For Twitter, Key to Revenue Is No Longer Ad Simplicity

Peter DaSilva for The New York Times

Twitter’s San Francisco headquarters. Virtually all of its revenue, estimated this year at nearly $600 million, comes from three basic ad formats.

SAN FRANCISCO â€" When it comes to making money, Twitter is all about keeping it simple. There are no banner ads, no dancing animations, no ads inserted between screens that you must click to get past.

Twitter’s chief executive, Dick Costolo.

Virtually all of the company’s revenue, which is projected to be nearly $600 million this year and $950 million next year, comes from three basic advertising formats that blend smoothly into its core microblogging service, whether users are accessing it from a mobile phone or a Web browser.

“What they have been able to do very well is develop products that meet the needs of most advertisers without being overly complex,” said Debra Aho Williamson, principal analyst for social media at eMarketer, a research firm.

But the simplicity of Twitter’s products is also a weakness, especially when compared with other social networks like Facebook. The company does not have concrete demographic information about individual users, like gender and age, to allow it to sell highly targeted ads at expensive rates. And its marketing efforts have largely been oriented toward large advertisers in the United States, with few sales to smaller businesses and only about one-fifth of its ad revenue coming from overseas, Ms. Williamson said.

Twitter, which announced last week that it had filed confidential paperwork to begin the process of selling stock in an initial public offering, has disclosed virtually no information about its finances. The company declined to comment for this article, citing regulatory restrictions surrounding its I.P.O.

But eMarketer estimates that the company will bring in $583 million in revenue from advertising this year, and $950 million in 2014. Twitter also makes additional revenue from selling the data in its raw feed of hundreds of millions of messages daily.

The most common type of Twitter ad, especially on mobile devices, is the promoted tweet. Essentially, advertisers create a Twitter message â€" limited to 140 characters like any other message on the service â€" and pay to insert it into the flow of messages that a user sees, based on certain traits like age, gender or keywords that a person is interested in.

So if you search for “Apple iPhone” on Twitter, the first message that is likely to appear is a paid ad from Google’s Motorola unit, which is running a campaign proclaiming the virtues of its Android smartphones (“Love to talk? Moto X responds to your voice â€" no touching necessary,” reads one) or from Microsoft, which is pushing its Windows Phone devices (“Watch how the 41-megapixel #WindowsPhone Nokia Lumia 1020 makes any seat the best seat in the house”). Both companies are bidding against each other to reach people interested in the iPhone.

In many ways, the results resemble the ads that pop up at the top of the page after a Web search on Google, which also emphasizes simplicity in its ad business.

As with Google, Twitter’s advertisers set key parameters like target audience and how much they want to spend, and then computer programs submit bids instantly to serve ads to available slots.

Advertisers pay only when someone interacts with an ad, such as by retweeting it to their followers, commenting on it or marking it as a favorite. That typically happens only 1 to 3 percent of the time. To get that rate on the higher side, Twitter’s system does not just automatically award an ad slot to the highest bidder; instead, it gives an advantage to ads that previous viewers have found to be more relevant or engaging.

The holy grail for advertisers is an ad that is widely shared by Twitter users to their own followers. To increase the chances of going viral, brands will often embed photos and videos into their ads.

Twitter’s other ad formats are even simpler.

The company’s list of trending topics, the most popular 10 or so subjects being discussed at any given moment on the service, is well known as a window into society’s transient obsessions. Advertisers can pay a flat fee to buy their way onto the list. The price for such a promoted trend, which is clearly labeled, varies by country, but runs about $200,000 for 24 hours of exposure to every Twitter user in the United States.

Companies or people seeking to build followers for their accounts can also pay to appear on the top of the list of new accounts to follow that Twitter suggests to each user.

As Twitter prepares to sell stock to the public, the company is planning initiatives that will add complexity to its advertising business while also diversifying its revenue stream.

Last week, for example, it announced that it had agreed to acquire MoPub, a start-up that acts as a middleman in placing ads from marketers inside mobile applications. MoPub does something quite different from Twitter, auctioning off two billion ad slots a day in apps like Songza and OpenTable through dozens of ad networks and delivering the ads so quickly that a user firing up the app barely notices.

But Jim Payne, chief executive of MoPub, said the two companies shared a common DNA. Like MoPub, he said, Twitter “was designed to be mobile and it was designed to be real-time.” He said Twitter had promised to let MoPub continue building out its current business even as the two worked together to improve the ad offerings on Twitter itself.

Ms. Williamson, the eMarketer analyst, said MoPub could become a significant source of revenue for Twitter.

“MoPub’s technology will streamline their self-serve platform,” she said. “It gives Twitter entree into the real-time bidding business, the ad network business, mobile app ads.”

Through its Amplify program, Twitter is also aggressively promoting joint ad sales with television channels. ESPN, for example, can show game clips on Twitter that are sponsored by an advertiser, with Twitter and the channel sharing revenue.

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Perelman’s Daughter Leads a Nasty Legal Brawl

Samantha Perelman, a 23-year-old student at Columbia University, will be at the center of a nasty family battle in a New Jersey courtroom this week.

She’s a legal novice, but she won’t be lacking for advice. Her father is Ronald O. Perelman, the 70-year-old financier and chairman of the cosmetics company Revlon, whose own fortune is estimated at roughly $14 billion. For his part, Mr. Perelman has never shied away from a court fight, having sued companies, ex-wives and a former business partner.

For years he waged war with the Samantha’s uncle James Cohen, the head of Hudson Media, magazine and newspaper wholesaler whose name is emblazoned across stores in dozens of airports around the country, charging Mr. Cohen siphoned hundreds of millions of dollars out of her inheritance. Now his daughter is leading her own charge, with her father picking up the bill.

All told, it has been an ugly legal brawl that has conservatively cost at least $60 million in legal bills so far, according to lawyers on both sides.

Like disputes over the estates of Leona Hemsley and Brooke Astor, this is a fight made for the gossip pages â€" all the more fitting given that Ms. Perelman’s mother was Claudia Cohen, a former columnist for The New York Post’s Page Six.

Until her death in 2007, Ms. Cohen was an heir to the fortune amassed by her father, Robert B. Cohen, the founder of Hudson Media. Ms. Perelman estimates that her share of the estate would have been valued at almost $700 million when her grandfather died last year, but for the actions of her uncle.

Mr. Perelman first sued Robert Cohen in 2008, but lost. In the latest round of litigation, in the New Jersey Superior Court in Hackensack, N.J., his daughter argues that her uncle, James, preyed on her sick grandfather before he died in February 2012, using “undue influence” over the 86-year-old to reduce her mother’s inheritance.

Ms. Perelman is arguing that the court should validate a 2004 will that she says would have left her mother, and ultimately her, hundreds of millions of dollars. While her mother died before her grandfather, the 2004 will said that in the event of Claudia’s death, Samantha was to inherit her mother’s share of the estate.

The nonjury trial of her lawsuit, before Judge Estela M. De La Cruz, has a witness list of more than 40 people and could take weeks to hear.

She and her father are nothing if not determined. Mr. Cohen’s lawyers say Mr. Perelman’s lawyers turned down a $100 million settlement offer in 2007, a claim that Ms. Perelman’s lawyers deny.

“What he did was greedy and not nice,” said Ms. Perelman in a videoconference interview from her father’s yacht off the shore of Greece. Ms. Perelman, who worked this summer as a production assistant on the set of the HBO show “Girls,” and is studying for a master’s in business administration, says that despite her father’s wealth her mother always wanted her to be provided for separately and she would be “incredibly heartbroken and angry to know her brother deceived her.”

Mr. Cohen, in court documents, said Ms. Perelman’s claims are “nothing short of galling” and were simply an attempt by Mr. Perelman to get a piece of Hudson Media. (Mr. Perelman said that was not true and that he “does not stand to gain anything from this litigation.”)

Mr. Cohen added that the stress of dealing with Mr. Perelman’s earlier lawsuits shortened his father’s life.

As for his niece, Mr. Cohen said his father’s decision to reduce her inheritance in the years before he died were a “rational response by him to the indignity and emotional pain” he suffered from the Perelmans’ litigation.

“My ex-brother-in-law is using Samantha as a tool to further his own gains,” he said in an interview.

