Citigroup just sold $4.5 billion of shares of its stock, and sold an additional $6 billion preferred stock sale. Reports are that it is likely to face more write-downs in the future and may need to raise even more capital.
According to reports of analyst reports, Citigroup management has shifted from believing it was essentially done raising new capital to signaling it is interested in raising more capital.
The willingness to raise more money is a warning sign to some investors, because companies are typically reluctant to issue equity capital, which can be dilutive and boost dividend obligations.
The financial services meltdown isn't over yet. How many brokers are going to be jumping ship in light of this piece of news?
Wednesday, April 30, 2008
Friday, April 18, 2008
Citigroup Loses $5.1 Billion and 9,000 jobs
Losing $5.11 billion dollars in a quarter is bad enough, but Citigroup is also cutting 9,000 jobs. I wonder how many of those jobs are going to be in the executive suite?
Thursday, April 17, 2008
Merrill Lynch posts big loss - Yahoo! News
Merrill Lynch posted a nearly $2 billion first-quarter loss, and said it plans to cut 4,000 jobs after suffering several billion dollars of write-downs for subprime mortgages and other risky assets.
Merrill Lynch posts big loss - Yahoo! News
Merrill Lynch posts big loss - Yahoo! News
Tuesday, April 8, 2008
Comment Period on Motions to Dismiss Ends Thursday
As everyone now knows, FINRA has a rule proposal pending to eliminate motions to dismiss in arbitrations. The comment period ends on Thursday, and very few comments have been submitted. The ones that have been made are almost uniformly in favor of the rule.
FINRA's proposal will effectively eliminate motions to dismiss in arbitrations prior to the presentation of Claimant's case. While those motions are rarely granted, some are granted, and motions made during the course of discovery are also granted. Such motions are a valid part of the arbitration process, and serve to limit the scope of a proceeding, or the length of a hearing.
And there are times when a motion to dismiss should be made at the outset, and all of these motions will be banned under the new proposal - for example, motions based on the statute of limitations, motions based on an absolute privilege, and motions based on res judicata.
FINRA claims that the proposal is necessary because arbitrations are being delayed by frivolous motions. Of course, if that is true, there are other ways to deal with the issue, rather than simply ban motion practice.
Before motion practice goes the way of subpoena issuance, you might consider submitting a comment on the proposed rule.
The comment period ends on Thursday, April 10.
The rule proposal is at http://www.sec.gov/rules/sro/finra/2008/34-57497.pdf
The comment page is at http://www.sec.gov/comments/sr-finra-2007-021/finra2007021.shtml
You can submit comments at http://preview.tinyurl.com/47wsh8
FINRA's proposal will effectively eliminate motions to dismiss in arbitrations prior to the presentation of Claimant's case. While those motions are rarely granted, some are granted, and motions made during the course of discovery are also granted. Such motions are a valid part of the arbitration process, and serve to limit the scope of a proceeding, or the length of a hearing.
And there are times when a motion to dismiss should be made at the outset, and all of these motions will be banned under the new proposal - for example, motions based on the statute of limitations, motions based on an absolute privilege, and motions based on res judicata.
FINRA claims that the proposal is necessary because arbitrations are being delayed by frivolous motions. Of course, if that is true, there are other ways to deal with the issue, rather than simply ban motion practice.
Before motion practice goes the way of subpoena issuance, you might consider submitting a comment on the proposed rule.
The comment period ends on Thursday, April 10.
The rule proposal is at http://www.sec.gov/rules/sro/finra/2008/34-57497.pdf
The comment page is at http://www.sec.gov/comments/sr-finra-2007-021/finra2007021.shtml
You can submit comments at http://preview.tinyurl.com/47wsh8
Ex-Brookstreet brokers file $36M claim
According to InvestmentNews, five brokers at the center of the collapse of Brookstreet Securities Corp. have filed a $36 million arbitration complaint against Brookstreet’s former clearing firm, National Financial Services LLC, alleging that hundreds of millions of dollars that clients lost in highly leveraged collateralized mortgage obligations were directly attributable to National Financial Services’wrongful conduct.
According to the article, the brokers are alleging that NFS forced a liquidation of customer securities. I don't know anything about the case, but if those are margin liquidations in customer accounts, without more that is a difficult case. Marging agreements allow for the liquidation of margined securities to meet a call, and while a particular case will turn on the language of the margin agreement, the agreements that I am familiar with allow the clearing firm to do just about anything.
But, agreements can be modified by writings, and by conduct, so this one will be interesting to watch. And there is the twist that it is the brokers, not the customers, who are suing.
If anyone has a copy of the pleadings, I would appreciate a copy - at astarita@beamlaw.com.
According to the article, the brokers are alleging that NFS forced a liquidation of customer securities. I don't know anything about the case, but if those are margin liquidations in customer accounts, without more that is a difficult case. Marging agreements allow for the liquidation of margined securities to meet a call, and while a particular case will turn on the language of the margin agreement, the agreements that I am familiar with allow the clearing firm to do just about anything.
