5 Financial Stories You May Have Missed – and Zombies

Zombie Debt Collection

1. Rough Play at Recess ~ Obama Appoints Head of CFPB During Break

Politicians don’t always play nice, but they do tend to stick to certain conventions of behavior.One convention states that presidents don’t make major appointments during congressional breaks although they technically have the power to do so. 

Richard Cordray

Richard Cordray, Director of the Consumer Financial Protection Bureau

So why did President Obama name the new head of the Consumer Financial Protection Bureau immediately after Congress recessed when he knew that it would cause a serious uproar? The answer is that the controversy wasn’t so much caused by the actual appointment as the Agency itself. Forty senators have already stated that they would oppose any appointment to the position until changes were made at the recently launched agency. Rather than engage the Republican senators in a rehash of the merits of the agency, the President broke with convention and appointed Richard Cordray to head the CFPB in this rarely used recess maneuver. But senators, like school children, don’t like getting tricked at recess. The CFPB finally has a director and can finally get going in earnest, but Congress may put up more roadblocks along its way.  Hopefully noogies can be avoided.

Obama recess appoints Cordray to CFPB

2. Does Your Employee Work for You?  Whistle-blowing at its Worst

Grant Wilson was a trader at BNY Mellon for many years. What his employer didn’t know was that while he worked at the bank he was secretly providing his lawyers information about how the bank conducted its foreign exchange trading. Wilson alleges that the bank provided unfavorable currency-exchange rates for state and local pensions that left standing instructions to exchange securities proceeds. His information is being used by multiple states and the Department of Justice, which have filed suit in the matter. In fact, he and his lawyers developed a step-by-step guide for prosecutors about what questions to ask fellow employees.

The facts of the case aside, what this means in practical terms is that Mr. Wilson went to work every day, went about his business, and then collected information to share with his lawyers to build his whistle-blower case.  Wilson left the bank, walking away from approximately $5 million in deferred bonus compensation, but is now eligible for between 10-30% of any penalties collected as a result of the suit resulting from his information. The new Dodd-Frank Act may have created a whole new industry, with employees working with the sole purpose of collecting information to develop a whistle-blowing opportunity. Employers need to develop better ways to root out illegal practices, including encouraging employees to report issues internally.

Whistleblower documents illuminate case against BNY Mellon

3. Feeling Behind?  Imagine How the SEC Feels.

U.S. Securities and Exchange CommissionAs 2012 came, some deadlines went, including 200 required sets of rules mandated by 2010’s Dodd-Frank Act. Regulators missed 149 of those deadlines!  The SEC, already overtaxed and short of staff, appears to have completed less than 1/5th of the 98 rules assigned to it. As regulators frantically rush to complete their Dodd-Frank assignments, we are left to wonder if this is really the way to create a sensible system of financial regulation.

 Regulators inching forward on Dodd-Frank rules 

4. Insurers Exiting the Broker-Dealer Arena

Investment News reports that major insurance carriers owning broker-dealers seems to be a fading trend. During the 1990s insurers like AIG and ING jumped into the broker-dealer business hoping to create a new channel for the sale of retail insurance products, but the results have been mixed. While the evidence is mostly anecdotal it appears that insurers are selling off broker-dealers to private-equity firms and large securities companies and quietly retreating from the securities. For the moment the general public appears happy with having a stock broker and an insurance broker.

 Insurer-owned B-Ds slowly fading away?

5. U.S. Investors Sue Lloyds Over Government-Engineered Merger

At the height of the financial crisis, English regulators arranged for Lloyds Banking Group to take control of insolvent bank HBOS.  Shareholders are claiming that they were not told the full extent of the deterioration of HBOS’ financials.  Only weeks after the merger, Lloyds was bailed out by UK taxpayers with a $26 billion investment surrendering 43% interest in the institution.  The interesting bit is the fact that the suit is being brought for misrepresentation in the U.S. under the U.S. Exchange Act.

U.S. investors sue Lloyds chiefs over HBOS deal

…And Zombie Debt Collection

Some debt collectors try to collect debts even from dead people – or their relatives at least.  The judge in a recent Florida case felt the tactics of the collectors warranted allowing the debtor’s widow to sue the collector for punitive damages!

Debt collector’s alleged tactics lead to lawsuit 

About Richard Magrann-Wells

Richard is a Executive Vice President with Willis Towers Watson’s Financial Institutions Group based in Los Angel…
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