The bitterness extends well beyond the courthouse. There is a legal agreement barring Mr. Perelman from entering the Cohen family’s house in Palm Beach, Fla. The Cohen family said that after Ms. Cohen’s death, Mr. Perelman crashed a family bar mitzvah and spent most of the celebration assessing Robert Cohen’s capacity, who at the time was in a wheelchair. (Mr. Perelman, who accompanied his daughter, who was invited, said he stayed only for cocktails and was not sizing him up.)

The Perelman side has its own extralegal criticisms of James Cohen, pointing to what it considers his conspicuous consumption â€" Mr. Cohen’s 25,000-square-foot house in Alpine, N.J., that includes 15 bathrooms and 13 fireplaces, according to a 2007 feature in Architectural Digest.

The legal clashes and mudslinging have their roots in happier times. Mr. Perelman met Claudia Cohn in 1984 at Le Cirque; a year later they were married. Samantha, the couple’s only child together, was born in 1990.

But four years later, the couple filed for divorce. Ms. Cohen received a healthy settlement, roughly $80 million, but the split, which played out in New York’s tabloids, was acrimonious.

In 2001 Ms. Cohen discovered she had cancer. She and Mr. Perelman had become friends again, and he spent millions of dollars trying to find a cure for her. In 2007, just before she died, Ms. Cohen changed her will to make Mr. Perelman, rather than a close friend of hers, executor of her estate.

Sparks flew immediately between the two families. Ms. Perelman said that just weeks after her mother’s death, her uncle tried to buy out Claudia Cohen’s stake in a partnership that controlled the Cohen family’s house in Palm Beach. She said the timing was hurtful, and he lowballed the price.

James Cohen’s legal team said that the Cohens were only observing the terms of the partnership and that the discussion was prompted by a call from one of Mr. Perelman’s lawyers, an allegation Mr. Perelman’s lawyers deny.

The wrangling uncovered a money transfer that is central to Ms. Perelman’s lawsuit. In 2008 the Cohen’s sold Hudson Media’s retail operations to a private equity firm, a sale that both sides agree resulted in a payment of roughly $600 million to Mr. Cohen.

Ms. Perelman says a big chunk of this money should have gone to her grandfather and when he died, it would have gone to her under the provisions of the 2004 will. Furthermore, she contends that her uncle was siphoning assets for years out of Hudson Media and into a company he alone controlled, further reducing her inheritance.

James Cohen said he owned about 90 percent of the assets that were sold, and was entitled to the cash. Separately, he said his father’s estate planning, dating back to the 1990s, intended for assets to be transferred to him.

Ms. Perelman claims her uncle has not paid taxes on any of the asset transfers, an allegation that Mr. Cohen says it not true.

In 2008, Mr. Perelman, in his capacity as executor of his ex-wife’s will, filed a flurry of lawsuits against Robert and James Cohen, the main one claiming that Robert had made an oral promise to Claudia before 1978 to leave half his fortune to her.

By now Robert Cohen was suffering from a debilitating neurological disorder called progressive supranuclear palsy, which can cause problems with thinking and even swallowing. Mr. Perelman’s team argued Robert lacked capacity to change his will and James used his influence over him to begin bleeding his father’s estate.

Mr. Cohen, in a weakened state, was deposed in this case. The videotapes of his testimony, which are expected to play a role in the trial that starts this week, show Mr. Cohen struggling to answer basic questions. Some of his answers, when he croaks yes and no, are clear. At one point he blurts out an expletive to describe the lawsuit Mr. Perelman has brought, demonstrating an understanding of the proceedings. There are also hours of tape that are seemingly unintelligible.

“In what year did you last change your will?” he is asked. He lets out a number of unintelligible grunts. “Did you say 2008?” an interpreter paid for by the Cohen family asks.

This round didn’t go well for Mr. Perelman. He lost on all but one count and a judge penalized his legal team $1.9 million for filing a “frivolous claim.” She also found Mr. Cohen was “functionally competent” and added that he might again decide to change his will, “since he has the capacity to do it at any time.”

One claim, that James used undue influence over his father to change his will, was dismissed. Since Robert was alive, he was the only person who could make that claim against James, the court found.

Now that Robert Cohen is dead, Ms. Perelman is bringing that claim, contending her uncle was heavily involved in his father’s estate planning for years, making changes that consistently benefited him at her mother’s â€" and her â€" expense.

Mr. Cohen’s response: “There are no witnesses who will say I unduly influenced my father, because I did not.”

Two-Name Race Drops to One, but Guessing Continues

WASHINGTON - What if Janet L. Yellen doesn’t get the job?

That was the intriguing question swirling around the capital on Monday only hours after Lawrence H. Summers withdrew his name from consideration to succeed Ben S. Bernanke as chairman of the Federal Reserve when he steps down at the end of January.

While the conventional wisdom is that the vice chairwoman, Ms. Yellen, is now almost assured the job, some White House and Fed watchers are not-so-privately speculating that President Obama may still choose another candidate.

His name is Donald L. Kohn, a former Fed vice chairman. He has a big fan whispering in the ear of President Obama: Timothy F. Geithner, the former Treasury secretary, who has been informally consulted by the White House on the selection.

Mr. Kohn, 70, has remained largely overlooked in the last several months as the political parlor game “Summers vs. Yellen” played out in the halls of Congress and in the news media.

President Obama may have cracked the door in August, however, when he told members of Congress that Mr. Kohn was also on his list.

Mr. Kohn spent 40 years at the Fed, starting as a staff member at the Federal Reserve Bank of Kansas City and later joining the board in August 2002. He was long considered a centrist and a confidant of Alan Greenspan before becoming Mr. Bernanke’s top adviser during the financial crisis.

He was named vice chairman in June 2006. Larry Meyer, a former Fed governor, lauded Mr. Kohn in 2010 upon his retirement for his “extraordinary judgment, the institutional memory that comes from many years of dedicated service” and “a calm and steady hand in the Fed’s responses to threats to economic and financial stability.”

A slight, balding man with a wicked wit, Mr. Kohn somewhat famously â€" at least within economist circles â€" rode a bicycle to work for years and led a hike known as the Death March in Jackson Hole, Wyo., at the annual summer gathering of the world’s leading economists. Since retirement, he has kept himself busy by joining the Brookings Institution and the Bank of England’s Financial Policy Committee.

If President Obama had hoped to nominate Mr. Summers based on his experience handling crises, Mr. Kohn may fit the mold even better than Ms. Yellen, who succeeded Mr. Kohn when he retired. She was president of the Federal Reserve Bank of San Francisco during the financial crisis.

For better or worse, Mr. Kohn was smack dab in the middle of the Fed’s rescue efforts, including advising Mr. Bernanke and Mr. Geithner on the bailout of the American International Group, a fact that might add tension to a confirmation hearing. He also oversaw the stress tests of the banking system in the aftermath of the crisis.

How does he think about monetary policy and regulation? How would he govern?

Well, his views have evolved.

When he retired in 2010, he said in an interview with Sewell Chan in The New York Times: “It’s going to be a slower recovery. But acceptance of that reality is not a reason for the central bank not to do everything it can to help that recovery along.”

At the time, like Ms. Yellen, he professed that the Fed should do more to try to stimulate the economy and bring unemployment down. “I would want to see that there was the prospect of progress in the forecast toward achieving both much higher levels of employment and, eventually, higher inflation, closer to my 2 percent target.”

Now, he appears â€" like the rest of the Fed that may begin easing up on stimulus as soon as this week â€" to have modulated his stance. He warned on Monday during a talk at Brookings: “Very easy monetary policy often builds imbalances that may become so large they that can’t be countered by regulation.”

He also admitted, like so many other policy makers, including Ms. Yellen, that he had missed the buildup of the financial crisis. Before the crisis, in 2005, he said, “Government regulation risks undermining private regulation and financial stability.”

“I don’t think I appreciated the lack of diversification, the amount of leverage, the amount of maturity transformation that made the system so vulnerable to a decline in housing prices,” he said. “Everybody â€" but certainly the regulators and the markets â€" became complacent about the housing market and whether housing prices could ever decline across a broad front.”

Unlike Mr. Bernanke, who has pushed the Fed to become more transparent, holding news conferences and the like, Mr. Kohn has long worried about the Fed’s independence and has, at times, pushed back at efforts to be more public, anxious that the institution would become politicized.

He wasn’t wrong. The debate over the next Fed chairman has become exactly that. And it may be why Mr. Kohn ultimately may not get the job.

