Sergio Ermotti, the new chief executive officer of UBS AG, made his first high-profile management changes, ousting the bank's risk-control officer and bringing back a veteran who helped clean up deep-seated oversight problems that emerged during the financial crisis.
Ermotti, who became CEO last month, on Thursday removed Maureen Miskovic as the bank's chief risk officer after less than a year on the job. He brought back Philip Lofts, who held the job between 2008 and 2010 before becoming head of UBS's America business.
The move is the highest-level change in UBS's risk-control department since a trading scandal struck the bank in September. Unauthorized trades by a staff member on UBS's London equities desk caused $2.3 billion in losses. The scandal forced the resignation of CEO Oswald Grübel in September, followed later by a handful of top executives in the equities business. In recent weeks, UBS has also disciplined other, unidentified managers in risk control, operations and finance.
Miskovic joined UBS in January from State Street Corp., where she was chief risk officer. She held the same position at Lehman Brothers between 1996 and 2002. While UBS didn't hold Ms. Miskovic directly responsible for the trading scandal, Ermotti didn't feel she was the right person for the job, according to a person familiar with the situation.
A person familiar with Ms. Miskovic's thinking said that she decided the chemistry between her and Ermotti wasn't right and preferred to step aside to let the new CEO build a fresh team.
UBS has said the London based-trader, Kweku Adoboli, was able to make the unauthorized trades in part because bank managers failed to adequately confirm some of his trades with counterparties outside the bank, a violation of UBS's internal rules. London police have charged Adoboli with fraud and false accounting in the case. Adoboli hasn't entered a plea in the case.
In bringing Lofts back to the top risk position, UBS is turning to a veteran of the bank who first stepped into the job in 2008, when the bank was on the verge of collapse under the weight of $50 billion in illiquid securities. Lofts helped manage the writedowns of these securities and oversaw a wholesale revamp of UBS's risk-control and risk-management functions. That revamp, however, focused on serious problems at UBS's fixed-income division—the source of the huge losses—and far less on the equities division, considered a tightly run unit.
A person familiar with the situation said that Swiss regulators, who have kept UBS under tight control since Swiss authorities had to bail out the bank in 2008 and who are conducting an inquiry into the September trading scandal, approved the appointment of Lofts.
Miskovic had been relatively unusual as an outsider brought into a top risk position at UBS. Some inside the bank criticized the fact that former risk-control executives who failed to prevent the massive securities losses remained with UBS after the financial crisis. Others instead say that those insiders helped the bank to act quickly during the turmoil.
Bob McCann, currently head of UBS's U.S. wealth management business, will also take over from Lofts as head of the Americas business. Ulrich Körner , currently group chief operating officer, will also become the head of Europe, Middle East and Africa, a job Ermotti held until assuming the top job. Körner joined UBS in 2009 from Credit Suisse Group, where he gained a reputation as a turnaround specialist.
Barclays Wealth, the wealth-management unit of Barclays PLC, is planning to increase staffing in Asia by 50% by the end of next year, Chief Executive Thomas Kalaris said, but acknowledged that the talent pool was limited.
"Asia is growing faster than the rest of the world, in terms of clients, but it's still a smaller portion than Europe and the U.K. for us," Kalaris said. "Our focus is on hiring senior bankers, so we can put more resources on our three focus markets—greater China, India and Indonesia—but the key will be getting senior bankers."
He said the private-banking unit of Barclays has "well north of 100" private bankers in its offices in Hong Kong, Singapore and India.
"I see the growth of ultra high net worth clients in Asia, and I also see a definite increase in the number of private banks focused on that space," he said. "There is a lot of competition for bankers, and also there is a shallow pool of talent with a limited number of high-quality private bankers, but we are investing in wealth management. So bankers know we're committed."
He defined senior bankers in wealth management as those with at least 10 to 15 years' experience, who "have a specific set of relationships and are trusted."
Last year, Barclays said it was injecting £350 million ($550 million) into its wealth business to expand the division. In August, it posted a 33% decline in first-half pretax profit, amid a sharp decline in revenue at its key investment-banking unit, but said wealth management and Africa presented opportunities to rapidly increase revenue.
The story is an oldie but a goodie: Large bank will hire dozens of wealth managers in, where else, Asia.
This time the bank is Barclays Wealth, and it will increase its 100-member staff in Hong Kong, Singapore and India by 50% by the end of 2012, Chief Executive Thomas Kalaris told The Wall Street Journal.
The unit will focus on hiring senior bankers, or those with at least 10 to 15 years' experience who can bring along relationships and also be "trusted," he said.
"I see the growth of ultra-high-net-worth clients in Asia, and I also see a definite increase in the number of private banks focused on that space," he said. "There is a lot of competition for bankers, and also there is a shallow pool of talent with a limited number of high-quality private bankers, but we are investing in wealth management. So bankers know we're committed."
The hiring fits into the bank's overall strategy of relying more heavily on wealth management as a source of revenue. It hopes to double the number of wealth managers in the Americas to 500 by 2015.
Add another one to the list of U.S. casualties: French-based Societe Generale will cut at least 200 jobs, about 10%, in the U.S. investment and corporate banking business.
Newly named UBS Chief Executive Sergio Ermotti is wasting no time removing heads and installing his own lieutenants. Chief Risk Officer Maureen Miskovic will be replaced by Philip Lofts, who previously held the position. Meanwhile, Robert McCann, head of wealth management, will also become CEO of the Americas.
Citigroup has appointed Slava Slavinskiy as head of banking for Russia and the Commonwealth of Independent States. Slavinskiy was formerly the head of energy for Europe, the Middle East and Africa at the bank.
If you're 30 or older, you may think you're too old for an MBA and too young for an executive MBA. Don't be deterred: There's still room for those with clear career goals.
The 2011 Banker of the Year isn't going to some flashy executive from a bulge bracket. Instead, it's going to Robert Wilmers, the 77-year-old CEO of Buffalo, N.Y.-based M&T Bank Corp.
If you want to get an MBA at Harvard, be prepared to work in the field. A new overhaul of the business school will result in an emphasis on "learning by doing," instead of merely cracking case studies in the library.
