Citigroup fined $2 million over facebook IPO

Associated Press | Updated On: October 26, 2012 22:36 (IST)New York: The top securities regulator in Massachusetts has fined Citigroup $2 million, charging that an analyst there leaked confidential information about Facebook's initial public offering.

Secretary of the Commonwealth William Galvin announced the charges Friday. Citi agreed to the settlement without admitting or denying wrongdoing.

Citi was part of the team of banks that helped underwrite the deal that made Facebook a public company in May. When a bank helps underwrite such a deal, it has information about a company that the broader investing public does not have. The bankers who underwrite the deal are not supposed to act on that information or share it with any favored clients, because it would give them an unfair advantage over the public.

The arrangements can also bring accusations of conflicts of interest; banks not only help companies go public or do other deals, they also have units that provide research on the companies. The research is supposed to be impartial, but the banks have a stake in how a company does if it is helping it with underwriting.

According to Galvin's office, a junior analyst in Citigroup's San Francisco office was assigned to help research Facebook. On May 2, the junior analyst sent an email to two employees at the technology website TechCrunch.com, with proprietary information about Citigroup's research on Facebook.

"I am ramping up coverage on FB and thought you guys might like to see how the street is thinking about it (and our estimates)," the junior analyst wrote.

A TechCrunch employee wrote back: "There's no way I can publish this doc from an anonymous source, right?"

A minute later, the junior analyst replied: "My boss would eat me alive."

The analyst and the TechCrunch employee were friends, according to Galvin's office, and had gone to Stanford together.

Citigroup fired the junior analyst in September. The bank told Galvin's office that the junior analyst acted alone. In addition to agreeing to the $2 million fine, Citi also agreed to review its policies for overseeing analysts' communications, and to strengthen compliance training for the analysts.

Euro zone rot spreads

Euro zone rot spreads to Germany, China mending

By Jonathan Cable

LONDON | Wed Oct 24, 2012 6:04pm IST

(Reuters) - The euro zone's biggest member Germany is being sucked into the bloc's worsening economic quagmire, business surveys suggested on Wednesday, as similar data signalled the slowdown in China may be abating.

The slump that began in Greece and spread to other smaller euro zone economies was clearly gripping the core in October, marking the worst month for the 17-member bloc since it emerged from recession more than three years ago.Markit's Composite Purchasing Managers' Index (PMI), which polls around 5,000 businesses across the 17-nation bloc and is viewed as a reliable growth indicator, fell to 45.8 this month.

That was the lowest reading since June 2009, confounding consensus expectations in a Reuters poll for a rise to 46.4. The index has now been below the 50 mark that separates growth from contraction since February. Similar PMI data for China suggested the world's second biggest economy, a key world exporter, is slowly recovering from its weakest period of growth in three years, with new orders and output at their highest in months. A comparable PMI for the United States due at 1258 GMT is also expected to rise, showing a modest acceleration in growth.

GERMAN PLUNGE

The manufacturing PMI for Germany - another major exporter and Europe's economic powerhouse - plunged to 45.7 from 47.4, also confounding expectations for a rise and well below even the lowest forecast polled by Reuters. The rate of decline was even worse in France.

"(It) reinforces concern that the economic downturn in the region may be deepening and widening," said Martin van Vliet, senior economist at ING. The data were published just before European Central Bank President Mario Draghi was due to appear before German lawmakers for a grilling over whether his plans to buy euro zone sovereign debt might trigger inflation or compromise ECB independence. They also coincided with the latest numbers from Germany's Ifo institute showing business sentiment in the country dropped sharply to its lowest in more than 2-1/2 years, the sixth consecutive monthly fall.

"Any hopes of a rebound appear to have been dashed for now. Germany is heavily dependent on exports so a global slowdown is going to impact on Europe's growth motor," said Peter Dixon at Commerzbank. Germany has been mostly resilient to the three-year old sovereign debt crisis. But economic data in recent months have shown the rot is spreading.