“Just can’t see Obama going for anyone other than Yellen â€" the pushback within his own party would be intense and it would revive all sorts of gender issues,” said Greg Valliere, chief political strategist at the Potomac Research Group, where, coincidentally, Mr. Kohn serves as a senior economic strategist. “He doesn’t need that, considering the other major battles that loom this fall.”

Andrew Ross Sorkin is the editor at large of DealBook. Twitter: @andrewrsorkin

Complying With U.S. Tax Evasion Law Is Vexing Foreign Banks

A sweeping new federal law has a seemingly simple goal â€" curbing offshore tax evasion by Americans through foreign banks, trusts and shell companies. But behind the scenes, foreign banks and financial firms are increasingly finding that complying with the law is a major headache.

Treasury Department officials say they are moving apace in getting the world’s banks on board with the law, the Foreign Account Tax Compliance Act. They say they have reached agreements with some large countries, are working on deals with others and are refining parts of the law, which is set to take effect on June 30, 2014.

But some financial institutions, trade groups, scholars and members of Congress have raised an array of concerns, starting with the cost of creating the complex computer systems needed to track Americans’ accounts.

In addition, tax havens like China, Panama and Russia have yet to sign on. And American banks are unhappy about a Treasury Department pledge to foreign banks, not part of the original law, to require American financial institutions to share data with other countries about foreign investors who have accounts in the United States.

“You can search a long time for comments from the private sector or other governments singing the praises” of the law, said Mark E. Matthews, a tax lawyer at Caplin & Drysdale in Washington, and a former deputy commissioner of the Internal Revenue Service. “It’s all criticism, and that speaks volumes about the challenges.”

Still, even the critics acknowledge that they cannot stop the law, which aims to become a model for global finance rules, from going into effect. The question is whether all the global financial institutions will comply equally.

The law, known informally as Fatca, effectively makes all foreign banks and foreign financial institutions arms of the I.R.S. by requiring them to disclose data on American clients with accounts containing at least $50,000, or to withhold 30 percent of the dividend, interest and other payments due those clients and to send that money to the I.R.S. The law applies to banks and financial institutions even if their home countries have secrecy laws. Those that do not comply could face significant fines or be locked out of doing business with American clients.

Robert B. Stack, deputy assistant secretary for international tax affairs at Treasury, described the law as a success. “We have worked very closely with financial institutions to come up with a practical, risk-based approach that balances benefits and burdens,” he said in an e-mail. “We think those efforts have paid off.”

Pascal Saint-Amans, director of the Organization for Economic Cooperation and Development’s Center for Tax Policy and Administration, called the regulation “a reality,” adding that “all countries support its underlying policy goals.”

But global banks and investment firms have made their dislike of the law known, though they are reluctant to speak out individually.

Payson Peabody, managing director and tax counsel at the Securities Industry and Financial Markets Association, Wall Street’s main lobbying group, said, “The goals are laudable, but there’s the risk of a train wreck” if some countries and banks do not comply.

Another critic is Georges Ugeux, a dual Belgian-American citizen, a lecturer at Columbia Law School and the founder of Galileo Global Advisors, an international business consulting firm. He described the law as “bullying and selfish.” The United States, he said, “is acting outside its borders as if they were its home.”

Mr. Ugeux also questioned the fact that the law addresses only tax evasion by individuals and not by corporations.

JPMorgan Set to Pay Fines for Whale Trading Losses

Global authorities are preparing to levy more than $700 million in fines against JPMorgan Chase over the bank’s huge trading loss in London last year, a rebuke that comes as the nation’s largest bank is confronting an onslaught of legal woes.

The bank’s board is meeting on Monday and Tuesday to approve the fines, which could be announced as soon as this week, according to people briefed on the matter.

A spokesman for the bank could not be immediately reached.

The Financial Crisis, Five Years Later

Andrew Ross Sorkin remembers the day the economic collapse began and offers answers to three tough, lingering questions.

Marchionne Still Low-Balling Chrysler

Fiat’s chief executive, Sergio Marchionne, passes for a tough and canny negotiator. These skills have brought him control of 58.5 percent of Chrysler at a bargain basement price of less than $2 billion. However, in his attempt to buy the remaining 41.5 percent owned by VEBA, a health care trust affiliated with the United Auto Workers, Mr. Marchionne may over-egg the pudding.

Fiat and VEBA have been embroiled for more than a year in a dispute about Chrysler’s appropriate valuation. The tussle, which already involves a court case, may lead to the listing of a 16.6 percent Chrysler stake in the coming months.

Fiat can avoid that outcome â€" and it should. A Chrysler I.P.O. will mean time and money. The full integration of both carmakers would be delayed, postponing Fiat’s access to Chrysler’s pool of liquidity. The streamlining of the group, which is supposed to generate further cost synergies, would be delayed.

Furthermore, the longer the dispute drags on, the higher the price Fiat will have to pay. The United States economy and its carmakers are in recovery. The market value of the country’s automakers has soared in recent months. Shares of General Motors and Ford are up 53 percent and 68 percent, respectively, over the last year. By the same logic, Chrysler is getting more expensive by the day. In April, UBS estimated the value of VEBA’s stake at $3.85 billion. By June, the bank reckoned it was worth a billion dollars more. Since then, automakers’ shares have gained an additional 10 percent to 13 percent.

Listing Chrysler on the stock exchange would make these value gains more visible. It is even possible that investors - knowing that Fiat has few choices but eventually acquiring all outstanding Chrysler shares - might drive Chrysler’s share price above its fundamental value.

Fiat’s offers so far are valuing VEBA’s stake at about $2.5 billion. It could afford a more realistic price of $5 billion or more - which would still make its acquisition of Chrysler an overall bargain. Concerns about overleverage could be dealt with by raising fresh capital â€" either by issuing new shares or, possibly, by spinning off Ferrari. It’s time for Marchionne to pay up and move on.

Olaf Storbeck is a columnist for Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.

Morgan Creek Starts Mutual Fund

Morgan Creek Capital Management has started a mutual fund, offering individual investors a chance to invest as they would in a hedge fund.

The new fund, called the Tactical Allocation Fund, will allow average stock and bond investors to get a taste of the exclusive world of hedge funds, traditionally reserved for pension funds, charities, big institutions and the ultra wealthy.

Morgan Creek, which is based in Chapel Hill, N.C., and manages $6.5 billion on behalf of institutions and university endowments, is the latest investment firm to cast a wider net designed to draw smaller investors into the world of so-called alternative investing. It follows a few hedge funds in seeking to tap new sources of money by offering mutual funds.

Last month, Blackstone, the world’s biggest hedge fund manager, announced that it was teaming up with Fidelity, the world’s largest mutual fund provider, to offer alternative funds, and more funds are considering offering similar products, according to industry insiders.

“It’s an access thing. If you think about what institutional investors have done better, it is that they have access to more sophisticated strategies,” Mark Yusko, the chief executive and chief investment officer at Morgan Creek Capital, said in an interview.

Mr. Yusko is bearish on emerging markets but said there are positions that the Tactical Fund can exploit.

Indications that Federal Reserve plans to pull back on its monetary stimulus sent emerging market currencies into a tailspin in August and put pressure on emerging market stocks and bonds.

Since then, opportunities in routed sectors within specific countries have emerged, Mr. Yusko said. The fund recently bought Indian banking stocks after investors headed for the exits.

Chinese gambling and Internet companies “are two themes we think are very durable because we don’t have to own all of emerging markets,” Mr. Yusko added.

The decision by Larry Summers to withdraw from consideration to succeed Ben Bernanke as Fed chairman was very positive for the markets in the short term “because people think it’s a shoo-in for Janet Yellen,” Mr. Yusko said.

Ms. Yellen, widely seen as the most likely candidate to be nominated by President Obama, would be expected to continue the Fed’s quantitative easing program of buying Treasuries to help stimulate the economy.

But the Fed is “running out of Treasuries to buy” and will have to continue supporting the markets by buying directly into stocks as soon as next year, Mr. Yusko added.

Mr. Yusko, who was previously the head of the University of North Carolina’s endowment, has tried recasting an investment strategy for a new audience before. In 2003, he teamed up with with Salient Partners, a Houston-based money manager, and founded the Endowment Fund. It was pitched as an investment vehicle that would offer individual investors a chance to invest in the same turbo-charged strategies as university endowments.

