You know that Compliance is becoming super cool when job descriptions refer to them as “Swat Teams”

A job posting by JP Morgan lists a role seeking aGlobal Head of the Global Financial Crimes SWAT Team.

The ad,Global Head of Global Financial Crimes SWAT Team, seeks … a senior management compliance position responsible for developing and managing a methodology for considering risk-based specialized reviews. Under the direction of the Global or Deputy Head of Global Financial Crimes Compliance, this position is responsible for identifying proactively potential risks/issues in the GFCC Program and implementing controls to mitigate the identified material risks that the GFCC Program faces…

Although admittedly the full ad starts getting wordy and boring you have to agree and admire that calling a unit within Compliance a Swat Team is a big bold move forward for improving and enhancing the role, morale and image of the Compliance Officer.

Some of us had imaginary friends when we were kids. A few of us were really socially awkward and had imaginary friends when we were teenagers. And some of us were really, really nerdy teenagers and had imaginary robot friends.

But how many of us concocted penny stock swindles using our imaginary robot friend?

In a complaint filed on Friday, the SEC alleges that a pair of British teenage twin brothers did just that.



I am willing to wager that Wall Street scandals will continue indefinitely.


You may think the current money laundering, Libor rate rigging, currency manipulations, insider trading, and other scandals will most surely subside.


One particular item caught our attention which captures the mindset of certain people who wish to work on Wall Street which will always doom us to failure., the largest job aggregation site, reported that job searches for ‘Stockbroker’ skyrocket after the release of ‘The Wolf of Wall Street’.


The acclaimed director Martin Scorsese and star Leonardo DiCaprio naively assert that the “Wolf of Wall Street” is meant as a condemnation of excessive greed.


In reality, the film glamorizes the lifestyle of  Jordan Belfort and his Stratton Oakmont stock broker henchmen as rock stars with over-the-top lavish drug fueled parties, hookers, mansions, Lamborghinis, Hampton summer homes and yachts all bankrolled by money stolen from clients.

The movie does not show chubby , middle-aged, balding, bespectacled, brokers offering prudent investment advice concerning matters such as diversifying your investments, contributing to IRAs, putting money into college funds for your children, dollar-cost-averaging and other essential yet dull reasoned guidance.

So, basically, the aspiring brokers are not looking to help investors, rather they wish to emulate the penny stock brokers by also ripping off clients to finance an  awesome life of  partying with the investors’  hard earned retirement  money.

Searches for stockbroker jobs on  rocketed  80% in the U.S. around the time of the release of the film.

Also, Stockbroker fever caught on in England with a 44% jump in broker job searches.

Welcome to the next generation of stockbrokers and scandals.

First U.S. Shutdown in 17 Years at Midnight Seen Probable

The U.S. government stands poised for its first partial shutdown in 17 years at midnight tonight, after a weekend with no signs of negotiations or compromise from either the House or Senate to avert it.

Republicans and Democrats in Congress say they don’t want a shutdown, though neither side is budging from their positions to avoid one. House Republicans want to delay President Barack Obama’s Affordable Care Act for a year and make other changes to the health law. The president and Democrats vow not to let that happen.

Hanging in the balance are 800,000 federal workers who would be sent home tomorrow if Congress fails to pass a stopgap spending bill before funding expires tonight. Standard & Poor’s 500 Index futures slid and contracts on Asian equity gauges retreated on concerns of a shutdown.

Asked yesterday if he thought the government would shut down, Illinois Senator Richard Durbin, the chamber’s No. 2 Democrat, said, “I’m afraid I do.”

“We know what is going to happen,” Durbin said on CBS’s “Face the Nation” program. “We are going to face the prospect of the government shutting down.”

The fallout would be far-reaching: national parks and Internal Revenue Service call centers probably would close. Those wanting to renew passports would have to wait and the backlog of veterans’ disability claims could increase.

Political Blame

The political implications are much less clear. Democrats are painting Republicans as obstructionists who are trying to undo a law passed by Congress and upheld by the Supreme Court. Republicans say they are trying to save Americans from the effects of Obamacare and that Democrats won’t negotiate.


