Rules & Regulations

Private equity tax hike proposal fizzles

Tue, 09 Oct 2007 06:59:58 -0400

I had been predicting that the much-feared hike on private equity gains would never really materialize. And I was right, not to sound too cocky. According to the Washington Post, private-equity firms have been informed that a tax-hike proposal will not get through the Senate this year. So the tax battle for the year is over, with the private equity firms winning. The issue remains whether it will re-ignite as an issue next year. My sense is that it will not. The major candidates do not want to make it an issue, and there is a whole lot of lobby power being directed toward preserving the low-tax treatment. But let it be said, the mere whiff off a tax change scared the bejeezus out of the industry. We may see the likes of Henry Kravis on Capitol Hill again, as a preventative measure.

For more:
- here's the Post article

Related articles:
- Private equity turns taxes into civil rights issue
- A clarification on the private equity tax debacle
- Another tax-hike bill is launched; class warfare?

Reg NMS weathers the storm

Mon, 20 Aug 2007 06:59:54 -0400

It did not get a lot of attention with the credit crunch dominating the news, but the phase-one launch of Regulations NMS has gone well, according to this article from Financial News Online. One guy likened it to Y2K. For many companies, the preparation has really paid off. That the launch occurred in a period of relative volatility is added reason to cheer. But a bigger test looms. The phase-one launch included only 250 stocks. Starting August 20, all stocks in the Nasdaq, NYSE and American Stock Exchange universe are set to be added. If this coincides with another spike in trading volume, well, it will provide an even greater test. Most people assume that the system is up to the task.

For more:
- here's some analysis from the Tabb Group

Banks new worry: Elder abuse

Tue, 07 Aug 2007 06:59:54 -0400

Consumer banks are facing more concerns and irate politicians when it comes to the tricky issue of elder abuse. About 20 states have imposed new laws holding banks accountable for willfully ignoring evidence of financial abuse of elderly clients, according to U.S. Banker. This is an issue that you ignore at your peril. Your brand has a lot riding on it. Many banks are starting to respond. Wells Fargo has been out in front. It apparently created a "centralized reporting unit" this year to coordinate the myriad laws its branches must follow. Training is starting to become more common. So you may want to think about rolling out whatever programs are necessary, including a consumer outreach program. In some ways, you can turn this to your advantage from a marketing perspective.

For more:
- here's the article from U.S. Banker

Merrill loses arbitration brought by Iranian broker

Tue, 24 Jul 2007 20:01:34 -0400

In a rare arbitration award explanation, one that spanned eight pages, a panel took pains to note the reasons behind the $1.6 million award ($1.2 million of which was for punitive reasons) it granted a former Merrill Lynch broker who happens to be Iranian. According to the Associated Press, the panel found that Merrill Lynch defamed Fariborz Todd Zojaji on his Form U5 and thus "destroyed claimant's ability to become employed in the securities industry." The panel also said that Zojaji was on management track in suburban Miami. But a regional complex director, uncomfortable with Zojaji, reduced his status and eventually fired him for unauthorized trades. He was not given a chance to respond to the charges. It's unclear how Merrill Lynch will respond.

For more:
- here's the AP article

Blackstone's big tax break on its IPO

Thu, 12 Jul 2007 20:01:38 -0400

More fodder for those who would hike taxes on private equity firms: The New York Times reports on an analysis in a newsletter covering taxes, Tax Notes, that the Blackstone Group has pulled off quite a coup when it comes to taxes on the proceeds from the IPO. The IPO raised $4.75 billion. But the firm, by dint of creative use of good will, will get deductions on about $3.7 billion. The partners are entitled to roughly 85 percent of this. These deductions are spread over 15 years. The Times says over all the Blackstone partners will get back $198 million more than they paid in taxes. Apparently, such plots are not that unusual. But in the current climate, tax-hike proponents will take note. I still maintain that it will be hard to pass a bill that really pushes tax on partnerships higher. The industry has mobilized, and their resources are significant. But stay tuned.

