The SEC goes against the grain
Gary Gensler, who in his first year as president of the SEC Raised alarms about how shares are traded, today they are expected to preview new market rules that could limit some of the deals that critics have said allow Wall Street firms to take advantage of individual investors.
The potential changes come about a year and a half after the AMC, GameStop, and other shares so-called meme titles soared by hundreds of percentage points in a matter of days. During the rally, a number of retail intermediaries, including Robinhood, prevented clients from buying more shares, prompting investigations by lawmakers and others. Many of the shares of the companies involved eventually collapsed. Melvin Capital, a hedge fund that took big losses when shares of GameStop and others soared, recently announced it was closing.
The SEC’s push for change is an indirect attack on “payment by order flow,” a practice long controversial on Wall Street. It allows brokers like Robinhood to sell the right to execute retail investor deals to larger companies and wholesalers like Citadel Securities, potentially allowing them to profit by betting against less powerful and knowledgeable players.
Many already complain about the possible changes. Robinhood’s commission-free trading is made possible in large part by the revenue from the payment of the order flow. So while eliminating that practice could restore trust, as suggested by DealBook, brokers should develop new business models. (A Robinhood spokesperson declined to comment.) Some major wholesalers told DealBook that the SEC had turned down their contribution, but the big trading companies argued that the reported solution would only harm the kids. “The view is that paying for order flow somehow compromises the integrity of the market, but the evidence shows that retail investors are getting a good deal,” the former chief economist told DealBook. SEC SP Kothari.
The SEC hasn’t said publicly how its potential solution would work. Former officials and market participants say the regulator is likely to propose a change in how trades are measured and executed. Instead of most stock transactions going directly to large trading companies, the new rules are likely to force most buy and sell orders to be completed through auctions hosted by stock exchanges. The idea is that auctions guarantee investors the best execution price on each trade, rather than on aggregate trades. The question, according to former SEC director of markets Brett Redfearn, is whether the path changes would serve investors or markets.
Critics expect a shift in power dynamics, but not a real solution. Here’s what they see happening. Exchanges would offer brokers incentives, replacing wholesalers’ payments; wholesalers would be transaction demanding, with no performance guarantees based on wholesale transactions; intermediaries should try harder and may start charging fees; and retailers would either participate less or pay more. Markets may also become less vibrant as there would be little incentive to execute many trades and business would end up concentrating on the higher end of stocks. “The key will be an economic analysis, if the benefits outweigh the costs,” Redfearn said. He suspects they can’t.
THIS IS WHAT HAPPENS
Treasury Secretary Janet Yellen says high inflation is likely to persist. Yesterday he verified that the Biden administration was it will likely revise its inflation forecasts upwards. The same day, the World Bank further cut its global growth forecast this year, citing the damage caused by the pandemic and the Russian invasion of Ukraine.
Trader Joe faces his first union election. Employees at a Trader Joe’s in Western Massachusetts last night he filed a request for a union election which if successful would create the retailer’s only union, which has more than 500 locations and 50,000 employees nationwide. The success of the unionization votes of Starbucks, REI and Amazon follows.
Credit Suisse expects another quarterly loss. Affected by market volatility, monetary tightening, the war in Ukraine and rising legal bills, the Swiss lender has issued three profit notices this year. It is shrinking its investment bank and refocusing on wealth management.
A culture clash on TikTok is reportedly triggering an exodus.The tension in TikTok’s e-commerce division between the platform’s Chinese owners and some of its London employees has led to many staff members leaving since the company launched TikTok Shop in the UK in October. The Financial Times reports it. Joshua Ma, a senior executive at ByteDance, which owns TikTok, allegedly said at a dinner this year that he didn’t believe companies should offer maternity leave.
Billionaire Rob Walton has reached a tentative deal to buy the Denver Broncos. The sale to Walton and members of the Walton and Penner families, who amassed their fortunes largely through their Walmart holdings, is expected to exceed $ 4 billion. a record price for an NFL franchise. The announcement of the Broncos and Walton ends a long tussle between the children of the team’s longtime owner Pat Bowlen, who passed away in 2019 at the age of 75.