But the $3.3 billion fund came under pressure amid lackluster performance last year and drew ire from investors when it limited the amount that could be redeemed from the fund. Mr. Yusko was removed from his position as chief investment officer in January. Experts said the fund was invested in assets that were illiquid and difficult to pull out of quickly such as real estate and private equity.

Morgan Creek’s latest offering may fare better. Investors can invest a minimum of $2,000 and will be able to redeem their investments daily, according to a filing with the Securities and Exchange Commission. The fund will invest in individual equities and bonds, as well as commodities. It can also short stocks, a strategy fundamental to many traditional hedge funds.

The fund’s monthly fee is 0.75 percent of assets, compared with the traditional hedge fund fee structure of 2 percent of assets and 20 percent of profits annually.

Twitter’s Plans May Run Into China’s Attitudes Toward the Internet

Twitter disclosed last week that it had confidentially filed for an initial public offering. The secret filing means outsiders are left guessing about many details of the social media giant’s business.

We can be fairly certain, however, that Twitter has no meaningful financial contribution from China. Nor are more than a handful of its reported 240 million active users among the nearly 600 million people on the Chinese Internet. Twitter, like Facebook, YouTube and several other foreign Internet services and news Web sites deemed sensitive, is blocked by China’s “Great Firewall.”

Twitter, however, may still have opportunities to generate revenue from China.

While Google’s consumer Internet services have basically become irrelevant inside China since it refused in 2010 to censor its search results in China, the company earns several hundred million dollars a year selling advertising to Chinese firms that want to reach customers on the Internet outside China.

Facebook, which reportedly tried to enter China via a joint venture with Baidu in 2011 before eventually abandoning those plans, also generates revenue selling access to its global users to Chinese firms.

Sheryl Sandberg, Facebook’s chief operating officer, was in Beijing last week to promote her book “Lean In” and attend the World Economic Forum summer session in Dalian. Ms. Sandberg met in Beijing with Cai Mingzhao the head of State Council Information Office. The office posted on its Web site a photo of Ms. Sandberg and Mr. Cai along with a brief statement noting that the two sides discussed the “important role the Facebook platform plays in helping Chinese companies expand overseas.”

The government’s so-far successful approach in harnessing the Internet is another example of China’s long history of trying to use Western technology to strengthen China while limiting the impact of those developments on Chinese society and the political system.

Beijing allowed the development of a domestic Twitter-like service when it approved Sina’s plans to build a microblogging service. Weibo, which began in August 2009, quickly became the most important and disruptive social media service on the Chinese Internet. Sina, a Nasdaq-listed company with a $5.5 billion market capitalization, reported earlier this year that Weibo had 54 million daily active users.

Sina Weibo has increasingly challenged the Chinese government’s traditional control of the media, leading the government to try repeatedly to rein it in without completely neutering it. Those efforts have never fully worked, as the China Insider column of May 6 noted in discussing a coming crackdown on Weibo and online rumors:

On May 2, China’s State Internet Information Office declared war against online rumors because they “have impaired the credibility of online media, disrupted normal communication order, and aroused great aversion among the public.” One report suggests the regulators have some of the most influential users of Sina Weibo, those with millions or tens of millions of followers, in their sights. Online rumors have been a real problem, but crackdowns against them can be used for broader goals. …

There have been campaigns against online rumors before. The most concerted efforts to reign in Weibo began after the sixth plenum of the 17th Party Congress in October 2011 when official media declared that “Internet rumors are like drugs” and propaganda work should focus on “strengthening the channeling and control of social media and real-time communication tools.”…

The regulators may not always succeed the first time, but it would be a mistake to assume they will not keep pushing the issue, especially when propaganda work and ideology are so core to the party’s control.

This latest campaign is now in full swing, and its scope and intensity have exceeded the previous efforts. The government has issued judicial guidelines to provide a legal framework for prosecuting the crackdown and has arrested dozens.

Charles Xue, an American citizen, well-known venture capitalist and one of the most influential Weibo bloggers with over 12 million followers, is the poster child for the campaign. He was detained on prostitution charges in late August and over the weekend starred in an official media campaign aimed at intimidating those who speak too freely online.

So far, investors do not care about the moves to rein in social media. Sina shares are up nearly 50 percent since late April, and Tencent, operator of a lesser microblogging service as well as the fast-growing social messaging mobile app WeChat, on Monday crossed $100 billion in market capitalization for the first time.

Twitter has opportunities to sell advertising to Chinese enterprises, but it is probably under no illusions that it can expand into the Chinese Internet. The company, along with other global Internet firms, may do well to pay attention to the Chinese government’s efforts to win allies for its approach to managing the Internet.

Last week, Lu Wei, the head of the State Internet Information Office, gave the keynote speech at the fifth China-United Kingdom Internet Roundtable. In his speech, called “Liberty and Order in Cyberspace,” Mr. Lu presented a vision of the Internet as a medium to be managed. That vision is far different from the one articulated by then-Secretary of State Hillary Clinton in her speech in January 2010, “Remarks on Internet Freedom,” in which she argued that “it’s critical that its users are assured certain basic freedoms.”

The actions by the American government to exploit the Internet and use it for surveillance, as disclosed in some of the classified documents provided by the former National Security Agency contractor Edward Snowden, may help China sell its view of Internet governance to many countries around the world. And that would not help the efforts of Twitter and other American Internet firms that are increasingly looking to international growth.

Britain to Sell 6% of Lloyds Banking Group

LONDON - The British government announced on Monday that it is selling part of its stake in the Lloyds Banking Group.

The decision to sell 6 percent of the bank’s shares comes five years after Lloyds received a multibillion-dollar bailout from taxpayers and is an effort to take advantage of the firm’s improving fortunes since the financial crisis.

The share sale, valued at 3.2 billion pounds, or $5.1 billion, at Lloyds’ current share price, would reduce the British government’s holding in the bank to 33 percent from about 39 percent.

Analysts expect United Kingdom Financial Investments, the British agency in charge of managing the holdings in the country’s bailed-out banks, to progressively sell down its stakes in both Lloyds and Royal Bank of Scotland over the coming years.

George Osbourne, the chancellor of the exchequer, announced earlier this year that the government was considering reducing its stake in Lloyds, which has benefited from Britain’s improving economy.

The share sale would represent a victory for the current British government and allow local taxpayers to profit from Lloyds’s return to profitability. The proceeds would mirror similar returns that the United States government has garnered after bailing out some of its largest financial institutions during the crisis.

Lloyds, whose share price has risen 93 percent over the last 12 months, has shed many of its so-called noncore assets and has refocused on lending to British customers. The bank’s second-quarter profit more than doubled, to $2.1 billion, and its current share price is above the 74 pence-a-share break-even price that the British government paid for its original holding. Lloyds’ shares rose just less than 1 percent, to 77.36 pence, by the close of trading in London on Monday.

Many analysts have set a 100 pence target price for Lloyds, whose fortunes contrast with those of Royal Bank of Scotland, which continues to suffer from a bloated balance sheet and several changes to its senior management. British taxpayers own an 81 percent stake in the bank.

“I am pleased that the government has been able to begin the process of selling its stake and give taxpayers the opportunity to get their money back,” the chief executive of LLoyds, Antonio Horta-Osorio, said in a statement.

United Kingdom Financial Investments did not disclose on Monday the price of the share offering, which will be started on Monday. The British agency said it would not sell shares in Lloyds again for at least 90 days after the sale was completed.

Earlier on Monday, United Kingdom Financial Investments announced that James Leigh Pemberton, the chief executive of Credit Suisse’s British business, would take charge of the agency next month.

He will succeed Jim O’Neil, formerly of Bank of America Merrill Lynch, who announced in April that he was stepping down from the role to return the American bank.

Bank of America Merrill Lynch, JPMorgan and UBS will manage the share sale, while Lazard and the law firm Slaughter & May are advising United Kingdom Financial Investments on the deal.

Questions Swirl After Summers Drops Out of Consideration for Fed

With Lawrence H. Summers having withdrawn from consideration to lead the Federal Reserve, Wall Street and Washington are analyzing possible outcomes and trying to prepare for what’s next.

Stocks and bonds rallied sharply Monday morning after the White House announced Mr. Summers’s withdrawal on Sunday. While Mr. Summers had been President Obama’s first choice to lead the Fed, investors had feared that, as Fed chairman, he might move too quickly to reduce the monetary stimulus that has pushed markets higher.

