Goldman Banker With Year’s Top Tech Quarry

Anthony J. Noto, a former Army Ranger and pro-football executive, may seem an odd fit among the cerebral recluses and flashy moneymen of the tech world.

Yet Mr. Noto, a 45-year-old Goldman Sachs tech banker, has proved himself a keen observer and trusted banker of Web pioneers. Now Mr. Noto and Goldman have won the most coveted tech banking assignment this year in leading the initial public offering of Twitter.

It is a sweet victory given that its archrival in tech I.P.O.’s, Morgan Stanley, has led the market debuts in Facebook, LinkedIn and Kayak, among others.

The problems with the Facebook offering last year â€" first-day trading troubles and an early slide in the stock price â€" took some of the luster off Morgan Stanley, and its star tech banker, Michael Grimes, possibly to Goldman’s benefit. (Morgan Stanley, however, has been the lead underwriter on eight of the 10 biggest tech I.P.O.’s since Facebook.)

Still, there are contrasts between Mr. Noto and Mr. Grimes, a charismatic gadget lover who lives in Silicon Valley, while Mr. Noto has chosen to remain in New York and avoid much of the Silicon Valley scene.

Mr. Noto forged a number of relationships during the first Internet boom, when he was an analyst with Goldman. One was with ChannelAdvisor, an e-commerce company based in North Carolina.

A decade later, Mr. Noto returned to North Carolina as a Goldman banker to help take the company public â€" an assignment that was won with his first pitch.

“He’s kind of like the Don Draper of I.P.O.’s,” Scot Wingo, the chief executive of ChannelAdvisor, said about Mr. Noto. “Part of a good I.P.O. pitch is confidence, and succinctness, and when he says those words there’s a certain amount of gravitas. As a nerdy computer guy, I respect that.”

A football fan from an early age, Mr. Noto was starting as quarterback for the high school team while he was still in middle school. He chose to attend West Point not because he wanted to join the military, but because he longed to be a leader. Nonetheless, he went on to serve as a member of the elite Rangers.

Upon leaving the Army, he worked as a brand manager for Kraft Foods, then received a master’s of business degree from the Wharton School at the University of Pennsylvania. After a brief turn at Lehman Brothers, Mr. Noto joined Goldman in 1999.

As a young analyst, he wrote glowing reports about some of the biggest flops of the Internet bubble, including Webvan and eToys. Investors who took his advice lost small fortunes. After some of those misses, colleagues within Goldman took to calling him Anthony “No-Dough.” CNBC, meanwhile, called him Anthony “Don’t Know.”

But Mr. Noto persevered, continuing to recommend tech stocks even after Silicon Valley had been humbled. His judgment improved, and he was named the best Internet analyst by Institutional Investor magazine for several years in a row.

“I honestly think I’m the kind of person that is driven by fear of failure rather than striving for success,” Mr. Noto told Wharton magazine in 2009. “I tend to go to bed scared and wake up terrified.”

By 2004 Mr. Noto had made partner at Goldman, a rapid ascent, especially given his early misses. He left to become chief financial officer of the National Football League, returning to Goldman to help lead the bank’s tech and media group just before a potential league lockout.

It was an audacious move, and some questioned whether he would be able to fit in with a technology industry that had come a long way since the dot-com bubble. Mr. Noto, a standout linebacker in college, does not possess the sort of big personality that might have made him a natural fit among the outsize egos of Silicon Valley’s traditional bankers.

“I know more about his family than the kind of car he drives,” Mr. Wingo of ChannelAdvisor said. “He’s not a flashy guy.”

But over the last three years, Mr. Noto’s understated approach has begun to pay off. Goldman’s share of the technology I.P.O. market, erratic in the years after the crisis, has been more consistent of late. This year, the firm has led the successful public offerings of a number of tech companies, including Marketo, Tableau Software and Silver Spring Networks, placing it atop the league tables for the year to date.

Now Mr. Noto faces his biggest test yet. In managing the Twitter offering, he will be bringing a ubiquitous but financially unproved social network to the public markets. In doing so, Mr. Noto and his team at Goldman must account for valuation expectations, the cash needs of Twitter and investor appetite for shares.

When Twitter began preparing to go public early this year, it interviewed a number of banks. Twitter’s chief executive, Dick Costolo, and its chief financial officer, Ali Rowghani, developed a strong rapport with Mr. Noto. Like Mr. Noto, the senior Twitter executives are operational types who prefer to fly under the radar. Helping matters further was the fact that Mr. Noto and Mr. Rowghani are both big fans of the Dallas Cowboys.

By April, Twitter had selected Goldman as lead underwriter, guaranteeing it a hefty fee and a large allocation of shares. Rounding out Twitter’s syndicate are Deutsche Bank, JPMorgan Chase, Morgan Stanley and Bank of America. Two boutiques, Allen & Company and Code Advisors, are providing Twitter with advice.

Also working in Goldman’s favor was the perception, inside Twitter, that the bank understood the company. Goldman features a Twitter widget on the company intranet, uses the service on its trading platform, and even advertises with Twitter.

Speaking at the TechCrunch Disrupt conference this year, Mr. Noto emphasized the importance of an investment bank’s role in helping a company draft its S-1 document, which Twitter filed late on Thursday. “You’re really solidifying, for the entire investment community, the foundation of how to think about the company,” he said.

Mr. Noto and his Goldman colleagues declined to comment. But others who know Mr. Noto say he is well suited for the job.

“I’ve known Anthony since 1997 and have always greatly respected him,” Spencer Rascoff, the chief executive of real estate Web site Zillow, said in an e-mail. “He is a trusted adviser to leading technology executives because he is a humble whip-smart straight-shooter.”

Since returning to technology after his time at the N.F.L., Mr. Noto has enmeshed himself in new technology. He is a regular user of Twitter, sending out public messages about football, venture capital and Internet companies.

On Quora, the question and answer Web site, he asked, “Is there a mismatch between private and public valuations for Internet companies?”

Twitter Puts Numbers to Its I.P.O. Talk

Millions of users seem to believe that Twitter has value.

Now investors can start to make that call, too.

To kick off the process of selling its shares to the public, Twitter released on Thursday a filing that, for the first time, gives outsiders hard numbers about its business. Investors will now pore over these to assess the company’s financial performance.

Twitter’s initial public offering comes at an auspicious time. Investors are once again keen to place highly optimistic values on social media companies. After a difficult first year on the stock market, shares of Facebook have soared as the company found its feet and posted resurgent revenue figures. In this climate, Twitter’s bankers will probably feel they can persuade investors to accept a high valuation. Based on sales of shares in the private market earlier this year, Twitter effectively estimated its own value at $9.7 billion, according to disclosures in the public offering documents.

But Facebook’s initial stumbles reveal the dangers of assuming that everything will go smoothly. And investors ought to be careful about assuming that all big social media companies will do well on the stock market, some investment specialists said. Competition for advertising dollars â€" the main source of revenue for these companies â€" could intensify in the coming years, they said.

“Are there going to be enough dollars out there to justify these valuations?” asked Moshe Cohen, an assistant professor in finance and economics at Columbia. “Or will there be winners and losers?”

Most of the debate about Twitter’s valuation will focus on projections of future sales and earnings. Such forecasts typically do not appear in regulatory public offering filings. Even so, the numbers in the filing will prove valuable to investors, who have so far had to rely on guesswork. In the 12 months through the end of June, Twitter had revenue of $450 million, two-thirds of which came from advertising. During that period, Twitter recorded a net loss of a little more than $100 million. That loss figure includes a lot of noncash expenses, like the stock it pays to employees. In the first six months of this year, Twitter’s operations had positive cash flow of $10 million.

