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Business

Due to COVID cases, Jefferies cancels travel and parties, resumes remote working

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Dec 8 (Reuters) – Investment bank Jefferies Financial Group (JEF.N) on Wednesday cancelled all client parties and most travel, asking employees to work from home when possible due to a spate of COVID-19 cases.

U.S. banks have been more assertive than other industries in encouraging employees back to the office although those plans have come under renewed scrutiny due to the rapid spread of the Omicron variant. Jefferies’ disclosure raised questions about whether other banks will also review return-to-office plans, mask mandates and travel and entertainment policies.

Jefferies, with its headquarters in midtown Manhattan, called its staff back to offices in October. The bank has felt the pandemic’s impact acutely, as its Chief Financial Officer Peg Broadbent died due to coronavirus complications in March 2020.

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“Our priority now is to best protect every one of you and your families,” wrote Chief Executive Richard Handler in a memo seen by Reuters. “Effective today, we are cancelling all social events and entertainment until January 3rd.”

The firm has had more than 40 new COVID-19 cases this month including 10 on Tuesday, the memo said, adding only very few cases required hospitalization. Handler added that Jefferies was re-imposing a mask mandate in all offices, regardless of vaccination status.

The investment bank, which has 3,000 employees worldwide, also has offices in Asia and Europe. More than 95% of Jefferies staff are now vaccinated, and all visitors to Jefferies’ offices must be fully vaccinated, Handler said in the memo.

Most major U.S. banks have had staff working in offices since the summer. Senior bankers such as Goldman Sachs Chief Executive David Solomon and Morgan Stanley Chief Executive James Gorman have spoken of the benefits of in-person interaction, particularly for younger employees.

So far, U.S. banks are sticking to their existing COVID-19 policies although sources at the “big six” firms say they are keeping a close watch on developments. read more

Goldman Sachs (GS.N), Morgan Stanley (MS.N) and JPMorgan (JPM.N) have had most workers back at offices on a rotational basis since the summer.

Others, like Wells Fargo (WFC.N), Citigroup (C.N) and Bank of America (BAC.N), have taken a more flexible stance.

Wells Fargo pushed its return-to-office plans back to January, while Citigroup employees in New York, Chicago, Boston, Philadelphia and Washington, D.C. have been working from the office at least two days a week since Sept. 13.

Most major U.S. banks have also been continuing with holiday parties and client meetings since the Omicron variant was discovered, sources said, although they require proof of vaccination to attend.

Wells Fargo said Wednesday it had no firm-wide celebrations planned. Team parties are at the discretion of individual managers, it added.

In Europe, where Omicron has spread more rapidly, some banks have cancelled events such as JPMorgan’s annual festive carols reception in London and year-end party in Paris.

Deutsche Bank (DBKGn.DE) has told its London staff they can hold small gatherings at the team level. Asset manager Schroders (SDR.L) and the City of London Corporation, which runs London’s historic financial district, ask guests to take rapid tests before some festive events. read more

Some large U.S. companies are also pushing back their office-return date due to the Omicron variant. read more

Jefferies, which the memo said had seen attendance average as high as 60% many days globally in recent weeks, said anyone who wants to enter a Jefferies office or event will have to have a booster vaccination administered by Jan. 31, unless they are not yet eligible to do so.

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Reporting by Matt Scuffham and Aaron Saldanha, additional reporting by Noor Zainab Hussain and Sruthi Shankar in Bangalore; writing by Matt Scuffham and Megan Davies; editing by Edward Tobin and Cynthia Osterman

Our Standards: The Thomson Reuters Trust Principles.

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Business

Hong Kong’s zero-COVID policy undermining financial hub status – industry group

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A general view showing the Central Business District, in Hong Kong, China, September 15, 2021. REUTERS/Tyrone Siu

HONG KONG, Oct 25 (Reuters) – A financial industry group warned on Monday that Hong Kong’s zero-COVID policy and strict quarantine requirements for international travellers threatens to undermine the city’s status as a financial hub.

The Asia Securities Industry and Financial Markets Association (ASIFMA) said a survey of members, including some of the world’s largest banks and asset managers, showed 48% were contemplating moving staff or functions away from Hong Kong due to operational challenges, which included uncertainty regarding when and how travel and quarantine restrictions will be lifted.

Hong Kong has some of the most stringent travel restrictions in the world and is virtually COVID-19 free, however unlike regional rival Singapore, which is slowly re-opening its borders, the Chinese-ruled city has no public plan for opening up to international travellers.

Local leaders say their focus is removing restrictions on travel from Hong Kong to mainland China, which also has strict entry restrictions. At present travellers from Hong Kong to the mainland must still undergo quarantine.

