eFC Briefing: 'Moses Lifted Up His Hand...'

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Four-year old trading technology firm SecondMarket grows by giving investors tools to trade illiquid assets, from auction-rate securities to limited partnership interests. Investment banks mull boosting executives' base salaries after Congress restricts bonuses. Scrutiny of staff pay in public retirement funds could paradoxically benefit the industry.

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If an avalanche blocks the road, pave a path around it. That's the idea behind a series of new illiquid-asset trading markets designed and operated by SecondMarket Inc. By building new avenues to trade various kinds of assets whose traditional venues seized up, SecondMarket actually is gaining business from the financial crisis. The four-year old New York-based firm has doubled its workforce to 100 in the last 12 months, and shows no sign of slowing down. It's currently looking to add 14 heads, including a general counsel, a CDO market director, and several technology roles.

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Adapting to congressional concerns about distorted incentives, investment banks are considering raising base salaries of top-paid employees whose bonuses were limited under the economic stimulus package enacted last month. "The trend is to increase the base pay in light of the reduced bonuses," Scott Talbott, senior vice president of government affairs at the Financial Services Roundtable, told The Wall Street Journal. The story names Citigroup and Morgan Stanley as among institutions contemplating such a step. Wells Fargo said last week it raised the base salary of Chief Executive John Stumpf and two others.

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While Congress debates overhauling bankers' compensation, public retirement systems - a far less glamorous corner of the investment world - are being pressed to reform pay practices too. These <a href=https://news.efinancialcareers.com/Blogs_ITEM/newsItemId-17866little-noticed battles over pay within state and local organizations might actually end up helping Wall Street and the fund management business in two ways. Bonus-plan overhauls could sweeten the pot for fund employees during bull-market periods. And some boards could opt to contract out their fund management work rather than put up with undereducated politicians' meritless criticism of staff performance and compensation levels.

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Any tech professionals who thought things were beginning to look up are set to have their hopes shattered, according to new reports that suggest financial services firms are continuing to cut back on IT. Two separate reports by technology consultancies Gartner and IDC say overall IT spending is likely to (slightly) increase this year after all... but not within banking and financial services. While algorithmic trading, complex event processing and system integration work may be providing some much needed hiring, it's looking pretty bearish elsewhere.

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The hedge fund sector's worldwide headcount could shrink by 20,000 jobs or 14 percent in 2009, according to a new forecast by Options Group. Hardest hit are sales and investor relations staff, followed by back-office operations staff and traders, Options Group says. Forecast job losses will be greatest in the New York area and London, followed by Hong Kong and Tokyo. Data compiled by Hedge Fund Intelligence suggests that Options Group's forecast of 20,000 job losses is, if anything, conservative.

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Add Bernard Madoff to the long list of other factors pushing corporations to beef up compliance teams. Amid a dearth of deal-related work, blue-chip law firms are laying off attorneys in unprecedented numbers. Meanwhile, compliance is shaping up as one of a few bright spots in the wake of the Madoff scandal, says American Lawyer's AmLaw Daily.

And while major law firms are awash in layoffs, lawyers who either probe and prosecute or defend against financial fraud charges are gearing up for a boom. Most targets thus far have been loan processors, mortgage brokers and bank officers indicated by numerous state authorities. Now, some public officials apparently hope to raise the ante by pursuing the bogeymen du jour: "executives" and "Wall Street." As the New York Times notes, the Obama administration requested more money for the SEC and for FBI agents to investigate mortgage fraud and white-collar crime. Federal subpoenas could proliferate.

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