At midday, the Standard & Poor’s 500-stock index was up more than 0.94 percent in morning trading, while the Dow Jones industrial average was up 1.05 percent. European stock indexes were higher as well.

Economists and pundits weighed in on the news on Sunday and Monday and speculated about the president’s next move. Janet Yellen, the current vice chairwoman of the Fed, has been described by White House officials as a finalist, and her candidacy to succeed Ben S. Bernanke as the leader of the central bank has received widespread attention, The New York Times reported on Monday.

But it remains unclear how seriously the president is considering Ms. Yellen. “There are two reasons Yellen might not be named to the Federal Reserve,” Ezra Klein wrote on The Washington Post’s Wonkblog, expressing support for Ms. Yellen. “One is that President Obama or his key advisers think she would do a bad job. The other is that the White House feels that nominating her would be a dangerous capitulation â€" it would show they could be pushed around by liberal Democrats.”

William H. Gross, who runs the world’s biggest bond fund at Pimco, looked ahead to Wednesday, when the Fed’s policy making committee is scheduled to announce its policy intentions and release economic projections.

Gross: #Summers departure strengthens forward guidance approach on Wednesday - Still expect a #Taper - Buy front end.

â€" PIMCO (@PIMCO) 16 Sep 13

Jared Bernstein, a former chief economist to Vice President Joseph R. Biden Jr., wrote on the Economix blog of The New York Times that the next leader of the Fed should have certain characteristics, including being a “bubble watcher,” a “consumer ally” and a “better forecaster.”

Other commentators tried to divine the White House’s strategy.

2 questions re Yellen: Have Summers’ allies in WH gone so negtive on her O wont pick her? Is O so pissed at lib mau-mauing he wont pick her?

â€" Noam Scheiber (@noamscheiber) 16 Sep 13

The president has interviewed other candidates for the post. Donald L. Kohn, Ms. Yellen’s predecessor as vice chairman, has been considered, but he lacks academic credentials and has never served in a Democratic administration, according to The Times.

One sign seemed to suggest the odds favored Ms. Yellen. Gregory R. Valliere, the chief political strategist of the Potomac Research Group, said in a research note on Monday that Ms. Yellen was “now the clear favorite.” The president “has virtually no option,” the note said.

Fueling interest in that commentary was the fact that Mr. Kohn is a senior economic strategist at Potomac, as Business Insider noted.

Even a staunch ally of Mr. Summers expressed support on Sunday for Ms. Yellen. Brad DeLong, a professor of economics at University of California, Berkeley, said on his blog that he “enthusiastically endorsed” Mr. Klein’s blog post arguing for Ms. Yellen.

Another prominent economist, Phillip Swagel, a former assistant secretary for economic policy at the Treasury Department and a contributor to The Times’s Economix blog, wrote on Facebook in support of Ms. Yellen, according to James Pethokoukis of the American Enterprise Institute.

Former Bush WH and Paulson Treasury economist @pswagel: “Janet Yellen would make a superb Fed chair if she is now chosen”

â€" James Pethokoukis (@JimPethokoukis) 16 Sep 13

Some suggested that Timothy F. Geithner, the former Treasury secretary, might be the president’s choice. But Mr. Geithner has made it clear to the president that he would not reconsider his decision to retire from the Obama administration, according to The Times.

Geithner. Just sayin’.

â€" Christine Harper (@cr_harper) 15 Sep 13

i know tim geithner SAYS he doesnt want fed job but recall hank paulson turned down treasury several times before finally accepting

â€" Charles Gasparino (@CGasparino) 16 Sep 13

With the favorite for the Fed job out of the running, some commentators took the opportunity to discuss their dream candidates. Matthew Yglesias, a blogger for Slate, argued that Christina D. Romer, an economist who was the chairwoman of the president’s Council of Economic Advisers, should have the job, though he conceded that she is not under consideration.

Others analyzed what led Mr. Summers to drop out.

Sign of the times: A Fed candidate undone by his views and record on financial regulation. Monetary policy has barely been mentioned.

â€" Binyamin Appelbaum (@BCAppelbaum) 15 Sep 13

Summers’s campaign was partly undermined by the giddy-eyed mawkishness of his fans. Just repeating “he’s so smart” wasn’t going to do it

â€" Peter Eavis (@petereavis) 15 Sep 13

Several commentators welcomed the news. Mr. Summers “was too polarizing and too sympathetic to Wall Street to have the confidence of the country, or even a lot of Senate Democrats,” Jonathan Weil wrote in Bloomberg View.

“This is extremely good news, of course,” Felix Salmon wrote on his blog at Reuters. “Summers simply shouldn’t be a leader of any major institution: he’s too cocksure, too abrasive.”

It was a coincidence that Mr. Summers’s withdrawal came on the five year anniversary of the collapse of Lehman Brothers. “But it was, in a way, fitting,” The Economist wrote. “Mr. Summers’s surprise decision, conveyed in a letter to Barack Obama on September 15th, would not have been necessary without the forces unleashed by Lehman’s failure in 2008.”

But not everyone cheered the end of Mr. Summers’s candidacy. The financier Steven Rattner, a friend of Mr. Summers, took to Twitter.

So sad for country that Larry Summers won’t be Fed chairman

â€" Steven Rattner (@SteveRattner) 15 Sep 13

The discussion was not confined to Wall Street and Washington. The comedian Seth Meyers also weighed in.

Uh-oh, a “Sarry Lummers” just submitted his name for the Fed job.

â€" Seth Meyers (@sethmeyers) 15 Sep 13

Questions Swirl After Summers Drops Out of Consideration for Fed

With Lawrence H. Summers having withdrawn from consideration to lead the Federal Reserve, Wall Street and Washington are analyzing possible outcomes and trying to prepare for what’s next.

Stocks and bonds rallied sharply Monday morning after the White House announced Mr. Summers’s withdrawal on Sunday. While Mr. Summers had been President Obama’s first choice to lead the Fed, investors had feared that, as Fed chairman, he might move too quickly to reduce the monetary stimulus that has pushed markets higher.

At midday, the Standard & Poor’s 500-stock index was up more than 0.94 percent in morning trading, while the Dow Jones industrial average was up 1.05 percent. European stock indexes were higher as well.

Economists and pundits weighed in on the news on Sunday and Monday and speculated about the president’s next move. Janet Yellen, the current vice chairwoman of the Fed, has been described by White House officials as a finalist, and her candidacy to succeed Ben S. Bernanke as the leader of the central bank has received widespread attention, The New York Times reported on Monday.

But it remains unclear how seriously the president is considering Ms. Yellen. “There are two reasons Yellen might not be named to the Federal Reserve,” Ezra Klein wrote on The Washington Post’s Wonkblog, expressing support for Ms. Yellen. “One is that President Obama or his key advisers think she would do a bad job. The other is that the White House feels that nominating her would be a dangerous capitulation â€" it would show they could be pushed around by liberal Democrats.”

William H. Gross, who runs the world’s biggest bond fund at Pimco, looked ahead to Wednesday, when the Fed’s policy making committee is scheduled to announce its policy intentions and release economic projections.

Gross: #Summers departure strengthens forward guidance approach on Wednesday - Still expect a #Taper - Buy front end.

â€" PIMCO (@PIMCO) 16 Sep 13

Jared Bernstein, a former chief economist to Vice President Joseph R. Biden Jr., wrote on the Economix blog of The New York Times that the next leader of the Fed should have certain characteristics, including being a “bubble watcher,” a “consumer ally” and a “better forecaster.”

Other commentators tried to divine the White House’s strategy.

2 questions re Yellen: Have Summers’ allies in WH gone so negtive on her O wont pick her? Is O so pissed at lib mau-mauing he wont pick her?

â€" Noam Scheiber (@noamscheiber) 16 Sep 13

The president has interviewed other candidates for the post. Donald L. Kohn, Ms. Yellen’s predecessor as vice chairman, has been considered, but he lacks academic credentials and has never served in a Democratic administration, according to The Times.

One sign seemed to suggest the odds favored Ms. Yellen. Gregory R. Valliere, the chief political strategist of the Potomac Research Group, said in a research note on Monday that Ms. Yellen was “now the clear favorite.” The president “has virtually no option,” the note said.

