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Screening Walls Will Be The Next Embarrassment For The SEC
Say you are a hedge fund and you have been unlucky enough to have bought GGP bonds or other GUCs in the biggest clusterfuck of a CRE bankruptcy in history: how will you know what the hell is going on in the deal that has more moving parts it would make Level 99 of The Incredible Machine look tame in contrast? The easiest way is by getting access to disseminated inside information. But how will you "ascertain" that your traders will not take advantage of this material, insider information, a process that would immediately hold them liable for civil and criminal charges? By erecting internal "screening walls" of course, that are so completely impenetrable, that you traders will never be able to have drinks with you and where, just after your 8th Jager bomb, you will never disclose just which maturity it is that traders needs to nudge or which GUC they need to "start opportunistically unwinding if you know what i mean, wink, wink."
At least that is the plan proposed by Judge Groper in the General Growth Properties bankruptcy, as reported in the Daily Herald:
The creditors said they will establish "screening walls" to isolate trading activities from their activities as members of the official committee. The request was approved today by U.S. Bankruptcy Judge Allan Gropper in New York.
And just who are these highly ethical unsecured creditors who really promose never to abuse information leakge:
The screening wall includes using different personnel, offices, file space and phone lines for trading versus committee business, according to court papers. The request was made by creditors American High-Income Trust, Fidelity Fixed Income Trust, Capital Ventures International, Eurohypo AG, Calyon New York Branch and General Electric Capital Corp.
GECC - what a shocker: unlike the other participants who likely bought GUCs at pennies on the dollar, it would be amusing to find out how much over par GECC paid for the bankrupt company's bonds.
While the practice is not unique, with internal Chinese walls set up on many occasions in history to avoid conflicts of interest, only to be flagrantly abused during cigarette breaks and jaunts to the local massage parlor, it will be interesting to see how Judge Groper intends to enforce and supervise that material information leakage is not actually occurring.
And more to the point, how is it that the SEC and Finra actually make sure that firms actually have any semblance of internal control over information dissemination? Do they have some compliance monkey eating bananas and checking that person X never talks to person Y? No, of course not, that would be stupid. Just as it is stupid to assume that "material, inside information" will not spread from within its destined confines.
Zero Hedge will be happy to follow this situation: we realize that the SEC needs all the help it can get in policing and enforcing its terminally flawed regulatory framework. This being just one minor example.
h/t Boy X-mas
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Well, they used to be called Chinese Walls, but, er...
not PC enough
I remember Chinese walls. they worked well back in the late 90s
I was thinking the "cones of silence" from Get Smart, would be a good start...
I mean, this whole thing is like a tradgic comedy anyway, we might as all get a visual guff out of watching it..
Come on Judge ...
Lets make them all go under a plexiglass bubble that comes down from the ceiling to do their biz...
I wish I was hedge fund. Then I could own my very own part of the government too.
Tyler and Staff: Once again, good reporting and thank you for exposing and bringing forth matters such as this. If poeple aren't informed, they cannot demand rule changes and/or alternatives. Good work...
This practice has been commonplace, and has been documented. Check out Liar's Poker, Fiasco, and Wall St. Meat. They all talk about the 90's, but the same thing happened then as is happening now. Conflicts of interest being ignored, use of complex instruments, absurdities of rating agencies. All those things are in the context of interesting accounts of real life within Wall St. Highly recommended. TD & Cast doing great job, and this story is true, but this 'smoking gun' has existed for a long time, even in the 80's... and no one has really done a thing about it, other than lip service.
You hit the nail on the head. An old script for sure but it works every time so why change.
Wash, rinse, repeat. Different decade, different players, same corruption, ultimately the same group (taxpayer) paying the bill and getting screwed.
Considering my age, this is the second time for me as the screwed taxpayer. Once a fool, always a fool I guess.
But why not?Bill Gross never talks to the fed traders who work out of his mansion,and if he to walks into the their trading floor,he is always accompanied by an attorney. However,"he does shake hands with them........."
rolling. i love you ZH.........you go...you go. ....the gang at the SEC is probably monitoring your site hourly now and completely freaking out....
what? we might have to actually do some work?
how can we take this site down?
HOW DO WE SHUT THESE GUYS UP BEFORE WE HAVE TO DO SOMETHING TO THOSE WHO OWN US?
This country is doomed. There simply is no sense of propriety or prudence any longer. These games are too obscure to get on the MSM radar, or even Congress 90% of the time. These institutions run this country through this type of crap, and the regulators can't come close to catching up. There working on last decade's "financial innovations".
I'm telling my kids to go into finance. Might as well be one of the predators rather than the endless sea of prey. I honestly do not believe in this country any longer, and it has nothing to do with political parties or who is in the White House. In times like these, nothing could be less relevant.
Found this quote on Ticker Forum a while ago. Liked it enough that I wrote it down:
"We have no government armed with power capable of contending with human passions unbridled by morality and religion. Avarice, ambition, revenge or gallantry would break the strongest cords of our Constitution as a whale goes through a net. Our Constitution is designed only for a moral and religious people. It is wholly inadequate for any other."
-John Adams
You are up to 28 years too late to be helpful in advising your kids to go into finance. Reagan was the man, the voice of GE, who would have sold you the parts and supplies to your own basement nuc-u-lar plant if he had his druthers. His era officially went bankrupt in late 2008....this is the meaningless vortex/vacuum adjacent to the black hole. The predators today will be eating their children best described in a Hieronymus Bosch painting . Believe in yourself and get a life....meet your neighbors; they need to be replacing your sheriff.
The 3pm pump definitely lacked velocity.
Re try @ 3:30?
I'm not one to be a seplinlg nzai or atynhnig but i tnhik a smpile slpel cehck cluod be in odrer...
Honor code LOL!
What's up with the 1,000 word sentences?? It's not against the law to through a period in there sometime.
we are doing all we can to curb Adderall abuse.
Outstandingly funny.
Cheerleaders getting desperate....or in need of lithium?
In the space of 10 mins CNBC goes from:
BREAKING NEWS: DOW TURNS POSTIVE (up 3 points)
MARKET ALERT: Stocks off their worst levels
Market Alert: Dow, S&P, Nasdq still postive for September
HAHAHAHAHAHA
You changed your picture! Who's the girl?
I noticed that yesterday, but was too busy to post. I can't decide whether I like the new one or the old one better (I am a sucker for understated). Either way, Tommy Likey
So you're saying to buy GGWPQ now to get in before the real runup?
Any comments on likely outcome and timeframe of GGK's BK proceedings?
this only applies to the bonds...not the trade debt. that's the loophole
It sounds like we need a glass stegir act 0 -or not, i forget. But where is my glass I a am up for number 9,