Such figures suggest that investors who have already purchased Twitter shares on the private market are willing to attach stratospheric valuations to the company. The $9.7 billion figure in the Twitter prospectus is equivalent to 22 times the sales that the company posted in the 12 months through June. Such a valuation is high, even for a young technology company.

Of course, investors are expecting Twitter’s business to grow rapidly. One common approach toward Twitter among analysts is to apply Facebook’s valuations. Facebook’s stock market value is 12 times the amount of sales that analysts expect the company to achieve next year. Some expect Twitter to reach $1 billion in sales next year. If the company were to trade at 12 times that estimate, it would be worth $12 billion. Some analysts will probably argue that Twitter is growing faster and therefore deserves to trade at a higher multiple of sales, which could push up Twitter’s stock market value. For instance, in the second quarter of this year, Twitter doubled its revenue from a year earlier, compared with a 50 percent increase at Facebook.

There are reasons to be cautious of this approach, however.

Facebook has earned its valuation by racking up strong earnings in recent quarters. But Twitter has yet to prove itself as a public company. Facebook has managed to attract advertisers onto its mobile service. Its cash flows are enormous.

Twitter is also a fraction of the size of Facebook. Twitter’s 218 million monthly average users are a mere 20 percent of Facebook’s 1.16 billion users. Twitter said it had “more than 100 million” daily users. Notably, it didn’t supply historical figures for that metric, preventing outsiders from tracking its performance.

Twitter’s $140 million of revenue in the second quarter was only 8 percent of Facebook’s $1.8 billion in the same period.

Another important figure is the amount of revenue that a social media company takes in for each user. Facebook earns about $1.60 for each user. An analysis of Twitter’s figures suggests revenue per user of 64 cents.

In the coming weeks, as Twitter markets its shares, investors are going to press the company for details on how it intends to increase its revenue. In the filing, the company highlighted an intriguing metric on advertising. In the second quarter, Twitter said it generated United States advertising revenue of $2.17 for every 1,000 times that users are active on their Twitter feeds. That compares with just 30 cents in the rest of the world. Skeptics will say that shows that Twitter is having trouble generating revenue in countries where it has large amounts of users, like Japan and Indonesia. But optimists will argue that the low figure suggests that Twitter has much room for growth.

Right now, uncertainty about the future is likely to feed bullishness about Twitter’s prospects. But that sentiment could just easily give way to stock-crushing doubt at the first sign of underperformance. In the social media world competition can appear very quickly. Mr. Cohen, the Columbia professor, points to Pinterest or Snapchat as potential threats.

“We’ve seen new entrants, and these guys grow fast,” he said.

In a commencement speech earlier this year at the University of Michigan, Dick Costolo, Twitter’s chief executive, told graduates, “Don’t always worry about what your next line is supposed to be.”

“There is no script,” he added. “Live your life. Be in this moment.”

With its numbers now in the public eye, Mr. Costolo cannot count on investors to be as relaxed.

At Trading Trial, Dispute Over Secrecy of Data

DALLAS â€" Mark Cuban sent out a series of e-mails saying that he had sold his shares in the search engine company Mamma.com because he had received information that the company was about to recruit private investors whose contributions would dilute the value of the public shares, a Securities and Exchange Commission lawyer said on Thursday.

But the lawyer, Jan Folena, and Mr. Cuban, the billionaire owner of the Dallas Mavericks basketball team, disagreed about whether the information about the private investors was confidential.

“You didn’t say anything else,” Ms. Folena said to Mr. Cuban. “You said you sold because of the private investment.”

Mr. Cuban said these were examples of “stock responses” he is often forced to give because of the sheer volume of e-mail he receives.

The testimony came in a federal courthouse here, where Mr. Cuban faces insider trading charges filed by the S.E.C. If found liable, he faces a fine of about $2 million.

The underlying issue, Ms. Folena said, is that Mr. Cuban told the company’s chief executive, Guy Fauré, in a telephone call on June 28, 2004, that he would keep the information about the coming private investment in Mamma confidential Mr. Cuban was the biggest single investor in the company, owning 6.3 percent of its shares.

Then, Mr. Cuban took that information, the S.E.C. has said, and sold his 600,000 shares, avoiding $750,000 in losses. The company’s stock fell 9.3 percent on June 30, when the offering was announced. Mr. Cuban said that he never promised to keep any information he received from Mr. Fauré confidential. But he also said he did not recall exactly what was said during that call nine years ago.

“I would never agree to do something without knowing what it is I’m being ask to do,” Mr. Cuban said.

When speaking of confidentiality, Mr. Cuban was crystal clear. “If I agree to do something, I’m going to stick to my word,” he said. “I’m a very conservative investor,” Mr. Cuban said, adding, “I sold my shares knowing it was public information.”

Ms. Folena asked if he had “conducted any research” about whether the forthcoming investment was yet in the public domain.
“I didn’t need to,” Mr. Cuban said. Mr. Cuban said he had never agreed orally to keep something confidential in business.

Late in the day, his defense lawyers asked him about his humble beginnings, with a father who worked on upholstery for cars and a mother who was a homemaker. They also discussed Mr. Cuban’s wife, three children, his first job in Dallas as a bartender and a second job at a software company, from which he was fired. They also discussed his philanthropic work.

New Leader Under Lens for Trading Commission

As Gary Gensler’s tenure as a Wall Street regulator draws to a close, the White House has begun to vet a senior Treasury Department official as a potential replacement.

Timothy G. Massad, an assistant secretary of the Treasury, is among those under consideration to succeed Mr. Gensler as leader of the Commodity Futures Trading Commission, according to people briefed on the matter. And Mr. Massad, who oversees financial stability issues at Treasury, has expressed interest in the job, one of the people said.

But the people, who spoke on the condition of anonymity because they were not authorized to discuss personnel issues, cautioned that the vetting was preliminary. The White House is considering at least two other candidates and has not reached a decision on who will replace Mr. Gensler, who is required to leave office at the end of the year, when his term extension expires.

Names of other potential successors, however, have emerged only to fade away. Amanda Renteria, a former Goldman Sachs employee and Senate aide, was briefly mentioned but was seen as a more likely candidate to become a Democratic commissioner at the agency.

It is unclear when the White House will make a decision on the chairman spot. If it declines to do so by January, one of the agency’s Democratic commissioners could fill the role on an interim basis.

A White House spokeswoman declined to comment.

As recently as September, the White House asked Mr. Gensler to serve a second term, the people briefed on the matter said. But Mr. Gensler, who overhauled the agency from one of Wall Street’s laxest regulators into one of its feistiest, balked at the offer.

He told colleagues that he believed a departure in December would come at a natural transition point. The agency, which he has run since 2009, has completed nearly every new rule for derivatives trading that it inherited under the Dodd-Frank Act, which Congress passed in response to the financial crisis.

His exit would also coincide with the departure of David Meister, the agency’s enforcement chief, who announced this week that he would soon leave. Mr. Meister and Mr. Gensler are leaving the agency after filing a record number of actions against the financial industry. The agency most notably cracked down on the banking industry’s manipulation of benchmark interest rates, extracting hundreds of millions of dollars in fines from big banks like UBS and Barclays.

The shake-up at the agency traces to Mr. Gensler’s unapologetic advocacy of Dodd-Frank. The law broadened the responsibility of the agency, stretching its reach to the dark corners of the $300 trillion derivatives market at the center of the financial crisis. Until recently, the agency oversaw the $40 trillion futures business.

