Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Saturday, February 10, 2007

Fortress IPO a Hit on Wall St

The Fortresss IPO yesterday, described as one of the hottest IPOs in recent years, is the big news today.  The private equity firm's shares were sold at $18.50, quickly rose to $35, and closed at $31.  Wall St. expects more IPOs for private equity firms/hedge funds, as less wealthy investors look for ways to get a piece of the action.  See WSJ, Hedge-Fund Crowd Sees More Green As Fortress Hits Jackpot With IPO and NYTimes, First Offering of a Hedge Fund Is Bid Up 67% on Opening Day.

February 10, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

Lear Shareholders Disappointed with Icahn Bid

Will someone give Carl Icahn some competition for his bid to acquire Lear, the auto parts supplier?  Some major shareholders hope so and express disappointment with the board for agreeing to Icahn's $36 bid.  Wall St., however, is doubtful anyone else will be interested.  See WSJ, Lear Holders Call for New Bids and NYTimes, Lear Agrees to Buyout Offer of $2.8 Billion From Icahn .

February 10, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

Justice Investigation into Municipal Bonds Practices

The Bank of America has agreed to cooperate in a Dept of Justice investigation into collusion in the municipal bond industry involving industry practices in the investment of bond proceeds before the money is needed for the project.  See NY Times, U.S. Inquiry on Bonds at Big Bank.

February 10, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

Sallie Mae Insider Sells Shares Before Price Drop

Sallie Mae Chair Albert L. Lord sold $18.3 million worth of stock last week, just  a few days before the Bush administration announced big cuts in subsidies to the lending industry that caused a drop in the price of Sallie Mae shares.  The company says the timing was a coincidence.  See Washington Post, Sallie Chairman Sold Shares Ahead of Cuts.

February 10, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

Nasdaq-LSE Merger Looks to be a No-Go

Nasdaq's year-long efforts to acquire the London Stock Exchange are likely to conclude with failure.  LSE's shareholders have until 1 p.m. Saturday to tender their shares, and the LSE market price is above Nasdaq's bid.  This leaves both exchanges at a competitive disadvantage in the face of the successful NYSE-Euronext merger.  See WSJ, Exchanges' Next Steps Are Unclear.

February 10, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

Friday, February 9, 2007

Notre Dame Looking for Visitor

The Notre Dame Law School is looking for a podium visitor to teach our 4-credit, required Business Associations course in either the fall or spring semester of the coming academic year as well as other courses in the corporate area.  We are also looking for a podium visitor to teach International Business Transactions, a three-credit optional upper level course, and related courses--again, in either the fall or spring semester.  Please pass this information along to anyone on your faculty who, in your judgment, might be interested in either of these positions.  Please ask whomever you ontact in that regard to get in touch with me at john.h.robinson.1@ nd.edu or at 574-631-6980.

       Thanks,

         John Robinson
         Associate Dean
         Notre Dame Law School
         Notre Dame IN

February 9, 2007 in Professional Announcements | Permalink | Comments (0) | TrackBack (0)

Glass & Lewis Recommends Against Caremark-CVS Merger

Glass Lewis & Co. recommends that Caremark shareholders vote against the proposed merger with CVS.  It believes that the Caremark board was not sufficiently aggressive in attracting competitive bids.  See WSJ, Investment Adviser Recommends Caremark Holders Reject CVS Deal.

February 9, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

Icahn-Lear Buyout

Lear and Carl Icahn have agreed that he will buy the company at $36 per share, although two major shareholders say it's worth more like $60.  See WSJ, Auto-Parts Maker Lear AgreesTo Buyout Offer From Icahn Arm.

February 9, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

Fortress IPO a Success

The much-anticipated IPO by Fortress, the first hedge fund to go public, was deemed a success.  The stock opened on the NYSE at $35, up from the offering price of $18.50.  See WSJ, Hedge-Fund Operator Fortress Jumps 89% Following IPO.

February 9, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

Former Hedge Fund Executive Charged with Securities Fraud

John Whittier, former head of hedge fund Wood River Capital Management, pleaded not guity to securities fraud in connection with the collapse of two funds and the loss to investors of about $88 million in 2005.  See NY Times, Former Hedge Fund Executive Enters Plea.

February 9, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

SEC New Rule on Independent Directors Rule for Mutual Funds in the Works?

Many thought the SEC rule requiring mutual funds to have 75% independent directors and an independent chair was dead after the D.C. Circuit kicked it back for reconsideration and Christopher Cox replaced William Donaldson as SEC Chair.  But Mr. Cox apparently wants some form of the rule adopted and is working to achieve consensus on an issue that split the Commission 3-2 last time around.  Some think a revised rule requiring 75% independent directors but not an independent chair wll pass muster with both the SEC and the industry.  See WSJ, Cox's 'Independent' Day.