The finance sector gained 8,000 jobs last month, according to the Bureau of Labor Statistics, but economists expect the sector to lose jobs over the next several months as banks' layoff announcements are carried out.
Real estate, rental and leasing gained 3,000 jobs, while insurance carriers and related activities lost 700. In contrast to last month, credit intermediation and related activities, which reflects activity at commercial banks and mortgage companies, gained 6,600 jobs.
"There's been a little evidence of some better activity from home builders and a big increase in pending home sales," said Nigel Gault, chief U.S. economist with IHS Global Insight, an Englewood, Colorado-based financial and economic forecasting firm. "There might be a little more activity in the household market, but it's still pretty tentative."
Even though the numbers are positive for the sector this month, the announced job cuts by banks like Bank of America, Goldman Sachs, JPMorgan and others signal that losses will soon start to pile up. The announcements "kick in over a long period of time," Gault said, which means the sector is likely to see reductions over coming months.
"For the moment, I'm sticking with the fundamentals," he said. "We're not seeing catastrophic cutbacks in like 2008, but these are going to take place over a long period of time. Companies are pulling back in the finance sector."
The broader economy added 120,000 jobs in November and the unemployment rate fell to 8.6% from 9.1% a month earlier. While there were some employment gains, 315,000 left the workforce, which partially accounts for the lower unemployment rate.
There are fewer white men in the increasingly diverse financial industry, but they still take home the bulk of Wall Street's money, according to a report set to be released Friday.
In some cases, white men on Wall Street earned more than twice as much annually as other ethnic groups, and their median earnings shot up 15%, to about $154,500, between the 2000 federal Census and the 2005 to 2009 American Communities Survey, the report said.
"The Progress and Pitfalls of Diversity on Wall Street"—a report conducted by the City University of New York's Center for Urban Research—examined U.S. Census Bureau data. It showed that white men made up about 54% of Wall Street's workforce in 2005 to 2009, down from about 57% in 2000.
Income also went up for other groups, but they lagged far behind white men. White women on Wall Street had median earnings of about $100,000 a year, black men $90,000 and black women $60,770, on average, between 2005 and 2009, according to the report.
"The most surprising findings regard women because as we know women now outperform men in the educational system," said Richard Alba, distinguished professor of sociology at the Graduate Center of CUNY, a co-author of the report. "They have higher rates of getting [bachelor's of arts degrees] and post-graduate degrees and that they still lag so much behind in terms of their position on Wall Street I find really remarkable."
The report said institutional discrimination could result in disparities in pay. It also noted that many higher-paying top jobs may go to applicants from elite schools where there are fewer minorities.
"I think both the minorities and the women are probably disadvantaged by what we might call discrimination writ large," Alba said.
The percentage of women in core jobs on Wall Street hasn't consistently increased as much as it has for minorities, the report found. Women made up about a quarter of the oldest workers—45 years old and up—in 2000 and in later years, and about a third of the youngest workers, regardless of the year.
Asians account for the majority of the diversification of Wall Street, going from 5% of older workers in 2000 to 19% of younger ones in 2005-09. The percentage of Asian men almost doubled.
While Latinos have also shown gains, blacks haven't, according to the study.
"These patterns, should they continue, really create an issue I think for Wall Street," Alba said. "How is it going to cope with the growing diversity of the work force? It's fishing for leadership in a pond of declining size, mainly the pond made up of college-educated white men. The workforce is going to change…. Who is going to replace them?"
The report looked at people who identified themselves as working full-time in the financial industry on long-form Census surveys and in answers to questions from the American Communities Survey.
The report, which took about two months, comes on the heels of a study released last month that found that women have achieved few gains in leadership positions in New York's largest corporations.
That study, conducted by Columbia Business School and the Women's Executive Circle of New York, found that women held 15.9% of high-level leadership positions in 2010, up from 14.7% in 2006. Overall, women held 11.7% of executive positions in 2010, a number that was 0.2 of a percentage point lower than in 2006.
Anxious business-school applicants have something to add to their to-do list: preparation for the new "integrated reasoning" section of the GMAT.
Although the new section was initially announced a year and a half ago, the Graduate Management Admission Council has offered scant details about what questions will look like and how they will be scored. With registration for the new test starting this month, many students are wringing their hands. Some test-prep experts say they may even see a rush of applicants wanting to take the test in the next few months just to avoid the new section, which won't appear on the exam until June.
The idea behind the "integrated reasoning" unit—which will be added to the existing verbal, quantitative and analytical writing sections—is to gauge how well applicants can extract and analyze complex data. The change comes as schools fall under increasing pressure from corporate recruiters to introduce more data-driven courses to better prepare students for the challenges they'll face after graduation.
"You're much more likely to have to analyze an integrated set of data than you are to do a geometry problem" in business school, says Andrew Mitchell, director of pre-business programs at Washington Post Co.'s Kaplan Test Prep. Geometry will still be covered within the GMAT's existing quantitative section.
So far, the council has published just four sample integrated-reasoning questions. One shows a table of data regarding flight traffic at various airports and asks the test-taker to determine relative passenger volume, flight landings and takeoffs at specific locations. Another question shows a scatter plot of ocean and air temperatures taken at a fixed location over the past year and asks test-takers to determine relationships between the two.
Many schools say GMAT scores, along with academic transcripts, are helpful predictors of how students will perform once they arrive on campus, but they are hopeful that the new section will provide an even more relevant data point.
"It's a step in the right direction," says Peter Zemsky, deputy dean of degree programs at INSEAD. Zemsky says that given the speed with which complicated decisions must be made in the business world, it's important to test applicants for such skills.
Still, admissions officers say they'll need at least a year before they know how to read results from the new section, as they see how test-takers progress through their first classes.
The test is still just a part of the total application package, which also includes interviews, references, essays and undergraduate transcripts.
Many admissions officers lament that students put too much emphasis on their GMAT scores, at the expense of other parts of their applications. "It doesn't matter what we say, applicants are going to stress out about the GMAT because it's (a) controllable, and (b) comparable," says Derrick Bolton, assistant dean and director of M.B.A. admissions at Stanford Graduate School of Business.
Data reflect that attitude: Admissions-consulting firm Veritas Prep found in a client survey that applicants already spend 71 hours preparing for the GMAT, but just 28 hours writing their essays and nine hours preparing for interviews.
