Tag Archives: Securities and Exchange Commission

J.P. Morgan’s Mortgage Deep Troubles

J.P. Morgan bundled 4,209 loans from New Century Financial. (Reuters)

According to The Wall Street Journal, a 1,625-square-foot bungalow at 51 Perthshire Lane in Palm Coast, Fla., is among the thousands of homes at the heart of J.P. Morgan Chase JPM +0.34% & Co.’s $5.1 billion settlement with a federal housing regulator on Friday.

In 2006, J.P. Morgan bought one of two mortgage loans on the home made by subprime lender New Century Financial Corp. J.P. Morgan then bundled the loan with 4,208 others from New Century into a mortgage-backed security it sold to investors including housing-finance giantFreddie MacFMCC +7.73%

By the end of 2007, the borrower had stopped paying back the loan, setting off yearslong delinquency and foreclosure proceedings that halted income to the investors, according to BlackBox Logic LLC, a mortgage-data company.

The Palm Coast loan wasn’t the only troubled one in the New Century deal: Within a year, 15% of the borrowers were delinquent—more than 60 days late on a payment, in some stage of foreclosure or in bankruptcy—according to BlackBox. By 2010, that number exceeded 50%.

“That’s much worse than anyone’s expectations when the deal was put together,” said Cory Lambert, an analyst at BlackBox and former mortgage-bond trader. “It’s all pretty bad.”

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Twitter’s IPO May Value It at $11.1 Billion

Source: Bloomberg News

Source: Bloomberg News

According to The Wall Street Journal, Twitter Inc. on Thursday said it would price its shares at $17 to $20 in an initial public offering, valuing the messaging service at up to $11.1 billion, a number seen as conservative even for a company facing widening losses.

The proposed market value would makeTwitter worth nearly twice as much asGroupon Inc., GRPN +3.11% the daily deals company, but less than one-tenth of social-networking rival Facebook Inc.

As proposed, Twitter’s IPO could raise as much as $1.6 billion for the company, whose service has grown to more than 230 million monthly active users since the first “tweet” was sent in 2006.

Analysts said the company might yet raise the target price. If the offering is well received, it could signal that investors are willing to wager on a big future for social-media companies even in the absence of profits, which Twitter doesn’t have. The deal comes amid the best year for U.S.-listed IPOs since 2007 based on number of deals.

With a price range established, Twitter can now begin to pitch investors who would have access to the starting IPO price. The company is expected to settle on a final price on Nov. 6, according to a marketing document reviewed by The Wall Street Journal. Twitter shares would then begin trading the next day on the New York Stock Exchange NYX -0.12% under the symbol TWTR.

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Goldman Sachs Vice Chairman to Step Down at End of Year

Source: Bloomberg

Source: Bloomberg

According to Bloomberg, Goldman Sachs Group Inc. (GS) said J. Michael Evans, a vice chairman who ran emerging markets and was seen as a potential successor to Chief Executive Officer Lloyd C. Blankfein, is retiring after more than 20 years at the bank.

Evans, 56, will step down at the end of the year and become a senior director, the New York-based company said today in a statement.

Evans ran businesses including the securities division, equity trading and equity-capital markets in a career that featured positions in New YorkLondon and Hong Kong. In 2011, he was named to lead the emerging-markets units as part of Blankfein’s push to be “Goldman Sachs in more places.”

“Michael’s deep commitment to the firm, his unrelenting focus on our clients and his broad global market knowledge have left an extraordinary mark at Goldman Sachs,” Blankfein, 59, said in the statement.

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How could JPMorgan settlement will cost bank closer to $9 billion?

Source: Ruters

Source: Ruters

According to Reuters, JPMorgan Chase & Co’s preliminary $13 billion mortgage settlement with the U.S. government could end up costing the bank closer to $9 billion after taxes, because the majority of the deal is expected to be tax deductible, two sources familiar with the matter said.

The deduction also means the government is getting less than it appears in this deal. Banks can often deduct legal settlements from their taxes, but cannot get tax benefits from penalties for violating laws.

JPMorgan and the U.S. government have been negotiating the tax treatment of the settlement. The outcome could have a dramatic impact on exactly what the deal ends up costing the bank, how it is perceived by the public and whether it becomes a model for resolving government investigations of mortgage deals at other banks.

JPMorgan is negotiating the settlement with a group of government agencies led by the Justice Department, and the deal is expected to include a $2 billion penalty, one source said.

But another $4 billion of the deal, which will go toward aid for struggling mortgage borrowers, is tax deductible, another person familiar with the negotiations said.

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Recent SEC ‘Bad Actor’ Provisions For Hedge Funds, Private Equity Funds, Could Unearth Unethical Backgrounds Of Executives: Securities Lawyers

Recent SEC ‘Bad Actor’ Provisions For Hedge Funds, Private Equity Funds, Could Unearth Unethical Backgrounds Of Executives: Securities Lawyers

Recent regulations unearthing the legal backgrounds of those who sell private securities could lead to nervousness and layoffs among hedge fund and private equity executives, according to securities lawyers.

The major 2010 Dodd-Frank financial reforms required the Securities and Exchange Commission to adopt so-called “bad actor” provisions, which bar those convicted of financial crimes from selling private securities. The commission adopted these rules earlier in July.

Although only crimes committed after September 2013 will automatically disqualify private fundraisers, the provision still requires investment executives to at least disclose past convictions to investors.

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S.E.C. Rejects Its Own Deal With Hedge Fund Manager

S.E.C. Rejects Its Own Deal With Hedge Fund Manager

The Securities and Exchange Commission overruled its own enforcement division’s decision to settle a civil case with the high-flying money manager Philip A. Falcone and his flagship hedge fund, a rare reversal that signals a broader crackdown by the agency.

The S.E.C. recently notified Mr. Falcone and the fund, Harbinger Capital Partners, that the agency’s five commissioners had rejected “the previously disclosed agreement in principle,” according to a public filing his company made on Friday. The charges stemmed from allegations that Mr. Falcone manipulated the market, used hedge fund assets to pay his own taxes and secretly favored select customers at the expense of others.

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Hedge Funds Ask SEC to Limit Liability in Solicitation Rule

The Hedge Fund Association—which represents investors, hedge funds and service providers— has asked the Securities and Exchange Commission to specifically tell private fund managers what they will need to do to safely verify whether investors are accredited once a new rule allowing solicitation and advertising of private funds is finalized.

Last month, the SEC approved a proposed rule to eliminate the current prohibition against general solicitation and advertising for private securities offerings. The proposed exemptions, mandated by the JOBS Act, focus on offerings conducted under Rule 506 of Regulation D. The elimination of the prohibition, as well as a similar one contained in Rule 144A of the Securities Act, permits general solicitation as long as issuers “take reasonable steps to verify” that all of the purchasers are accredited investors.

Concerns have been voiced that the guidance thus far for screening accredited investors is overly broad. In a comment letter to the SEC on Thursday, the HFA lauded its “good intent” regarding proposed standards for verifying investor accreditation,but proposed that the end result might go against the original intent of the JOBS Act, “to increase employment by making it simpler for private companies to raise money from investors.”

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