Saturday, May 23, 2015

Wednesday, May 20, GAFI Recap: BHP Billiton, Data Jobs Pay $41.04/hr, New Reporting Rules, FOMC Minutes, Real GDP & Arjent LLC

Why Are Interest Rates So Low? 
SEC charges BHP Billiton  
Fed announces more charges against banks
Data jobs pay more? How much?
SEC votes for stronger reporting rules 
The FOMC released minutes from the last meeting
Real GDP increased .2%  
SEC charges Arjent LLC

  • A working paper published by the Federal Reserve titled Why Are Interest Rates So Low?  analyzes the former Chairman of the Federal Reserve System, Ben Bernanke's, three part post about why interest rates are so low.  The paper suggests that Bernanke believes rates are low due to a reduction in the natural rate of interest, saying that "Monetary policy has largely accommodated the decline in the natural rate of interest, in order to mitigate the adverse effects of the crisis, but the zero lower bound on interest rates has imposed a constraint on the ability of interest rate policy to stabilize the economy." The operative phrase is "the zero lower bound on interest rates has imposed a constraint." It implies that the Fed may be inclined to raise rates more so out of a need to be able to impose monetary policy than a real need to tighten economic policy.
  • The SEC charged BHP Billiton with violating the Foreign Corrupt Practices Act (FCPA) as it sponsored the "attendance of foreign government officials at the Summer Olympics." The company has agreed to pay $25 million in penalties to settle the charges. The charges allege that BHP Billiton did not maintain sufficient controls over the program after the company invited over 150 government officials to attend the Games at BHP's expense. “BHP Billiton footed the bill for foreign government officials to attend the Olympics while they were in a position to help the company with its business or regulatory endeavors,” said Andrew Ceresney, Director of the SEC’s Division of Enforcement.
  • The Fed announced that it will impose $342 million each for UBS AG, Barclays Bank PLC, Citigroup Inc., and JPMorgan Chase & Co.; $274 million for Royal Bank of Scotland PLC (RBS); and $205 million for Bank of America Corporation. The Fed also issued cease and desist orders over activities in wholesale FX. Five banks were charged with failing to detect illegal agreements between traders. Bank of America was charged with failing to detect traders that merely discussed the possibility of entering illegal agreements. The Federal Reserve also found UBS, Citigroup, JPMorgan Chase, and Barclays conducted unsafe FX sales. Action is being taken against UBS, Barclays, Citigroup, JPMorgan Chase, and RBS alongside charges from the Department of Justice (DOJ) regarding the FX markets, however, Bank of America was not part of the actions taken by the DOJ. Other actions from entities such as the Connecticut Department of Banking and the New York Department of Financial Services are taking separate actions.
  • According to the Department of Commerce's Economics & Statistics Administration data jobs are growing at a faster clip than non-data jobs. "The unemployment rate for data jobs was just 3.1 percent in 2014, or half the national average," said the official announcement. Data jobs are defined as occupations where data analysis is central to the work performed. 
    Source: Department of Commerce's Economics & Statistics Administration
    The average pay in the private sector for data jobs was $41.04 an hour.  During the Great Recession the unemployment rate related to data jobs was 4.9 percent compared to 9.6 percent for the national average. 
  • SEC voted for stronger reporting rules for investment companies and investment advisers. “These recommendations will vastly improve the type and format of the information that funds provide to the Commission and to investors,” said SEC Chair Mary Jo White.  The new reporting requires a new monthly portfolio reporting form, Form N-PORT. The form will ask for the following information as listed in the press release:
  • Data related to the pricing of portfolio securities.
  • Information regarding repurchase agreements, securities lending activities, and counterparty exposures.
  • Terms of derivatives contracts.
  • Discrete portfolio level and position level risk measures to better understand fund exposure to changes in market conditions.
The proposed rules also call for a new annual reporting form, Form N-CEN, which requires "registered funds to annually report certain census-type information to the Commission and would replace the form currently used to report fund census information (Form N-SAR)."  Additionally, funds must report data in a structured data format, and provide more information about fund financial statements, particularly relating to the fund’s securities lending activities. The new rules also allow mutual funds and other registered investment companies to provide shareholder reports on their website instead of printing and mailing. The comment period for the rules will be open for 60 days.
Source: BEA
  • The Federal Reserve Board and the FOMC released the minutes of the meeting held on April 28-29. I'll discuss my views on the minutes in an upcoming post. 
  • Real GDP increased .2% in the fist quarter compared to 2.2% in the fourth quarter of 2014. The drop was blamed on weather, strength in the dollar, West coast labor disputes, and lower energy prices. Lower energy prices may have dampened the energy economy but it also helped consumer spending, as can be seen in the chart to the right, as well as investments in inventory. However, exports, nonresidential fixed investment, and imports are down considerably.  
  • The SEC alleges that Arjent LLC and its UK-based affiliate Arjent Limited misrepresented themselves to investors on the value of the firm's assets and how investor money would be used. The CEO allegedly transferred the first $2.3 million raised in an offering directly to his own bank account and used it for his personal benefit.“We allege that DePalo and Gladtke sold overvalued interests in Pangaea and then raided investor funds for their own personal benefit,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office. The New York County District Attorney’s Office also announced criminal charges against Robert P. DePalo and Joshua B. Gladtke. Gregg A. Lerman was also named in the charges.