“Hong Kong’s status as an (international financial centre) is increasingly at risk along with its long-term economic recovery and competitiveness as a premier place to do business,” Mark Austen chief executive of Asifma wrote in open letter to Hong Kong’s financial secretary Paul Chan.

The letter made a series of recommendations including publishing “a roadmap for exiting Hong Kong’s ‘zero-case’ based COVID-19 strategy beyond solely the immediate goal of opening borders with China”, as well as prioritising vaccinations.

Hong Kong has reported just over 12,300 cases since the start of the pandemic, mostly imported, and 213 deaths.

Regional rival Singapore is expanding quarantine-free travel to nearly a dozen countries, but authorities are grappling with how to do so while averting a surge of Covid-19 cases among older people and those with weak immune systems.

Reporting by Alun John; Editing by Michael Perry

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Business

In corporate crackdown, U.S. SEC takes aim at executive pay

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WASHINGTON, Oct 22 (Reuters) – The new Democratic leadership of the U.S. securities watchdog has a message for Corporate America’s highly paid executives: if your company screws up, your pay is at risk.

Clawing back compensation is shaping up to be a key part of the U.S. Securities and Exchange Commission’s (SEC) agenda as it cracks down on corporate misconduct, raising the stakes for thousands of executives who could potentially lose millions of dollars in bonuses and stock sale profits.

“Clawbacks can be an important factor in accountability,” said John Coffee, a professor at Columbia University Law School. “If properly implemented, they can be much more effective than they currently are.”

Last week, the SEC said it would revive a rule left unfinished from the 2007-09 financial crisis that would require U.S.-listed companies to implement a plan to recoup executive compensation in the event they have to correct financial statements due to compliance failures.

But in behind-the-scenes enforcement talks with companies, the SEC has already dusted off a narrower clawback power created in 2002 following the Enron and WorldCom accounting scandals, according to four lawyers familiar with the private discussions.

That rule allows the SEC to force a public company’s chief executive or chief financial officer to return bonuses or other incentive-based pay in the event the company restates its results due to misconduct.

In 2016, a federal court settled a lingering question over whether the SEC could recoup pay from executives who were not directly accused of wrongdoing. It said the agency could, because the executives should not profit from the proceeds of foul play.

In nearly two decades, however, the SEC has used the 2002 clawback power sparingly overall, despite potentially hundreds of opportunities to so, and just 15 times to penalize executives who were not directly accused of misconduct, according to a new analysis by law firm Covington and Burling LLP.

Gerald Hodgkins, a partner in the firm’s Washington office and a former associate director in the SEC’s enforcement division, said it was unclear why the SEC had pursued so few such actions, but that “perceived unfairness” was one potential reason.

The SEC appears to be shifting its stance on the issue.

Its enforcement staff have recently proposed using the clawback power in private settlement negotiations over cases involving financial restatements where the CEO and CFO are not accused of misconduct, said four attorneys involved in the separate cases, in what appears to be a change in strategy.

Among them is Joseph Dever, a lawyer with Cozen O’Connor LLP and a former SEC enforcement attorney.

“Staff seems to be raising this remedy far more frequently now than in the past,” he said.

On one occasion, staff proposed clawing back an executive’s compensation after the issue with the company had been resolved, said one of the three other attorneys, adding that was highly unusual.

The three attorneys asked to remain anonymous to discuss private matters.

Reuters could not ascertain how frequently overall the SEC was proposing clawbacks in settlement discussions.

But Allison Lee, a Democratic Commissioner who was a senior enforcement attorney with the agency from 2015 to 2018, told Reuters in an interview that the 2002 power has been “underutilized.”

While Lee said she could not comment on enforcement probes over which she now has no oversight, she said of the power: “I’d like to see us ensure we are vindicating the recourse it provides for shareholders.”

ACCOUNTABILITY

Cracking down on corporations is a priority for Democrats who say the SEC has long been too soft on big business.

When properly enforced, clawbacks can improve accountability in an era where writing checks to appease regulators is seen by companies as a cost of doing business, say advocates.

Over the past decade, investors have pushed for corporate clawback policies for a range of missteps, but companies have struggled to get the cash back once it is out the door, said Coffee.

Goldman Sachs Group Inc (GS.N), for example, failed to recoup compensation from former Chief Operating Officer Gary Cohn over the Wall Street bank’s involvement in Malaysia’s 1MDB sovereign fund corruption scandal. He gave the money to charity instead.

That is why tougher regulatory clawback tools are important, say experts.

Last week, the SEC reopened to public comment an additional clawback rule it first proposed in 2015 but never finalized. The comment period closes on Nov. 22.