The figure for test-prep likely will increase once the new version launches, say testing experts.
As if European debt talks weren't enough to hammer banks this holiday season, the do-gooders trying to profit from stemming global warming are also losing their jobs.
JPMorgan, Commerzbank, UBS and others are cutting traders and analysts in climate-related businesses, Bloomberg reports. JPMorgan's MD for environmental markets has left by mutual agreement, UBS has fired its climate policy group and the alternative energy analyst at Commerzbank is gone. What once seemed like a promising area of expansion has disappeared like a puff of hot air.
The culprit, once again, is politics. United Nations talks have failed for years to extend the Kyoto Protocol greenhouse gas curbs beyond December 2012. Without consensus on how to restrict emissions, people who might trade in such contracts can't build a business.
"There are shakeouts and departures happening as you would expect to be the case during any market that was a little bit unsure about where it was going," Henry Derwent, head of the International Emissions Trading Association told Bloomberg. His group has lost 6% of its members this year while benchmark EU carbon permits have lost more than 40% of their value.
Perhaps it's time to invest in some tanning lotion, instead.
The finance sector added 8,000 jobs last month, according to the Bureau of Labor Statistics. That doesn't account for all the jobs to be cut as banks execute their layoff plans.
The U.S. House Agriculture Committee voted to subpoena Jon S. Corzine, the former MF Global head. They want to know from the top what led to the firm's collapse Oct. 31.
Nothing like being contrarian. One U.S. hedge fund is setting up shop in the U.K. because it sees "compelling" investment opportunities in European debt.
Many companies are tossing tired, traditional job titles for new ones that add a little personality to job descriptions. Here are a few new-age examples:
Barclays Wealth will add 50 employees to its 100-member roster in Hong Kong, Singapore and India by the end of 2012. The bank is looking for senior bankers with 10 to 15 years' experience who have established client relationships. The bank is competing for wealth management talent in a region that's seen an influx of banks hoping to capture millionaire market share.
Wealth management is the area of finance that keeps on giving. BNY Mellon Wealth Management recently made a number of appointments and opened an office in Washington, D.C., its first in that city. More broadly, Chief Executive Gerald Hassell said the bank will continue to grow in Boston after adding 1,200 employees in the area over the past four years. Technology and operations are two areas that won't see hiring, but cost-cutting instead.
Finance hiring is admittedly pretty glum right now for most practice areas, but last month, the sector added 6,600 jobs in credit intermediation and related activities (in other words, commercial banks) and mortgage companies, according to the Bureau of Labor Statistics. Companies like JPMorgan are expanding their retail network strategy, albeit at a slower pace. Low mortgage rates, which have fueled a refinancing surge, have prompted demand for mortgage professionals like loan processors and underwriters.
As if you haven't heard this enough, Asia is the place to be in finance.
The latest firm to join the Asia herd is Carlyle, which sees boundless possibilities in private equity in the region. In an interview with The Wall Street Journal, the firm's co-head of Carlyle Asia Partners, X.D. Yang, talked about his 200-strong private-equity team.
The key to success, Yang said, is having Chinese people doing deals in China, Australians doing business in Australia and Indians doing transactions in India. "In each country, our team is natives of that country," Yang told the Journal. New hires must be able to work well with others and prima donnas aren't wanted. "We genuinely try to find people from a personality perspective that can work well with each other," Yang said.
So there's a formula: in private equity in Asia, become local and be nice to your teammates.
Go-go markets such as Latin America, the Middle East and Africa have seen falling investment banking revenue so far this year. Big surprise: Asia's investment banking revenue fell the most, by 17.3%.
Protester Tracy Postert spent a couple weeks in Zuccotti Park only to get offered a job by John Thomas Financial Brokerage. Just goes to show that the 99% can join the 1% if they protest long enough.
Credit Suisse said it plans to split in two its private-banking unit for Europe, the Middle East and Africa. A global crackdown on tax havens is behind the move.
As banks cut staff around the world, they are fighting in China over a rare commodity: a banker licensed by the government to do stock and bond deals.
Chinese securities rules require that every underwriter on a domestic initial public offering of shares or a bond sale have two qualified "sponsors" among the bankers working on the deal. The pair nursemaid the IPO from beginning to end and ultimately take responsibility for signing off on the company's books and business plan.
The pressure on sponsors, already great, is increasing as the country's regulator steps up its efforts to root out accounting fraud by listed companies and cracks down on underwriters.
Only about 2,000 sponsors are active in China, home to many of the world's biggest IPOs. Based on last year's deal flow, they are fully employed. China limits each to working on no more than two deals at a time, and deals can take a year or more to complete. Salaries, already high by local standards, are rising rapidly as firms compete for the relatively small number of people.
To earn the title, bankers must show proficiency in accounting, law and finance through a written exam in Chinese that takes place once a year. Only about 10% pass, according to a banker who did pass as well as several senior bankers; the China Securities Regulatory Commission wouldn't disclose the rate. Bankers say all who pass are Chinese nationals, and most have studied abroad.
"Ultimately this is a very coveted position, given there are a limited amount of sponsors and the exam is not easy," said Jonathan Penkin, co-head of equity capital markets for Asia, excluding Japan, at Goldman Sachs Group Inc. The 14 sponsors at Goldman's China joint venture Goldman Sachs Gao Hua Securities Co. report to him.
China's government tightly restricts the ability of foreign firms to operate in its capital markets and requires them to do business through licensed joint ventures, in which they can hold a maximum stake of 33%.
To keep their securities licenses, banks need to employ at least four sponsors. But for a firm to do a reasonable number of deals, it needs many more. That has led to a scramble as more Western banks set up securities joint ventures. J.P. Morgan Chase & Co., Morgan Stanley, Citigroup Inc. and Royal Bank of Scotland Group PLC have set up such ventures this year and are adding employees. Bankers complain the scarcity of sponsors is creating a bottleneck for deal making in China and driving up banks' costs.
"There is a huge fight for [sponsors]," said one banker in China who works for a Wall Street firm.