Tesla’s stock analyst solves the SEC’s “accounting gimmick” case
Dan Ives, a prominent tech stocks analyst, dismissed SEC allegations that it was part of a long-standing scheme that allowed a company to report misleading sales figures.
the settlement announced yesterday, which involved a 2017 case involving Synchronoss Technologies, a New Jersey telecommunications company in which Ives headed investor relations before taking up his current job at brokerage firm Wedbush Securities. Ives, which covers Tesla and other companies, is widely quoted in the media.
Ives declined to comment on DealBook on the deal. Ives resolved the allegations without admitting or denying wrongdoing, as is standard practice in SEC agreements. A Wedbush spokesperson told DealBook that the case had been resolved and would not affect Ives’ role at the company.
It is one of several recent deals with the SEC, which is starting to bring more cases of financial misconduct, according to Thomas Gorman, a Dorsey & Whitney attorney who closely follows the regulator. Gorman said, however, that the Synchronoss case has been unusual in recent years as it involved a Wall Street analyst, albeit not in his current position. In the 1990s, several high-profile cases were brought against analysts who helped advertise some tech stocks as the dot-com bubble expanded.
According to the SEC, Ives and six other executives at the company used “accounting gimmicks” to book at least $ 190 million in sales that they didn’t actually make. The SEC says Ives and others have arranged a series of “collateral letter” arrangements “for which revenue has been improperly recognized.” In one case cited by the regulator, Ives helped negotiate a deal in which Synchronoss advanced a consultant $ 4 million so that he could buy and then resell $ 3.6 million of software from Synchronoss. Ives promised the advisor that Synchronoss would cover any losses from the transaction. The deal was signed last December 31, 2016, the last day the company could book a sale for the year.
Synchronoss paid $ 12.5 million to settle the charges against the company. Ives paid $ 15,000 to settle the charges against him and agreed to complete 30 hours of compliance training related to “revenue recognition and / or accounting fraud.”
“There is a lack of data to give the public confidence that these systems, as implemented, live up to the expected security benefits.”
– J. Christian Gerdes, co-director of Stanford University’s Center for Automotive Research, Hon the difficulty of verifying the complaints of car manufacturers and technology companies on the characteristics of autonomous driving.
A test of the US anti-hacking law
Almost three years after the disclosure of one of the largest data breaches in the United States, the former Amazon employee accused of stealing customer personal information from Capital One is on trial in a case that will test the power of American law. anti-hacking. Kate Conger of the Times reports it. Defendant, Paige Thompson, faces 10 counts of computer fraud, computer fraud and identity theft in a federal trial that began yesterday in Seattle.
Thompson is accused of violating an anti-hacking law known as the Computer Fraud and Abuse Act, which prohibits access to computers without authorization. In 2019, several years after he quit working for Amazon Web Services, Thompson looked for service customers who had not properly configured their firewalls to protect their data. She found files belonging to Capital One and downloaded personal information on more than 100 million of the bank’s customers, the Justice Department said. Ms. Thompson pleaded not guilty, and her lawyers say her actions – scanning vulnerabilities online and exploring what they exposed – were those of a “novice white hat hacker.”
Critics of the cyber fraud law have said it is too broad and it can penalize people who discover vulnerabilities in online systems or break digital deals in benign ways (such as using a pseudonym on a social media site that requires users to use their real name). The supreme court narrowed the scope of the law last year And in April a federal appeals court has determined that the automated collection of data from websites, known as web scraping, does not violate the law. Last month, the Department of Justice told prosecutors they should no longer use the law to prosecute hackers involved in “bona fide security research.”
Thompson’s trial will raise questions about how far security researchers can go before the search for cyber security holes breaks the law. Thompson’s lawyers said they engaged in practices used by legitimate security researchers. But prosecutors said Thompson intended to use the collected information for identity theft and that she took advantage of her access to corporate servers in a scheme to mine cryptocurrency.
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