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Goldman elevates Cohen in shake-up; JPMorgan fined $920M for spoofing

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Shake it up

Goldman Sachs named Stephanie Cohen as co-head of its consumer and wealth management business, “making her the first woman to lead a major division at the Wall Street bank in several years,” the Financial Times reported.

“The appointment was part of a broad shake-up of the divisions outside Goldman’s trading and investment banking core. The structure unites Goldman’s consumer and wealth management businesses — to be jointly run by Ms. Cohen, the bank’s current strategy head, and Tucker York, its current wealth management head — and puts its asset management unit and merchant bank into the same division. The result is a clean separation between consumer and institutional businesses.”

“The change marks the first time in years that a woman will run a major division at the firm,” the Wall Street Journal said. “Goldman Kremlinologists will find plenty to dissect in the moves. Ms. Cohen, a favorite of [CEO David] Solomon, gets a division to run—a must-have for executives with their eye on the C-suite.”

No joke

JPMorgan Chase “agreed to pay $920 million and admit misconduct tied to manipulation of precious-metals and Treasury markets,” the Journal reported. “The settlement resolves investigations by the Justice Department, Commodity Futures Trading Commission and the Securities and Exchange Commission. The fine is the largest the CFTC has ever imposed for spoofing, a type of market manipulation.”

“The settlement is just the latest move from prosecutors and regulators that began cracking down on spoofing in 2014. Since then, the Justice Department has charged 20 people with spoofing-related crimes, and banks and other financial institutions have collectively paid more than $1 billion in fines tied to civil and criminal spoofing probes. The agreement announced Tuesday is particularly notable because it involved claims that traders spoofed to manipulate the price of Treasury securities, one of the largest and most liquid trading markets in the world.”

“The record fine is a notable step-up in punishment from regulators, who have been pushing to curb spoofing since the rise of rapid-fire, computer-driven trading on global markets over the last fifteen years,” the FT said. “The violations, which covered thousands of trades, included numerous traders and sales personnel on JPMorgan’s precious metals desk located in New York, London, and Singapore.”

To resolve criminal charges, the bank “entered into a deferred prosecution agreement with the Justice Department,” the Washington Post said. “The bank is required to self-report violations of federal anti-fraud laws and cooperate in any future criminal investigations.”

Wall Street Journal

All is forgiven

The Treasury Department said “it would begin forgiving loans granted to small-business owners under the Paycheck Protection Program, following banks’ and borrowers’ complaints that the process had been bogged down. The government expects to approve and pay forgiveness requests by late this week or early next. The applications are generally expected to be approved quickly, with the exception of loans above $2 million that will get added scrutiny.”

Under a proposed $2.2 trillion stimulus package introduced by House Democrats, PPP loans of $50,000 or less would be automatically forgiven, American Banker’s John Reosti reports. But bankers have mixed views of the latest proposal to revamp the PPP.

Financial Times

Wirecard fallout continues

German police raided the headquarters of state-owned bank KfW earlier this month “as part of a criminal investigation into employees who approved an unsecured €100 million loan” to Wirecard, the failed German payments company. “Wirecard’s own headquarters on the outskirts of Munich were raided by police on Tuesday as part of the same investigation.”

A KfW subsidiary “in September 2018 agreed to an unsecured loan over €100 million to Wirecard and then extended it last year. Following Wirecard’s collapse in June, KfW sold the loan to a distressed-debt investor, taking a huge but undisclosed loss. The focus of the investigation is whether KfW’s decision to make and extend the loan may have been a breach of fiduciary duty.”

Separately, Ernst & Young, Wirecard’s auditor, “was warned in 2016 by one of its own employees that senior managers at Wirecard may have committed fraud and one had attempted to bribe an auditor. The revelation that an EY employee identified suspicious activity at Wirecard four years before the payments group imploded in Germany’s largest postwar corporate fraud will increase the pressure on the accounting firm, which audited Wirecard for more than a decade and provided unqualified audits until 2018.”

“EY is already under investigation by Germany’s auditor oversight body Apas and is the target of lawsuits from Wirecard investors who lost billions of euros when the company collapsed in June.”

Quotable

Spoofing is illegal—pure and simple. This record-setting enforcement action demonstrates the CFTC’s commitment to being tough on those who intentionally break our rules, no matter who they are.” — CFTC Chairman Heath Tarbert, announcing a record $920 million settlement with JPMorgan Chase.

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