Required by the 2010 Dodd-Frank Act, that rule would go further than the 2002 power, capturing a broader range of corporate roles and situations in which incentive-based compensation could be recouped.

While it puts the responsibility of implementing and enforcing the clawbacks on companies and exchanges, Lee said it could be a “powerful” accountability tool.

“It’s based on the common-sense notion that you shouldn’t get to keep incentive-based comp that wasn’t actually earned,” she said in a follow-up statement. “I’m glad we’re finally moving toward implementing that mandate.”

Reporting by Chris Prentice in Washington
Editing by Michelle Price and Matthew Lewis

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China power crunch slams factories as coal lobby warns woes could stay until winter

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SHENYANG, China, Sept 30 (Reuters) – Small firms caught in China’s prolonged energy crunch are turning to diesel generators, or simply shutting shop, as coal industry officials voiced fears about stockpiles ahead of winter and manufacturing shrank in the world’s no. 2 economy.

Beijing is scrambling to deliver more coal to utilities to restore supply as the northeast grapples with its worst power outages in years, particularly the three provinces of Liaoning, Heilongjiang and Jilin, home to nearly 100 million people.

Gao Lai, who runs an industrial laundry service in Shenyang, the capital of Liaoning, said he was losing money after the power crunch forced him to hire a diesel generator.

“We can afford it for just four days, but if it’s for longer, then the costs are too much, so we can’t survive,” he told Reuters.

“We are willing to make it work because the country needs it, but if (power curbs continue) in the long run, we have to think of a way out.”

The curbs were triggered by shortages of coal, which fuels about two-thirds of China’s power generation.

Thermal coal futures closed Thursday up 4.2% on the Zhengzhou Commodity Exchange after hitting an all-time high of 1,408 yuan ($218) per tonne.

The contract surged 96% in the July to September period on tight supplies and strong demand, its biggest quarterly jump since the first quarter of 2017, spurring the exchange to adopt trading limits.

Official data separately showed China’s factory activity contracted in September for the first time since February 2020. read more

Since last week, more than 100 companies from electronic component manufacturers to gold miners have notified stock markets of production suspensions. Some have said they resumed production in the last two days, however.

The strain comes as the China Coal Industry Association warned it was “not optimistic” about supplies ahead of winter, the peak season for demand, and added that power plant inventories were now “obviously low”.

It urged companies to “spare no effort” to boost supply and focus on sales to smaller, high-energy consumers who have not signed long-term supply contracts.

Although coal production hit a record in August, analysts with Chinese investment bank CICC said a recent spate of mine accidents had made regulators more cautious about approving expansions in output.

They said imports, down 10.3% on the year in the January to August period, were unlikely to rise significantly over the rest of 2021 and more local production had to be “freed”.

SWITCH TO DIESEL

In Shenyang, staff at a steel parts factory that has been shut for the last few days said they had not yet rented a generator but might do so if rationing continued.

Zhai Junwang, manager of a company that rents standalone diesel-fired generators, said brisk business in recent days had led to a doubling in rates.

“There’s very limited stock,” he said, but added that he did not expect the situation to last, as most small factories using his generators were losing money.

The government has said its priority will be to guarantee household power and heating supplies over the winter, as state-run energy firm Sinopec pledged to boost imports of liquefied natural gas. read more

But Citi analysts said in a note they expected power shortages to persist in the peak winter season for heating, most of it coal-fired.

Experts are pressing for fundamental reforms to China’s energy system.

The crisis was caused not by supply shortages but an inflexible grid system, said Zhang Boting of industry research group the China Society for Hydropower Engineering.

“The solution … isn’t simply relying on increasing power generating capacity, but boosting the ability of the grid to adjust peaks and solve the serious mismatches between energy loads and energy supplies,” he said on the group’s website.

($1=6.46107 Chinese yuan renminbi)

Reporting by Gabriel Crossley in Shenyang and Shivani Singh in Beijing; Additional reporting by Min Zhang in Beijing, Brenda Goh and David Stanway in Shanghai, Aizhu Chen in Singapore and Tom Daly; Editing by Clarence Fernandez

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Business

Banks beware, outsiders are cracking the code for finance

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  • Embedded finance investment jumps in 2021, data shows
  • Buy now pay later deals take centre stage
  • Fintech market valuations leapfrog banks

LONDON, Sept 17 (Reuters) – Anyone can be a banker these days, you just need the right code.

Global brands from Mercedes and Amazon (AMZN.O) to IKEA and Walmart (WMT.N) are cutting out the traditional financial middleman and plugging in software from tech startups to offer customers everything from banking and credit to insurance.