For more:
- here's the article from The New York Times

The real likelihood of higher taxes on rate hikes

Wed, 11 Jul 2007 20:01:37 -0400

The private equity industry is certainly mobilizing. Their footprint is being felt in Washington, as evidenced by Henry Kravis paying a visit to key Congressmen. So what are the chances the industry will prevail. Pretty good really. The Senate has been anything but enthusiastic about tax hikes, and the industry appears to be targeting members of Congress who depend on the industry (or really any partnership) or have benefited via job gains. John Kerry told the AP that he had to weigh the revenue against the effects on venture capital flows. All in all, any bill will have to be narrowly drawn or you will invoke the wrath of all partnership-oriented industries. Right now, I would say the industry's chances of escaping higher taxes are pretty good. But this far from over.

For more:
- here's the AP article

The big losers in Bear Stearns hedge fund fiasco?

Wed, 11 Jul 2007 20:01:36 -0400

Business Week Online notes some of the losers in the near-meltdown of the Bear Stearns High-Grade Structured Credit Strategies Enhanced Leverage fund. Heading the list: The colorful and controversial Jeffrey Epstein's Financial Trust Company. A hedge fund managed by BNP Paribas is another beneficial owner. There are countless others with smaller stakes perhaps. For Epstein, this is a tricky situation. He was once a former Bear Stearns trader that turned himself into a hedge fund guy. He probably thought he had an in with his former company. This is one more piece of bad publicity. Last July, prosecutors in Florida charged him with solicitation at his Palm Beach (Fla.) mansion--made headlines of course. Bad news has a way of cascading.

For more on Epstein:
- here's the article from Business Week Online

Henry Kravis, lobbyist

Tue, 10 Jul 2007 20:01:38 -0400

The halls and stuffy offices of Capitol Hill are not familiar terrain for Henry Kravis. But The New York Times reports that he went to Washington this week for some good old-fashioned flesh pressing. (The Times headline: Capra Rolls Over.) He reminded one Michigan representative that his deals have created jobs in his home state. Kravis is not alone. Steve Schwarzman also recently paid a visit. They are being wise--proposals that would tax their carry gains would be a huge issue. Their paychecks are certainly threatened. This whole issue will unfold over the next year or so. But you have to give the industry credit for jumping on the issue. You might see this as a cultural watershed. The super rich lobbying to keep their favorable treatment. The industry would be wise to focus on how they have benefited pensions and thus the common man.

For more:
- here's the article from The New York Times

Still time to comment on new communication rules

Mon, 09 Jul 2007 20:01:36 -0400

Electronic communications are a big deal at Wall Street firms these days. With so many people Blackberrying, IMing and text messaging, there are many new avenues for confidential information to leak. The NYSE and NASD have to come up with some guidance and are asking for comment. The comment period expires July 13, so you have time still. The guidance as of now is principles-based and basically holds that if a company can't properly monitor messages or senders cannot be identified, then the communications should be blocked. The guidelines suggest using only messaging methods that can result in saved messages. This is a major issue that could very well change the way some of your employees do business. So it is at least worth thinking about. You may want to review your policies now.

For more:
- here's the guidance from NASD

Hedge funds still bent on going public?

Mon, 02 Jul 2007 20:01:38 -0400

Och-Ziff, a hedge fund firm founded by an ex-Goldman Sachs employee among others, seems to be the first pure U.S.-based hedge fund to file for an initial public offering. The others, like Fortress, had private equity units. GLG Partners, a European hedge fund power, announced a merger with a U.S.-based blank-check company. This will be another master limited partnership deal along the lines of the Blackstone Group IPO. So what to make of this? It may be that firms are not all that fazed by the prospect of additional taxes or moves to limit the ability of funds to take advantage of off-shore tax havens. Och-Ziff has about $1.8 billion in deferred income offshore. So it may be that the expected train of hedge funds to file for offerings will continue unabated.

For more:
- here's the article from the New York Times