The battle is heating up against payday lenders and their practice of offering fast money to borrowers so desperate for cash that they are often willing to accept it at almost any terms, Jessica Silver-Greenberg and Rachel Abrams write in DealBook.
The crackdown, which is playing out state by state, gained momentum on Tuesday when the Illinois attorney general, Lisa Madigan, accused All Credit Lenders of misleading borrowers into buying a product pitched as a way to protect them from falling behind on payments in the event of a job loss. But the lawsuit contends that the protections never materialize and the fee is simply a way to raise interest rates that circumvent the state’s usury cap.
The payday loan industry has long argued that it provides a valuable product to borrowers who might otherwise lack access to credit â€" with the high interest rates a reflection of the riskiness of the loans â€" but federal and state authorities remain unconvinced. The Consumer Financial Protection Bureau and regulators across the country are currently investigating a range of lenders, including online lenders and lenders tied to Native American tribes, in the hopes of shielding Americans from interest rates that can exceed 300 percent.
NEW ALLIANCES IN BATTLE FOR CORPORATE CONTROL Â |Â Institutional investors like mutual funds and pension funds used to be happy to take stakes in public companies and let their management do their thing. In turn, companies trusted that these investors would be passive shareholders and not rock the boat. But the abrupt rise and increasing success of activist investors is challenging these long-held assumptions, David Gelles and Michael J. de la Merced write in DealBook. Now, mutual funds and other big money managers are working alongside activist hedge funds behind the scenes to agitate for change.
Several factors are contributing to the more robust dialogue between traditional investors and activists. For one, many activist hedge funds have outperformed traditional index funds in recent years, emboldening activists and causing traditional money managers to take note. Activists have also been cleaning up their image, with many prominent agitators no longer issuing management-bashing poison-pen letters that once characterized the industry. And though it is rare, institutional investors are “even taking the next step and effectively starting activist campaigns of their own,†Mr. Gelles and Mr. de la Merced write.
EXAMINING UNEQUAL TREATMENT IN PENALIZING CORPORATE WRONGDOERS Â |Â Bankers these days would probably not win a popularity contest. Even so, a recent court ruling calls into question whether it is right for an investment bank to pay the bill in a legal settlement while directors escape with nary a scratch, Steven M. Davidoff writes in the Deal Professor column.
Earlier this month, a Delaware judge ruled that the Royal Bank of Canada’s investment bank was liable for up to $250 million based on a claim that it aided wrongdoing by the board of the ambulance services company Rural/Metro Corporation by selling the company on the cheap. At the same time, Rural/Metro’s board was able to settle a shareholder lawsuit over the sale for just $6.6 million, most of which was paid by insurance. So why the apparent discrepancy?
Mr. Davidoff writes: “It goes back to Delaware laws, which allow companies to limit the liability of directors, rules that Rural/Metro adopted. But these laws don’t apply to investment bankers, so you have the strange situation where the R.B.C. bankers who did wrong pay for their liability but the directors move on without any real penalty.â€
ON THE AGENDA  | The Mortgage Bankers’ Association purchase applications index is out at 7 a.m. The Federal Reserve’s policy-making committee makes an announcement at 2 p.m. after concluding its two-day meeting. Janet L. Yellen holds her first news conference as Fed chairwoman at 2:30 p.m. Stephen A. Schwarzman, the head of the Blackstone Group, is on CNBC at 8 a.m. William H. Gross, the founder of Pimco, is on CNBC at 1:55 p.m. Robert F. Kennedy Jr. is on Bloomberg TV at 5 p.m.
MORE SCRUTINY OF HIGH-SPEED TRADING  | The New York attorney general, Eric T. Schneiderman, announced on Tuesday that he was widening his clampdown on the high-frequency traders that dominate financial markets, urging regulators and stock exchanges to curb practices that help foster what he terms “insider trading 2.0,†William Alden writes in DealBook. In particular, Mr. Schneiderman is taking aim at the exchanges, including the New York Stock Exchange and Nasdaq, that permit high-frequency traders to put their computer servers within the exchanges’ data centers, a practice known as co-location.