For established financial institutions, the warning signs are flashing.

So-called embedded finance – a fancy term for companies integrating software to offer financial services – means Amazon can let customers “buy now pay later” when they check out and Mercedes drivers can get their cars to pay for their fuel.

To be sure, banks are still behind most of the transactions but investors and analysts say the risk for traditional lenders is that they will get pushed further away from the front end of the finance chain.

And that means they’ll be further away from the mountains of data others are hoovering up about the preferences and behaviours of their customers – data that could be crucial in giving them an edge over banks in financial services.

“Embedded financial services takes the cross-sell concept to new heights. It’s predicated on a deep software-based ongoing data relationship with the consumer and business,” said Matt Harris, a partner at investor Bain Capital Ventures.

“That is why this revolution is so important,” he said. “It means that all the good risk is going to go to these embedded companies that know so much about their customers and what is left over will go to banks and insurance companies.”

WHERE DO YOU WANT TO PLAY?

For now, many areas of embedded finance are barely denting the dominance of banks and even though some upstarts have licences to offer regulated services such as lending, they lack the scale and deep funding pools of the biggest banks.

But if financial technology firms, or fintechs, can match their success in grabbing a chunk of digital payments from banks – and boosting their valuations in the process – lenders may have to respond, analysts say.

Stripe, for example, the payments platform behind many sites with clients including Amazon and Alphabet’s (GOOGL.O) Google, was valued at $95 billion in March. read more

Accenture estimated in 2019 that new entrants to the payments market had amassed 8% of revenues globally – and that share has risen over the past year as the pandemic boosted digital payments and hit traditional payments, Alan McIntyre, senior banking industry director at Accenture, said.

Now the focus is turning to lending, as well as complete off-the-shelf digital lenders with a variety of products businesses can pick and choose to embed in their processes.

“The vast majority of consumer centric companies will be able to launch financial products that will allow them to significantly improve their customer experience,” said Luca Bocchio, partner at venture capital firm Accel.

“That is why we feel excited about this space.”

So far this year, investors have poured $4.25 billion into embedded finance startups, almost three times the amount in 2020, data provided to Reuters by PitchBook shows.

Leading the way is Swedish buy now pay later (BNPL) firm Klarna which raised $1.9 billion.

DriveWealth, which sells technology allowing companies to offer fractional share trading, attracted $459 million while investors put $229 million into Solarisbank, a licensed German digital bank which offers an array of banking services software.

Shares in Affirm (AFRM.O), meanwhile, surged last month when it teamed up with Amazon to offer BNPL products while rival U.S. fintech Square (SQ.N) said last month it was buying Australian BNPL firm Afterpay (APT.AX) for $29 billion.

Square is now worth $113 billion, more than Europe’s most valuable bank, HSBC (HSBA.L), on $105 billion.

“Big banks and insurers will lose out if they don’t act quickly and work out where to play in this market,” said Simon Torrance, founder of Embedded Finance & Super App Strategies.

Reuters Graphics

YOU NEED A LOAN!

Several other retailers have announced plans this year to expand in financial services.

Walmart launched a fintech startup with investment firm Ribbit Capital in January to develop financial products for its employees and customers while IKEA took a minority stake in BNPL firm Jifiti last month.

Automakers such as Volkswagen’s (VOWG_p.DE) Audi and Tata’s (TAMO.NS) Jaguar Land Rover have experimented with embedding payment technology in their vehicles to take the hassle out of paying, besides Daimler’s (DAIGn.DE) Mercedes.

“Customers expect services, including financial services, to be directly integrated at the point of consumption, and to be convenient, digital, and immediately accessible,” said Roland Folz, chief executive of Solarisbank which provides banking services to more than 50 companies including Samsung.

It’s not just end consumers being targeted by embedded finance startups. Businesses themselves are being tapped on the shoulder as their digital data is crunched by fintechs such as Canada’s Shopify (SHOP.TO).

It provides software for merchants and its Shopify Capital division also offers cash advances, based on an analysis of more than 70 million data points across its platform.

“No merchant comes to us and says, I would like a loan. We go to merchants and say, we think it’s time for funding for you,” said Kaz Nejatian, vice president, product, merchant services at Shopify.

“We don’t ask for business plans, we don’t ask for tax statements, we don’t ask for income statements, and we don’t ask for personal guarantees. Not because we are benevolent but because we think those are bad signals into the odds of success on the internet,” he said.

A Shopify spokesperson said funding goes from $200 to $2 million. It has provided $2.3 billion in cumulative capital advances and is valued at $184 billion, well above Royal Bank of Canada (RY.TO), the country’s biggest traditional lender.

