SEC

Third Point entwined in rumor probe

Jim Kim — Wed, 20 Aug 2008 17:43:32 -0400

When Third Point--the hedge fund operated by the well-known Daniel Loeb--registered as an investment adviser last year, the SEC undertook an audit and noted that managers often talk to managers at other hedge funds, notes the Financial Times. In a letter to shareholders, the fund says that the probe has since been upgraded to a formal investigation, which may be connected to the SEC's in-progress look at rumor-mongering and whether the practice has harmed various companies. Ex-Bear Stearns executives aver they were victimized. Loeb writes that the practice is legally sound, giving his managers a chance to "test our hypotheses and refine our thinking," and is thus in the best interest of their customers. We'll see where this goes.

For more:
- here's the letter to investors

SEC to take hard line on rumor spreading

Jim Kim — Mon, 14 Jul 2008 07:53:25 -0400

As soon as Jamie Dimon went off on short sellers (see next item), the SEC took the unusual step of issuing a warning that it is taking hard look at rumor mongering to manipulate securities prices. This is not necessarily news. We all knew various probes were underway. One settlement had already been announced. The move was likely intended as a warning, notes the New York Times. The SEC intends to begin the probe this week. It will look at policies in place to prevent false rumors from being spread. This is an inherently tricky area. Can you really police rumors? But it does put people on notice, and may deter coordinated attempts to spread false information.

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

Related Articles:
The art of the rumor
Rumors slam conduits and SIVs

Illinois to sue Countrywide; tip of iceberg?

Jim Kim — Wed, 25 Jun 2008 07:31:02 -0400

We've noted before that prosecution and regulatory action always follow scandals. So the news that the state of Illinois will sue Countrywide and its CEO, Angelo Mozilo, come as no surprise. You can bet that other states are mulling similar action. The charges will be familiar: misleading marketing, perverse incentives to sell inappropriate mortgages, lack of disclosure, inflated income...those sorts of things.

So what effect this will have on Bank of America, which has committed to a purchase of the troubled mortgage company? This may be the tip of a very large mountain of regulatory action from a host of players, including the SEC and FBI. Bank of America--CEO Ken Lewis in particular--has a lot riding on this. Countrywide needs to clean up fast.

For more:
- here's a New York Times article

Man in the spotlight: David Einhorn

Jim Kim — Fri, 06 Jun 2008 10:03:27 -0400

He's one of Lehman Brothers' highest profile critics, a man who has bet heavily against the firm. A real thorn in the firm's side, particularly for Erin Callan, Lehman's CFO. David Einhorn, 39, of hedge fund Greenlight Capital, has been making the media rounds with his analysis of Lehman Brothers. Of course, he has a lot to gain by creating uncertainty and doubt. Some think he's acting recklessly. In his mind, he's on the side of angels. He's certainly no stranger to this sort of media firestorm. He's got a book out by the way, "Fooling Some of the People All the Time." The SEC once took a look at his activity during his battle with Allied Capital. It's fair to say that his campaign, for better or worse, is working. There is a lot nervousness on the Street right now. One analysts says that counterparty worries have led some firms to reduce trading with the firm, notes MarketWatch. That my friends is ominous.

For more:
- here's Einhorn's latest appearance on CNBC
- here's the MarketWatch article

ALSO NOTED: Wachovia to take big charge due to court ruling; Och-Ziff founder fares well; and much more...

Thu, 01 May 2008 06:59:50 -0400

Company News:
> Wachovia to take big charge due to court ruling. Article
> Analysts sour more on Countrywide. Article
> PNC private equity unit sells food maker. Article
> Despite stock swoon, Och-Ziff founder fares well. Article

Industry News:
> Police hunting for hedge fund fraudster in Canada. Article
> Cramer: The only non-toxic banks. Video
> Banks need to come clean on capital needs. Article
> Book about Eliot Spitzer coming soon. Article

Regulatory News:
> SEC must give up documents in Aguirre case. Article

And Finally... Is a liberal arts degree a waste in the job market? Article

ALSO NOTED: John Thain says he's not heading into politics; SEC may require banks to hold more cash as cushion; and much more..