In one example, Morgan Stanley is in the process of hiring a team of roughly 20 bankers, about half of whom are qualified sponsors, from J.P. Morgan Chase's joint venture, according to people familiar with the matter. The switch may accelerate the plans of Morgan Stanley's Shanghai-based joint venture, Morgan Stanley Huaxin Securities, to add offices in Shenzhen and Beijing, one of the people added.
A sponsor typically earns around 2 million yuan (US$300,000) a year, including bonuses, which is high for locally hired bankers, and rising due to strong demand. Chinese banks sometimes outbid Western banks because they often offer commission-based pay allowing a sponsor to double his base salary in a good year, the bankers said.
"Once you have this license you are all set for life, even if you don't do deals," said the head of a Wall Street firm in China.
Still, the life of a sponsor isn't easy. One 30-year-old sponsor said he lives in a state of constant anxiety. Getting detailed answers from massive, complicated state-owned Chinese companies to meet the regulators' deadlines is difficult, he said. In some fast-growing companies, records are incomplete and ownership opaque.
Penalties for a sponsor who is found to have been negligent range from a warning to losing the license, fines and criminal prosecution, according to the securities regulator's website.
Bankers complain that the system puts too much responsibility in the hands of young, book-smart but unseasoned bankers who may miss instances of fraud. Some even claim the regulator is deliberately restricting the number of sponsors so it can more easily control the flow of IPOs. The regulator, the China Securities Regulatory Commission, declined to comment.
Now China's new top securities regulator is stepping up scrutiny of the industry. Local media have reported that Guo Shuqing, former chairman of China Construction Bank Corp., who was appointed to the job in October, has opened a record number of securities investigations. On its website, the CSRC says it has investigated 82 securities-market cases this year, of which half relate to insider trading. The regulator this year has disciplined 35 firms, including brokerage firms and handed out fines to some.
The CSRC, which created the sponsor system in late 2003, has argued that holding specific people responsible can prevent fraud as well as accounting scandals. In the U.S., the norm is that the investment bank, not the individual, is held culpable for errors unless fraud is involved.
While Chinese companies have been accused by short sellers of accounting fraud, most of the cases occurred in companies that used so-called reverse mergers to list in the U.S., a process that doesn't require a qualified sponsor.
In November, the regulator stripped the licenses of two sponsors who worked for Chinese firm Ping An Securities, saying their due diligence on the IPO of Chinese rice-wine maker Shengjing Shanhe Bio-Technology Co. had been sloppy. The IPO was canceled earlier this year by the regulator because it said the company didn't disclose important information for investors.
"The objective is to remind people they cannot hide behind the name of an institution if they make major mistakes in the listing process," said Heiner Braun, managing partner of law firm Freshfields' Shanghai office.
Two former employees of MF Global have filed a class-action lawsuit against the firm's former Chief Executive Jon Corzine, other senior executives and board directors on behalf of themselves and current and former employees who acquired stock in the company while Corzine led the firm.
The lawsuit, filed in the United States District Court for the Southern District of New York, alleges that the defendants provided false information regarding the company's financial condition and made statements that artificially inflated the stock price.
Once the the firm was downgraded due to its exposure to risky trades in European sovereign debt, investors got spooked and the stock price dropped, causing employees' shares to lose value.
"Jon Corzine and the board breached their fiduciary duty to their employees and destroyed their careers and retirement savings," Jacob Zamansky, lead counsel for the plaintiffs, said in an email.
The plaintiffs are Monica Rodriguez, the New York-based head of credit for the Americas, and Cyrille Guillaume, the London-based managing director of the commodities and stock division.
Plaintiffs are seeking class action status for all employees who acquired MF Global shares between May 20, 2010 and Nov. 3, 2011 through company-supported plans. At the time of the company's bankruptcy Oct. 31, the firm had close to 2,900 employees.
Employee plans included a long term incentive plan, which required employees to receive a portion of their compensation in stock, and an employee stock purchase plan (ESPP), which allowed them to buy shares at a discount. The lawsuit claims the defendants breached their duty "to keep [employees] reasonably informed of all facts and circumstances relating to their decision to participate in the ESPP."
If employees had known MF Global's true financial state, Zamansky said, "they could have refused to buy in or insisted on compensation arrangements that were all cash."
The employees did not file suit against MF Global, the company itself, because it is currently undergoing bankruptcy proceedings.
MF Global Holdings Ltd.'s executive in charge of controlling risks raised serious concerns several times last year to directors at the securities firm about the growing bet on European bonds by his boss, Jon S. Corzine, people familiar with the matter said.
The board allowed the company's exposure to troubled European sovereign debt to swell from about $1.5 billion in late 2010 to $6.3 billion shortly before MF Global tumbled into bankruptcy Oct. 31, these people said. The executive who challenged Mr. Corzine resigned in March.
Watch FINS reporter Julie Steinberg discuss MF Global's risky bets on European bonds on The WSJ's News Hub.
The disagreement shows that concerns about the big bet grew inside the company months before the trade rattled regulators, investors and customers. The executive, Michael Roseman, whose title was chief risk officer, also expressed concerns directly to Mr. Corzine, in meetings of just the two men and with other people present, people familiar with the situation said.
Mr. Roseman contended MF Global didn't have enough spare cash to withstand the risks of its position in bonds of Italy, Spain, Portugal, Ireland and Belgium. He also presented gloomy hypothetical scenarios of what could happen if MF Global's credit rating was downgraded because of the exposure.
Mr. Corzine, who started betting on the bonds shortly after arriving as chief executive in March 2010, responded to Mr. Roseman's concerns that some of the scenarios were too extreme and likely impossible, people familiar with the matter said. The former New Jersey governor and Goldman Sachs Group Inc. chairman said MF Global's exposure was limited, adding that the likely profit was worth the risks, these people said.
Boardroom Disagreements
The CEO suggested to board members at one point earlier this year that he might leave the company if they didn't trust his judgment about the bet, according to people familiar with the matter.
Boardroom disagreements in which the CEO's decisions are questioned by a lieutenant are rare. The situation at MF Global is even more unusual because it came just six months after directors hired Mr. Corzine to turn around the struggling brokerage firm. He replaced hundreds of sales officials and other employees with former traders from bigger Wall Street firms more accustomed to taking risks.
Mr. Corzine, 64 years old, has had no comment on MF Global since he resigned as chairman and CEO last month. His spokesman declined to comment on Monday.