CONNECTED FUTURE?

Shopify’s lending business is, however, still dwarfed by the big banks. JPMorgan Chase & Co (JPM.N), for example, had a consumer and community loan book worth $435 billion at the end of June.

Major advances into finance by companies from other sectors could also be limited by regulators.

Officials from the Bank for International Settlements, a consortium of central banks and financial regulators, warned watchdogs last month to get to grips with the growing influence of technology firms in finance. read more

Bain’s Harris said financial regulators were taking the approach that because they don’t know how to regulate tech firms they are insisting there’s a bank behind every transaction – but that did not mean banks would prevent fintechs encroaching.

“They are right that the banks will always have a role but it’s not a very remunerative role and it involves very little ownership of the customer,” he said.

Forrester analyst Jacob Morgan said banks had to decide where they want to be in the finance chain.

“Can they afford to fight for customer primacy, or do they actually see a more profitable route to market to become the rails that other people run on top of?” he said. “Some banks will choose to do both.”

And some are already fighting back.

Citigroup (C.N) has teamed up with Google on bank accounts, Goldman Sachs (GS.N) is providing credit cards for Apple (AAPL.O) and JPMorgan is buying 75% of Volkswagen’s payments business and plans to expand to other industries. read more 06:00:00

“Connectivity between different systems is the future,” said Shahrokh Moinian, head of wholesale payments, EMEA, at JPMorgan. “We want to be the leader.”

Reporting by Anna Irrera and Iain Withers; Editing by Rachel Armstrong and David Clarke

Our Standards: The Thomson Reuters Trust Principles.

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Fed’s Powell orders sweeping ethics review after officials’ trading prompts outcry

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WASHINGTON, Sept 16 (Reuters) – Federal Reserve Chair Jerome Powell has ordered a sweeping review of the ethics rules governing financial holdings and dealings by senior officials at the U.S. central bank, a Fed spokesperson said on Thursday.

Powell ordered the review late last week, the spokesperson said in an emailed statement, following recent reports that two of the Fed system’s 12 regional reserve bank presidents had been active investors during 2020, a notably volatile year for asset prices as the country battled the COVID-19 pandemic.Those revelations, originally reported by the Wall Street Journal, prompted senior U.S. lawmakers – including Senator Elizabeth Warren of Massachusetts – to demand more stringent restrictions on such activities.

“Because the trust of the American people is essential for the Federal Reserve to effectively carry out our important mission, Chair Powell late last week directed Board staff to take a fresh and comprehensive look at the ethics rules around permissible financial holdings and activities by senior Fed officials,” the statement said.

The rules that guide personal financial practices for Fed officials are the same as those for other government agencies, the spokesperson said. Moreover, the Fed has supplemental rules that are stricter than those for Congress and other agencies that are specific to its work.

“This review will assist in identifying ways to further tighten those rules and standards. The Board will make changes, as appropriate, and any changes will be added to the Reserve Bank Code of Conduct,” the statement said.

Following news reports on their trading last week,Dallas Fed President Robert Kaplan and Boston Fed President Eric Rosengren both said they would divest any holdings of individual stocks by Sept. 30 and put the proceeds into index funds or cash.

Their investments were judged by in-house ethics officers to have complied with Fed ethics rules. Kaplan, a former vice-chair of Goldman Sachs, has been an active trader since taking over the Dallas Fed in 2015, with multiple, million-dollar transactions in individual stocks each year, according to finiancial disclosures dating to 2016.

Still, their activity drew a sharp reaction given the context of a pandemic year in which tens of millions faced joblessness and the economy was on the precipice of a threatened depression.

The Fed, beginning in March of 2020, rolled out a response that was record-breaking for its speed and scope, with interest rates slashed to zero and open-ended promises to use bond buying and other tools to keep the economy afloat.

The effort stabilized financial markets, underwrote credit to small businesses and helped set the stage for a fast rebound of jobs and economic growth.

It also triggered a record surge of asset prices following a crash early in the pandemic. Between the Fed’s efforts and trillions of dollars in government spending approved by Congress, the S&P 500 Index (.SPX) has more than doubled from its pandemic low on March 23, 2020 and is about 30% above the high hit in the previous month.

It is not unusual for Fed officials to hold extensive portfolios. Powell, a private equity lawyer with a stint at the Washington-based Carlyle Group, has net worth in excess of $17 million and perhaps much higher, according to his latest ethics filings.

But they are not as a rule active traders, and many join the Fed from academic backgrounds or government posts. St. Louis Fed President James Bullard’s holdings are modest enough that he hand writes his ethics form. Former Fed Chair Janet Yellen’s disclosure was notable largely for its stamp collection.

