SEC : New Rule For BDs Too-Big-To-Fail


BrokerDealer TOP NEWS–courtesy of Law360-Top Story: SEC joins with FDIC in new rule for BDs deemed too big to fail, latest court ruling involving Madoff case, and more.


SEC Floats Rule With FDIC On Failing Broker-Dealers

The U.S. Securities and Exchange Commission and Federal Deposit Insurance Corp. jointly proposed a rule Wednesday intended to provide a more efficient liquidation process for large broker-dealers in the event they fail, carrying out a mandate under the Dodd-Frank Act.

Broker Describes IBM Tipping Chain In SEC Insider Case

A broker testified in New York federal court on Wednesday that he relayed information about an impending $1.2 billion IBM acquisition to two former colleagues who are now on trial in a closely watched U.S. Securities and Exchange Commission insider trading case.

Madoff Trustee Shuts Down $11B Investor Suit For Now

A Manhattan federal bankruptcy judge on Wednesday blocked the latest investor suit targeting a Bernie Madoff associate for his role in Madoff’s massive Ponzi scheme, agreeing with the trustee for Madoff’s defunct securities firm that the $11 billion claims in Florida are preempted by a 2011 settlement.

Victims of Bernard Madoff’s fraud cannot pursue a Florida lawsuit to recover $11 billion from the estate of Jeffry Picower, who they say helped perpetuate the swindler’s Ponzi scheme, a Manhattan bankruptcy judge ruled on Wednesday.

U.S. Bankruptcy Judge Stuart Bernstein said the lawsuit by A&G Goldman Partnership and Pamela Goldman, their third effort to sue in Florida, violated an injunction barring Madoff victims from pursuing claims belonging to Irving Picard, the trustee liquidating Bernard L. Madoff Investment Securities LLC.

Ex-Wells Fargo Trader Fights SEC’s Insider Trading Finding

A former Wells Fargo trader urged the U.S. Securities and Exchange Commission to overturn part of a finding by the agency’s in-house court that he made four trades on tips from an analyst, but asked it to preserve the court’s finding that cleared him in two other trades, according to a brief filed in the appeal.

SEC Hits More Traders With Newswire Hacking Allegations

The U.S. Securities and Exchange Commission on Wednesday brought more litigation over an alleged scheme to hack into newswires to secure a trading advantage, filing suit in New Jersey federal court against Russian traders who allegedly scored more than $19.5 million in illegal profits.

7th Circ. Won’t Rekindle Steak ‘N Shake Suit Over CEO Deals

The Seventh Circuit on Wednesday refused to revive a shareholder derivative suit against the heads of restaurant chain Steak ‘n Shake filed over deals which purportedly enriched holding company CEO Sardar Biglari at the expense of the company, citing a lack of a sufficient challenge to company leaders’ business judgment.

Ex-Deutsche Bank Analyst In Big Trouble Over Big Lots Rating

A former Deutsche Bank research analyst has been suspended from the securities industry for a year and ordered to pay a $100,000 fine over Securities and Exchange Commission charges that he let his relationship with Big Lots Stores Inc. executives taint his analysis of the company and its stock.

Atty Violated Securities Laws In Fracking Venture, Judge Says

A Texas federal judge on Wednesday found that an attorney violated securities laws in connection with a fracking water filtration venture, but did not immediately rule on $2.5 million in disgorgements and civil penalties sought by the U.S. Securities and Exchange Commission.


IRS Locks In Rules On Broker Reporting Obligations

The Internal Revenue Service on Wednesday released final regulations on brokers’ reporting requirements for transactions involving debt instruments and options, including the reporting of original issue discounts on tax-exempt obligations.


11th Circ. Won’t Revive Paulson Feeder Fund Investor’s Suit

The Eleventh Circuit on Wednesday refused to revive a Florida investor’s suit against Paulson & Co. hedge fund managers for his losses in a feeder fund, after Delaware’s high court answered a certified question from the appeals court by saying he had no direct claim.