The euro zone economy contracted 0.2 percent in the second quarter and is predicted to have shrunk 0.3 percent in the third, meeting the technical definition of recession. While official data implies a similar decline in the third quarter just ended, Markit said the PMIs suggest the downturn will accelerate into the current quarter - a far gloomier prediction than in a Reuters poll last week.

"We are more downbeat than the official data. The PMIs are running at levels in the third quarter and start of the fourth quarter historically consistent with GDP falling at about 0.6 percent," said Chris Williamson at data collator Markit. Bad news has been flowing out of company boardrooms too. Carmaker Volkswagen reported a fall in nine-month operating profit on Wednesday and sportswear maker Puma (PUMG.DE) reported sales in the region dropped in the third quarter. Heineken NV (HEIN.AS), the world's third-largest brewer, reported a stronger than expected increase in third-quarter revenue, but sold more beer everywhere except western Europe.

Markit's measure of services business expectations sank to its lowest reading since February 2009, at the nadir of the last recession and when world stock markets were tumbling.

STABILISATION IN CHINA

But it was a different story for China, where the HSBC Flash Manufacturing PMI rose to a three-month high of 49.1 in October but remained below the key 50 mark. "(This) adds to recent signs of stabilisation of the Chinese economy, thus underpinning our view that the slowdown in activity is bottoming out," said Nikolaus Keis at UniCredit.

A Reuters poll taken after last week's GDP data showed economists anticipating a modest rebound in growth in Q4 to 7.7 percent from Q3's below-target 7.4 percent. Even that figure would not be enough to lift full year expansion from an expected 13-year low, however. (Editing by Catherine Evans)

http://in.reuters.com/article/2012/10/24/economy-global-wrapup-idINDEE89N06420121024

BNRSTOCKS

NIFTY bearish below 5,130

Wkly Tech Analysis: Bias to remain bearish below 5,130

Among the index stocks, Hero MotoCorp slumped almost 10% to Rs 1,981, and Maruti plunged over 8% to Rs 1,283

Rex Cano / Mumbai May 05, 2012, 23:59 IST

The markets, as expected, began the week with hopes of a counter rally by the bulls. We saw the Sensex touch a high of 17,432, but eventually the gains turned into significant losses by the end of the week as technically the momentum oscillators were not supportive.

The Sensex slumped to a low of 16,777 amid heavy losses in auto, banking and capital goods shares. The BSE benchmark eventually ended the week with a loss of 356 points at 16,831.

Among the index stocks, Hero MotoCorp slumped almost 10 per cent to Rs 1,981, and Maruti plunged over 8 per cent to Rs 1,283. BHEL, Tata Steel, State Bank of India, Coal India, Bajaj Auto and Larsen & Toubro were the other major losers. On the other hand, TCS surged over 6 per cent to Rs 1,278. Cipla and Hindustan Unilever were the other prominent gainers, up around 4.5 per cent each.

According to the monthly Fibonacci charts, Sensex has near support around 16,700, a break below which could see the index dip towards the quarterly support level, which is around 16,200. The yearly chart also indicates some support around 16,670-odd levels. On the upside, the Sensex needs to sustain above 16,980.

Next week, the Sensex may seek support around 16,580-16,425, while it may face resistance around 17,080-17,240.

The NSE Nifty moved in a range of over 200 points. The index touched a high of 5,280, and then tumbled to a low of 5,071. The index finally settled with a significant loss of 122 points at 5,209.

The Nifty has broken below its 200-day DMA (daily moving average) on the daily charts after more than three months. The momentum oscillators continue to remain fairly bearish, hence we may see some more losses going ahead.

Select key momentum oscillators like the MACD and Stochastic Slow are both negative, on the daily and weekly charts, hence chances of a further downside are higher.

The near-term bias is likely to be negative as long as Nifty remains below 5,130 — which is the lower end of the Bollinger Band. The nearest support for Nifty is at 5,020, below which we could see fresh weakness with the next major support at 4,835.

