Credit Suisse settles nepotism charges; JPM broaches Brexit
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Family business: Credit Suisse agreed to pay $77 million to settle Justice Department and Securities and Exchange Commission charges that it hired friends and family members of Chinese officials to help win business for its Hong Kong subsidiary. The Switzerland-based bank "offered to hire more than 100 employees at the request of foreign officials" between 2007 and 2013, the SEC said. Credit Suisse paid $47 million to the DOJ and $30 million to the SEC.
Credit Suisse is hardly the only bank to hire “princelings” to win business in China. JPMorgan Chase paid $264 million in 2016 to settle similar charges while Citigroup, HSBC, Deutsche Bank, Goldman Sachs and Barclays said federal investigators are looking into their hiring practices. Financial Times, New York Times
Brexit planning: JPMorgan Chase has asked “several dozen” employees in London to consider relocating to other European financial centers, including Paris, Madrid and Milan, according to a memo to employees. The impacted employees are expected to start relocating later this year and in early 2019. About 300 to 400 employees are expected to move out of London once the U.K. exits the European Union next March. Wall Street Journal, Financial Times
Not happy: Clients of hedge-fund manager David Einhorn are losing patience following several years of poor performance, with many of them already cashing out. His Greenlight Capital has shrunk to about $5.5 billion in assets under management, less than half of what it managed four years ago. During that time, the fund has returned negative 11.3%, while the S&P 500 has increased more than 38%.
Another well-known hedge fund manager, Steven Cohen, is facing obstacles in reopening his fund in the U.K. following a two-year ban for insider trading. The Financial Conduct Authority has reportedly ruled that Cohen is not “fit and proper” to reopen the fund. He has received approval in the U.S. to reopen under a different name and structure.
Wall Street Journal
Transformers: Nasdaq says it has developed “early-stage artificial intelligence systems that can write certain financial reports and help detect fraudulent activity, and is considering other ways AI could collaborate with human analysts to enhance services for corporate clients.” Nasdaq, “known for its stock markets and other ventures, sees AI as a transformative technology and is looking for several ways to put it to use to remain competitive.”
Bounty hunters: A small group of “crypto hunters” is helping investors and others locate passwords to retrieve misplaced bitcoin with an estimated value of $20 billion. It seems that in order to retrieve your bitcoin, you need a password, but “unlike an ATM PIN, this password can’t be recovered easily, since there is no bank to retrieve it.” With bitcoin now trading around $6,000, “a waylaid slip of paper, misplaced USB drive or damaged hard drive containing a password could be the key to a small fortune.”
Protection money: Ireland’s central bank has ordered the country’s banks — including its two biggest, Allied Irish Banks and Bank of Ireland — to hold an extra capital buffer of 1% against any “substantial downturns” in the country’s booming economy. The requirement takes effect in July 2019.
New York Times
Stepping on toes: “Evidence is accumulating that the Trump administration might be more willing to question” the Federal Reserve’s independence following comments by Larry Kudlow, the director of the National Economic Council, and the president himself, the paper says. “Investors and others are on the lookout for any encroachment on the Fed’s autonomy.” Kudlow told the paper he was stating a personal opinion when he said he hopes the Fed moves slowly on interest rate hikes. “I respect the Fed’s independence. In no way would I ever seek to undermine it,” he told the paper.
“Credit Suisse Hong Kong’s practice of employing friends and family members of Chinese government officials as a quid pro quo for lucrative business opportunities was both profitable and corrupt, and now the company will pay the price for that corruption.” — Richard Donoghue, U.S. attorney for the eastern district of New York.