Mr. Gensler’s approach to Dodd-Frank made him few friends on Wall Street. He routinely rebuffed the demands of financial lobbyists and Congressional Republicans, who contended that the agency was overstepping its authority.

Mr. Massad is less of a lightning rod. And the Senate already confirmed him to be an assistant Treasury secretary in 2011. The role requires Mr. Massad to oversee the wind-down of the government’s bank bailout program stemming from the financial crisis.

Before arriving at Treasury in 2009, he worked for the Congressional Oversight Panel, a watchdog group assigned to keep an eye on the bailout. That experience might appeal to lawmakers who were skeptical of the government’s efforts to save Wall Street during the depths of the crisis.

Mr. Massad, who received his bachelor’s and law degrees from Harvard, also has corporate experience. Before his government work, Mr. Massad was a partner at the law firm Cravath, Swaine & Moore, which represents many of the Wall Street banks.

While being a corporate lawyer might project a certain sympathy to Wall Street, Mr. Gensler’s tenure suggests that is not always the case. Mr. Gensler joined the agency after a long career at Goldman Sachs and a stint in the Wall Street-friendly Clinton administration.

New Leader Under Lens for Trading Commission

As Gary Gensler’s tenure as a Wall Street regulator draws to a close, the White House has begun to vet a senior Treasury Department official as a potential replacement.

Timothy G. Massad, an assistant secretary of the Treasury, is among those under consideration to succeed Mr. Gensler as leader of the Commodity Futures Trading Commission, according to people briefed on the matter. And Mr. Massad, who oversees financial stability issues at Treasury, has expressed interest in the job, one of the people said.

But the people, who spoke on the condition of anonymity because they were not authorized to discuss personnel issues, cautioned that the vetting was preliminary. The White House is considering at least two other candidates and has not reached a decision on who will replace Mr. Gensler, who is required to leave office at the end of the year, when his term extension expires.

Names of other potential successors, however, have emerged only to fade away. Amanda Renteria, a former Goldman Sachs employee and Senate aide, was briefly mentioned but was seen as a more likely candidate to become a Democratic commissioner at the agency.

It is unclear when the White House will make a decision on the chairman spot. If it declines to do so by January, one of the agency’s Democratic commissioners could fill the role on an interim basis.

A White House spokeswoman declined to comment.

As recently as September, the White House asked Mr. Gensler to serve a second term, the people briefed on the matter said. But Mr. Gensler, who overhauled the agency from one of Wall Street’s laxest regulators into one of its feistiest, balked at the offer.

He told colleagues that he believed a departure in December would come at a natural transition point. The agency, which he has run since 2009, has completed nearly every new rule for derivatives trading that it inherited under the Dodd-Frank Act, which Congress passed in response to the financial crisis.

His exit would also coincide with the departure of David Meister, the agency’s enforcement chief, who announced this week that he would soon leave. Mr. Meister and Mr. Gensler are leaving the agency after filing a record number of actions against the financial industry. The agency most notably cracked down on the banking industry’s manipulation of benchmark interest rates, extracting hundreds of millions of dollars in fines from big banks like UBS and Barclays.

The shake-up at the agency traces to Mr. Gensler’s unapologetic advocacy of Dodd-Frank. The law broadened the responsibility of the agency, stretching its reach to the dark corners of the $300 trillion derivatives market at the center of the financial crisis. Until recently, the agency oversaw the $40 trillion futures business.

Mr. Gensler’s approach to Dodd-Frank made him few friends on Wall Street. He routinely rebuffed the demands of financial lobbyists and Congressional Republicans, who contended that the agency was overstepping its authority.

Mr. Massad is less of a lightning rod. And the Senate already confirmed him to be an assistant Treasury secretary in 2011. The role requires Mr. Massad to oversee the wind-down of the government’s bank bailout program stemming from the financial crisis.

Before arriving at Treasury in 2009, he worked for the Congressional Oversight Panel, a watchdog group assigned to keep an eye on the bailout. That experience might appeal to lawmakers who were skeptical of the government’s efforts to save Wall Street during the depths of the crisis.

Mr. Massad, who received his bachelor’s and law degrees from Harvard, also has corporate experience. Before his government work, Mr. Massad was a partner at the law firm Cravath, Swaine & Moore, which represents many of the Wall Street banks.

While being a corporate lawyer might project a certain sympathy to Wall Street, Mr. Gensler’s tenure suggests that is not always the case. Mr. Gensler joined the agency after a long career at Goldman Sachs and a stint in the Wall Street-friendly Clinton administration.

Wall Street Seeks to Soothe, While Preparing for Trouble

Wall Street is preparing for the government to bounce its first check.

The government is partly shut down, but a bigger concern for financial executives is a potential default on public debt should Congress fail to raise the nation’s borrowing limits. Financial companies are making some early preparations just in case.

The pivotal date is in less than two weeks. The Obama administration has said that on Oct. 17 it will no longer be able to finance government obligations without raising the $16.7 trillion cap on government borrowing. A Treasury Department report released on Thursday said the debt limit impasse could cause credit markets to freeze, the dollar to plunge and interest rates to rise. A default, the report added, could potentially result “in a financial crisis and recession that could echo the events of 2008 or worse.”

A default would make it tough for the Treasury to make good on coming interest payments and other obligations, including paying scores of government employees and financing critical safety net programs like Social Security and Medicare.

Wall Street remains confident that a deal to avert a default will materialize, according to interviews with senior executives, who spoke on the condition of anonymity because of company policies against speaking to the media. The relatively upbeat sentiment grew on Thursday, stoked by reports that Speaker John A. Boehner had indicated to colleagues that he was determined to prevent a federal default.

And while Wall Street is sanguine, big banks like Morgan Stanley and Citigroup are still working out contingency plans that involve redoubling efforts to keep clients calm and are selling government bonds â€" a sign that confidence in Washington has waned.

To guard against possible mayhem from a debt ceiling crisis, some of the nation’s largest banks are deploying plans that were developed in 2011 â€" when the government first looked as if it were on the verge of surpassing its debt ceiling limits.

One senior bank executive said his bank’s plan includes stocking retail branches with at least 20 percent more cash. That way, any customers who want to stockpile cash reserves in the event of a default can readily withdraw their money.

The executive also said that his bank was adopting safeguards to protect customers whose income flows from Social Security or other government programs from incurring any fees. The executive said that the bank intended to waive all fees and possibly advance customers money interest-free if their government checks were delayed.

At Morgan Stanley, there was speculation last week that the troubles in Washington might derail a conference taking place at West Point on Thursday and Friday for traders at big asset managers. But the markets have been manageable so far, and the meeting proceeded, according to attendees.

On the wealth management side, the bank prepared this week a concise note for its team of financial advisers, many of whom are fielding calls from clients about both the debt ceiling and government shutdown. “We believe there is a zero percent chance of a federal government default at this time,” the note said. “The U.S. government will pay its bills.”

The report also noted that there had been 17 government shutdowns since 1976, a fact one adviser said he was emphasizing with clients this week. “I am not a soothsayer, but I’m more of a soothing sayer, someone who will remind them that this is going to be all right.”

The financial advisers noted that clients were keenly aware of the tax consequences they would face if they choose to leave the stock market hastily. Those who do, the advisers said, could incur a hefty tax bill.

Most brokers are not strangers to the anxiety surrounding the debt ceiling. Just two years ago, the nation faced the same looming prospect of a default, when the government needed to raise its cap on borrowing from $14.3 trillion.

