorandum or an offering prospectus, and it is therefore incumbent on the Issuer to provide the investor offering documents.)

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Ryan Gorman, Prospectus.com

According to Ryan Gorman, a PR-IR-Corporate Communications expert who works with many startup companies, “While some capital markets  professionals will attribute the continued spike in private placement issuance to the ‘Trump Bump”,others will credit the evolution of the JOBS Act [the US legislation spearheaded by former President Obama intended to make the regulatory steps more simple for small companies in the US to raise capital], global macro gurus point to the rising economic tides in various regions of the globe. That said, nobody disputes the number of new companies and latter-stage funding initiatives for small, medium and large companies remains in an unobstructed uptrend.

Private Placement offerings are surging and direct IPOs are gathering steam. But, for those seeking to raise capital for a start-up or to fuel expansion for a fast-growing business, any entrepreneur worth his salt knows their first step is preparing a cogent business plan, then consolidating that blueprint into a short-form ‘pitch deck’ and once prospective investors have expressed interest in the investment opportunity, the enterprise seeking capital (aka “Issuer”) provides the investor with an offering memorandum or an offering prospectus. Simple as this process might sound, offering memorandum preparation is non-trivial and is typically performed by securities attorneys who specialize in investor offering documents. Also known as an “OM”, the offering memorandum is perhaps the most critical document, as it frames the terms and conditions of the investment, and when prepared within the context of best practices, the offering memorandum is the document that both Issuer and Investor can hang their hats on. Somewhere in the mix, the enterprise that seeks funding (also known as the Issuer) might engage a registered broker-dealer to serve as a placement-agent aka underwriter for the financing round, or the Issuer may already have identified investors and has determined there is no need to engage a broker-dealer

*Registered broker-dealers generally serve as a placement agent or underwriter for a capital raise, but typically defer to the Issuer to provide them with the investor offering documents, as such it is the obligation of the Issuer or their corporate counsel to create an offering memorandum or a prospectus. In most instances the Issuer will engage their law firm to prepare these documents, and increasingly, law firms that do not have a securities law practice will outsource or sub-contract to firms that dedicated to this type of work. As the number of private placement offerings and direct IPOs via Regulation A+ continues to grow, portals such as OfferingMemorandum.com and Prospectus.com provide a unique solution.

US SEC Brings in Top Gun Lawyer to Promote IPOs, Expand JOBS Act

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May 15–The US Securities & Exchange Commission (SEC), following policy goals advanced by the Trump administration, is sharpening its focus on encouraging private companies to go public via IPOs. Towards that effort, veteran Silicon Valley tech deal lawyer Bill Hinman, a former partner of Simpson Thacher & Bartlett who has guided the likes of among others, Apple Inc (NASDAQ:AAPL), Alphabet Inc. (NASDAQ: GOOGL) and Facebook Inc (NYSE:FB)  has been appointed Director of the SEC’s Corporation Finance division; the unit that oversees initial public offerings.  SEC Commissioner  Jay Clayton, who has called for scaling back requirements on listed firms and argued the government should make it “more attractive” to go public and according to Clayton, “Bill Hinman is the ideal man for the job.”

The top Corporation Finance Division post will be crucial because of the unit’s role in writing rules that govern public and private capital-raising.

In an interview, Mr. Hinman said “spurring more public offerings is a worthy goal of regulators, because investors benefit from the detailed public disclosures.” Hinman has also voiced his view towards further expanding the 2012 Jumpstart Our Business Startups Act. The law, also known as the JOBS Act, passed with bipartisan support and was hailed as the first sign that Washington understood how the internet could be used to help smaller companies raise money without turning to Wall Street.

“To the extent the SEC can make it more attractive and efficient to raise capital here, we are going to want to do that,” he said. “That is our primary focus and challenge going forward.”

Companies raised $2.1 trillion in private placements of stocks and bonds in 2014, compared with about $1.35 trillion for public sales of equity and debt, according to SEC figures. The decline in U.S. public listings has happened as fast-growing startups such as Uber Technologies Inc. and other “unicorns” have been able to get the cash they need from venture capitalists.

However much deal makers have lauded the SEC’s new-found resolve to promote public offerings, some market participants say they don’t see the problem that Mr. Clayton has said he wants to solve. “The real question is do small-growth companies have access to capital, and they do,” according to Robin Graham, managing director and head of technology, media and communications at Oppenheimer & Co. Inc. “It’s just in the private markets.”

According to Samuel Goldberg, a senior partner at Prospectus.com, a firm that specializes in business plan writing, feasibility studies and the preparation of investor offering documents and guiding private companies throughout the course of both private placements and public capital raising initiatives, “Public markets are ultimately the holy grail for start-up companies; easing the complexities of public listing can prove helpful for those who have private investors seeking exit strategies and enabling share Issuers to attract a new and much broader universe of investors.”