The House Agriculture Committee has subpoenaed Mr. Corzine to testify at a hearing Thursday where lawmakers will probe the company's collapse and press for answers about an estimated $1.2 billion in missing customer money. Mr. Corzine is expected to attend the hearing.
A spokesman for law firm Davis Polk & Wardwell LLP, which represents the company's former directors, declined to comment. The directors resigned last week. Before the bankruptcy filing, the board's audit and risk committee was led by Eileen Fusco, a former Deloitte LLP partner. Ms. Fusco couldn't be reached for comment.
Improve Risk Culture
Mr. Roseman, 50 years old, joined MF Global in 2008 to improve risk-management culture after a rogue-trading incident cost the firm $140 million. In his first year, he helped install risk-management systems designed to prevent future blowups.
"Mike had a very good nose for the issues," said Thomas A. Kloet, CEO of Canadian exchange operator TMX Group and a former executive at brokerage firm Fimat, where Mr. Roseman was hired in 2004. "If he identified a risk, I listened to him." Mr. Roseman began his financial career in the early 1990s after a decade in aerospace and engineering. He traded interest-rate products at a Japanese bank before moving into risk management.
At Fimat, Mr. Roseman warned the company not to take too much risk on any one client, said a person familiar with the matter. At Bank of Montreal, where he worked in the early 2000s, he raised concerns about an energy transaction, according to other people.
"He would stand in people's face," one person said. A Wall Street executive who worked with Mr. Roseman added: "He got nervous when he saw concentrated risk positions."
Some MF Global executives felt even before Mr. Corzine, a former bond trader, took over as CEO that Mr. Roseman was too risk-averse, according to people familiar with the matter.
Better Fit for Old Business
These people contend that his background was a much better fit for the firm's traditional business of trading futures on exchanges for clients, rather than its aspirations under Mr. Corzine to become a full-service investment bank that could nimbly trade various financial instruments.
Mr. Corzine started making his bets on European bonds in the summer of 2010. As reported by The Wall Street Journal in November, he didn't rely heavily on the risk-management department at MF Global, reporting only to the company's board of directors.
Mr. Roseman was cautious about Mr. Corzine's bet on European bonds almost from the start, even though the CEO expressed confidence that euro-zone leaders wouldn't let the countries default. They haven't yet, though the bonds' prices have been volatile.
By September 2010, Mr. Roseman started voicing his concerns to board members, according to people familiar with the matter. Around the same time, the bet grew to about $1.5 billion, these people said. Mr. Roseman worried the trade might get bigger and even endanger MF Global if the financial turbulence in Europe got too rough.
People familiar with the situation said Mr. Corzine was annoyed by Mr. Roseman's dour attitude and persistence, though their face-to-face meetings about the trade were cordial. Some of their meetings included MF Global employees in risk management, treasury and finance.
As the bet ballooned, it flashed a warning sign on trading limits that Mr. Roseman had helped put in place before Mr. Corzine became his boss.
Replaced as Chief Risk Officer
Even though Mr. Corzine answered only to the board, the directors had to approve any breaches of those trading limits. It was Mr. Roseman's job to seek permission from the board in those cases, even if he had concerns. A person familiar with the matter estimated that Mr. Roseman made at least three separate requests on behalf of the firm to increase the sovereign-debt exposure. Each time, directors asked Mr. Roseman about the risks of the trade.
He responded by outlining the risks that made him uncomfortable about the trade, people familiar with the situation said. Another person briefed on the matter said two directors don't recall hearing any protests by Mr. Roseman.
It isn't clear what Mr. Corzine said at the board meetings, but he was allowed to keep increasing the European bet gradually until June, when it hit $6.4 billion, someone familiar with the situation said.
In January, Mr. Roseman was notified by MF Global that he would be replaced by a new chief risk officer. He left in March after helping with the transition to his successor. Since leaving MF Global, Mr. Roseman has done some consulting work.
Earlier this year, some directors and executives also raised concerns about the size of Mr. Corzine's bet. On at least one occasion, Mr. Corzine wanted to boost the size of the trade by more than the board would let him, according to a person familiar with the matter.
Red Flags: A Timeline
Sept. 2, 2008: Michael Roseman joins MF Global as chief risk officer.
March 23, 2010: Jon Corzine joins MF Global as chairman and CEO. MF Global's European bond trade is at zero.
September 2010: Mr. Roseman expresses concern to Mr. Corzine and MF Global's board that the bet was getting too big. European bond trade now stands at about $1.5 billion.
Jan. 31, 2011: MF Global informs Mr. Roseman that he would be replaced as chief risk officer.
March 31, 2011: Mr. Roseman leaves company. European bond trade is now at $6.3 billion
June 2011: Securities regulators start looking at whether an MF Global unit held enough capital for its European trade. European bond trade at the firm is at $6.4 billion as of June 30, 2011.
September 2011: Concerns about Italy and other European sovereigns grow. European bond trade at $6.3 billion as of Sept. 30.
October 2011: MF Global bonds are downgraded Oct. 24, partially due to the European bet. As customers flee, the company begins reducing its European bond position. MF Global files for bankruptcy Oct. 31. European bond trade at about $5 billion as of the bankruptcy filing.
November 2011: The U.K. bankruptcy administrator sells the bulk of the remaining European sovereign bonds in MF Global's positions by Nov. 9. European bond trade at or near zero.
Lazard used to be rife with plotlines ripped straight from the movies, wherein chief executives stomped mightily around the globe to put their mark on the firm and bankers were rumored to make grown men cry.
Since former Chief Executive Bruce Wasserstein's death two years ago, things have quieted down and perhaps for the better. Under the leadership of Ken Jacobs, 53, the firm has added dozens of senior bankers to bring total headcount to just above 2,300 employees. More than one-third of the managing directors in London joined since 2007, and returning alumni Lazardites include Felix Rohatyn, Gerry Rosenfeld and Pierre Tattevin.
The firm has been expanding into fields other than mergers and acquisitions advising, the business it's known for. Recently, the bank has expanded its debt advisory, sovereign advisory (like telling Greece what to do) and structured credit advisory businesses.