Fed rules explicitly prohibit trading around the time of Fed policy meetings – when market-sensitive information is distributed – requires securities to be held for at least 30 days and forbids officials from holding bank stocks or funds with holdings concentrated in the financial sector that the Fed oversees.

But broader language in the Fed’s internal rules requires officials to avoid even the appearance of conflict or of using their position for personal gain.

For Powell, promoted to Fed chair in 2018 by former President Donald Trump and subsequently a target of Trump’s ire for his management of Fed interest rate policy, the revelations come at a particularly awkward time.

His current term as chair ends in February, and President Joe Biden is in the midst of deciding whether to appoint him to a second four-year term.

Among those advocating for a change in Fed leadership, one of the chief arguments has been that Powell, a private equity lawyer, has not been strict enough in his approach to Wall Street.

He has also worked to build strong relationships among U.S. lawmakers and has preached the need for the unelected central bankers to be transparent in their actions and accept oversight by the country’s elected officials.

Reporting by Howard Schneider; Additional reporting by Ann Saphir;
Writing by Dan Burns; Editing by Chizu Nomiyama and Dan Grebler

Our Standards: The Thomson Reuters Trust Principles.

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Business

London takes aim at New York with five-year financial plan

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A woman exercises with a dog near the City of London financial district, in London, Britain, April 30, 2021. REUTERS/John Sibley

  • Ambitious plan depends on tax cuts, open door hiring
  • TheCityUK says New York took top spot in 2018
  • Brexit, rise of Asian financial centres add pressure

LONDON, Sept 7 (Reuters) – Britain needs to ease taxes on banks and make it easier to hire staff from abroad, its financial and professional services lobby said in a blueprint to help London unseat New York as the world’s top international financial centre within five years.

The strategy paper on Tuesday from TheCityUK reiterated some ideas already aired in government-backed reports and elsewhere in recent months as the City of London looks to recoup ground lost following Britain’s departure from the EU. read more

“By some metrics, the UK is losing ground: London is currently slipping further behind New York each year while other centres are strengthening,” the paper said.

The U.S. financial capital overtook London in 2018 in a leading annual survey, it said, adding that New York dominated in stock market listings.

“The UK therefore needs to adopt a relentless focus on strengthening its international competitiveness to win back the prize of being the world’s leading international financial centre,” TheCityUK lobby group, which promotes the wider financial sector abroad, paper added in the paper.

Britain’s departure from the European Union effectively closed London off from its biggest financial services customer, adding further pressure to catch up.

The finance ministry has already set out reforms to make London’s capital market more competitive, and TheCityUK set a five-year target for London to “out-compete its rivals” by amending tax, visa and other rules.

Becoming the global hub for financial data, sustainability investing and investment and risk management will also be crucial in helping Britain overtake New York, TheCityUK said.

The total tax rate for a London bank is 46.5%, 13% higher than a New York based bank, it added.

But persuading government to cut taxes on finance as it mends a hole in the economy from COVID may be challenging, as will having an open door on hiring given the Brexit referendum pledged to crack down on high levels of international mobility.

The single most important issue for financial firms is being able to hire globally, TheCityUK CEO Miles Celic said.

“In conversations we have had with government, I think that is something that is absolutely understood,” he told reporters.

Reporting by Huw Jones; Editing by Alexander Smith

Our Standards: The Thomson Reuters Trust Principles.

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Business

Robinhood, gateway to ‘meme’ stocks, raises $2.1 billion in IPO

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Robinhood logo is seen on a smartphone in front of a displayed same logo in this illustration taken, July 2, 2021. REUTERS/Dado Ruvic/Illustration

July 28 (Reuters) – Robinhood Markets Inc, the owner of the trading app which emerged as the go-to destination for retail investors speculating on this year’s “meme’ stock trading frenzy, raised $2.1 billion in its initial public offering on Wednesday.

The company was seeking to capitalize on individual investors’ fascination with cryptocurrencies and stocks such as GameStop Corp (GME.N), which have seen wild swings after becoming the subject of trading speculation on social media sites such as Reddit. Robinhood’s monthly active users surged from 11.7 million at the end of December to 21.3 million as of the end of June.

The IPO valued Robinhood at $31.8 billion, making it greater as a function of its revenue than many of its traditional rivals such as Charles Schwab Corp (SCHW.N), but the offering priced at the bottom of the company’s indicated range.