“We have seen this movie before,” said Steven Wieting, the global chief investment strategist at Citigroup’s private bank. Just like in 2011, “this will be resolved,” he said.

That is not to say that past Congressional skirmishes over the debt ceiling did not have an effect. In 2011, the fight prompted Standard & Poor’s to lower the United States’ credit rating, and the S.&P. 500-stock index swooned more than 10 percent.

In a note to clients earlier this week, Mr. Wieting said: “Like seeing a horror movie a second time around, we see the markets ‘recoiling’ far less.”

Beyond their preparations, some Wall Street executives have been discussing which hedge funds are poised to reap big gains in the event of a default. Bankers have been speculating about which hedge funds have quietly built bets on a default. That alone was one of the liveliest topics of conversation last week at an exclusive Wall Street meeting in Singapore.

One thing Wall Street executives seem to agree on is that the debate has hurt America’s image, both at home and abroad.

“This is a really serious issue,” said Laurence D. Fink , the chairman and chief executive of BlackRock, the world’s largest asset manager. “It may not happen, but the fact the government has allowed this narrative is bad enough. We should be saying we are a principled nation and would never allow a default.”

Wall Street Seeks to Soothe, While Preparing for Trouble

Wall Street is preparing for the government to bounce its first check.

The government is partly shut down, but a bigger concern for financial executives is a potential default on public debt should Congress fail to raise the nation’s borrowing limits. Financial companies are making some early preparations just in case.

The pivotal date is in less than two weeks. The Obama administration has said that on Oct. 17 it will no longer be able to finance government obligations without raising the $16.7 trillion cap on government borrowing. A Treasury Department report released on Thursday said the debt limit impasse could cause credit markets to freeze, the dollar to plunge and interest rates to rise. A default, the report added, could potentially result “in a financial crisis and recession that could echo the events of 2008 or worse.”

A default would make it tough for the Treasury to make good on coming interest payments and other obligations, including paying scores of government employees and financing critical safety net programs like Social Security and Medicare.

Wall Street remains confident that a deal to avert a default will materialize, according to interviews with senior executives, who spoke on the condition of anonymity because of company policies against speaking to the media. The relatively upbeat sentiment grew on Thursday, stoked by reports that Speaker John A. Boehner had indicated to colleagues that he was determined to prevent a federal default.

And while Wall Street is sanguine, big banks like Morgan Stanley and Citigroup are still working out contingency plans that involve redoubling efforts to keep clients calm and are selling government bonds â€" a sign that confidence in Washington has waned.

To guard against possible mayhem from a debt ceiling crisis, some of the nation’s largest banks are deploying plans that were developed in 2011 â€" when the government first looked as if it were on the verge of surpassing its debt ceiling limits.

One senior bank executive said his bank’s plan includes stocking retail branches with at least 20 percent more cash. That way, any customers who want to stockpile cash reserves in the event of a default can readily withdraw their money.

The executive also said that his bank was adopting safeguards to protect customers whose income flows from Social Security or other government programs from incurring any fees. The executive said that the bank intended to waive all fees and possibly advance customers money interest-free if their government checks were delayed.

At Morgan Stanley, there was speculation last week that the troubles in Washington might derail a conference taking place at West Point on Thursday and Friday for traders at big asset managers. But the markets have been manageable so far, and the meeting proceeded, according to attendees.

On the wealth management side, the bank prepared this week a concise note for its team of financial advisers, many of whom are fielding calls from clients about both the debt ceiling and government shutdown. “We believe there is a zero percent chance of a federal government default at this time,” the note said. “The U.S. government will pay its bills.”

The report also noted that there had been 17 government shutdowns since 1976, a fact one adviser said he was emphasizing with clients this week. “I am not a soothsayer, but I’m more of a soothing sayer, someone who will remind them that this is going to be all right.”

The financial advisers noted that clients were keenly aware of the tax consequences they would face if they choose to leave the stock market hastily. Those who do, the advisers said, could incur a hefty tax bill.

Most brokers are not strangers to the anxiety surrounding the debt ceiling. Just two years ago, the nation faced the same looming prospect of a default, when the government needed to raise its cap on borrowing from $14.3 trillion.

“We have seen this movie before,” said Steven Wieting, the global chief investment strategist at Citigroup’s private bank. Just like in 2011, “this will be resolved,” he said.

That is not to say that past Congressional skirmishes over the debt ceiling did not have an effect. In 2011, the fight prompted Standard & Poor’s to lower the United States’ credit rating, and the S.&P. 500-stock index swooned more than 10 percent.

In a note to clients earlier this week, Mr. Wieting said: “Like seeing a horror movie a second time around, we see the markets ‘recoiling’ far less.”

Beyond their preparations, some Wall Street executives have been discussing which hedge funds are poised to reap big gains in the event of a default. Bankers have been speculating about which hedge funds have quietly built bets on a default. That alone was one of the liveliest topics of conversation last week at an exclusive Wall Street meeting in Singapore.

One thing Wall Street executives seem to agree on is that the debate has hurt America’s image, both at home and abroad.

“This is a really serious issue,” said Laurence D. Fink , the chairman and chief executive of BlackRock, the world’s largest asset manager. “It may not happen, but the fact the government has allowed this narrative is bad enough. We should be saying we are a principled nation and would never allow a default.”

After a Fraud, Regulators Go After a Bank

You can’t run a Ponzi scheme without a bank.

In such a scheme, money that is supposed to be invested is really used to line the pockets of the Ponzi promoter or to pay previous investors. A lot of money has to flow through bank accounts, and it flows in ways that differ from what the promoter tells investors is happening. Banks are in a unique position to notice what is going on before the money is all gone.

But it is extremely rare for a bank to face sanctions for not noticing.

The typical judicial attitude was expressed last year when the United States Court of Appeals for the 11th Circuit upheld the dismissal â€" before a trial or any discovery of evidence â€" of a class-action suit against Bank of America by investors who had lost money in a pyramid scheme run by a promoter named Beau Diamond.

Even assuming that the plaintiffs could prove that Mr. Diamond “engaged in atypical business transactions, such as numerous wire transfers unrelated to any legitimate business activity,” the appellate court ruled, that would not be enough. The allegations in the suit were insufficient to render “plausible” a conclusion that the bank had “actual knowledge” of what Mr. Diamond was doing, so there was no need for a trial.

See no evil, face no liability.

That is why a joint regulatory action filed last week by the Securities and Exchange Commission, the Office of the Comptroller of the Currency and the Financial Crimes Enforcement Network, a part of the Treasury Department, seems so noteworthy. TD Bank, an American subsidiary of Canada’s large Toronto-Dominion Bank, agreed to pay $52.5 million to settle accusations that it had helped a Florida lawyer named Scott W. Rothstein commit one of the more brazen Ponzi schemes of recent years.

It is not clear, however, whether this represents a new attitude on the part of regulators to try to force banks to pay attention to possible Ponzi schemes â€" just as the Patriot Act requires them to monitor possible terrorist financing â€" or whether it is an isolated response to a particularly egregious case. Certainly the regulators had evidence, much of it provided by Mr. Rothstein in an effort to minimize his sentence, suggesting that one or more bank employees knew they were helping him deceive investors.

If regulators do not go after banks, the banks are usually home free. Some bankruptcy trustees for collapsed Ponzi schemes have tried to sue banks to recover money for defrauded investors only to have judges rule that because the trustee is standing in the shoes of the fraudster, such suits are not permitted. But when investors try to sue the banks, they can run up against rules limiting class-action suits and a Supreme Court decision saying that only the government â€" not victims â€" can bring suits contending that a bank, or anyone else, aided and abetted a fraud.

