Pot Court Case May Be Pot of Luck for Investors: $Billions At Stake

Posted on February 12, 2015 by admin

Brokerdealer.com blog update is courtesy of Karen Gullo from Bloomberg Business.

About a month ago, the Brokerdealer.com blog profiled Peter Thiel’s Founders Fund, a venture capital firm best known for backing tech companies including Facebook, SpaceX, Airbnb and Spotify, making a multimillion-dollar investment in Privateer Holdings, a Seattle-based private equity firm focused on pot. Now the further success of this private equity firm hangs on the outcome of a current pot court case in California.

A federal drug enforcement agent turned private-equity manager at a firm backed by PayPal Inc. co-founder Peter Thiel is watching the trial of a garden-variety pot grower with high hopes for the nascent marijuana industry.

It may sound like an only-in-California story — and it is, for now — but a win by the defendant may move the entire nation toward legalization of a business some value at more than $50 billion a year.

Patrick Moen, head of compliance and chief lawyer at Privateer Holdings Inc., an investment firm focused on cannabis, is following the case of a man described by prosecutors as the “go-to” guy at a sprawling marijuana plantation in the mountains of Northern California.

The defendant’s lawyers won the right to challenge the government’s treatment of marijuana as a controlled substance, as dangerous as heroin. They’re making their final pitch Wednesday for a federal judge to declare the government’s position unconstitutional in light of evidence of pot’s medical uses and steps the U.S. has taken to recognize legalization efforts in several states.

A defense win would boost the legal market for cannabis-related products and confirm for investors that the times for pot are changing.

‘Enormously Significant’

“It’s pretty obvious that a positive outcome would be well-received by policy advocates and the markets,” Moen said in an interview. “Just the fact that the judge has agreed to consider the issue is an enormously significant event.”

Moen, who in November 2013 became the first agent to leave the U.S. Drug Enforcement Administration for a job in the cannabis industry, according to the Privateer Holdings website, said he wasn’t alone at the DEA in believing that banning marijuana “was foolish and a waste of resources.”

While most of his cases involved crack cocaine, heroin and methamphetamine, his team busted medical-marijuana growers in Oregon, he said. Moen said he came to the realization that “this whole policy is just wrong.”

Some DEA colleagues were disappointed with his new career, though most were supportive and share his feelings, Moen said, adding that he’ll be looking to hire former agents in the next year as part of his effort to professionalize the cannabis industry.

Marijuana Investments

Thiel’s venture capital firm, Founders Fund, last month announced its investment in Privateer. The Seattle-based holding company owns marijuana-related businesses, including the information website Leafly, Canadian medical marijuana company Tilray and Marley Natural, a cannabis brand venture with the family of singer Bob Marley that will offer Jamaican marijuana strains and cannabis- and hemp-infused topical products and accessories.

Founders Fund didn’t say how much it contributed.

“This is a multibillion-dollar business opportunity,” Founders Fund partner Geoff Lewis said in January.

Voters in Alaska, Oregon, Washington, Colorado and the District of Columbia have legalized recreational marijuana, and medical use of the drug is allowed in 23 states.

Pot smokers and investors are tracking the Sacramento, California, case of Brian Pickard, one of 16 people charged in 2011 with growing almost 2,000 marijuana plants in a national forest and in gardens off a dirt road in Hayfork, a town of 2,000 about 100 miles south of the Oregon border.

U.S. District Kimberly Mueller, an appointee of Democratic President Barack Obama, decided last year to allow Pickard’s lawyers to argue that classifying pot as one the nation’s most dangerous drugs is irrational.

PE Firms Raiding BrokerDealers in Battle for Young Bankers

Posted on February 11, 2015 by admin

young bankers Brokerdealer.com blog update courtesy of the New York Times Deal Book section.

Young bankers fresh out of college are in high demand for private equity firms. Firms what the brightest and best that show great tenacity and enthusiasm for Wall Street. Firms are so aggressive about finding the best candidates that recruiters are interviewing potential employees up to 18 months before the start of the actual job.

They are only in their early to mid-20s, but some young bankers on Wall Street are the most sought-after financiers around, with lucrative pay packages dangling before them.

Junior investment bankers who graduated from college only last year are being madly courted by private equity firms like Apollo Global Management, the Blackstone Group, Bain Capital and theCarlyle Group in a scramble that kicked off last weekend. After back-to-back interviews, many are now fielding offers for jobs that won’t start until the summer of 2016.