Fueling interest in that commentary was the fact that Mr. Kohn is a senior economic strategist at Potomac, as Business Insider noted.

Even a staunch ally of Mr. Summers expressed support on Sunday for Ms. Yellen. Brad DeLong, a professor of economics at University of California, Berkeley, said on his blog that he “enthusiastically endorsed” Mr. Klein’s blog post arguing for Ms. Yellen.

Another prominent economist, Phillip Swagel, a former assistant secretary for economic policy at the Treasury Department and a contributor to The Times’s Economix blog, wrote on Facebook in support of Ms. Yellen, according to James Pethokoukis of the American Enterprise Institute.

Former Bush WH and Paulson Treasury economist @pswagel: “Janet Yellen would make a superb Fed chair if she is now chosen”

â€" James Pethokoukis (@JimPethokoukis) 16 Sep 13

Some suggested that Timothy F. Geithner, the former Treasury secretary, might be the president’s choice. But Mr. Geithner has made it clear to the president that he would not reconsider his decision to retire from the Obama administration, according to The Times.

Geithner. Just sayin’.

â€" Christine Harper (@cr_harper) 15 Sep 13

i know tim geithner SAYS he doesnt want fed job but recall hank paulson turned down treasury several times before finally accepting

â€" Charles Gasparino (@CGasparino) 16 Sep 13

With the favorite for the Fed job out of the running, some commentators took the opportunity to discuss their dream candidates. Matthew Yglesias, a blogger for Slate, argued that Christina D. Romer, an economist who was the chairwoman of the president’s Council of Economic Advisers, should have the job, though he conceded that she is not under consideration.

Others analyzed what led Mr. Summers to drop out.

Sign of the times: A Fed candidate undone by his views and record on financial regulation. Monetary policy has barely been mentioned.

â€" Binyamin Appelbaum (@BCAppelbaum) 15 Sep 13

Summers’s campaign was partly undermined by the giddy-eyed mawkishness of his fans. Just repeating “he’s so smart” wasn’t going to do it

â€" Peter Eavis (@petereavis) 15 Sep 13

Several commentators welcomed the news. Mr. Summers “was too polarizing and too sympathetic to Wall Street to have the confidence of the country, or even a lot of Senate Democrats,” Jonathan Weil wrote in Bloomberg View.

“This is extremely good news, of course,” Felix Salmon wrote on his blog at Reuters. “Summers simply shouldn’t be a leader of any major institution: he’s too cocksure, too abrasive.”

It was a coincidence that Mr. Summers’s withdrawal came on the five year anniversary of the collapse of Lehman Brothers. “But it was, in a way, fitting,” The Economist wrote. “Mr. Summers’s surprise decision, conveyed in a letter to Barack Obama on September 15th, would not have been necessary without the forces unleashed by Lehman’s failure in 2008.”

But not everyone cheered the end of Mr. Summers’s candidacy. The financier Steven Rattner, a friend of Mr. Summers, took to Twitter.

So sad for country that Larry Summers won’t be Fed chairman

â€" Steven Rattner (@SteveRattner) 15 Sep 13

The discussion was not confined to Wall Street and Washington. The comedian Seth Meyers also weighed in.

Uh-oh, a “Sarry Lummers” just submitted his name for the Fed job.

â€" Seth Meyers (@sethmeyers) 15 Sep 13

Barclays Faces Fine in Qatar Deal

LONDON - Barclays said on Monday that Britain’s financial regulator had concluded the bank acted “recklessly” when it raised emergency money from Qatari investors during the financial crisis and could be fined $79 million.

Barclays might be fined 50 million pounds because it breached certain listing rules, including the need to act with integrity toward shareholders, as part of the agreement with Qatar Holdings in 2008, according to a so-called warning notice, which is not final, issued by the Financial Conduct Authority on Friday.

Barclays disclosed the information Monday in its prospectus for its coming 5.8 billion pound rights issue and said it continued to contest the regulator’s findings. An investigation by the authority focused on 322 million pounds in fees that were paid over five years as part of the fund-raising but were not disclosed publicly at the time.

“The warning notices conclude that Barclays and Barclays Bank were in breach of certain disclosure-related listing rules and Barclays was also in breach of listing principle 3 (the requirement to act with integrity toward holders and potential holders of the company’s shares),” Barclays said in the prospectus. “In this regard, the F.C.A. considers that Barclays and Barclays Bank acted recklessly.”

Unlike Royal Bank of Scotland Group and Lloyds Banking Group, which received government bailouts, Barclays tapped investors in the Middle East to inject more capital when the financial markets froze and regulators started to demand larger buffers against losses.

Barclays said last year that the British authorities had started an investigation into payments to Qatari investors as part of the capital-raising. Separate investigations into the matter by Britain’s Serious Fraud Office, the United States Justice Department and the Securities and Exchange Commission are continuing, Barclays said in the prospectus.

“It is not possible to estimate the full impact on the group if the final conclusion of these matters is adverse,” it said.

Barclays has already set aside large sums for different legal investigations, including a $450 million settlement last year for accusations that it tried to manipulate the London interbank offered rate, or Libor. It was also among a group of British banks fined for selling a certain insurance product to customers who were not be eligible for it.

Barclays also disclosed in its prospectus on Monday that income at its investment banking operation during July and August was “significantly below” the level in the two months a year earlier, mainly because of its bonds, currencies and commodities business.

With the planned rights issue announced in July, Barclays bowed to pressure from British regulators, which had demanded the bank should improve its so-called leverage ratio, a measure of how much borrowed money a bank uses.

Barclays Faces Fine in Qatar Deal

LONDON - Barclays said on Monday that Britain’s financial regulator had concluded the bank acted “recklessly” when it raised emergency money from Qatari investors during the financial crisis and could be fined $79 million.

Barclays might be fined 50 million pounds because it breached certain listing rules, including the need to act with integrity toward shareholders, as part of the agreement with Qatar Holdings in 2008, according to a so-called warning notice, which is not final, issued by the Financial Conduct Authority on Friday.

Barclays disclosed the information Monday in its prospectus for its coming 5.8 billion pound rights issue and said it continued to contest the regulator’s findings. An investigation by the authority focused on 322 million pounds in fees that were paid over five years as part of the fund-raising but were not disclosed publicly at the time.

“The warning notices conclude that Barclays and Barclays Bank were in breach of certain disclosure-related listing rules and Barclays was also in breach of listing principle 3 (the requirement to act with integrity toward holders and potential holders of the company’s shares),” Barclays said in the prospectus. “In this regard, the F.C.A. considers that Barclays and Barclays Bank acted recklessly.”

Unlike Royal Bank of Scotland Group and Lloyds Banking Group, which received government bailouts, Barclays tapped investors in the Middle East to inject more capital when the financial markets froze and regulators started to demand larger buffers against losses.

Barclays said last year that the British authorities had started an investigation into payments to Qatari investors as part of the capital-raising. Separate investigations into the matter by Britain’s Serious Fraud Office, the United States Justice Department and the Securities and Exchange Commission are continuing, Barclays said in the prospectus.

“It is not possible to estimate the full impact on the group if the final conclusion of these matters is adverse,” it said.

Barclays has already set aside large sums for different legal investigations, including a $450 million settlement last year for accusations that it tried to manipulate the London interbank offered rate, or Libor. It was also among a group of British banks fined for selling a certain insurance product to customers who were not be eligible for it.

Barclays also disclosed in its prospectus on Monday that income at its investment banking operation during July and August was “significantly below” the level in the two months a year earlier, mainly because of its bonds, currencies and commodities business.

With the planned rights issue announced in July, Barclays bowed to pressure from British regulators, which had demanded the bank should improve its so-called leverage ratio, a measure of how much borrowed money a bank uses.

Since Lehman’s Collapse, Companies More Forthcoming on Compliance

In the five years since Lehman Brothers filed for bankruptcy, Wall Street and regulators have had plenty of time to reflect on what could - and should â€" have been done.

One major change since the financial crisis is how companies have become more transparent about pending litigation and government investigations. And in response to greater public scrutiny, that has meant committing a lot more money and resources to comply with a host of regulatory requirements.

The collapse of Lehman Brothers had little to do with how well, or poorly, the firm followed the rules. But the public outrage over the government’s failure to oversee financial institutions has created a much tougher regulatory environment in which companies cannot afford to fall short.