On the positive front, if the Nifty is able to sustain above 5,130, then we could see a counter rally all the way up to 5,290-odd levels.

Next week, the Nifty is likely to seek support around 5,005-4,960, while it may face resistance around 5,165-5,215.

SUCCESS A WAY OF LIFE

11 MAR, 2012, 10.38AM IST,

Lesson's from AM Naik and L&T's leadership change

Managing leadership succession is very challenging for all organisations, tougher for more complex entities. Unfortunately, in several cases, neither the incumbent nor the board wakes up to address this challenge early on.

Typically, in their hurry to grow the organisation, they either forget or do not devote adequate attention to such a strategically important matter before it becomes a crisis. The leadership change at L&T has attracted a lot of attention precisely for the same reason. There are several lessons from this experience.

Every Lap Counts

Leadership succession is like a relay race. Choice of the runners for each lap depends on the challenges ahead, the first and last runners being the fastest. There has to be adequate preparation and perfect understanding between runners about the timing of passing the baton.

The person handing over the baton should feel confident that the person receiving it has caught hold of it. The two runners have to have perfect understanding between them about each other. In a well-trained context, this happens in split seconds. Played out in slow motion, the same thing happens in leadership succession in corporations.

In this highly professionalised organisation, the board and management have always been aware of the need for finding a successor to Mr Naik, who is already 70. In fact, media reports that appeared about two years ago had described the dilemma that the company was going to face.

It is unfortunate that the board did not do much then or earlier about choosing the runner for the next lap with all the appropriate capabilities, and prepare the ground for a smooth change over. This was in spite of the fact that the entire team of executive directors was over 60 then!

Start Early

The board should have started the process of identifying the successor at least five years back with a definite deadline, and intensified the search especially when it was clear then itself that there was no obvious choice available.

The company would have been better off with a younger top leadership to steer the organisation to achieve the 25 percent compound growth planned in the next several years. Such an approach would have guaranteed smooth transition of leadership at L&T, with an over lapping phase for the baton change to be trouble free.

Doubles Game

The current decision to split the responsibilities between chairman and managing director appears to be a convenient decision. The new duo of chairman and MD/CEO is going to face sharing the responsibilities of shaping the destiny of the organisation. It may not be easy for the new entrant to flourish when Mr Naik's shadow continues to loom large as the executive chairman.

Given that Mr Naik and Mr Venkatraman will play a doubles game for the next five years, it is critical for them both as well as the board to objectively discuss the roles they will actually play independently and jointly. The new MD should not become a figure head

Prepare Next Runner

Mr Naik has built L&T into a giant organisation, fighting several odds. He has a larger than life image. In such a scenario, it is for the incumbent to remind himself of the trusteeship role he is playing and prepare the organisation for the next leader. It appears that Mr Naik did not do it early enough.

By asking Mr Naik to continue as the executive chairman, the board has signalled its lack of preparedness for a change which is inevitable for anyone. Many leaders in business and politics do not believe that their time for retirement would ever come; they tend to think that they alone are capable of running subsequent laps. They do not recognise the need to prepare the next lap runner early on. Mr Naik and the board failed in their trusteeship responsibility.

Insecurity of Retirement

The longer a leader stays and the bigger the success, the greater is likely to be the challenge for his departure. Individual egos play a dominant role in refusing to accept realities. This is where some of the basic teachings of this country such as detachment, contentment and feeling of duty become all the more helpful. This is when leaders show their maturity.

National Institution

L&T is a national institution, respected and regarded for its professionalism by multiple stakeholders. The top team, representing all the stakeholders has a responsibility to ensure that it starts preparing for the next lap runner now itself. As trustees, they have to constantly remind themselves that no individual is indispensable.


(The author is Thomas Schmidheiny Chair Professor of Family Business & Wealth Management, Indian School