As Fines Sting, a Hiring Spree for Compliance Staff


 In a U.S. economy struggling to create jobs, at least one field is booming: compliance.

Hefty fines and other penalties have jolted companies, especially banks, into a compliance hiring spree, as governments at home and abroad tighten business laws and regulations and ramp up their enforcement activity.

“We’re in a battle royal for talent in the compliance space, across the board,” said Corey Gunderson, who heads the risk-and-compliance practice of research consulting firm Protiviti.

Banks, which are under heightened scrutiny, have been hiring thousands of people in their compliance departments: HSBC Holdings  PLC said it added 1,600 compliance employees last year, and J.P. Morgan Chase  & Co. is bringing in what it calls a “SWAT Team” after agreeing to make billions of dollars in settlement payments.

The hiring spree makes the compliance field hotter than many others. According to the Bureau of Labor Statistics, the U.S. unemployment rate for compliance professionals was 5.7% in last year’s third quarter, compared with the overall jobless rate of 7.2% in the same period.

“The regulatory environment in the U.S. is driving the hiring,” said Paul McDonald, a senior executive director at human-resources consulting firm Robert Half International Inc. The outlook is “very bright for anyone entering into compliance as a career.”

Starting salaries are on the rise as well, growing by an average of more than 3.5% a year since 2011, according to data compiled by Robert Half. U.S. starting salaries for professional occupations as a whole are expected to rise 3.7% in 2014, the firm said.

At a large company, a chief compliance officer can expect to earn from about $162,000 to $232,000 this year, Robert Half said. At small and midsize companies, salaries are slightly lower, but the rate of increase is nearly identical.

Despite all the opportunities, few young people start out aspiring to a career in compliance. These jobs aren’t easy. They require keeping up with increasingly strict and complex regulatory systems around the world, and sometimes elicit skepticism or hostility from colleagues.

…Compliance officers at some companies rank relatively high on the corporate ladder, reflecting the heightened risks companies face for regulatory infractions. The downside is that compliance staff can be held accountable for lapses, along with the rest of the company.

Please read the full Wall Street Journal article by Gregory J. Millman and Samuel Rubenfeld here (note, subscription may be needed):

So, basically daily stock market trading is owned by high frequency trading computers trading with other high frequency trading computers who cancel their trades when they don’t make money?

96.8% of trades placed in the US stock market are cancelled

New data from the US Securities and Exchange Commission (SEC) show that only 3.2% of the orders placed in the stock market in the second quarter of 2013 actually went through.


Although the SEC isn’t saying as much, experts think it’s a sign that high-frequency trading are flooding the market with orders, overwhelming the average retail or institutional investor.  

Read the full article here:
Hedge Fund Moguls’ Pay Has the 1% Looking Up

The 25 highest-earning hedge fund managers in the United States took home a total of $21.15 billion in compensation in 2013, according to an annual ranking published on Tuesday by Institutional Investor’s annual ranking published on Tuesday by Institutional Investor’s Alpha magazine.

They earned that hefty sum in a year when most hedge fund managers fell short of the market’s returns. The multibillion-dollar payday is the highest since 2010, and it is 50 percent more than in 2012, according to the survey.

David A. Tepper, the 56-year-old founder of Appaloosa Management, maintained his spot atop the list, bringing in $3.5 billion last year, after earning $2.2 billion in 2012. Steven A. Cohen of SAC Capital Advisors ranked No. 2 after pocketing $2.4 billion, while John A. Paulson of Paulson & Company took home $2.3 billion, ranking No. 3.

The size of these paychecks are estimates based on the value of the managers’ stakes in their hedge funds and the fees they charge. Investors typically pay management fees of 2 percent of the total assets under management and 20 percent of the profits, or “2 and 20.”

Please read the full story here:


You Know that you Work in a Hot area when the Press refers to you as a Rock Star…

Once modest of pay and profile, risk experts are being reborn as rock stars of the banking world - their status and salaries soaring as regulators force financial institutions to clean up.