Meanwhile, it's been steadily lowering its compensation-to-revenue ratio (from 72% to 58% over the course of two years) and reaping modest returns.
Smaller banks may win the race in 2012, especially if bigger banks continue laying off thousands.
Here's why you keep chief risk officers around. Even if they're not saying what you want to hear, like MF Global's former CRO Michael Roseman, they're probably saying it for a reason.
An Arkansas-based bank is opening a Northwest office in Portland and hiring more than 50 mortgage professionals and administrators. The office is looking for underwriters, closers and processors.
Here's the story of the rise and fall of Jon S. Corzine, the former chief executive of MF Global. Whether he can recover from this latest disaster remains to be seen.
Citigroup Chief Executive Vikram Pandit owned up to the bank's cost and revenue troubles. He told investors the bank will cut 4,500 jobs in the coming quarters and take a charge of $400 million in the fourth quarter to account for severance and other costs.
A new survey of female executives in alternative investments found that nearly two-thirds believe women have a harder time rising in the industry than men. One-third of respondents think women remain trapped by societal stereotypes about the role of women.
With their retirement nest eggs shrinking, more baby boomers are buying annuities as a hedge against declining returns. The industry expects sales to rise 5% a year for the next three years, reaching a record $265 billion in 2014.
As with any investment, annuities sold by insurance companies come with strings attached. While investing $100,000 in an annuity contract that guarantees income of $7,500 a year for life may sound appealing, it passes up the opportunity for potentially higher returns from a more diversified investment. In addition, there are always a few uncertainties, such as whether the insurer will remain solvent.
Thus, selling annuities as relatively safe investment options takes a sensitive approach. The sales pitches are multilayered, if one can even call them pitches. The process requires agents to probe an individual's needs and appetite for risk before recommending a specific annuity contract to carry that person through retirement.
"You have to carefully evaluate a client's personality, objectives and time frame to retirement," said Steve Kaneski, one of New York Life's top sales agents who works primarily with physicians. "In order to do that you have to dig deep and ask them, "What are you willing to tolerate in terms of volatility?"
As with any other complicated sale, the key is educating the customer, said Lew Nason, an insurance sales trainer who started his own business, Insurance Pro Shop, 12 years ago. Agents can tailor their pitches by asking potential clients questions such as, "Where are your investments right now?" and "Are you worried about running out of money?"
"It's about helping them see they might have a financial problem and then helping them understand that problem," said Nason, who worked for MetLife from 1982 to 1994.
Sales commissions on fixed annuities usually range between 2% to 4%, while the commissions on variable annuities are slightly more. "There are companies that pay their sales agents higher commissions," said Kaneski. "But those are typically not the better companies."
Fidelity does not pay its sales agents direct commissions and leaves it to customers to ask about annuities as potential investment options, said Jeffrey Cimini and Robert Cummings, two Fidelity executives.
"If someone comes into one of our financial investment centers and says 'I need $10,000 a month to live on,' we might talk about an annuity as a fit for that need," said Cimini. "But we don't pitch them and there are times when we will tell a customer that an annuity is not the best fit for them."
That makes selling less about volume and more about quality as a growing percentage of baby boomers reach retirement age. The annuities market saw a surge in sales beginning in 2007 and that growth will continue over the next 15 years, said Cimini.
"We are having the best year in our history this year," he said. "With the gaps in social security and other investments, people are on the look for products that provide lifetime income."
Clients may require three or four in-person meetings lasting two hours each before they feel comfortable investing, said Kaneski, who has worked with New York Life Insurance for 22 years.
"When a client sits in front of me and tells me he or she is nervous, it sends an entirely different message than a phone call or an email expressing the same thing," he said. "When you are working with a client, you have to understand what his or her inner-voice is saying in addition to what that person wants you to hear. During that first appointment, they are evaluating you as much as you are evaluating them."
The best potential clients are either nearing retirement or constantly thinking about it, said Cimini. The opportunity to use annuities for tax deferral or lifetime income makes them a better fit for clients who are in a slightly higher-than-average tax bracket.
To further boost demand, New York Life has begun selling annuities that return the principal to next of kin when the contract holder dies. Usually, the insurance company keeps the original investment on annuities that promise lifetime income, said Kaneski.
"Making a sale is inevitably part of the process, but at the same time you really have to figure out the best match for clients since these are extremely long-term propositions," he said. "A doctor has to sell a prescription to a patient, but that doctor is going to do all of the necessary testing and background examinations before deciding what that prescription might be."
Finance chief executive turnover decreased in November, according to a report by outplacement firm Challenger, Gray & Christmas.
Last month, nine CEOs, led by MF Global Chief Executive Jon Corzine, announced they would leave their positions, down from 13 the previous month. So far this year, 118 finance executives have departed their posts, up from 112 in the year earlier period.
The Chicago-based company tallies CEO turnover from company filings and media announcements.
Notable departures include Corzine, who resigned on November 4 after the company declared bankruptcy. Bradley Abelow is acting head as the company gets wound down. Other departures include Gary Votapka of Calif.-based Mission Oaks Bancorp, who will be replaced by Gary Deems, and Tom Dobyns of Calif.-based American Security Bank.
Across all industries, 82 CEOs announced their intentions to step aside in November, up from 79 in September.
Of the 26 sectors covered in the report, healthcare, government and non-profit sectors contributed the most to CEO turnover.
Jobs in private equity are out there, but you have to know where to look.
If your first instinct was Asia, you're correct. If your first instinct was Europe, you may want to recalibrate your thinking.
"This is still an active jobs market, the industry is focusing on niche businesses and smaller transactions and looking for senior advisers to succeed where the deals are," Todd Monti, a Heidrick & Struggles recruiter, told Reuters.
PE activity has been slowing in Europe, causing some firms, like TPG and Vestar Capital, to reduce staff and close offices.
A mere 10-hour plane ride away, however, there are opportunities. Buyouts in Asia-Pacific total $33 billion year-to-date, up 54% from the year-earlier period. Growth was 9% in Europe.
"We are seriously thinking of expanding our presence in the Southeast Asia region in terms of people on the ground and investment focus," said Michael Chae, Blackstone Group's regional head.
If you've got the language skills, cultural awareness and good capital-raising skills, those firms will want you.