This process has become an annual rite by private equity firms, which raise money from investors (like pension funds) to buy entire companies. But it has grown more frenzied since the financial crisis, and it started this year weeks earlier than many in the industry had expected. Fearful of missing the best talent being developed at investment banks, the giants of private equity have turned Wall Street’s white-collar entry-level workers into a hot commodity.

“It’s as if these were star athletes,” said Adam Zoia, chief executive of the recruiting firm Glocap Search, who helps private equity firms hire young workers. “The irony is they are professionals six, seven months out of undergrad. It’s hard to imagine you can tell if someone’s a star or not.”

For the young bankers, who are known as analysts, the recruiting race is an important step on a journey to becoming a Wall Street tycoon who can command a seven-figure (or more) pay package. These workers, graduates of elite colleges, often hope to spend two years at investment banks, learning the basics of corporate finance, before leaving for private equity firms, where they can use those skills to make investments. That career path makes them prime candidates for an elite business school, or something even more financially rewarding.

Even though these youthful analysts are starting at big Wall Street firms, the sector’s reputation has lost some of its sheen since the financial crisis. At the same time, Silicon Valley is luring away talent.

But private equity firms can offer higher pay to young bankers. A private equity associate — one who is just three years out of college — can earn as much as $300,000 a year, including salary and bonus. That is roughly double what a second-year banker might earn at Goldman Sachs. “Private equity is the preferable place to be in terms of compensation,” said Jeff P. Visithpanich, a managing director at the compensation consulting firm Johnson Associates.

While data is hard to come by, a December report from Vettery, a start-up recruiting firm, said that private equity was the single most popular destination for Wall Street’s junior workers. Roughly 36 percent of junior bankers with two-year contracts in 2012 have now joined private equity firms, compared with 27.5 percent who stayed in the same division at their bank, Vettery said.

It may seem surprising that these untested financiers are being so heavily courted when the overall unemployment rate of workers between the ages of 20 and 24 in January was more than twice as high as the rate for those 25 and older.

But the process of hiring these workers has grown only more frenzied since the crisis, as financial firms increasingly believe they must work harder to attract ambitious graduates. The banks, from which these workers are being poached, are raising salaries or offering additional days off in an effort to retain them.

To read the complete article from the New York Times, click here.

Bitcoin Market Could Be Too Good To Be True

Posted on February 10, 2015February 10, 2015 by admin

Brokerdealer.com blog update courtesy of CNBC.

In December, Brokerdealer.com covered the emerging bitcoin market and in January, MarketMuse profiled the Winklevoss twins’ plans to launch a bitcoin ETF. The bitcoin market is still emerging and was on track to be a booming business but the market now is taking a step back. In fact, UK International Business Times is saying that the bitcoin market is dying off, now with the supposed bitcoin scam occurring in Hong Kong, the bitcoin market seems to be even more hopeless.

Hong Kong-based bitcoin exchange MyCoin has allegedly shut its doors and stolen HKD 3 billion ($386.9 million) in the process.

The South China Morning Post reported Monday that 30 MyCoin clients approached a local lawmaker with complaints that the company had fled with funds from up to 3,000 investors.

The reports coming out of Hong Kong would seem to indicate that there may have been a Ponzi scheme at play.

“No one seems to know who is behind this,” a woman surnamed Lau, who said she lost HKD 1.3 million, told the paper. “Everyone says they, too, are victims … but we were told by those at higher tiers [of the scheme] that we can get our money back if we find more new clients.”

One warning sign of a pending collapse could have been that when the company changed its trading rules to bar people from exchanging all of their bitcoins unless they solicited new investors for the firm.

As bitcoin-focused site CoinDesk reasons, the incident may lead to new regulations for the cryptocurrency industry in Hong Kong, “which has so far operated with little scrutiny.”

According to the SCMP, MyCoin had hosted events at luxury hotels and a roadshow in Macau in 2014.

MyCoin did not immediately return a request for comment.

For the entire article from CNBC, click here.

The 2015 Wall Street Letter Award For Best BrokerDealer(s) Goes To…

Posted on February 5, 2015 by admin

Financial Industry publication Wall Street Letter held it’s 5th Annual Award Ceremony on Feb 5 and feted the top dozen brokerdealers for best-in-class products and services, as well as recognizing an assortment of the financial industry’s leading technology firms and exchanges.

In connection with above, BrokerDealer.com blog is honored to profile the award for “Best Research-BrokerDealer” , which was determined by a panel of industry judges. The winner for this category was Mischler Financial Group, the financial industry’s first and foremost Finra member firm that is owned and operated by Service-Disabled Veterans.