Bankia Commits $2B To Repay Retail Investors For IPO Bust

State-backed Spanish lender Bankia SA said Wednesday it will set aside €1.84 billion ($2.1 billion) to fully refund retail investors for their losses following the company’s doomed, 2011 initial public offering and to resolve ongoing litigation after the bank lost two appeals.

Argentina To Pay $1B To End Debt Fight With EM, Montreux

Argentina has agreed to pay creditors EM Ltd. and Montreux Partners LP as much as $1.1 billion to resolve long-running litigation over the country’s 2001 default, according to documents filed Wednesday in New York federal court.

$27M Goldman CDO Deal Gets Judge’s Initial Sign-Off

A New York federal judge preliminarily approved a $27.5 million settlement Tuesday between Goldman Sachs Group Inc. and a class of investors led by hedge fund Dodona I LLC that sued over toxic collateralized debt obligations.

Ex-Rabobankers Denied Acquittal, New Trial In Libor Scam

A New York federal judge denied acquittal or a new trial Wednesday for two former Rabobank traders convicted of conspiracy and wire fraud in connection with a scheme to manipulate Libor, rejecting arguments their submissions to the global benchmark weren’t misstatements intended to cause harm.

Genworth Says Witness Recantations Ruin Investors’ IPO Suit

Genworth Financial on Wednesday blasted investors opposing the insurance giant’s bid to dismiss multidistrict litigation over an initial public offering delayed by a swell of mortgage insurance claims, telling a New York federal judge that they’ve relied on “irrelevant distractions” in an effort to rescue recanted testimony from the cutting-room floor.

ADT Wants Lookalike $450M Stock Buyback Suit Tossed

ADT Corp. urged the Delaware Chancery Court to toss a shareholder suit over $450 million in stock the company repurchased from a hedge fund, saying Wednesday the case nearly mirrors a challenge the court threw out 10 months ago.

AIG Unit Policy Must Pay Prejudgment Interest, 9th Circ. Told

Nutritional supplement maker Cell Tech International shareholders on Wednesday urged the Ninth Circuit to find that an American International Group unit owes them them millions of dollars in prejudgment interest on a $4.1 million judgment against the insurer, saying a lower court erred in ruling that a $5 million policy limit precludes the interest.

Investor Green Cards Imperiled In EB-5 Fraud Case, Court Told

A group of investors in a real estate project targeted by a $136 million EB-5 fraud suit brought by the U.S. Securities and Exchange Commission urged a Washington federal judge on Tuesday not to let a receiver in the case sell the project without considering their immigration interests.

Lehman Tells 2nd Circ. Treaty Entitles It To Tax Credits

Defunct investment bank Lehman Brothers Holding Inc. told the Second Circuit on Tuesday that its bankruptcy administrators are entitled to $67 million in foreign tax credits under the terms of a 1975 U.S-U.K. income tax treaty favoring newly enacted legislation.

SEC Passes Equity Crowdfunding Rules-A Boon For BDs?

brokerdealers crowdfunding

Will New Regs Create A Boon For BDs?  Brother, Can You Raise $1mil?

(–If only coincident to the Halloween Trick or Treat Holiday, it’s now official, on Friday Oct 30 the US Securities & Exchange Commission (SEC) passed new equity crowdfund regs, opening the path to what some believe will be a multi-billion dollar tidal wave of startup funding, and also, what more cautious experts believe could be an entirely new cycle of speculative investing by unsophisticated investors. The new rules approved will make it easier for start-ups to sell shares directly to the masses. Brother, can you spare $1million?

They could also be big business for a broad universe of broker-dealers, as well as handful of Los Angeles firms (among many others) that want to act as the stock exchanges where these deals will take place.

The rules, which will take effect in about six months, allow private companies to raise up to $1 million a year from small-time investors without most of the reporting and auditing required of larger firms or companies raising more money.

For the entire story from, please click here



Bulls and Bears Make Money; BDs Who Are Pigs..