Industry-wide investigations into alleged exchange rate manipulation, trading scandals at UBS, Societe Generale and JPMorgan and HSBC’s $1.9 billion fine for lax money-laundering rules have upped the ante for banks already under pressure to curb reckless behaviour that led to the financial crisis.

Now watchdogs and central banks want to see a clear line of responsibility for the avoidance of such fiascos in the future, and as a result, the position of chief risk officer (CRO) has jumped up the ranks. Many CROs now sit alongside the finance director as second in importance behind the chief executive.

“The role of the CRO has become broader, higher profile and more influential,” said Anne Murphy, head of UK financial services for executive recruitment firm Odgers Berndtson.

In turn, salaries have soared. Pay in risk-related jobs rose 6 percent in 2013 and rocketed 19 percent for those who moved firms, according to a report by recruitment firm Barclay Simpson.

HSBC chief risk officer Marc Moses joined the bank’s board at the start of 2014, alongside the chairman, chief executive and finance director, and could be paid 6 million pounds ($10 million) this year. Chief Executive Stuart Gulliver, who could be paid 11.4 million this year, says pre-crisis, the bank’s CRO would not have made it into the top 50 earners.

At Spain’s Santander the top risk executive Matias Rodriguez Inciarte was its second-highest paid director last year, getting 4.7 million euros.

Those numbers, says Murphy, are “recognition that it’s a big job. There aren’t many people who have the skills and abilities to do it well, combined with the increase in seniority and responsibility.”

Rock on here:

The Securities and Exchange Commission is Investigating Itself 

Securities and Exchange Commission attorneys are reviewing the stock holdings of about 3,400 employees after some New York staffers were found to own securities prohibited by ethics rules.

The agency’s ethics office has begun an examination of all personal financial disclosures to ensure that employees don’t have a financial interest in companies they regulate or investigate, SEC ethics counsel Shira Pavis Minton said in an interview.

The ethics review raises questions about the effectiveness of SEC programs for ensuring compliance with its trading rules, which bar workers from owning shares of most Wall Street firms, including Bank of America Corp. and BlackRock Inc. (BLK) The agency relies on employees to disclose their investments and doesn’t have a tool to automatically scan employee holdings for violations.

10 things financial advisers won’t say

1. “We’re your biggest advocate, except when we’re not.”

A consumer who seeks help from one of the nation’s 300,000-plus financial advisers is probably hoping to find (what else?) financial advice. Seems straightforward enough. But like anything where there’s a lot of money, and lawyers, involved, it’s not. For years, consumer groups and rival industry factions have battled — before Congress, the Securities and Exchange Commission and, of course, the press — over whether that “advice” should be required to be in the client’s best interest (the so-called fiduciary standard) or merely “suitable,” based on factors like age and risk tolerance.

Read on:

So, have you heard this one; a knucklehead broker walks into a trading room and places an order of 1,625,000 shares of Apple instead 1,625 shares…


By Jack Kelly


Last year David Miller, a securities trader at the boutique (a polite term for small and not well known) brokerage firm, Rochdale Securities, saw an opportunity to make a quick buck.


This was about the time that everyone realized Steve Jobs was really dead and not coming back and people noticed Samsung actually made a smart phone that was just as good as an iPhone.


Apple stock was imploding. Dave Miller however expected a surprise positive earnings report which he thought would give the stock a pop.


External image
He took a supposed client’s order for 1,625 shares to the trading room but purposefully purchased 1,625,000 shares instead (moving the decimal point over three digits gave him the out to say, “Ooops, I made a mistake. Silly me, I put the decimal in the wrong place.”). If your math is not that good, this is a billion dollar trade made at little Rochdale, not Goldman or JP Morgan or some hedge fund.


Miller figured Apple stock would rise, he would use the firm’s capital to back the trade, pay his client the profits on 1,625 shares and keep the rest. Hamptons summer house rental and Porsche payment in the bag!


External image

Well, unfortunately Apple’s earnings disappointed the street and Mr. Miller.


The stock went down and he lost $30 million dollars on the fake trade.