Some investors stayed on the sidelines, citing concerns over the frothy valuation, the risk of regulators cracking down on Robinhood’s business, and even lingering anger with the company’s imposition of trading curbs when the meme stock trading frenzy flared up at the end of January. read more

Robinhood said it sold 55 million shares in the IPO at $38 apiece, the low end of its $38 to $42 price range. This makes it one of the most valuable U.S. companies to have gone public year-to-date, amid a red-hot market for new listings.

In an unusual move, Robinhood had said it would reserve between 20% and 35% of its shares for its users.

Robinhood’s platform allows users to make unlimited commission-free trades in stocks, exchange-traded funds, options and cryptocurrencies. Its simple interface made it popular with young investors trading from home during the COVID-19 pandemic.

Robinhood enraged some investors and U.S. lawmakers earlier this year when it restricted trading in some popular stocks following a 10-fold rise in deposit requirements at its clearinghouse. It has been at the center of many regulatory probes.

The company disclosed this week that it has received inquiries from U.S. regulators looking into whether its employees traded shares of GameStop and AMC Entertainment Holdings, Inc (AMC.N) before the trading curbs were placed at the end of January.

In June, Robinhood agreed to pay nearly $70 million to settle an investigation by Wall Street’s own regulator, the Financial Industry Regulatory Authority, for “systemic” failures, including systems outages, providing “false or misleading” information, and weak options trading controls.

The brokerage has also been criticized for relying on “payment for order flow” for most of its revenue, under which it receives fees from market makers for routing trades to them and does not charge users for individual trades.

Critics argue the practice, which is used by many other brokers, creates a conflict of interest, on the grounds that it incentivizes brokers to send orders to whoever pays the higher fees. Robinhood contends that it routes trades based on what is cheapest for its users, and that charging a commission would be more expensive. The U.S. Securities and Exchange Commission is examining the practice.

Robinhood was founded in 2013 by Stanford University roommates Vlad Tenev and Baiju Bhatt. They will hold a majority of the voting power after the offering, these filings showed, with Bhatt having around 39% of the voting power of outstanding stock while Tenev will hold about 26.2%.

The company’s shares are scheduled to start trading on Nasdaq on Thursday under the ticker “HOOD”

Goldman Sachs and J.P. Morgan were the lead underwriters in Robinhood’s IPO.

Reporting by Echo Wang and David French in New York; Editing by Leslie Adler

Our Standards: The Thomson Reuters Trust Principles.

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Robinhood CEO says he is considering offering U.S. retirement accounts

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July 24 (Reuters) – Robinhood Markets Inc is considering launching U.S. retirement accounts, CEO and co-founder Vlad Tenev said on Saturday in a webcast with users of its trading app looking to participate in its initial public offering, which is set to price next week.

The online brokerage has about 18 million funded investment accounts on its platform, most of which are held by retail traders.

Offering individual retirement accounts (IRAs) and Roth IRAs, which offer tax advantages to those saving for retirement, would allow Robinhood to tap a vast market. Americans held $12.6 trillion in IRAs at the end of March, up 2.8% from the end of December, according to the Investment Company Institute.

“We are interested in building more account types, including IRAs and Roth IRAs, we’ve been hearing that a lot from our customers. We want to make first-time investors into long-term investors,” Tenev said in response to an investor question.

Due to the penalties involved in withdrawing money, IRAs tend to attract long-term investments, rather than the quick flip in stocks, options and cryptocurrencies that some investors turn to Robinhood for.

In his webcast, however, Tenev said: “We see evidence that the majority of our customers are primarily buy and hold.”

Robinhood, which is targeting a valuation of up to $35 billion in its IPO, has said it will allocate 20% to 35% of shares offered to its users, an unusual move for a high-profile offering. One of the reasons many IPOs enjoy a first-day trading pop is because the retail investors that Robinhood has invited are excluded and must buy shares in the open market.

Robinhood launched its IPO Access platform earlier this year to enable users to buy into the IPOs of other companies if it can negotiate deals with the investment banks handling them.

Some individual investors are calling for a boycott of Robinhood’s IPO on Reddit and other social media over its handling of the ‘meme’ stock-trading frenzy in January. Robinhood placed restrictions on buying GameStop Corp (GME.N) and other stocks that hedge funds had bet against, on grounds it was needed for the financial and operational stability of its platform.

Tenev said in Saturday’s webcast that Robinhood had invested in the stability of its platform to avoid another such incident.

PAYMENT FOR ORDER FLOW

Robinhood’s popularity has soared over the past 18 months of coronavirus-induced social restrictions that have kept many retail investors at home. It has said its mission is to “democratize finance for all” by allowing users to make unlimited commission-free trades in stocks, exchange-traded funds, options and cryptocurrencies.