Deutsche Bank is cutting 20 jobs from its 70-member team in Tokyo. Casualties include Koichiro Yasuda, the head of corporate finance investment banking, who is resigning. At least three managing director positions are being axed.
Those who don't get cut by Citigroup in the latest round of layoffs may be relieved to still have a job, but they won't be getting a huge bonus. Only key investment bankers with fee-generating relationships are certain to get paid.
You may not want a job as an assistant, but just wait until you hear who's doing the hiring: Top portfolio managers at Berkshire Hathaway. May be worth taking a demotion just to get your foot in the door.
You're about to be offered your dream job as a top official in the company and everyone is rooting for you. You've also just found out that you're pregnant.
A contrite Jon S. Corzine will express both sorrow and a firm defense of his actions Thursday in his first public appearance since the collapse of MF Global Holdings Ltd. in late October.
"Recognizing the enormous impact on many peoples' lives resulting from the events surrounding the MF Global bankruptcy, I appear at today's hearings with great sadness," Corzine plans to say in testimony prepared for a hearing by the House Agriculture Committee, which subpoenaed the former MF Global Chief Executive Friday. A copy of the testimony was released early Thursday on the panel's website.
The testimony Thursday is sure to be contentious. Corzine, who resigned as chairman and CEO of MF Global after its Oct. 31 bankruptcy filing, is a Democrat and former U.S. Senator and governor of New Jersey.
He will face an intense grilling by the Republican-led committee, creating an atmosphere fraught with political drama. Corzine, 64 years old, received President Barack Obama's support in 2009 for his unsuccessful campaign for re-election as governor, and more recently held a fund-raising dinner for Obama.
Much of the day's testimony is likely to focus on a significant shortfall in customer funds at MF Global. As Corzine scrambled to stabilize the firm in its last days, it was discovered that hundreds of millions of dollars were missing in customer accounts.
The trustee overseeing MF Global's liquidation estimates the amount at $1.2 billion. Corzine will say in his testimony that he had little to do with the mechanics of moving customer cash and collateral and that he was "stunned" when he learned on Oct. 30 that the money was missing.
"I simply do not know where the money is," he will say, noting that "there were an extraordinary number of transactions during MF Global's last few days."
Corzine will mount a defense of his tenure at MF Global, arguing that he cut leverage at the company from 37.3 to 1 in the first quarter of 2010, when he took charge at MF Global, to 30 to 1 at the end. He will also defend his controversial bet on European debt. Corzine, who was also a former Goldman Sachs Group Inc. chairman, took the helm of MF Global in March 2010 and quickly started making big bets on European government bonds.
Corzine will defend his decision to invest in troubled European sovereign bonds of countries including Italy, Spain and Portugal. The bet grew to more than $6 billion in a strategy that was repeatedly discussed by the company's board.
"I strongly advocated the trading strategy," Corzine said, noting that he had identified the yields on the bonds as "favorable" at a time when he and senior traders at the firm were "discussing ways to improve the firm's profitability."
He also noted that the firm structured the trade as a "repurchase to maturity," which reduced some of MF Global's financing risk and market risks on the strategy.
"I believed that [MF Global's] investments in short-term European debt securities were prudent," Corzine will say. "There were discussions at board meetings, at which the transactions were described, analyzed and debated."
Corzine planned to say that on Aug. 15, 2011, he met with officials from the Financial Industry Regulatory Authority and the Securities and Exchange Commission in Washington, D.C., to discuss the European bet.
Several days later, MF Global was told that it needed to raise capital to support its positions. He also planned to discuss a controversial lobbying effort he made to influence the Commodity Futures Trading Commission's plans to change rules regarding how futures commission merchants such as MF Global can treat customer funds.
The CFTC was considering a ban on internal repurchase agreements, in which futures firms swap customer funds for higher yielding assets such as government bonds.
In a July 20 conference call with CFTC officials, including Chairman Gary Gensler, Corzine will say that "I argued, in substance, that such transactions should continue to be permitted because such transactions could be beneficial" to the futures commission merchants.
Corzine will also say that he spoke with Gensler "on only limited occasions" since the time he joined MF Global. Gensler, who for years worked alongside Corzine at Goldman Sachs, recused himself from the investigation into MF Global's collapse to avoid the appearance of a conflict of interest.
In its final weeks, as customers and counterparties fled the firm, MF Global undertook "extraordinary steps to ensure that it was able to honor customers' requests to withdraw funds or collateral," Corzine will say.
The firm unwound hundreds of millions of dollars worth of European debt trades and attempted to draw down loans from a consortium of banks led by J.P. Morgan Chase & Co. In its question and answer period following Corzine's statement, the House committee is sure to press him for answers about the missing customer cash.
Investigators believe MF Global in the week before it declared bankruptcy shifted funds from the customer accounts to its broker dealer, which handled the European-bond bet, according to people familiar with the matter.
Futures firms such as MF Global are prohibited from using customer cash in their own accounts, according to the Commodity Exchange Act. Corzine is widely expected to avoid directly answering specific questions about MF Global's activities by invoking his Constitutional right against self-incrimination.
He planned to say in his testimony that he doesn't have all the information he needs to provide informed answers and he hasn't had complete access to the firm's records or his own notes since the bankruptcy.
The Federal Bureau of Investigation is currently investigating MF Global's collapse and any statements could be used in a case against him. "He would be making a major mistake if he doesn't take the fifth on almost all of this," said Anthony Sabino, a professor of law at St. John's University who specializes in white-collar crime, referring to the Fifth Amendment to the Constitution.
"He's in a tight spot and he's going to be under oath so he has to speak truthfully." Corzine is also expected to testify before a House Financial Services subcommittee and the Senate's Agriculture committee next week. James Kobak, lead counsel for the trustee overseeing the liquidation of MF Global, and CFTC Commissioner Jill Sommers are also scheduled to testify at the Thursday hearing.
Ms. Sommers took on oversight of the agency's investigation into MF Global after Gensler recused himself.
"While our current focus is returning as much money as possible to customers, we are expending an enormous amount of effort to locate the missing customer funds and pursuing the enforcement investigation," Ms. Sommers will say.