Feb 5, 2015 New York- Mischler Financial Group, Inc., the securities industry’s oldest investment bank/institutional brokerage owned and operated by service-disabled veterans was recognized by industry peers last night and awarded “Best Research-BrokerDealer” during the 5^th Annual Wall Street Letter Awards held at New York City’s Cipriani 42^nd Street.

This is the second year in a row that Mischler has been feted for its excellence in research content by a panel of judges representing both buy-side investment managers and sell-side broker-dealers. Runners-up in the Best Research-BrokerDealer category included two other contenders: 125-year old super regional and full-service investment brokerage Stifel Nicolaus and financial service sector investment bank Sandler O’Neill + Partners.

The 5^th Annual Wall Street Letter Award program encompassed 36 categories of excellence, including broker-dealer products and services, trading technology vendors and major exchanges. More than125 firms were nominated across the various categories, and Mischler Financial was the sole diversity firm recognized for being “best-in-class.”

Accepting the award on behalf of Mischler Financial Group was Ron Quigley, Managing Director of Fixed Income Syndicate and Primary Sales and author of “Quigley’s Corner,” the firm’s daily debt capital market commentary, which includes granular insight to corporate bond market issuance and rates trading. Quigley’s Corner is distributed to more than 1000 Fortune corporate treasurers, leading investment managers, public plan sponsors and senior executives across the sell-side’s fixed income syndicate universe. Mischler also provides bespoke global macro strategy observations, equity trading insight and consumer market sector analysis to its institutional client base.

Noted Dean Chamberlain, CEO of Mischler Financial, “It is both an honor and a privilege to be recognized by such an esteemed group of industry professionals and a further testament to our value-add capabilities, especially when compared to the most recognized and respected firms in the financial services industry.”

Cybercriminals Assault BrokerDealers; Most BDs Bamboozled by MITB and Phishing Schemes

Posted on February 5, 2015 by admin

BrokerDealer.com blog update courtesy of extract below from 3 Feb WSJ story by Matthias Rieker

More than half of U.S. brokerage firms surveyed by regulators said they had been targeted by email scams aimed at tricking them into wiring away client money.

In many cases, brokers fell for the impostors and their firms had to reimburse their clients. Of the brokerage firms that received the fraudulent emails, 26% reported losses of more than $5,000, according to the Securities and Exchange Commission.

The SEC last year sampled 106 firms—57 broker-dealers and 49 registered investment advisers—to assess the industry’s cybersecurity risk.

On Tuesday, the regulator said 88% of the broker-dealers and 74% of RIAs it examined for its report had experienced some form of a cyberattack. The agency didn’t say in what years the attacks occurred.

The wealth-advisory industry has long been struggling with what security experts and advisers say has been an onslaught of fraudulent wire-transfer requests, many resulting from client email accounts being hacked. Fifty-four percent of broker-dealers and 43% of RIAs said they had received fraudulent emails seeking to transfer client money.

Fifty-four percent of broker-dealers and 43% of advisers said they had received fraudulent emails seeking to transfer client money.

For example, a former Morgan Stanley Smith Barney adviser—whose client’s email had been hacked—wired a total of $521,500 in four requests over two months last year. Also, a former Wells Fargo adviser failed to confirm two wire transfers for a total of $67,532 over two months in 2012 that turned out to be from an impostor.

The Financial Industry Regulatory Authority, Wall Street’s self-regulator, suspended and fined both advisers last month. Neither admitted or denied the allegations, and their firms fired them, according to Finra. Morgan Stanley and Wells Fargo declined to comment on the cases.

Like most firms, Morgan Stanley and Wells Fargo have strict procedures on how to thwart such scammers, but some advisers haven’t been vigilant enough to ensure the requests are actually from their clients. Of the broker-dealers that reported losses from fraudulent emails, a quarter said the losses were the result of employees not following the firms’ authentication procedures, the SEC said.

SEC chairwoman Mary Jo White says assessing the readiness of market participants and providing investors with information on how to better protect online investments from cyberthreats is an important focus of her agency.

Finra said that last year it brought 37 cases related to the improper transfer of investors’ money to third-party accounts.

“Cybersecurity threats know no boundaries,” SEC Chair Mary Jo White said in statement. “That’s why assessing the readiness of market participants and providing investors with information on how to better protect their online investment accounts from cyber threats has been and will continue to be an important focus of the SEC.”

The SEC also said it found that 58% of broker-dealers but only 21% of RIAs are insured against losses from cyberattacks. One broker-dealer and one adviser reported that they had filed claims, the SEC said.

For the full story from the WSJ, please click here