As the Wall Street adage goes, “Bulls and Bears Make Money…Pigs Get Slaughtered..” The folks here at could not resist re-distributing the news about former Lehman trader Jonathan Hoffman and his smack down by Federal Bankruptcy Court Judge Shelly Chapman, who ruled that double-dipping isn’t good form and Mr. Hoffman must be bonkers if he believes the Lehman estate should pay him a past-due $83mil bonus–which was the exact amount Lehman’s subsequent owner Barclays paid to Hoffman when he joined that acquiring bank.

The only thing Judge Chapman neglected to add (also overlooked by DealBreaker’s Bess Levin-who published the below) was a reference to Donald Trump’s recent metaphorical comments on the topic of double-dipping..  We says this was an oversight on Judge Chapman’s part only because of the wit in her writ.  We can’t explain how gossip writer and social media actress Bess Levin overlooked the joke, simply because she should know better: Any fun story gets much more distance these days whenever inserting Trump’s name into the narrative.

Here’s Bess Levin’s ‘editorial take’…

jonathan hoffman former lehman trader wsj photo

Former Lehman Trader Jonathan Hoffman; photo courtesy of WSJ

Remember Jonathan Hoffman? Former Lehman Brothers trader who later took a job with Barclays, who decided in 2014 that he wanted to figuratively demonstrate the size of his testicles to the world by making the case that although the British paid him an $83 million bonus upon joining the firm, Lehman separately owed him that exact same amount, which he sued the estate to collect? Based on the argument that unlike many of the Lehman employees who were simply taken in by Barclays following the collapse of the investment bank, he could have gotten a job anywhere and chose to join Barclays, with whom he entered into a new contract, separate from the one he had with Lehman? And that the $83 million they paid him was kind of just like a signing bonus, and didn’t let his former employer off the hook? A judge told him Friday to sit down and shut up.

Judge Shelley Chapman of the U.S. Bankruptcy Court in New York said former top trader Jonathan Hoffman is entitled to only about $7.7 million stemming from an unpaid portion of the bonus he was awarded in 2007. Furthermore, Mr. Hoffman will receive only 35 cents on the dollar for the bonus. “Mr. Hoffman was a gifted trader who generated billions of dollars in profits for Lehman over the course of his employment,” Judge Chapman said in an 87-page decision Thursday. But she characterized as “pure nonsense” the Wall Street veteran’s argument that Lehman owed him more than $83 million, even though he had received a similar amount from Barclays PLC. The judge said Lehman’s obligation to pay Mr. Hoffman’s bonus was transferred to Barclays PLC when it bought Lehman shortly after the failed investment bank filed for bankruptcy. Barclays agreed to pay the $83 million and to copy other key terms of his employment agreement with Lehman.’

The entire article can be found at

BrokerDealer Compensation: Re-Visiting Retention Contracts; Advisor Advisory

retention advisor contracts blog update profiling the topic of compensation agreements between brokerdealers and respective financial advisors operating under BD umbrellas is courtesy of extract from 10 Mar article in

With many long-term retention contracts expiring, wirehouses are under pressure to once again ensure the retention of their top producers. Kenton Shirk, associate director at Cerulli Associates, discusses how management is leveraging deferred comp to stem defections.

What are the latest triggers resulting in advisor moves?

A change dictated by B-D leadership may cause advisors to switch firms, especially if advisors feel their net financial benefits have decreased or their employer is rigidly dictating undesirable new policies. Industry recruiters have told Cerulli that continuous changes to comp structures also have left some advisors feeling they need to work harder to earn the same amount of money. Competitors can use this point of frustration to their advantage when recruiting advisors.

Describe the pros and cons when firms overreach, in terms of comp. 

B-Ds need to weigh the strategic benefits of a new comp strategy with the potential impact on advisor satisfaction.

An example is Merrill Lynch’s introduction of relationship pricing in its Merrill One platform in which a client’s fee considers the total financial relationship with both Merrill Lynch and Bank of America. Over the long term, it makes investor relationships stickier since they might be disinclined to follow an advisor to a competing firm since it means giving up discounts across their wealth management and banking accounts.

Yet in the short term, established advisors could potentially feel their parent firm is requiring pricing discounts they might not otherwise offer, creating a sense of frustration.

Will cutting the comp on smaller clients be significant enough to impact retention?

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