Several exchange representatives will also testify, including CME Group Inc. Executive Chairman Terrence Duffy. Duffy will disclose in testimony new details about the final days of MF Global in his prepared statement. CME auditors learned from the CFTC on Oct. 30, one day before MF Global declared bankruptcy, that a draft segregation report provided to the CFTC on Oct. 28 showed a $900 million shortfall in customer funds. MF Global had said the shortfall was caused by an "accounting error," according to Duffy.
Throughout the rest of the day and that night, CME auditors and the CFTC worked with MF Global to discover the error. After finding that the shortfall was not an error, MF Global told the CFTC and CME that "customer money had been transferred out of segregation to firm accounts," Duffy plans to say.
Private equity hiring and compensation are expected to increase next year, according to industry experts.
Speakers at Dow Jones' webinar, "Avoiding the PE Comp Squeeze," said that PE investment professionals can expect a modest pay increase of between 1% and 4% over levels seen in 2010.
A recent survey conducted by Dow Jones Private Equity Analyst and New York-based search firm Glocap Search showed that no firms expect a decrease in compensation in the coming year, said Brian Korb, Glocap's co-founder.
Compensation "will follow a steady incline with less volatility," than experienced recently, said Korb. "It feels like the market has settled."
Because private equity firms were quick to reduce expenses during the financial crisis in 2008 and 2009, they've been quick to rebound, Korb said. Half of PE firms will hire next year, he added.
Firms are looking for investment professionals to work on deals as well as fund marketers and investor relations people schooled in fund-raising. For most investor relations professionals, compensation won't be tied to how much money they can raise, but how strong their relationship-management skills are.
Compensation structure has changed since the downturn. Firms are focusing more on performance and less apologetic about paying B-rate performers less. Star performers are getting paid as much or more than they did at the peak in 2007, Korb said.
Write to Julie Steinberg at Julie.Steinberg @dowjones.com
Jon Corzine broke his silence yesterday for the first time since he resigned as chief executive at now-bankrupt MF Global.
Testifying in front of the House Committee on Agriculture, Corzine acknowledged that he had a difference of opinion with Chief Risk Officer Michael Roseman, as reported by FINS and The Wall Street Journal. Roseman had warned against making the positions on European sovereign debt too big. Those positions ended up sinking the firm as investors began to doubt the firm's strategy.
During the question and answer period at yesterday's hearing, Corzine said Roseman "certainly had a different view about the sovereign default risk," and that Roseman had expressed his concerns to Corzine directly as well as to the board of directors.
Roseman was told in January this year that he was being replaced by a new chief risk officer. Corzine told the House committee that MF Global needed someone who was "more attuned" to the business the company was trying to adopt, that is, a riskier-based investment banking model, rather than the standard broker-dealer machinations Roseman was used to.
Health insurance is apparently overrated these days. Nearly half of FINS respondents said in a survey they'd forgo the coverage if it was a condition of their dream job.
Standard Chartered had planned on hiring a net 1,000 people by the end of the year, but now it plans to have added 2,000 in total. Hiring in Asia, Africa and the Middle East will continue into 2012.
Five out of six of Canada's biggest banks have set aside more for their bonus pool this year than last. If you haven't thought about Toronto as a top banking center, you may want to throw on a parka and try it out.
Senate Republicans voted to block the nomination of former Ohio attorney general Richard Cordray to be the first director of the Consumer Financial Protection Bureau.
Depending on whom you ask, investment bankers will either see higher or lower compensation due to new regulations. In one corner, Lazard's Ken Jacobs. In the other, JPMorgan honcho Jamie Dimon. You might be able to guess who thinks what.
You may groan inwardly, but there's no escaping the crimson: For the second year in a row, Harvard Business School is the top MBA program in the country, according to new rankings.
You've decided to leave your firm for greener pastures. Congratulations! Now just don't burn any bridges in the exit interview. You never know when you may want to come back.
When it comes to having health insurance, FINS readers don't seem to care.
U.S. Census figures indicate that 16.3% of Americans aren't covered by any health plan. Our informal Sign or Decline survey suggests far more than that are willing to forgo it. Asked if they would take their dream job if it didn't come with health insurance, 48% of 742 respondents said they would.
In these days of belt-tightening, it's not uncommon to be offered a job without health benefits. According to a 2011 survey from the Kaiser Family Foundation, 60% of American companies provide some kind of health insurance benefits for their employees; the smaller the firm, the less likely employers are to provide care. According to the 2010 Census, 55.3% of workers were covered by an employment-based health plan, while those covered by government-sponsored and direct-purchase insurance plans have climbed year-over-year.
Making the decision to forgo health benefits shouldn't be made lightly. Situations vary, but several factors should be weighed before taking a job that doesn't provide benefits, says Joseph Torella, Northeast president and national practice leader of employee benefits for HUB International, a North American insurance brokerage.
If you're covered by a spouse's plan or are young enough to fall under the umbrella of a parent's insurance plan, not getting insurance from your employer isn't as much of a concern. Younger members in particular would probably be more likely to do so, says Torella.
"People younger and healthier tend not to think the same way that people who have been in the workforce longer and have families do," says Torella. "Someone who is 21 or 25 might want a room with a view or higher pay, versus someone who is at a different point in their life."
The promise of insurance for all under the Obama health care law may contribute to the surprising FINS survey results. "People may be thinking that because of health care reform, the law provides some level of protection that they don't need from their employer," says Torella. However, the health care act can't necessarily be relied on; it faces significant legal challenges.
Many Americans are unaware of how much buying into their own health insurance plan can cost. "Health care costs are expected to continue to rise, and the affordability factor for the average employee is something they may not be aware of," says Torella. Premiums in the private market can run to $9,000 a year for individuals and $15,000 a year for families.
The absence of a health care plan doesn't need to be a deal breaker in accepting a job. In the current economic climate, those without work may have opt to take such a job if they don't have health insurance anyway. "If insurance is something they are giving up when accepting a job," says Torella, "that might be different."
What Would You Do?
Answer the question and see how you match up with the rest of the FINS community.
You've just been offered your dream job, but... you don't get health insurance.
Sign or Decline is a series of questions on FINS.com that ask what you would do for your dream job. Since its launch late last year, over 100,000 answers have been received and compiled in our database. Participate in Sign or Decline here.