The Dodd-Frank Act was adopted in 2010 to address inadequate oversight and regulation of the financial markets. It was heralded as a means to preclude government bailouts of “too big to fail” banks.

But many of the rules mandated by the law have yet to be adopted as the Securities and Exchange Commission and the Commodity Futures Trading Commission are bogged down in figuring out exactly how to regulate financial products like derivatives and money market funds.

It is always easy to criticize the government for not moving fast enough. Of course, when it did move quickly in response to the Lehman bankruptcy by bailing out the American International Group, the complaint was that it overreached and played favorites in the market.

But companies, surprisingly, have not waited around to be prodded. Even without many regulations in place, it has become almost an arms race among companies to highlight how well they comply with the law. This may only be temporary, however, because at some point corporate America is sure to complain about the costs and seek a measure of relief from what will not doubt be assailed as “burdensome” regulation.

It should come as no surprise that firms are lobbying behind the scenes to keep new rules from being too onerous. JPMorgan Chase and its chief executive, Jamie Dimon, came through the financial crisis with the strongest reputation. At one point, the bank led the charge against regulations like the Volcker Rule that would restrict investments made by large banks.

But things have changed substantially in the last year. JPMorgan and Mr. Dimon now have to deal with a host of government investigations that include its disclosure of $6 billion in trading losses caused by the “London whale” and whether its hiring of the children of government officials in Asia violated the Foreign Corrupt Practices Act.

JPMorgan’s most recent quarterly securities filing includes a nine-page recitation of numerous investigations and lawsuits it faces.

This is quite a change from how Goldman Sachs dealt with a 2009 investigation of its sale of a collateralized debt obligation. The firm made no mention of it, so the market was caught by surprise when the S.E.C. filed a civil fraud lawsuit in April 2010 that Goldman eventually paid $550 million to settle.

JPMorgan disclosed an estimate of potential litigation costs could run as high as $6.8 billion, and its legal expenses were $678 million in the quarter. Sources told The Wall Street Journal last week that the bank planned to spend an additional $1.5 billion and commit 5,000 employees to its compliance program while strengthening the autonomy of those responsible for how it follows laws and regulations. These are not onetime expenses, but represent a continuing cost.

Dealing with overseas bribery, an area the government has placed much greater emphasis on in the last few years, has impacted a number of companies with global operations. While not connected directly to the financial crisis, policing foreign corruption has become an important tool for ensuring that corporations are in compliance with the law.

In response to articles in The New York Times about bribery in its Mexican subsidiary, Wal-Mart started an internal review of its operations that has resulted in $93 million in legal expenses in just the last six months, a number that is sure to grow as it looks into potential bribes in Brazil, China and India.

Wal-Mart also disclosed that it spent an additional $63 million in that period to enhance its compliance programs, another figure that is unlikely to diminish in the near future.

Spending money on compliance is not something that will generate future revenue or directly enhance a company’s profitability in the short term. Instead, like getting a flu shot, the money put into following the law and training employees how to act properly can result in benefits when the company does not have to pay for a future investigation and any penalties the government may seek to impose for a violation.

But like any form of deterrence, it can be difficult to measure how much is saved from preventing misconduct. There is always the chance a company might get away with a violation, and even if the company gets caught, the benefits might be more than what must be paid to settle an investigation. So for those who look only at the bottom line, compliance programs can be viewed as an unjustifiable expense when the benefit is not immediately quantifiable, especially when those costs show no sign of abating.

One legacy of the collapse of Lehman Brothers has been a greater emphasis on companies showing that they are following the rules. The question is whether the seemingly inevitable pushback will result in a significant weakening in the commitment to compliance.
No company is likely to announce that it no longer cares about the law, and firms can be expected to mouth the platitudes about the importance of compliance and business ethics. Don’t forget that Enron had a 64-page booklet outlining its ethical principles that the Justice Department used as an exhibit at the trial of its former chief executive, Jeffrey K. Skilling.

When President Obama signed the Dodd-Frank Act, he said, “No law can force anybody to be responsible; it’s still incumbent on those on Wall Street to heed the lessons of this crisis in terms of how they conduct their businesses.”
The issue is whether the transparency fostered since the demise of Lehman Brothers will continue to permit monitoring whether the commitment to following the law remains in place.

KPN Books Loss on Sale of German Unit

LONDON - The Dutch cellphone operator KPN announced on Monday that it would book a $4.9 billion loss on the sale of its German unit E-Plus to the Spanish giant Telefónica.

KPN, the former Dutch mobile phone monopoly, is facing a 7.2 billion euro takeover offer from the Latin American telecommunications company América Móvil. It agreed to sell E-Plus to its Spanish rival for 8.6 billion euros earlier this year.

In a brief statement on Monday, KPN’s chief executive, Eelco Blok, said the company would use the 3.7 billion euro loss to offset taxable income in the Netherlands starting in 2014. The move marks a change of fortune for KPN, which had previously attempted to expand its operations into Germany to diversify from its home market.

Analysts said the company’s reduced tax bill could make KPN more valuable to América Móvil, which already owns a stake of just less than 30 percent.

So far, efforts by América Móvil, which is owned by the Mexican billionaire Carlos Slim Helú, to acquire the Dutch company have not gone to plan.

After increasing its minority stake in KPN over the last year, América Móvil has faced vocal opposition from an independent foundation connected to KPN that has moved to block the deal.

The foundation, which has exercised its right to acquire just less than 50 percent of the voting rights in KPN, said it viewed América Móvil’s 2.40-euro-a-share offer as a hostile takeover and has called on the company to discuss its plans with KPN’s management.

Last week, both KPN and América Móvil said that they were still discussing the tentative bid, though the Latin American company has said that it could walk away from the deal if the foundation does not back down from its demands.

The multibillion-dollar tax loss comes after a lukewarm reception by América Móvil over Telefónica’s initial bid for E-Plus. The two companies already compete in many Latin American markets, and América Móvil has said that it plans to use its investment in KPN to expand its presence in the European market.

Despite the rivalry between the two companies, Telefónica eventually increased its offer to 8.55 billion euros from 8.1 billion, a deal that eventually secured the backing of América Móvil.

Boise Inc. Is Sold for $1.28 Billion

The Packaging Corporation of America agreed on Monday to buy the rival Boise Inc. for $1.28 billion.

Morning Agenda: Hoping Twitter I.P.O. Leads to More

LOOKING TO TWITTER TO REIGNITE TECH I.P.O.’S  |  Investors and deal makers are hoping that Twitter’s coming stock sale will help the market for technology initial public offerings take flight again, after a period of reduced activity in the wake of Facebook’s I.P.O., Michael J. de la Merced and David Gelles report in DealBook.

About 22 technology deals have priced in 2013, about 17 percent of all I.P.O.’s this year â€" the lowest percentage of total initial stock sales since 2008, according to Renaissance Capital. Some of that decline occurred after Facebook’s botched offering, which was marred by technical errors. And yet, changes in the technology sector may temper any broad expansion of new stock sales. After the passage last year of the JOBS Act, businesses can also afford to be more patient, biding their time before becoming public companies. And when they do decide to go public, they can begin the process in secret, helping mask the number of would-be debutantes exploring I.P.O.’s.

“I wouldn’t characterize it as companies not needing to go public, but they don’t feel a rush to go public,” said Cully Davis, the head of technology initial public offerings at Credit Suisse.

For Twitter’s early investors and employees, an I.P.O. would offer the payday many were waiting for, Nick Bilton and Vindu Goel report in The New York Times. Dick Costolo, who is now the company’s chief executive, could see an initial investment of $25,000 grow to more than $10 million, with additional shares he received worth many millions more. Evan Williams, a co-founder of the company who remains its largest shareholder, will almost certainly become a billionaire.

Four big banks are said to have secured roles in the stock offering, Mr. Gelles reports. Goldman Sachs will take the lead role, while JPMorgan Chase, Morgan Stanley, and Bank of America Merrill Lynch are also serving as underwriters, according to people briefed on the matter. For investors, the question will be: How much is Twitter really worth? “The doubters are likely to be drowned out,” DealBook’s Peter Eavis writes.

SUMMERS WITHDRAWS FROM CONSIDERATION FOR FED CHIEF  |  Lawrence H. Summers, President Obama’s preferred candidate to lead the Federal Reserve, concluded that the White House was unlikely to overcome opposition to his candidacy from Congressional Democrats and pulled his name from consideration on Sunday, Annie Lowrey and Binyamin Appelbaum report in The New York Times. “Clearly Obama couldn’t bring his own most enthusiastic supporters to back him on an issue of national security,” one supporter said. “How was he going to corral them for Larry?”