The Rothstein Ponzi scheme was created by a lawyer who had burst onto the Fort Lauderdale scene, living large and making highly publicized charitable donations. His firm, Rothstein, Rosenfeldt & Adler, employed 70 lawyers. He was vice chairman of a Florida Bar Association grievance committee that heard ethics complaints against lawyers. He was named to a committee to advise on state judicial appointments.

And he put together a $1.2 billion Ponzi scheme, according to the federal charges to which he pleaded guilty.

His scheme involved persuading investors to put money into “structured settlements.” Supposedly, these were settlements of cases that involved complaints like sexual harassment. The companies, he explained, had agreed to pay money over time to his clients in return for their silence. Those clients would sell the right to the payments in return for an upfront payment from the investor. He assured the investor that all the money had in fact been paid into escrow accounts he administered.

He spread the profits of the Ponzi scheme around, according to the federal charges, using money to “provide gratuities to high-ranking members of police agencies in order to curry favors with such police personnel and to deflect law enforcement scrutiny.” Political contributions were made with the money “in a manner designed to conceal the true source of such funds and to circumvent state and federal laws governing the limitations and contribution of such funds.” He sponsored fund-raisers for, among others, Gov. Charlie Crist, Senator John McCain and President George W. Bush.

For their first wedding anniversary, in 2009, he and his wife, Kimberly, attended an Eagles concert, where Don Henley dedicated a song, “Life in the Fast Lane,” to them. That cost him a $100,000 charitable contribution.

Floyd Norris comments on finance and the economy at nytimes.com/economix

After a Fraud, Regulators Go After a Bank

You can’t run a Ponzi scheme without a bank.

In such a scheme, money that is supposed to be invested is really used to line the pockets of the Ponzi promoter or to pay previous investors. A lot of money has to flow through bank accounts, and it flows in ways that differ from what the promoter tells investors is happening. Banks are in a unique position to notice what is going on before the money is all gone.

But it is extremely rare for a bank to face sanctions for not noticing.

The typical judicial attitude was expressed last year when the United States Court of Appeals for the 11th Circuit upheld the dismissal â€" before a trial or any discovery of evidence â€" of a class-action suit against Bank of America by investors who had lost money in a pyramid scheme run by a promoter named Beau Diamond.

Even assuming that the plaintiffs could prove that Mr. Diamond “engaged in atypical business transactions, such as numerous wire transfers unrelated to any legitimate business activity,” the appellate court ruled, that would not be enough. The allegations in the suit were insufficient to render “plausible” a conclusion that the bank had “actual knowledge” of what Mr. Diamond was doing, so there was no need for a trial.

See no evil, face no liability.

That is why a joint regulatory action filed last week by the Securities and Exchange Commission, the Office of the Comptroller of the Currency and the Financial Crimes Enforcement Network, a part of the Treasury Department, seems so noteworthy. TD Bank, an American subsidiary of Canada’s large Toronto-Dominion Bank, agreed to pay $52.5 million to settle accusations that it had helped a Florida lawyer named Scott W. Rothstein commit one of the more brazen Ponzi schemes of recent years.

It is not clear, however, whether this represents a new attitude on the part of regulators to try to force banks to pay attention to possible Ponzi schemes â€" just as the Patriot Act requires them to monitor possible terrorist financing â€" or whether it is an isolated response to a particularly egregious case. Certainly the regulators had evidence, much of it provided by Mr. Rothstein in an effort to minimize his sentence, suggesting that one or more bank employees knew they were helping him deceive investors.

If regulators do not go after banks, the banks are usually home free. Some bankruptcy trustees for collapsed Ponzi schemes have tried to sue banks to recover money for defrauded investors only to have judges rule that because the trustee is standing in the shoes of the fraudster, such suits are not permitted. But when investors try to sue the banks, they can run up against rules limiting class-action suits and a Supreme Court decision saying that only the government â€" not victims â€" can bring suits contending that a bank, or anyone else, aided and abetted a fraud.

The Rothstein Ponzi scheme was created by a lawyer who had burst onto the Fort Lauderdale scene, living large and making highly publicized charitable donations. His firm, Rothstein, Rosenfeldt & Adler, employed 70 lawyers. He was vice chairman of a Florida Bar Association grievance committee that heard ethics complaints against lawyers. He was named to a committee to advise on state judicial appointments.

And he put together a $1.2 billion Ponzi scheme, according to the federal charges to which he pleaded guilty.

His scheme involved persuading investors to put money into “structured settlements.” Supposedly, these were settlements of cases that involved complaints like sexual harassment. The companies, he explained, had agreed to pay money over time to his clients in return for their silence. Those clients would sell the right to the payments in return for an upfront payment from the investor. He assured the investor that all the money had in fact been paid into escrow accounts he administered.

He spread the profits of the Ponzi scheme around, according to the federal charges, using money to “provide gratuities to high-ranking members of police agencies in order to curry favors with such police personnel and to deflect law enforcement scrutiny.” Political contributions were made with the money “in a manner designed to conceal the true source of such funds and to circumvent state and federal laws governing the limitations and contribution of such funds.” He sponsored fund-raisers for, among others, Gov. Charlie Crist, Senator John McCain and President George W. Bush.

For their first wedding anniversary, in 2009, he and his wife, Kimberly, attended an Eagles concert, where Don Henley dedicated a song, “Life in the Fast Lane,” to them. That cost him a $100,000 charitable contribution.

Floyd Norris comments on finance and the economy at nytimes.com/economix

Breaking From Recent Tech Tradition, Twitter Forgoes Multiple Stock Classes

Twitter’s initial public offering highlights many of the social network’s differences from rivals like Facebook. But the company’s prospectus highlights one unexpected change: the lack of multiple classes of stock.

Instead, shareholders will all have a single vote on corporate matters.

That marks a big change from the big Internet I.P.O.’s of the last several years, in which companies rolled out multiclass stock structures aimed at preserving control for the company’s founders. Facebook, Groupon and LinkedIn all featured two classes of stock; Zynga, the game maker, went further and unveiled a highly unusual triple-class system, including a tier meant solely for its founder, Mark Pincus./p>

Such structures have been around for some time, often used at companies where controlling families wish to maintain control. (The New York Times Company is among them.) But the systems have drawn criticism for being unfriendly to regular shareholders.

In theory, then, Twitter would be considered more open than others in the latest generation of Internet companies. But the company still plans to institute other means of protecting itself against hostile takeovers and activist investors. Twitter will have three classes of directors who are elected in different years, making it significantly more difficult to replace the board in one fell swoop.

Twitter also disclosed that its certificate of incorporation and its bylaws also contain provisions that limit shareholders’ ability to call special meetings and control the procedures for any investor meeting. Those governing documents will also let Twitter issue “blank check” preferred shares that could give holders of those securities more power than common stockholders.

“These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management,” the company wrote in its prospectus.

Twitter Discloses Its I.P.O. Plans

Twitter has taken the cover off its initial public offering, making public its prospectus and setting the clock on one of the most anticipated stock sales of the year.

Twitter’s prospectus â€" whose filing was initially disclosed in a 135-character post on its own service last month â€" offers the fullest look yet at the privately held company.

The company’s growth has been smaller than anticipated. It reported 215 million average monthly users. Twitter reported revenue of $317 million in 2012, and $253 million for the first six months of this year.