Among other services being examined, Mr. Schneiderman is looking into the exchanges’ practices of providing extra network bandwidth, special switches and fast connection cables. In redoubling his commitment to police high-frequency trading, Mr. Schneiderman hopes to build on earlier successes by his office, including the decision last summer by the financial information provider Thomson Reuters to end its practice of selling speedy traders an early glimpse at a closely watched survey of consumer confidence.
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Société Générale Offers to Buy Outstanding Shares in Online Bank  | The share purchase would value Boursorama, in which Société Générale owns a 56 percent stake, at about 1 billion euros. After the buyout, the Spanish bank La Caixa would continue to own a 21 percent stake in Boursorama. DealBook »
Vestar to Buy I.S.S., an Influential Shareholder Adviser  | MSCI, the parent company of Institutional Shareholder Services, agreed on Tuesday to sell the business to the private equity firm Vestar Capital Partners for $364 million. DealBook »
Arca Continental of Mexico to Buy Ecuador’s Tonicorp  | The Mexican bottling and snacks company Arca Continental announced on Tuesday that it would acquire Holding Tonicorp, a dairy products company based in Ecuador, in a deal valued at about $400 million, The Wall Street Journal writes. WALL STREET JOURNAL
Merger Talks Between J. Crew and Japan’s Fast Retailing Collapse  | Japan’s Fast Retailing, the parent of the apparel chain Uniqlo, is no longer in talks to buy the American clothing retailer J. Crew from its private equity owners, TPG Capital and Leonard Green & Partners, Reuters reports, citing unidentified people familiar with the situation. REUTERS
Barclays Grants $53 Million in Shares to Top Executives  | The awards for the year come as Barclays, which is shedding jobs as part of a restructuring, is facing criticism over its pay structure. DealBook »
A Credible Strategy to Fix Barclays  | Barclays’ chief executive needs to pare back in businesses that the bank does not need and shore up several areas that remain, Dominic Elliott writes for Reuters Breakingviews. DealBook »
JPMorgan Agrees to Sell Commodities Business  | JPMorgan Chase has agreed to sell its physical commodities trading business to the Swiss energy trading company Mercuria Energy Group, The Wall Street Journal writes, citing an unidentified person familiar with the situation. The terms of the deal are not yet clear, but when the bank opened its books to potential buyers last fall, it valued the assets at $3.3 billion. WALL STREET JOURNAL
Thoma Bravo Agrees to Purchase TravelClick for $930 Million  | The private equity firm Thoma Bravo has agreed to acquire TravelClick, a hospitality software company, from Genstar Capital for $930 million, The Wall Street Journal writes. People familiar with the situation said Genstar roughly tripled what it paid for the company in 2007. WALL STREET JOURNAL
Paul Capital Said to Be Winding Down  | Paul Capital, which buys stakes in private equity funds, is winding down its portfolio and closing all but one of its offices after a planned sale to the private equity firm Hamilton Lane collapsed, The Wall Street Journal writes, citing unidentified people familiar with the situation. WALL STREET JOURNAL
Blackstone Working on Higher Bid for Gates Global  | The Blackstone Group is working on a higher offer for the industrial conglomerate Gates Global after its owners turned down the firm’s previous bid of about $5.5 billion last week, Reuters reports, citing unidentified people familiar with the situation. REUTERS
In Private Equity, Popularity of Co-Investments Soars  | “Although there’s plenty of reason to think that co-investments have underperformed returns from private equity funds in the past, there’s no reason why co-investments can’t be as lucrative - or perform even better than funds - in the future, provided investors exercise care,†Antoine Drean writes in Forbes. FORBES
Activists Prevail in Campaign to Oust CommonWealth’s Board  | A shareholder vote set in motion a process that will almost certainly result in the ouster of Barry M. Portnoy and his son, Adam D. Portnoy, who control CommonWealth REIT. DealBook »
