All has been quiet on the SAC Capital front for a couple of weeks now, at least publicly. Behind the Wall, however, banks that partner with the hedge fund are reportedly sweating bullets.
People close to the matter told CNBC that Wall Street executives whose firms have close ties to SAC are worried, and for more reasons than one. The first is rather obvious, and one we’ve pointed out before. SAC is a trading machine that moves markets with its $15 billion in assets and hundreds of billions more in leverage – money borrowed from banks.
The Connecticut hedge fund reportedly borrows roughly $3 for every $1 in the fund, but that’s just in a snapshot. Over time, SAC likely borrows and trades at historic levels, paying billions in fees to banks and brokers like Merrill Lynch, Barclays, BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs and Morgan Stanley. You then come to understand why Goldman Sachs President Gary Cohn called SAC “a great counterparty” just last week, despite the insider trading charges.
The second concern – besides money – is liability. CNBC suggests that brokers and their employees could be subject to criminal charges for "aiding and abetting" SAC by providing funds reportedly used for insider trading. The legal flexibility granted to prosecutors under Dodd Frank is what’s really scarring big banks. Several have already begun conducting internal investigations as to whether red flags should have popped up and been reported.
It would be awfully difficult for the SEC or other watchdogs to prove that banks and bankers should have known better, and acted on those presumptions, but you never know. They’re still riding high from the Fabrice Tourre verdict, and that case was rather speculative in its own right.
The SEC is Hiring (eFinancialCareers)
The SEC doesn’t always target former Wall Streeters, but it hires plenty of them. We talked to Lacey Dingman, the director of the office of human resources at the SEC, to find out what they’re looking for.
Dangerous Game (WSJ)
Private equity firms are adding debt to companies that they own at record pace as they seek to pay out investors before interest rates rise. They’re also increasing their risk of default.
Does it Take a Man to Bring “Gravitas” to the Fed? (eFinancialCareers)
The underlying or hidden sexism exists at a far deeper level than any whispering done behind closed doors. Even as Janet Yellen competes for the most powerful position in her career, she faces the same underlying discrimination as any other woman in business or finance.
Lousy Scores (Business Insider)
Only 49% of test takers passed the CFA Level III exam. The pass rate has only fallen below 50% twice before in the history of the exam.
Necessary Cuts (Biz Journals)
Bank of America will cut an additional 209 jobs within its troubled mortgages unit in Pittsburg. Good news for the mortgage industry, bad news for the 209.
Deutsche Building Asset Management Arm (MarketWatch)
Deutsche Asset & Wealth Management added three new members to its New York team, including Richard Glass, who is leaving his own asset management firm to lead Deutsche’s U.S. Head of Small and Mid Cap Value Equities fund.
Exchange Outage (WSJ)
Stock-exchange operator BATS Global Markets suffered an outage on Tuesday. Customers were unable to process orders for roughly an hour. No details yet on what caused the outage.
Persuasive Tongue (Bloomberg)
Big names at Barclays’s U.S. oil and gas team, including co-head Gregory Pipkin, seriously considered leaving the firm in April due to the compensation and regulatory pressures facing European banks. They were coerced to stay by Hugh “Skip” McGee, Barclays’ new CEO of the Americas.
Buzz Around the Office
Tell Me How You Really Feel (Daily Mail)
The results of a new study suggest that women don’t have all that much faith in the abilities of their opposite sex. Men rated well at killing spiders, barbequing, getting drunk at family functions and buying the wrong-sized clothes for their partner. We’re useless at basically anything else.
List of the Day: Getting Settled
Feeling unconfident at your new job? Do this.
- Remember why you’re there.
- Trust the training process.
- See your bosses as people too.
(Source: The Daily Muse)