Rochdale Securities didn’t have $30 million. So, the punch line; the firm closed its doors, laid off 40 people and Miller was just sentenced to 30 months in prison.


In case you were wondering what happened to the stock, at the time of the trade Apple was at $601.25, it is now trading at $515.00. He would still be a loser.

External image

Boom times for bank trading have gone, and may never come back

The boom years of financial market trading, when banks made unprecedented profits from bonds, currencies and commodities, may be over for good as financial firms realise there will be no cyclical upswing on their dealing desks.

Even though it’s taken Western economies several years to regain pre-crisis national output levels, many doubt banks will ever revisit the pre-crisis high watermark of their trading activities.

Revenues from fixed income, currencies and commodities - the so-called ‘FICC’ universe - continued to tumble for most major U.S. and European banks during the first quarter of 2014, increasing the pressure on them to rethink business models.

Thanks to a more stringent regulatory environment and a potential turning point in the 20-year cycle of falling global interest rates, the twin peaks of just before and after the 2008 global financial crisis look unlikely to be revisited.

Revenue from FICC and equity trading, which critics sometimes dub “casino banking” and distinguish from traditional investment banking services like underwriting share issues or arranging mergers and acquisitions, still accounts for over 70 percent of banks’ overall income from investment banking, according to research by Freeman Consulting.

FICC and equity trading income at Goldman Sachs last year was 72 percent of the bank’s overall revenue from investment banking, compared with 82 percent in 2010. Morgan Stanley’s FICC and equity trading revenue was 70 percent of its total investment banking revenue, well down from 82 percent in 2003.

Please read the full story:

Big Banks Face Sharper Risk-Management Focus in OCC Plan

Big banks such as JPMorgan Chase & Co. (JPM) could face quicker reprimands for risk-management failures under an Office of the Comptroller of the Currency policy shift proposed today.

The national-bank regulator’s new standards remove hurdles to targeting lenders with certain enforcement actions. The 79-page proposal follows agency chief Thomas Curry’s push to clean up risk-taking at banks hit with billions of dollars in penalties over misdeeds in the wake of the 2008 credit crisis.

“The standards announced today build on lessons learned from the financial crisis,” said Comptroller of the Currency Curry, in a statement. “They will contribute to a safer financial system for all of us by providing clear and enforceable standards for the risk management and governance of our largest institutions.”

Under Curry’s leadership since 2012, the OCC has extracted the largest penalties in its 150-year history. The agency fined London-based HSBC Holdings Plc (HSBA) a record $500 million in 2012 for money-laundering faults and has penalized JPMorgan twice – reaching a $300 million settlement over the London Whale trading losses and a $350 million agreement resolving allegations that the bank failed to report suspicions about Bernard Madoff’s Ponzi scheme.


‘Walking Dead’ market: Why the rally keeps going

Call it the Zombie Market, if you will, a staggering, stumbling, somnambulant thing of macabre beauty that sustains slings, arrows and shotgun blasts but still marches forward.

Jeff Kleintop, chief market strategist at LPL Financial, is more succinct and culturally aware: He calls it the “Walking Dead” market, after the wildly popular, zeitgeist-y AMC zombie series.

Instead of the perils zombies face to survive in a post-Apocalyptic world, the “walkers” of Wall Street must fend off the many macro and micro economic threat to their existence.

(Read moreTen bets from top hedge fund managers )

Negligible economic growth? No sweat. Recession in Europe? Nobody cares. China slowdown? Big deal. Near-zero revenue growth? Someone else’s problem. Federal Reserve tapering? Who needs 'em?

Kleintop bemoans the lack of Emmy nominations for “Walking Dead,” and said the stock market,like the show’s- zombies, doesn’t get enough credit for defying its many detractors.

“This unkillable stock market rally seems to get no respect. U.S. stocks have been snubbed by investors this year,” he said. “The S&P 500 has continued the strongest bull market since WWII despite all the shots fired at the market this year.”

In addition to the aforementioned zombie-slayers, he also cited the “ fiscal cliff ” tax increases and sequestration spending cuts in Congress; zooming oil prices, European debt woes; rising interest rates, geopolitical turmoil and low market participation.

