5 Financial News Stories You May Have Missed: Clawbacks and Jelly

5 Financial News Stories

Here are news stories from the week that were easy to miss, but may have some lasting impact.

1. NY May Get Tough With Insurance Wanna-Be’s

New York’s top financial regulator is concerned about private equity firms jumping into the world of insurance. There has been a growing interest from private equity and other investors in the insurance world and particularly the annuity segment. With rates of return hovering near all-time lows, most of the financial industry is looking for opportunity to earn higher rates. Ben Lawsky, New York’s Department of Financial Services Supervisor, is concerned about the potential “troubling role” of private equity firms purchasing insurance companies. Lasky’s concern with private equity is that “their focus is on maximizing their immediate financial returns, rather than ensuring that promised retirement benefits are there at the end of the day for policyholders.” New York is considering imposing tougher standards on private equity firms insurance acquisitions.

Huffington Post: Ben Lawsky Weighs Crackdown On Private-Equity Firms


2. Settlement & Guilt – Like Peanut Butter & Jelly?

Any kindergartener will tell you some things just belong together. The new SEC chairman Mary Jo White is reviewing the commission’s long standing policy of negotiating sizeable settlements with no admission of guilt on the defendant’s part. Certain outspoken judges have asserted that the rash of settlements (694 to date) combined with the SEC new “no-guilt” admissions is an abomination.   Defenders of the policy will argue that it is a better use of resources and gets faster results and larger settlements but many oppose the idea of allowing defendants to quietly settle cases without any determination of guilt.  Chairman White has defended the policy in congressional hearings in the past but is now reviewing.  Will “no-guilt” admissions stand up to the scrutiny? That’s unclear. So, are settlement and guilt inseparable like peanut butter and jelly, or a more questionable combination—like mayonnaise and pastrami?

Bloomberg: White Says SEC Settlements Without Guilt Admissions Under Review


3. The Expanding Clawback

They may sound like a bad slasher movie, but clawbacks are here to stay and  are becoming a more common provision in employment agreements. A means to recover money paid to an employee while the employee was engaging in wrongdoing, clawbacks first became popular after Enron, Worldcom, and the introduction of Sarbannes-Oxley. At that time it was largely limited to senior management of public companies. This week SAC Capital Advisors, one of the country’s largest hedge funds, announced that it was introducing clawback provisions to bolster their compliance practices. Clawbacks give an employer the contractual right to recover compensation paid in salary, bonus and deferred stock grants if certain conditions are met. One possible trigger occurs when employees engage in wrongdoing that later increases their bonus or salary. I would expect clawbacks to become more pervasive and harder to escape. Just like any good horror movie.

The New York Times: On Wall Street, Recovering Money From Rogue Employees


4. Libor Lawsuit Revival

The multi-district litigation against the banks accused of wrongfully manipulating  the London Interbank Offering Rate (LIBOR) has been given yet another opportunity at life. This week, the court has given the plaintiffs the opportunity to amend their complaint. The case has been in and out of court for 2 years already and involves potential damages of billions of dollars. The case pits major financial institutions against each other. The stakes are high. This revival could run for years.

Law 360: Investors Get Chance To Revive Antitrust Claims In Libor MDL


5. What if you Threw a Protest and Nobody Came? Hyped DDOS Attack Fails.

May 5th was supposed to be the day that 600 websites were attacked by the protest group Anonymous. Most of those sites were governmental or financial institutions. Despite the site names being posted on various links and the date widely publicized, not much happened. Are system defenses getting better? Hackers lazier? The answer is not clear, but some experts postulate that this may have been a test to see what the government and industry would do in preparation. A feint, if you will. Either way it is a costly nuisance to get ready for a party that didn’t happen.

USA Today: Lessons from fizzled Anonymous DDoS attack


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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