Leucadia Raises Stake in Harbinger  | The share sale to the Leucadia National Corporation is the latest in a series of moves by the embattled hedge fund billionaire Philip A. Falcone to focus on the Harbinger Group after reaching an $18 million settlement with the S.E.C. DealBook »
Hong Kong Hedge Funds Find a Way to Invest in Alibaba Shares Ahead of I.P.O. Â |Â Some hedge funds in Hong Kong are so eager for the initial public offering of the Chinese Internet giant Alibaba Group that they are purchasing synthetic shares of the company, which are being sold by investment banks as certificates, The Financial Times writes. FINANCIAL TIMES
After Accidental Release, ING Group Confirms Stock Sale Plans  | The Dutch insurance giant ING Group announced that it would, in fact, sell 33.5 million shares in its American insurance unit. DealBook »
N.Y.S.E. Leads Race to Land Alibaba Listing  | The New York Stock Exchange is leading the pack in a race to win the listing for the shares of the Chinese Internet giant Alibaba Group, The Wall Street Journal writes, citing unidentified people familiar with the situation. The initial public offering is expected to be one of the largest ever in the United States by a Chinese company. WALL STREET JOURNAL
Li Ka-shing Retail Flagship Plans I.P.O.  | The Hong Kong billionaire Li Ka-shing’s retail flagship, A.S. Watson & Company, is planning to list in both Hong Kong and London by the end of June, The Wall Street Journal Reports. The offering could raise up to $6 billion. WALL STREET JOURNAL
London Holds Onto Internet I.P.O. Rank  | Though its rank will likely fall in the coming months, Britain has so far raised the most money in Internet-related initial public offerings this year, The Financial Times writes. FINANCIAL TIMES
Fortress, Benchmark and Ribbit Buy Stake in Pantera Bitcoin  | The three firms will work together on the digital currency Bitcoin. DealBook »
New Social App Has Juicy Posts, All Anonymous  | Posts on Secret, an app that allows users to upload anonymous messages, can range from benign to inappropriate and are testing the tech industry’s appetite for sharing, Jenna Wortham writes in The New York Times. NEW YORK TIMES
Cloudera Secures $160 Million in Funding Round  | Cloudera, which distributes and services Hadoop, the big data file store developed by Yahoo, has raised $160 million in new funding led by T. Rowe Price, bringing its total funding to $300 million. TECHCRUNCH
FunPlus Collects $74 Million  | FunPlus, a start-up based in Beijing that makes the game Family Fun, has raised $74 million in a Series B funding round led by Orchid Asia Group Management, The Wall Street Journal writes. The funding round is the largest mobile gaming round in nearly a decade. WALL STREET JOURNAL
Content Marketer Percolate Raises $24 Million  | Percolate, a start-up that aims to help advertisers manage native ads, has raised $24 million in a funding round led by Sequoia Capital, ReCode writes. RECODE
Murky Path for the Fed as Yellen Takes Reins  | Observers say Janet L. Yellen, the chairwoman of the Federal Reserve, is taking over as the relatively clear decisions of the financial crisis must give way to more complex ones, The New York Times reports. NEW YORK TIMES
What to Look for When Yellen Meets the Press  | Janet L. Yellen will face questions from reporters on Wednesday for the first time as chairwoman of the Federal Reserve. Politico provides five things to watch as she takes the podium. POLITICO
I.M.F. Official to Fill New Oversight Post at Bank of England  | Nemat Shafik, the International Monetary Fund’s deputy managing director, will join the Bank of England in August in a new role as deputy governor for markets and banking. DealBook »
Women Lawyers Climb Top Rungs of Corporate America  | Some 21 percent of the top lawyers at the nation’s Fortune 500 companies are women, an increase from 17 percent five years ago, according to a new tally of corporate counsel ranks. DealBook »
German Court Validates Participation in Euro Zone Bailout Fund  | The decision allows Germany to contribute to the European Stability Mechanism, provided that lawmakers are consulted on major contributions, The New York Times writes. NEW YORK TIMES
Big Banks Fulfill Part of Mortgage Deal  | The nation’s four largest banks â€" Bank of America, JPMorgan Chase, Citigroup and Wells Fargo â€" have more than fulfilled their financial obligations toward homeowners under a $25 billion settlement reached in 2012, The New York Times reports. NEW YORK TIMES