The social network disclosed that it plans to use the ticker symbol “TWTR,” but didn’t specify a stock exchange. It also listed a $1 billion fund-raising target, a pro forma number meant to calculate listing fees.

With the regulatory filing late on Thursday, Twitter now has about three weeks until it kicks off a road show to potential investors across the country, in what is expected to be a series of standing-room-only meetings.

The company has hoped to complete its offering by Thanksgiving, people briefed on the matter have said. But if the markets prove unwelcoming â€" a possibility if the government shutdown goes on for weeks â€" the company is likely to postpone the offering until next year.

Twitter’s impending I.P.O. seizes on the continued growth of social networking and mobile devices, two trends that the company has ridden to enormous growth. Founded seven years ago as a side project in a floundering start-up, it is now one of the world’s biggest public forums, ranking alongside Facebook. And aspects of the service, like hashtags denoting specific discussion topics, have infiltrated popular culture.

The company has turned its deceptively simple product, short messages no longer than 140 characters, into a global phenomenon used by more than 200 million users. It has found a way to make that business profitable through advertising, notably through so-called sponsored tweets that resemble regular users’ posts.

If successful, the stock offering would create a windfall for Twitter’s investors, a raft of venture capital firms and individuals who have poured money into the company for years. They include the social network’s three founders, Ev Williams, Jack Dorsey and Biz Stone; the investment firms Union Square Ventures, Spark Capital and Andreessen Horowitz; and investors like Chris Sacca and Kevin Rose.

Deal makers hope that Twitter’s offering will help lead a revival in technology public listings, after the market underperformed for much of 2013. Technology companies have accounted for just 19 percent of all initial offerings so far this year, the smallest share since 2008, according to the research firm Renaissance Capital.

Some of that decline took place after Facebook’s botched I.P.O. last year, as well as periods of market turmoil as recently as this summer.

But analysts say that investors are eager to take a piece of technology start-ups, especially fast-growing companies that appear poised to continue expanding â€" and someday make healthy profit margins. Despite a flawed debut, Facebook’s shares now trade 29 percent higher than their offering price, as the social networking giant demonstrates strong growth in advertising revenue.

Two start-ups, the advertising technology company Rocket Fuel and the cybsersecurity provider FireEye, leaped by double-digit percentages in their debuts last month.

And shares of LinkedIn, the social network that kicked off the current round of Internet I.P.O.’s, have risen more than fivefold since their May 2011 debut.

Potential buyers aren’t the only firms eager for a piece of Twitter’s offering. Wall Street banks have battled for months for the privilege of leading the stock sale, which will bestow prestige and bragging rights. Goldman Sachs won that fight and is serving as lead underwriter, with Morgan Stanley, JPMorgan Chase, Bank of America Merrill Lynch and Deutsche Bank joining as additional advisers.

One thing the I.P.O. probably will not bring is high fees, since companies staging big offerings can command sharply lower rates. Facebook paid fees of just 1.1 percent for its $16 billion offering last year.

Citigroup to Pay $30 Million Fine for Disclosure of Unpublished Research

Citigroup will pay a $30 million fine to Massachusetts to settle charges that one of its analysts offered unpublished research related to orders for Apple smartphones to hedge funds and other select clients, including SAC Capital Advisors.

The analyst, Kevin Chang, provided three hedge funds â€" SAC Capital, Citadel and GLG Partners â€" and T. Rowe Price with confidential information about Hon Hai, a Taiwanese supplier to Apple smartphones, according to an order filed by William Francis Galvin, the Massachusetts secretary of the Commonwealth who oversees securities laws.

Citigroup has also been censured and will have to undertake a three-year review of its policies and procedures. The fine comes nearly a year after Citigroup paid $2 million to Massachusetts to settle charges that two other analysts broke federal and state securities laws by sharing nonpublic information about Facebook. Mr. Galvin’s office said the latest charges violated the terms of last year’s agreement.

“It seems that the concept that investors are to be presented with a level playing field when it comes to the product of research analysts is a lesson that must be learned over and over again,” Mr. Galvin said. “But it’s important that it should be taught as often as necessary.”

Citigroup said on Thursday that it was “pleased to have this matter resolved,” adding, “We take our regulatory compliance requirements very seriously and train all of our employees about these obligations. ”

The order, which includes references to e-mails from fund managers to Mr. Chang, demonstrates the lengths that a handful of SAC Capital employees were willing to go to get information on a stock they had large positions in.

The allegations date back to Nov. 13, 2012, when Mr. Chang, a research analyst who worked for a Taiwanese partner of Citigroup, published a report with a “buy” rating on Hon Hai’s stock. In the report, the analyst estimated that Apple iPhone shipments would increase from the third quarter to the fourth quarter of the year. These estimates were in line with other analyst estimates at the time.

But when Macquarie, a competing investment bank, issued a report on Dec.13 highlighting “structural risks” to demand for Apple iPhones and downgraded its rating on Hon Hai’s stock, a flurry of internal e-mails began to fly within Citigroup, questioning Mr. Chang on the new numbers.

At the same time, he was also bombarded with e-mails from Citigroup’s hedge fund and institutional clients, seeking more information. Over the span of one morning alone, multiple managers from SAC Capital e-mailed Mr. Chang, according to the order.

Under pressure from the hedge funds and institutional clients, Mr. Chang sent them “previews” of a new research report that same day, a day before publishing this same information to all of Citigroup’s clients. The new report included Mr. Chang’s estimates of cuts in Apple iPhone production numbers.

After this research note, the Citigroup downgraded its recommendation on the Apple stock from “buy” to “neutral.”

The Latest Fashion Accessory Is an I.P.O.

An initial public offering instead of a contract. LVMH may have found an original way to keep close the hot designers that made it worth 75 billion euros and created the world’s largest luxury group.

Marc Jacobs, the creative director of Louis Vuitton, is leaving after a 16-year stint. He will now focus on the potential I.P.O. of his fast-growing namesake brand. Investors were not amused at the news and shaved more than 1 billion euros from LVMH’s market value. Coincidentally, that is just about what the Marc Jacobs label might be worth, according to very preliminary analyst estimates hampered by a lack of reliable numbers. The young brand is co-owned in equal parts by LVMH, Mr. Jacobs himself, and his business partner, Robert Duffy.

LVMH, which is facing slowing growth and has significantly underperformed its competitors and the French CAC 40 stock index over the last year, is in the midst of a strategic and generational change. Many designers have moved, or been moved, in recent months. The company’s founder, Bernard Arnault, wants to take Louis Vuitton - a quarter of LVMH’s sales and perhaps half its operating profit, analysts estimate - up market by reducing its reliance on its world-famous, high-markup waxed canvas bags. The French billionaire recently chose a new chief executive for the brand and appointed his own daughter as executive vice president, amid much criticism. But he owns 46 percent of the group and, at 64, clearly has dynastic designs for its future.

It’s much too early to know whether the idea of listing one of the company’s hottest brands will serve as a precedent within LVMH or as a model for others such as archrival Kering, the owner of fashion houses like Gucci, Saint Laurent and Stella McCartney. The fashion business has a tradition of young talented designers creating and nurturing eponymous brands within the umbrella of a large group while taking on the task of rejuvenating the grand names of fashion in the parent’s stable. LVMH is taking this a step further: allowing couture stars to enjoy more independence and higher rewards while sharing in the benefits of their endeavors. But it won’t become a tradition before Marc Jacobs - the company - shows that it can fly on its own.

Pierre Briançon is the European editor of Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.