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MiFID II: Broker-Dealers Still Vexed re Unbundling Research

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As the Jan 2018 deadline for full implementation of MiFID II approaches, US broker-dealers and their EU counterparts remain vexed by looming regulations that seek to parse buy-side client payment for research content and commission payments tied to actual trade execution.  In an effort to distill the confusion, ESMA, the UK regulator has provided a recent update to the new regulatory scheme, including a highlight of topics such as how/where global macroeconomic research, FICC markets corporate access, RPA and CSA arrangements and the distinction between ‘free research’ and paid-for research.

Courtesy of insight from Rebecca Healey of Liquidnet, the equities trading platform that connects buyside and sell-side traders from across the globe, “the latest FCA summary, published on March 3, 2017, highlights just how far the UK regulator believes firms are falling short of expectations in unbundling research and execution services. The regulator’s opinion is that poor market practice remains commonplace despite rules that have been in place for more than a decade. In particular, firms are still failing to adequately assess and budget for substantive research that is of value to their end clients’ investments.” Ms. Healey’s coverage is excerpted below, with a link to her recent posting in Tabb Forum.

Corporate Access

ESMA is of the view that arranging a meeting itself is not providing material or services which “explicitly or implicitly recommend or suggest an investment strategy and provide a substantiated opinion as to the present or future value or price of such instruments or assets.” (Recital 28) As such, Corporate Access is not to be considered “research” but as a separate service to be paid for commercially.

However, ESMA notes that it is important that the Corporate Access provider prices services at commercial levels and any access provided is not linked to or dependent on payments for research or execution services. Under Article 13(9), each benefit or service an investment firm provides must be “subject to a separately identifiable charge.”

ESMA is of the view that corporate access such as arranging meetings or field trips could involve the allocation of valuable resources by the provider and could influence the recipient’s behavior (Article 12(3)). As such, ESMA expects firms to assess whether corporate access services facilitated by an investment firm are material or of minor non-monetary benefit, and therefore, whether these services can be accepted. If the investor “road show” is freely and publicly open to analysts from investment firms and other investors, it could be considered acceptable minor non-monetary benefits under Article 12(3).

However, to avoid any conflict of interest, an investment firm wishing to meet a corporate issuer can approach the firm directly and/or pay for a third-party corporate access service provider that does not provide other MiFID investment services.

Macro-Economic Research

In ESMA’s opinion whether macro-economic analysis can be considered research should be weighed against the criteria set out in Recital 28. In particular, whether the research in question “informs views on financial instruments, assets or issuers within that sector or market” and whether “this material or service explicitly or implicitly recommends or suggests an investment strategy … could be used to inform an investment strategy.”

In ESMA’s view most macro-economic analysis is likely to suggest an investment strategy, unless it is sufficiently general to fall outside the definition of research. If it is considered research, it is then capable of being received (and paid for) by an investment firm, under Article 13.

If not, it does not automatically classify as a minor non-monetary benefit, and portfolio managers and independent advisors would need to make a commercial decision either to pay for this or not accept the service.

Prospectus.com team of capital markets experts and securities lawyers specialize in real estate investment trusts (REIT), preliminary offering prospectus, secondary offering prospectus and full menu of financial offering memorandum document preparation.For more info, visit www.Prospectus.com

No Carve Out for FICC

To continue reading, please visit Tabb Forum via this link

 

Advisers Blast New SEC Policy re Accredited Investor Rule

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(InvestmentNews.com)-Financial advisers rejected a recommendation Friday from the acting chairman of the SEC that will loosen the accredited investor definition (aka QIB) and increase investor access to private and exotic investment strategies that are usually reserved for rich people.

“I think this is an awful idea, as awful as ideas come,” said Scot Stark, owner of Stark Strategic Capital Management.

Reacting to comments made on Friday by acting Securities and Exchange Commissioner Michael Piwowar, which recommended allowing more retail-class investors access to investments currently restricted to people with a net worth of at least $1 million, a lot of advisers didn’t see the logic.

“Any guidelines that help to protect the investor consumer is a positive,” said Mark Germain, chief executive of Beacon Wealth Management.

“As an adviser, it is easy to see that many clients do not understand the investments that some may offer to them,” he added. “The accredited investor rule puts an onus on the adviser to be sure the investor understands the risk and is willing to take the risk.”

During his speech Friday, Mr. Piwowar referenced the “forgotten investor” and said the current accreditation rules limit access to types of investments that could increase portfolio performance and diversification.

“I question the notion that non-accredited investors are truly protected by regulations that prevent them from investing in high-risk, high-return securities available only to the Davos jet-set,” he said.

But most financial advisers are questioning the logic of increasing access to products and strategies that typically come with higher fees, less liquidity, and less regulatory oversight.

More information re capital raising and related investor offering documentation services via this link

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