Mr. Summers’s decision was described as reluctantly made and reluctantly accepted. Though Mr. Summers wanted the job and Mr. Obama wanted to pick him, the public opposition of three Democrats on the Senate Banking Committee, the first step in the confirmation process, surprised the White House and forced a calculation that this was a battle the administration could not afford to fight, The Times writes.

A BROKERAGE FIRM THAT’S PROUDLY PRIVATE  |  Sandler O’Neill, the boutique brokerage firm, “is a throwback to a different era, a vestige of a time that all but ended in 1999 when Goldman Sachs’s partners decided to take their firm public,” DealBook’s Susanne Craig writes. “As one of the last major private partnerships on Wall Street â€" the other notable one is Brown Brothers Harriman â€" Sandler plays by different rules. Most important, it takes fewer risks than other firms. A big trading loss would have very personal implications for its 52 partners, who would have to pick up the tab.”

“In an age of government bailouts and London Whales, Sandler may be relatively small â€" it has just 309 employees â€" but it’s also relatively untroubled. It has been fined by regulators just three times in its 25-year history, according to regulatory filings.”

ON THE AGENDA  |  Prominent investors are sharing their ideas at the Value Investing Congress in Manhattan. John Thain, the former head of Merrill Lynch who now is the chief executive of the CIT Group, is on CNBC at 10 a.m. The bankruptcy lawyer Harvey Miller is on Bloomberg TV at 10 a.m.

ETHANOL CREDITS ON WALL STREET  |  A little-known market in ethanol credits has become “a hot new game on Wall Street,” Gretchen Morgenson and Robert Gebeloff report in The New York Times. Many people now believe that the market in ethanol credits, which the federal government created eight years ago to push refiners to use the cleaner fuel, has been exploited.

“The price of the ethanol credits skyrocketed 20-fold in just six months, according to an analysis of regulatory documents and interviews with more than 40 people involved in the market, including industry executives, brokers, traders and analysts,” The Times reports. “Traders for big banks and other financial institutions, these people say, amassed millions of the credits just as refiners were looking to buy more of them to meet an expanding federal requirement.”

Mergers & Acquisitions »

Versace Says Fashion House Is Fielding Offers for a Stake  |  The designer Donatella Versace said in an interview with an Italian business publication, according to Reuters: “The Versace brand has an enormous potential. Our advisers are selecting an investor that will buy a minority stake through a capital hike. We are not selling. Being small is neither good nor convenient. We must grow.”
REUTERS

Vodafone Sets Sights on Acquisitions in India  |  “Vodafone is a natural consolidator in the market. We are only in telecoms. We believe in scale, and we are financially strong,” Marten Pieters, the head of Vodafone India, told The Financial Times. “So why is it not happening? Because the government has not put up the right M.&A. conditions.”
FINANCIAL TIMES

A Sale of BlackBerry May Be in Pieces  |  Reuters reports: “A handful of potential bidders, including private equity firms, are lining up to look at BlackBerry Ltd., but initial indications suggest that interest is tepid and buyers are eyeing parts of the Canadian smartphone maker rather than the whole company, several sources familiar with the situation said.”
REUTERS

The Dell Deal Showed How Deals Aren’t Supposed to Work  |  Overconfidence and delay got the better of both sides in the bid by Michael Dell and an investment firm to take Dell private. Speculators, too, succumbed to their overactive imaginations, Robert Cyran of Reuters Breakingviews writes.
DealBook »

INVESTMENT BANKING »

Former Chief of Barclays Says New Rules Have Fallen Short  |  The legal and regulatory changes after the financial crisis have “proved insufficient to end the ‘too big to fail’ problem,” Robert E. Diamond Jr., the former chief executive of Barclays, writes in an essay in The Financial Times. “First and most important, we must establish a global resolution regime that is rigorously tested - with ironclad protocols and agreements for implementation.”
FINANCIAL TIMES

After the Crisis, Financial Plumbing Is Still a Concern  |  The securities financing system, known as the repurchase obligation or repo market, still contains a “crucial vulnerability” five years after the bankruptcy filing of Lehman Brothers, Gretchen Morgenson writes in the Fair Game column in The New York Times.
NEW YORK TIMES

Trying to Make It in Music, and a Connected Father Doesn’t Hurt  |  Caroline Gorman, the 17-year-old daughter of James Gorman, Morgan Stanley’s chief executive, was “freaked out and delighted” when her father intervened to help her budding music career get going, she tells New York magazine.
NEW YORK

When ‘More, Bigger, Faster’ Is Not Better  |  For many leaders, growing means building bigger companies. But it also includes spiritual and psychological growth, for personal benefit as well as serving as a role model for others, Tony Schwartz writes in the Life@Work column.
DealBook »

PRIVATE EQUITY »

In Britain, Firms Backed by Private Equity Seek Tax Advantage  |  Financial News reports: “Management teams of U.K. private equity portfolio companies are looking to use the government’s new ‘employee shareholder’ policy to avoid paying capital gains tax on their shares, according to legal experts.”
FINANCIAL NEWS

HEDGE FUNDS »

Lessons in Fraud From a Short-Seller  |  James S. Chanos, the prominent short-seller, teaches a class at the Yale School of Management called Financial Fraud through History: A Forensic Approach. He told the class this year that it was “almost inevitable that you will come across fraud in the course of your careers,” according to the Yale Alumni Magazine.
YALE ALUMNI MAGAZINE

To Improve Profits, Hedge Funds Turn to Psychology  |  The Financial Times reports: “Man Group, the world’s biggest publicly traded hedge fund, is among early adopters of a software program that aims to create the perfect environment to help individual fund managers produce their best trades.”
FINANCIAL TIMES

I.P.O./OFFERINGS »

Amid a Deadlock, Chrysler to Move Ahead With I.P.O.  |  “Chrysler is planning to file documents for its initial public offering this week after majority owner Fiat and the healthcare trust that owns the rest of the U.S. carmaker failed to agree a market price in a long-running dispute,” The Financial Times reports. The listing would be “an unwelcome last resort.”
FINANCIAL TIMES

Saudi Prince Says He Will Keep Twitter Stake  |  The Saudi billionaire Prince Alwaleed bin Talal told Reuters: “Twitter is a very strategic investment for us. We believe that it is just beginning to touch the surface. We have invested $300 million in the company. We will be selling zero, nothing, at the I.P.O.”
REUTERS

VENTURE CAPITAL »

Online Music Service Rdio in Deal With Broadcaster  |  The New York Times reports: “On Monday, Cumulus Media, which operates 525 radio stations, will announce a deal with Rdio, a subscription music service from the founders of Skype, that will give Cumulus an online outlet and help Rdio compete against more established players like Spotify.”
NEW YORK TIMES

Convo, a Collaboration Service, Attracts $5 Million  |  The venture capital firm Morgenthaler Ventures has invested $5 million in Convo, a cloud-based service that helps groups of workers collaborate, the company plans to announce on Monday.
CONVO

LEGAL/REGULATORY »

British Agency Appoints New Chief to Oversee Bailout Investments  |  The British government agency in charge of managing the holdings in the country’s bailed-out banks has appointed James Leigh Pemberton, a former Credit Suisse banker, as its new chief executive.
DealBook »

Geithner Is Said to Have No Interest in Fed Job  |  The former Treasury Secretary Timothy F. Geithner “remains firm that he won’t be among the candidates to succeed Ben Bernanke as Federal Reserve chairman, a person close to him said Sunday night,” The Wall Street Journal reports.
WALL STREET JOURNAL

Why Lehman Wasn’t Rescued  |  The Lehman Brothers crisis was different in nature than the failures of Bear Stearns and A.I.G., and the Treasury and the Fed responded appropriately, says Phillip Swagel, an economist and former Treasury official, in The New York Times Economix blog.
DealBook »

Some Creditors of Lehman Are Still Waiting for Payout  |  The Wall Street Journal reports: “Some hedge funds that kept money with Lehman Brothers Holdings Inc. will recoup 100 percent of their investments. Other groups, such as towns and religious organizations that invested with Lehman’s Australia unit, will be less fortunate.”
WALL STREET JOURNAL