Ackman Modifies Bet Against Herbalife

The activist investor William A. Ackman has pared down his $1 billion bet against the nutritional supplements company Herbalife, he told investors on Wednesday.

Mr. Ackman, who runs Pershing Square Capital Management, said he had restructured his bet on Herbalife, reducing more than 40 percent of the hedge fund’s short position against the stock in an attempt to stem Pershing Square’s paper losses on the investment, which have run into the hundreds of millions of dollars.

Part of the short position has been replaced with derivatives that give the firm the option to short Herbalife stock in the future, according to a letter to investors dated Oct. 2.

But Mr. Ackman has not folded his cards just yet. The theme in his last letter to investors in August was “mistakes” made by Pershing Square; this time it is“conviction.”

“Bottom line, we continue to have enormous conviction in our investment thesis,” he told his investors in the latest letter. He still contends that Herbalife is a pyramid scheme, an assertion Herbalife denies.

This conviction goes back to December 2012, when Mr. Ackman made a three-hour presentation at an Ira Sohn Conference Foundation gathering in Manhattan, outlining his reasons for believing the company was a pyramid scheme. During the presentation, he disclosed that he had an “enormous” short position in Herbalife’s stock.

While Herbalife shares tumbled in the days after Mr. Ackman’s presentation, they have since stormed back. The stock price is up 121.9 percent this year. Other hedge fund managers have taken positions against Mr. Ackman, the most notable being Carl C. Icahn.

In the third quarter alone, Herbalife’s share price rose to $70 from $45 a share, which has amplified the losses for Pershing Square.

But Mr. Ackman is still convinced that Herbalife is a pyramid scheme, and he referred to state, federal and international investigations into the company’s business practices.

“If the company fails within a reasonable time frame, we will make a similar amount of profit as if we had maintained the entire initial short position,” Mr. Ackman said.

He also touched on Pershing Square’s investment in J.C. Penney. Mr. Ackman sold the firm’s 18 percent stake suddenly in August after a failed public battle with directors that resulted in his resignation from the board. On Wednesday, Mr. Ackman told investors that Pershing Square lost around half of its original investment in J.C. Penney.

Since Mr. Ackman stepped down from the board, the struggling retailer has announced plans to raise as much as $932 million in fresh capital as it attempts a turnaround.

During his tenure on the board, Mr. Ackman brought in Ron Johnson as chief executive. Mr. Johnson’s effort to revamp the business failed, and he was forced to leave this year.

“Turnarounds are inherently risky and require a totally aligned board of directors, a C.E.O. with substantial turnaround experience and the support and confidence of all stakeholders,” Mr. Ackman told investors. “Without all of these ingredients, we are bearish on J.C. Penney’s prospects.”

Obama Warns Wall Street

Markets have had a muted response to the government shutdown that began on Tuesday. But President Obama, in an interview with CNBC, warned that the economic effects of political gridlock could grow far worse if Congress fails to raise the debt ceiling by Oct. 17, leaving the country at risk of defaulting on its borrowing. “This time is different,” he said, adding that Wall Street “should be concerned.”

Mr. Obama and Vice President Joseph R. Biden Jr. met on Wednesday with Wall Street chieftains, including Lloyd C. Blankfein, the chief executive of Goldman Sachs. “I told them that it is not unusual for Democrats and Republicans to disagree,” Mr. Obama recalled in the CNBC interview. “But when you have a situation in which a faction is willing potentially to default on U.S. government obligations, then we are in trouble. If they’re willing to do it now, they’ll be willing to do it later.”

Economists and investors are quietly exploring the options the White House might have in the event Congress fails to act, The New York Times writes. “The most widely discussed strategy would be for President Obama to invoke authority under the 14th Amendment and essentially order the federal government to keep borrowing, an option that was endorsed by former President Bill Clinton during an earlier debt standoff in 2011.”

ACKMAN SAID TO MODIFY HERBALIFE BET  |  William A. Ackman, with hundreds of millions of dollars in paper losses on his short-selling bet against Herbalife, has moved to reduce his firm’s risk by converting 40 percent of that position to long-term derivatives, he told investors in a letter, according to The New York Post. “The restructuring of the position preserves our opportunity for profit,” Mr. Ackman said, according to the report.

Mr. Ackman continued, according to Bloomberg News: “Since our presentation on Herbalife at the end of last year, we have not learned any facts that are inconsistent with our belief that the company is a pyramid scheme that engages in unlawful and deceptive marketing practices.” The company has denied Mr. Ackman’s accusations.

UBS’S PUERTO RICO HEADACHE  | 
Municipal bond funds in Puerto Rico have been hit hard recently amid the island’s economic struggles. “For the Swiss banking giant UBS, which boasts that it manages money for half of the island’s millionaires â€" roughly $10 billion â€" the downturn has created a particularly nasty headache,” DealBook’s Susanne Craig reports.

“The bank’s clients had piled into highly leveraged bond funds run by UBS and were encouraged by its brokers to borrow even more money to invest in those funds. In some cases, money was lent improperly, exacerbating current losses, according to UBS employees in the region close to the situation, who spoke on the condition that they not be named because of a company policy against speaking to the news media. Now, a number of UBS clients have been forced to liquidate hundreds of millions of dollars in holdings in these funds to meet margin calls. And the bank says it has begun an internal investigation into the lending practices of some of its top-producing brokers in the commonwealth.”

ON THE AGENDA  |  Warren E. Buffett and Henry M. Paulson Jr., a former Treasury secretary, are on CNBC at 7:30 a.m. Jacob J. Lew, the current Treasury secretary, is on Fox Business Network at 4 p.m. Constellation Brands reports earnings before the market opens. Activist investors are gathering in New York for a conference sponsored by Schulte Roth & Zabel.

BLACKBERRY SAID TO DRAW INTEREST OF CERBERUS  | Cerberus Capital Management is seeking a confidentiality agreement that would allow it to examine BlackBerry’s books, Ian Austen and Michael J. de la Merced report in DealBook. It was not clear whether the move would lead to a bid for BlackBerry, which reported a $1 billion quarterly loss last week. “The company has already agreed to a preliminary and conditional offer from its largest shareholder, Fairfax Financial Holdings of Toronto. While it remains free to look for a better offer, BlackBerry would have to pay Fairfax $157 million if it accepts another bid before Nov. 4. Fairfax can walk away without penalty,” DealBook writes.

Mergers & Acquisitions »

Apax Wins and Loses in rue21 Conundrum of Its Own Design  |  The buyout of the fashion retailer rue21 pits old investors in Apax Partners against new ones, with the firm forced to choose the best path through the conflicts of interest, Steven M. Davidoff writes in the Deal Professor column. DealBook »

Tesla Shares Fall After Video Shows Car on Fire  |  A negative analyst report also put downward pressure on the stock on Wednesday. WALL STREET JOURNAL

Goldman to Buy Stake in Danish Utility  |  Goldman is buying a 19 percent stake worth $1.46 billion in Dong Energy, the largest utility in Denmark, Bloomberg News reports. BLOOMBERG NEWS

Portugal Telecom and Oi of Brazil Agree to Merge  |  The companies said they would have 100 million telecommunications subscribers combined. DealBook »

INVESTMENT BANKING »

A Charm Offensive to Lure Banking Customers in Britain  |  By focusing on service, Vernon W. Hill II is drawing consumers to his British start-up, Metro Bank, but the hurdles have been high. DealBook »

