Wednesday, April 29, 2015

Tuesday, April 28, 2015 Recap: Ex-Evercore Banker & Girlfriend Charged, IMF on Islamic Banking, Bank Profitability, and a $600K Payday For Whistleblower

A summary of federal regulatory actions and government announcements for investors on Tuesday, April 28, 2015:  

The SEC won an order against Frank Perkins Hixon, Jr., former employee of Evercore Partners Inc.(NYSE: EVR) his father and former girlfriend. The order gave the SEC the right to disgorge $920K and another $1.2M in restitution to his employer. He used material nonpublic information learned from his job to make trades under his father, Frank P. Hixon, Sr., and former girlfriend, Destiny Robinson's, account. Inside trades were made on Westway Group, Inc. (NASDAQ:WWAY), Titanium Metals Corporation (formerly NYSE: TIE), and Evercore Partners, Inc. The judgment also ordered him to pay a civil penalty of $682,500. Hixon Jr., or "Perk" as he was known on the street, was already sentenced to 30 months in prison followed by three years of supervised release. 

The International Monetary Fund published a working paper entitled Is Islamic Banking Good for Growth? The paper suggests there's a direct relationship between Islamic banking development and economic growth. Of course it also makes me wonder if a working paper entitled Is Christian Banking Good For Growth or Is Judeo Banking Good For Growth would be considered appropriate, but I digress. That said, the paper makes an interesting point about the rise of Islamic Banking.

SeekingAlpha published the paper Is Bank Profitability Linked To Fed Funds? which shows a clear link between an increase in the fed funds rate (IOER) and bank profitability. In 2008, the Fed started paying interest on reserves and excess reserves. Today, the rate for both is .25%, but it will probably go up this year. If the FOMC sets the fed funds rate to 3% over the next 5 years it will pay $156 billion to banks in interest. In this piece I look at how much banks stand to profit from this lending arrangement.

The Securities and Exchange Commission (SEC) announced that it would be giving $600,000 to a whistleblower, the maximum award payment allowed in connection with charges against Paradigm Capital Management, Inc. According to the announcement, the whistleblower "suffered unique hardships, including retaliation, as a result of reporting to the Commission." Paradigm was also charged with retaliation. To date, the SEC has awarded 17 whistleblowers over $50 million.
Upcoming Events & Meetings:

The U.S. Commodity Futures Trading Commission (CFTC) announced a public meeting of the Global Markets Advisory Committee (GMAC) on May 14 at CFTC’s headquarters from 2 pm to 5:30pm. The focus of the meeting will be on issues "related to assessing clearinghouse safeguards and the CFTC’s proposal on the cross-border application of its margin requirements for uncleared swaps." Two panels have been created to address issues. The meeting is open to the public and seating is available on a first-come, first-served basis. You can also listen to the meeting via conference call: 1-866-844-9416, Code: CFTC. Location: CFTC Headquarters lobby-level Hearing Room, 1155 21st Street, NW, Washington, DC 20581. 

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