Fri, 25 Apr 2008 06:59:50 -0400

Company News:

> Court approves Citigroup settlement over Enron. Article
> Thain says he's not heading into politics. Article
> Barclays lowers Q1 earnings guidance. Article
> Franklin Resources misses estimates. Article
> TradeStation's earnings rise. Article
> KBW posts a loss. Article

Regulatory News:
> SEC may require banks to hold more cash as cushion. Article

And Finally... Will the Net destroy the nation's writing ability? Article

Another round: Lehman Brothers vs. shorts

Thu, 03 Apr 2008 07:59:57 -0400

The Lehman Brothers bears took a bath when the market rallied on the news that the company had raised $4 billion to shore up its capital position. A lot of put buyers and short sellers were hit hard. Lehman Brothers now thinks the heaviest shorting came from hedge funds that illegally conspired to drive down its stock price. Lehman has forwarded information on the matter to the SEC. According to the Financial Times, executives believe a coordinated effort to attack its stock began on March 16, the day Bear's sale to JPMorgan was announced. Lehman's stock fell nearly 50 percent on that day. Short interest hit a record 43 million shares. A lot of those guys, subsequently, were forced to cover, which aided a huge rally. Such allegations will be hard to prove but there maybe some truth to them. Still, some say Lehman can't blame the shorts entirely.

For more:
- here's the Financial Times article

Related Articles:
Lehman doubters' short-sightedness backfires. Article
Private equity vs. the shorts. Article

Did false market rumors lead to Bear Stearns' demise?

Thu, 20 Mar 2008 07:59:58 -0400

Ah, rumors. We've noted their power on Wall Street. Now some are wondering whether those rumors about Bear Stearns were maliciously spread by people who took a long position on the firm. Now that's some conspiracy theory. But what if it were true? The SEC is looking into it. If you bet on the Bear's collapse and won big, you'll likely be getting a call. In general, there is an understandable concern that rumors, especially in a tinderbox environment, can really do a number. But these short tricks have been around for years. Can anyone really do anything?

For more:
- here's an item in the LA Times

Related Articles:
Also Noted: Rumors about Bear Stearns' liquidity heat up. Read
Bear Stearns rumors intensify. Article
Bear Stearns small capital base, Cayne's golf game. Article

Did Bear Stearns executives lie?

Thu, 20 Mar 2008 07:59:57 -0400

Bear Stearns just can't win. The humiliation of the Fed-backed, JP Morgan Chase bailout was rank enough. Now comes word from Financial News Online that the SEC is taking a look at statements by executive committee chairman Ace Greenberg and CEO Alan Schwartz before the deal that said, outright, that the bank had no liquidity problems. No one really believed them, obviously, but did they lie? People have speculated. It will be interesting to see what comes of this. The irony is that JP Morgan Chase will be liable for all the damage.

For more:
- here's the Financial News Online article
- Schwartz likened to Skilling. Article

Related Articles:
Bear Stearns: A timeline of decline. Timeline
Can Bear Stearns be salvaged? Article
The future of Bear Stearns. Editor's Corner
Cayne joins rogues list. Article

ALSO NOTED: Yahoo maneuvers to stave off Microsoft; Ladenburg Thalmann to buy Punk Ziegel; and much more...

Thu, 06 Mar 2008 06:59:50 -0500

Company News:
> Credit Agricole reports big loss. Article
> Ladenburg Thalmann to buy Punk Ziegel. Article
> Yahoo looking for new ways to survive. Article
> Yahoo maneuvers to stave off Microsoft. Article
> WaMu expands ATM network. Article
> Pandit says Citigroup is sound. Article
> Legg Mason upgraded. Article

Industry News:
> CDS for top brokers explode. Article
> Wave of hedge fund closures in Europe? Article

Regulatory News:
> SEC to take action on muni bond fraud? Article

And Finally... Best undergrad business schools. Article