February 9, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

Bogle on ETFs

John Bogle gives his opinion of ETFs in a WSJ commentary today.  He doesn't like them because they are contrary to the index mutual fund model he invented.  Why are ETFs doing so well?  Because, he says, "ETFs are a dream come true for fund managers, brokers, financial advisers and entrepreneurs."  See 'Value' Strategies.

February 9, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

Hedge Fund Goes Public

Fortress Investment Group will be the first hedge fund and private equity firm in the US to go public today at $18.50 per share.  At that price it will have a market value of $7.4 billion.  Its class A shares will trade on the NYSE.  See NY Times, Fortress Goes Public, a First for Hedge Funds Inside U.S. and WSJ, First Hedge-Fund IPO May Encourage Others.

February 9, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

Regulators' Scrutiny of Hedge Funds Increases

The Washington Post reports on growing regulatory and Congressional interest in regulating hedge funds.  However, many believe that the rich can take care of themselves.  And a more practical problem -- what agency has the resources to figure them out?  Former SEC Commissioner Harvey Goldschmidt warns the industry is two scandals away from pervasive regulation unless they clean up their houses.  See WPost, Hedge Funds Begin to Show Up on Regulators' Radar.

February 9, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

Donaldson Joins Perella Weinberg

William Donaldson, former SEC Chair, has joined the investment firm Perella Weinberg.  See NY Times,Ex-Chief of S.E.C. Joins Perella Weinberg Investment Bank.

February 9, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

Some Hedge Funds Want to Share Information with Public

Should the SEC lift the ban on "general solicitation" for hedge funds and allow them to communicate publicly about their activities?  Some funds are urging the SEC to do so, and NY Times columnist, Jenny Anderson, thinks it's a good idea.  If the only people who can invest are wealthy, what's the harm, she asks.  See Hedge Funds Walk a Hard Line Between Silence and Sharing.

February 9, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

Thursday, February 8, 2007

Insider Trading Charges Settled

The SEC announced today that Daniel Fongnien Chiang, the former Co-Chairman of SINA Corp., and  his  wife, Eva Yi-Fen Chen, the CEO of Trend Micro  Incorporated, settled charges that they engaged in illegal insider  trading by selling SINA stock short while  in  possession  of  material,  non-public information that internal SINA projections showed that  SINA's  first quarter 2005 revenues could be significantly lower than forecast.

February 8, 2007 in SEC Action | Permalink | Comments (0) | TrackBack (0)

SEC Charges Family Hedge Fund with Insider Trading

The SEC charged seven individuals with engaging in an insider trading scheme that netted over $3.7 million in profits and losses avoided over four years. The defendants include a father and his three sons, a family-run hedge fund, and other relatives and friends. The defendants also include accountants and lawyers at some of the nation's largest firms.

The SEC's complaint, filed in federal court in New York, alleges that the father, Zvi Rosenthal, formerly an executive with Taro Pharmaceuticals Industries, tipped his sons with confidential information concerning at least 13 separate Taro announcements, including earnings results and FDA drug approvals. The family pooled their money into a hedge fund in order to help conceal their trading in Taro securities from detection. In addition to trading in Taro stock and options in advance of the announcements, one of the sons tipped his supervisor at his law firm, a friend who worked at an accounting firm, and his father-in-law. Two of the defendants are also charged with using confidential information obtained from their employers, PricewaterhouseCoopers (PwC) and Ernst & Young (E&Y), concerning two possible mergers.

Mark K. Schonfeld, Director of the Commission's Northeast Regional Office, said, "This case is particularly troubling, not just because this appears to have been a 'family business' built on insider trading, but also because the defendants include accountants and lawyers at prominent firms. These are professionals who understand their obligation not to use confidential information for their own benefit."  See SEC Charges Family-Run Hedge Fund With a $3.7 Million Insider Trading Scheme.

February 8, 2007 in SEC Action | Permalink | Comments (0) | TrackBack (0)

NASD Warns Seniors About Life Settlements

NASD issued a warning to seniors about the potential pitfalls of selling their existing life insurance polices for cash in transactions known as "life settlements" or "senior settlements."

"Life settlements are not for everyone," said NASD Chairman and CEO Mary Schapiro. "While they can be a valuable source of liquidity for people who no longer want or need their current policies, life settlements can have high transaction costs and can have negative consequences for your financial situation. And it is very difficult to determine whether you're getting a fair price for your policy. The best advice is to proceed with caution."

Because only variable insurance products are securities, NASD only has jurisdiction over life settlements involving variable policies.

February 8, 2007 in Other Regulatory Action | Permalink | Comments (0) | TrackBack (0)

Deutsche Bank Settles With Some Tax Shelter Investors

Deutsche Bank announced it has settled claims with approximately 340 wealthy investors who purchased bogus tax shelters it marketed; the size and terms of the settlement are confidential.  Criminal charges remain pending, as do other civl suits.  See NY Times, Bank Settles Shelter Suits by Investors.

February 8, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)