But, agreements can be modified by writings, and by conduct, so this one will be interesting to watch. And there is the twist that it is the brokers, not the customers, who are suing.
If anyone has a copy of the pleadings, I would appreciate a copy - at astarita@beamlaw.com.
SEC Charges Five San Diego Officials with Securities Fraud
It is rare that you see the SEC filing charges against government officials, but yesterday the Commission announced that it had filed securities fraud charges against five former San Diego city officials who played key roles in the city’s inadequate municipal securities disclosures in 2002 and 2003.
According to the press release (linked above) the SEC charged the former officials for failing to disclose to the investing public buying the city’s municipal bonds that there were funding problems with its pension and retiree health care obligations and those liabilities had placed the city in serious financial jeopardy.
The SEC’s complaint, filed in federal district court in San Diego, charges former City Manager Michael Uberuaga, former City Treasurer Mary Vattimo, former Auditor & Comptroller Edward Ryan, former Deputy City Manager of Finance Patricia Frazier, and former Assistant Auditor & Comptroller Teresa Webster.
This might be one way to get politicans to be candid with the masses.
According to the press release (linked above) the SEC charged the former officials for failing to disclose to the investing public buying the city’s municipal bonds that there were funding problems with its pension and retiree health care obligations and those liabilities had placed the city in serious financial jeopardy.
The SEC’s complaint, filed in federal district court in San Diego, charges former City Manager Michael Uberuaga, former City Treasurer Mary Vattimo, former Auditor & Comptroller Edward Ryan, former Deputy City Manager of Finance Patricia Frazier, and former Assistant Auditor & Comptroller Teresa Webster.
This might be one way to get politicans to be candid with the masses.
Bear Stearns, Deloitte Sued Over Hedge Fund
The problems for Bear Stearns seem to keep on coming. After its fire sale to JP Morgan, today's news is that the liquidators of two of its hedge funds that collapsed last year, have filed suit against the company and its auditor, Deloitte & Touche seeking to recover over $1 billion in losses.
The suit, filed in U.S. District Court in Manhattan, accuses Bear, the managers of the hedge fund, and Deloitte, of not living up to assurances that the funds were relatively safe and conservative investment vehicles.
According to the Reuters article, the plaintiffs allege that the funds were not designed to withstand even a "slight downtick" in the housing market and that Bear Stearns "conceived, marketed and managed hedge funds that they knew would be viable so long as - but only so long as - the U.S. housing market continued to rise," the suit said.
The suit charges that the company, the fund managers, and Deloitte violated their fiduciary and professional duties. The suit said Deloitte's preparation of the funds' audits was "at a minimum negligent."
An interesting series of allegations against Bear - do the plaintiffs really believe that they created a hedge fund that would fall apart if the housing market fell apart?
The suit, filed in U.S. District Court in Manhattan, accuses Bear, the managers of the hedge fund, and Deloitte, of not living up to assurances that the funds were relatively safe and conservative investment vehicles.
According to the Reuters article, the plaintiffs allege that the funds were not designed to withstand even a "slight downtick" in the housing market and that Bear Stearns "conceived, marketed and managed hedge funds that they knew would be viable so long as - but only so long as - the U.S. housing market continued to rise," the suit said.
The suit charges that the company, the fund managers, and Deloitte violated their fiduciary and professional duties. The suit said Deloitte's preparation of the funds' audits was "at a minimum negligent."
An interesting series of allegations against Bear - do the plaintiffs really believe that they created a hedge fund that would fall apart if the housing market fell apart?
Sunday, April 6, 2008
Comments Due on FINRA's Proposed Ban of Motions to Dismiss
FINRA's controversial rule change proposal, which would effectively force every arbitration case to a full hearing, regardless of the merits of the claim, is before the SEC for approval.
The comment period ends on April 10, 2008. The claimant's bar has submitted their glowing support for the ban (not too much of a surprise there), there have been very few comments from the defense bar.
Given the fact that this rule means that firms will be forced to pay for representation at multiple hearing sessions in every case that anyone cares to file against them, one would imagine there would be strong opposition to this proposal from the broker-dealers.
Yet not one letter in opposition from a brokerage firm.
I previously wrote about this proposal here.
The text of the rule proposal available at
http://www.sec.gov/rules/sro/finra/2008/34-57497.pdf
Comments can be submitted online.
The comment period ends on April 10, 2008. The claimant's bar has submitted their glowing support for the ban (not too much of a surprise there), there have been very few comments from the defense bar.
Given the fact that this rule means that firms will be forced to pay for representation at multiple hearing sessions in every case that anyone cares to file against them, one would imagine there would be strong opposition to this proposal from the broker-dealers.
Yet not one letter in opposition from a brokerage firm.
I previously wrote about this proposal here.
The text of the rule proposal available at
http://www.sec.gov/rules/sro/finra/2008/34-57497.pdf
Comments can be submitted online.
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