(Read moreWhile the traders are away, the bulls will play )

“While it has been impossible to kill so far this year despite all the shots fired at it, this is no mindless and shambling rally,” Kleintop contended. “Stocks have deliberately moved past these events that did not stop the still beating heart of economic growth in the United States.”

About that last point: The “beating heart” has been less a beat and more a fading tap lately.

Second-quarter gross domestic product growth likely will register below 1 percent after an disappointing 1.8 percent in the first quarter.

U.S. investors, meanwhile, are bailing on bonds but not exactly flocking to stocks either. A record outflow from fixed-income funds in June saw that money go not to equities but rather en masse-to the tune of nearly $110 billion-into savings and money market funds.

(Read moreSidelined cash suggests 'mini-rotation’ into cash )

But those are just two more to add to the list of demons this market has vanquished and may yet again, in Kleintop’s view.

He advised investors to stay tuned for a raft of data points likely to influence the markets ahead.

“A volatile second half in the stock market is likely, but so too are potential gains as the U.S. economy continues to post growth of about 2 percent, resulting in opportunities to buy on the dips,” he said.
U.S. Broadens Hunt for Tax Evaders

External image
The hunt for money hidden in Swiss bank accounts by U.S. citizens has become a global chase, with prosecutors tracing records to Singapore, the Cook Islands and elsewhere as U.S. authorities increase the pressure on Swiss lenders to turn over evidence, according to officials. Kathryn Keneally, head of the Justice Department’s tax division, said in an interview that in the wake of a guilty plea to criminal charges by Credit Suisse Group AG, the U.S. expects to collect more evidence pointing to suspect accounts beyond Switzerland’s borders.

Credit Suisse, which last week pleaded guilty to conspiracy and agreed to pay $2.6 billion to settle allegations it helped wealthy Americans hide money from the Internal Revenue Service, has agreed to turn over some bank records that can help U.S. authorities track down individual account holders across the globe. You’ve got Singapore, you’ve got the Cook Islands,” said Ms. Keneally, who plans to announce Tuesday that she will leave the Justice Department to return to private practice.

Credit Suisse is in talks to pay $1.6 billion to resolve allegations of assisting wealthy clients to avoid paying US taxes

Swiss based bank, Credit Suisse Group AG, is in talks with the U.S. Justice Department to pay as much as $1.6 billion to resolve an investigation into the bank’s role in helping Americans evade U.S. taxes.

In attempt to address the public backlash against banks being “too big to jail”, prosecutors are also pushing for Credit Suisse to plead criminally guilty in connection with the probe.

A spokesman for Credit Suisse declined comment. The penalty would exceed the 895 million Swiss francs ($1 billion) that Credit Suisse has set aside to pay potential penalties to the United States.


The Billionaire Hedge Fund Battle over Herbalife

It is great to know that the SEC, FBI, and other regulatory and law enforcement agencies are avid readers of The Compliance Exchange newsletter and blog. 

We recently ran several pieces in ComplianceX questioning the activities of activist hedge funds. While the big banks have extensive rules and regulations covering the use of inside information and an army of lawyers, compliance, auditors and other internal regulatory professionals to monitor traders and bankers, the emerging powerful hedge fund industry seems to act in a much looser fashion (even though they are also subject to regulations). 

In particular, we were curious as to the activities of William Ackman, the head of hedge fund Pershing Capital, as he launched an alleged smear campaign against the nutrition and weight loss company Herbalife which he hoped would cause the stock to plummet and earn his funds billions of dollars on their massive short position in the stock. On the side of the trade, several prominent hedge fund gurus including Carl Icahn were long the stock, trashed Ackman, and bet that the Pyramid Scheme allegations wouldn’t stick, Ackman would loose on his $1 billion short position, and they would reap billions in gains. 

Today, we learn that the U.S. Securities and Exchange Commission is probing to determine if hedge funds, on both sides of the trade, acted improperly. 

The SEC is reviewing whether the hedge funds may have engaged in market manipulation or failed to properly disclose that they were working as a group when they ganged up against billionaire investor William Ackman. 