A.I.G.’s Former Chief Comes to JPMorgan’s Defense  |  “I experienced regulatory overreach first hand at A.I.G.,” Maurice R. Greenberg, who led the American International Group in the years before the financial crisis, writes in an essay in The Wall Street Journal. “History seems to be repeating itself with the case of J.P. Morgan.” WALL STREET JOURNAL

Striking Stagehands Irk Guests at Carnegie Hall  |  “I think it’s very selfish on the part of this union to ruin the experience of all these supporters,” the hedge fund manager John A. Paulson said in response to the stagehands’ strike at Carnegie Hall that forced the cancellation of a concert, according to Bloomberg News. BLOOMBERG NEWS

Greenhill Expands Into Brazil Despite Nation’s Woes  |  The boutique investment bank Greenhill & Company has opened an office in Brazil and hired the former Goldman Sachs executive Daniel Wainstein to run it. DealBook »

At Barclays, Ultracasual Fridays  |  Barclays has recently adopted a policy of allowing employees to wear jeans, T-shirts and sneakers on Fridays, CNBC reports. The change has irked some employees, the report says. CNBC

Wharton Admissions Director Steps Down  |  The admissions director at the University of Pennsylvania’s Wharton School resigned after a decline in applications. BLOOMBERG NEWS

PRIVATE EQUITY »

Blackstone Buys Dutch Mall Developer  |  The Blackstone Group completed its acquisition of the Multi Corporation, a Dutch owner of shopping centers, in a deal that may increase the private equity firm’s presence in Turkey, Reuters reports. REUTERS

HEDGE FUNDS »

Loeb Raises Stake in Sotheby’s and Seeks Board Seat  |  The activist investor Daniel S. Loeb has disclosed that he is now the auction house’s biggest shareholder with a 9.3 percent stake in the company. DealBook »

Departures at SAC Capital Unit in London  |  Three portfolio managers with a SAC Capital Advisors unit in London have left the firm, according to documents filed with a British agency that tracks corporate registrations. DealBook »

I.P.O./OFFERINGS »

Re/Max Rises in Debut, While Empire State Trust Is Subdued  |  Outside the real estate sector, investors also lined up on Wednesday for shares of Burlington Stores, which operates the Burlington Coat Factory retail chain. DealBook »

Marc Jacobs Leaving Louis Vuitton  |  Marc Jacobs is leaving Louis Vuitton after 16 years to focus on his own fashion line, which reportedly will move toward an initial public offering. DealBook »

VENTURE CAPITAL »

How the Founder of Lavabit Waged a Privacy Fight  |  Ladar Levison decided to close his secure e-mail service, Lavabit, rather than allow more access to government investigators who were pursuing Edward J. Snowden. NEW YORK TIMES

LEGAL/REGULATORY »

S.E.C. Raises Concerns With New Derivatives System  |  After the Commodity Futures Trading Commission pushed to implement a new system for trading derivatives on electronic platforms, officials from the Securities and Exchange Commission warned on Wednesday that certain products should not be traded there because they might fall under the S.E.C.’s jurisdiction, The Financial Times reports. FINANCIAL TIMES

European Central Bank Holds Rates Steady  |  The European Central Bank left its benchmark interest rate unchanged at a record low on Wednesday, but indicated it was ready to take steps if needed to protect the euro zone from political turmoil in the United States, The New York Times writes. NEW YORK TIMES

Tracking the Fed’s Plans to Taper  |  A timeline of quotes from Federal Reserve officials. NEW YORK TIMES

Beanie Baby Creator Pleads Guilty to Tax Evasion  |  H. Ty Warner pleaded guilty to hiding money from United States tax authorities in a Swiss bank account, Bloomberg News reports. BLOOMBERG NEWS

Doctoroffs to Give University of Chicago Law School $5 Million  |  The law school is expected to announce a $5 million gift from Daniel and Alisa Doctoroff to create a business leadership program that combines law and business classes. DealBook »

British Regulator Plans New Rules for Payday Lenders

British regulators announced plans on Thursday to impose stiff new rules next year for payday lenders, whose business has grown sharply since the financial crisis.

The new rules in Britain will include requirements that lenders properly evaluate whether a consumer can afford such a loan and to limit the number of times they can roll over such a loan. Lenders also will be required to provide consumers sources of debt advice before refinancing.

Payday lenders also will be required to include risk warnings in advertisements, which have proliferated on British daytime television, many offering loans of up to £1,000, or $1,620, at a time.

Firms will face fines for violations of the rules.

The Financial Conduct Authority, which is set take over regulation of consumer credit firms in April 2014, said the proposed changes were intended to make promotions by lenders “clear, fair and not misleading.”

The move comes as regulators in the United States crack down on what they have excess interest rates charged by payday lenders on such loans.

In August, the New York state financial regulator sent letters to 35 online lenders, instructing them to “cease and desist” from offering loans that violate local usury laws. The federal Consumer Financial Protection Bureau has also been examining short-term, payday-style loans.

In Britain, short-term, high-cost lending has grown to an estimated £2 billion ($3.24 billion) industry in 2011-2012, up from about £900 million, or $1.46 billion, in 2008-2009, according to the Financial Conduct Authority.

Consumer advocates have complained that payday lenders have forced consumers into taking out loans they can’t afford, forcing them into a cycle where it is difficult to ever exit.

The Archbishop of Canterbury, in a speech to the House of Lords in June, said the Church of England and other local institutions should work to develop an alternative system of credit unions, instead of payday lenders being the only alternatives for consumers.

“For the credit union movement to be successful and sustainable, and other forms of local finance to develop, we need a bottom-up movement of local organizations working to change the sources of supply,” Archbishop Justin Welby said. “It will take many yearsâ€"10 to 15 yearsâ€"but it must start now.”

Alibaba Invests in a Search Engine for Apps

The Chinese Internet company Alibaba Group wears a number of hats, with commerce sites, a payment system and a search engine.

It is also a tech investor.

Quixey, a search engine for apps, announced on Thursday that it had raised a $50 million financing round led by Alibaba. The deal shows the Chinese company expanding its influence in Silicon Valley, many miles away from its home market.

The Alibaba name lends some prominence to Quixey. Alibaba is also getting a seat on the board, according to Tomer Kagan, Quixey’s chief executive and co-founder.

“They’ve been more founder-friendly than almost any V.C. I’ve ever met,” Mr. Kagan said in an interview, using a shorthand for venture capitalist. “They really believe in the founders having a strong say on the board and a strong say in the company.”

In addition to Alibaba, GGV Capital invested in the latest financing round, joined by several existing investors like Innovation Endeavors and US Venture Partners. Quixey has raised $74.2 million to date, the company said.

A partner at GGV, Jeff Richards, introduced Quixey to Alibaba, Mr. Kagan said, adding that he soon discovered that the philosophies of Quixey and Alibaba were aligned.

“All the world’s functionality, all the world’s software, should be at everyone’s disposal easily and equally,” Mr. Kagan said.

To distinguish itself from other search engines, Quixey lets people search for phrases that describe a particular task, like “book a flight.” It then shows mobile and desktop apps available for download that might help carry out that task.

Quixey recently started a program to let a company pay to have its app sponsored, giving it prominent placement in searches.

“Innovation is at the heart of Alibaba’s culture, so backing entrepreneurs who are developing forward-thinking technology is what we love to do,” Joe Tsai, the executive vice chairman of Alibaba, said in a statement. “Quixey has a great vision for the future and a fantastic team to see it through.”

The chatter surrounding Alibaba has lately centered on the company’s plans to hold its initial public offering in New York. The I.P.O. could value Alibaba at more than $75 billion.