The brokerage has been criticized for relying on “payment for order flow” for most of its revenue, under which it receives fees from market makers for routing trades to them and does not charge users for individual trades, however.

Critics argue the practice, which is used by many other brokers, creates a conflict of interest, on the grounds that it incentivizes brokers to send orders to whoever pays the higher fees. Robinhood contends that it routes trades based on what is cheapest for its users, and that charging a commission would be more expensive.

Robinhood chief financial officer Jason Warnick left the door open for the company to change the practice if necessary.

“If a ban or other limitations on it were to be imposed, we believe Robinhood and the industry would adapt and explore other revenue sources,” Warnick said.

Robinhood was founded in 2013 by Stanford University roommates Tenev and Baiju Bhatt, who will hold nearly two-thirds of the voting power after the offering, a filing with the stock exchange showed.

Robinhood customer Minjie Xu, who works as a software engineer in Missouri, remained unimpressed after the presentation on concerns the offering was overpriced.

“This is not unique to them, as I think most IPOs are overpriced,” Xu told Reuters.

Reporting by Echo Wang and Krystal Hu in New York
Editing by Greg Roumeliotis and Sonya Hepinstall

Our Standards: The Thomson Reuters Trust Principles.

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Business

China’s Didi raises $4.4 bln in upsized U.S. IPO -sources

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  • Didi sold 317 mln ADS, more than planned 288 mln -sources
  • Sells ADS at $14 a piece – sources
  • Would give Didi $73 bln valuation on fully diluted basis

June 29 (Reuters) – Chinese ride hailing company Didi Global Inc (DIDI.N) raised $4.4 billion in its U.S IPO on Tuesday, pricing it at the top of its indicated range and increasing the number of shares sold, according to two sources familiar with the matter.

Didi sold 317 million American Depository Shares (ADS), versus the planned 288 million, at $14 apiece, the people said on condition of anonymity ahead of an official announcement.

This would give Didi a valuation of about $73 billion on a fully diluted basis. On a non-diluted basis, it will be worth $67.5 billion. The company is expected to debut on the New York Stock Exchange on June 30.

The increase in deal size came after the Didi investor order book was oversubscribed multiple times, one of the sources said.

Investors have been told to expect their orders to be scaled back once allocations are completed on Wednesday, according to a separate source with direct knowledge of the matter.

Didi did not respond to a request for comment.

The listing, which will be the biggest U.S. share sale by a Chinese company since Alibaba raised $25 billion in 2014, comes amid record IPO activity this year as companies rush to capture the lucrative valuations seen in the U.S. stock market.

Didi’s IPO is more conservative than its initial aim for a valuation of up to $100 billion, Reuters has previously reported. The size of the deal was cut during briefings with investors ahead of the IPO’s launch. read more

This suggests increasing investor worries about China’s potential anti-trust related crackdown and a more volatile IPO environment globally in 2021, said Douglas Kim, a London-based independent analyst, who writes on Smartkarma.

A Didi logo is seen at the headquarters of Didi Chuxing in Beijing, China November 20, 2020. REUTERS/Florence Lo/File Photo

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“But it seems like many investors like this deal, the volatile IPO environment helped to lower IPO price and valuation looks attractive,” Kim told Reuters.

Didi’s IPO was covered early on the first day of the book-build last week and the investor books were closed on Monday, a day ahead of schedule. read more .

An over-allotment option, or greenshoe, exists where another 43.2 million shares can be sold to increase the deal size.

DIDI HISTORY

Didi was co-founded in 2012 by former Alibaba employee Will Wei Cheng, who currently serves as the chief executive officer. Cheng was joined by Jean Qing Liu, a former Goldman Sachs banker and the current president of the ride-sharing company.

The company counts SoftBank (9984.T), Uber Technologies Inc (UBER.N) and Tencent (0700.HK) as its main backers.

Didi is also known for successfully pushing Uber out of the Chinese market after the U.S. company lost a price war and ended up selling its China operations to Didi for a stake. Liu Zhen, the head of Uber China at the time, is Didi’s Liu’s cousin.

Like most ride-hailing companies, Didi had historically been unprofitable, until it reported a profit of $30 million in the first quarter of this year.

The company reported a loss of $1.6 billion last year and an 8% drop in revenue to $21.63 billion, according to a regulatory filing, as business slid during the pandemic.

Its shares are due to start trading under the “DIDI” symbol.

Reporting by Echo Wang in New York and Anirban Sen in Bengaluru and Scott Murdoch in Hong Kong; Editing by Greg Roumeliotis, Bill Berkrot and Himani Sarkar

Our Standards: The Thomson Reuters Trust Principles.

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