The F.B.I is now involved investigating “…possible insider trading, disclosure violations and market manipulation." 

The SEC is reviewing the details of a closed- door "ideas” dinner attended by many hedge fund professionals during which time opinions of Herbalife were openly discussed and significant trades were executed shortly thereafter. 

The S.E.C. and F.B.I. are also beginning to question whether Mr. Ackman’s hedges fund “… improperly encouraged other traders to bet against Herbalife just before bad news emerged about the company…" 

Hedge fund multi-billionaire, Carl Icahn, interestingly and presciently predicted that Ackman would get caught in the "mother of all short squeezes” and thereby lose a fortune on his investment. 

An aspect of the review may also focus on an orchestrated attempt to commit a massive short squeeze. A short squeeze occurs when there is a large short position in a stock, positive news about the company comes to light, the stock rises in value, and the holder of the short position scrambles to get out of his losing position incurring huge losses. When the other hedge funds (George Soros, Carl Icahn and Daniel Loeb’s Third Point) wagered against Ackman’s short position the Herbalife stock price rocketed up 138 percent incurring substantial paper losses for his fund. 

We believe that as The Volcker Rule part of Dodd-Frank curtails proprietary trading by the big banks the action will move to the hedge funds. It is interesting that the law of unintended consequences may create serious issues in the hedge funds space while trying to resolve risks at the banks. 

As this migration will most certainly continue ComplianceX will happily share the soap opera dramas. 

What do you think? We would love your thoughts. Please email me directly at and we can share your insights with your fellow readers.
J.P. Morgan's Dimon Describes Year of Pain

External image

J.P. Morgan Chase & Co. Chairman and Chief Executive Officer James Dimon acknowledged Wednesday that a series of legal headaches in 2013 evolved into “the most painful, difficult and nerve-wracking experience I have ever dealt with professionally.”

The comments in Mr. Dimon’s annual shareholder letter offer the most revealing picture to date of how the 58-year-old bank chief reacted to a combination of government probes and lawsuits that culminated in payouts of more than $20 billion. In his 32-page letter, Mr. Dimon also presented a more detailed view inside J.P. Morgan’s scramble to adapt to heightened scrutiny from its federal overseers and a raft of new U.S. regulations enacted since the financial crisis.

A new “state-of-the-art control room” at J.P. Morgan’s Park Avenue headquarters is now up and running, and by the end of 2014 the company will have added 13,000 employees over two years to beef up controls in areas ranging from compliance to legal to risk to technology.

Chief compliance officer to leave SAC Capital Advisors

Steven Kessler, the chief compliance officer at SAC Capital Advisors, is leaving the firm at the end of the month, a source familiar with the move said on Friday.

Kessler, who joined SAC in 2005, is leaving to spend more time with his family, said the source. John Casey will become the firm’s interim compliance chief.

A spokesman for the firm declined to comment.

The departure comes as SAC, once one of the world’s biggest and most successful hedge funds, turns itself into a family office that will manage founder Steven A. Cohen’s $9 billion personal fortune.

The firm was forced to stop managing money for outside investors last November as part of an agreement to plead guilty to insider-trading charges and pay $1.8 billion in penalties.

Kessler, who came to the Stamford, Connecticut-based firm from Goldman Sachs, was one of a handful of top SAC officials who received subpoenas as the government built its case against the firm.


It’s the first full week of 2014 and we are already looking at another billion dollar big bank regulatory settlement

JP Morgan Chase is close to a $2 Billion settlement deal relative to their dealings with Bernie Madoff.

 Working through a long list of legal problems, JPMorgan Chase is starting the new year with another steep payout to the government.

The bank plans to reach as soon as this week roughly $2 billion in criminal and civil settlements with federal authorities who suspect that it ignored signs of Bernard L. Madoff’s Ponzi scheme, according to people briefed on the case.

All told, after reaching the Madoff settlements with federal prosecutors in Manhattan and regulators in Washington, the bank will have paid some $20 billion to resolve government investigations over the last 12 months.