BNY Mellon Settles Charges Stemming From
Miscalculations of Regulatory Capital Figures
FOR IMMEDIATE RELEASE
Washington D.C., Jan. 12, 2017—
The Securities and Exchange Commission today announced that BNY
Mellon has agreed to pay a $6.6 million penalty to settle charges
stemming from miscalculations of its risk-based capital ratios and
risk-weighted assets reported to investors.
An SEC investigation found that BNY Mellon deviated from regulatory
capital rules by excluding from its calculations approximately $14
billion in collateralized loan obligation assets that the firm
consolidated onto its balance sheet in 2010. BNY Mellon never
obtained Federal Reserve Board approval as required under regulatory
capital rules to exclude the assets from its calculations. Due to
the miscalculations and the firm’s lack of internal accounting
controls to ensure its financial statements were being prepared
properly, BNY Mellon understated its risk-weighted assets and
overstated certain risk-based capital ratios in quarterly and annual
reports from the third quarter of 2010 to the first quarter of 2014.
“Regulatory capital ratios and risk-weighted assets are critical
data points for investors in large banking institutions like BNY
Mellon,” said Michael J. Osnato, Chief of the SEC Enforcement
Division’s Complex Financial Instruments Unit. “We will continue to
aggressively focus on these kinds of disclosures to ensure that
control failures do not prevent investors from receiving accurate
and timely information.”
Without admitting or denying the charges, BNY Mellon consented to an
SEC order finding that it violated internal controls and
recordkeeping provisions of the federal securities laws,
specifically Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities
Exchange Act of 1934.
The SEC’s investigation was conducted by Armita Cohen and Amy
Flaherty Hartman and the case was supervised by Michael Osnato, Reid
Muoio, and Jeffrey Shank. The SEC appreciates the assistance of the
Board of Governors of the Federal Reserve System and the Federal
Reserve Bank of New York.
Mellon Securities Trust Company
09/12/1985 NYS Chartered Mellon Securities Trust Company
07/01/2008 Merge To State Bank of New York Mellon, The
Mellon Trust of New York
06/16/1988 NYS Chartered Boston Safe Deposit & Trust Company of New
05/01/1997 Name Change To Mellon Trust of New York
01/03/2001 Name Change To Mellon Trust of New York, LLC
07/01/2008 Merge To Federal Mellon New York Interim National Bank
Mellon Trust of New York, LLC
06/16/1988 NYS Chartered Boston Safe Deposit & Trust Company of New
05/01/1997 Name Change To Mellon Trust of New York
01/03/2001 Name Change To Mellon Trust of New York, LLC
07/01/2008 Merge To Federal Mellon New York Interim National Bank
The Bank of New York Mellon Corporation, commonly
referred to as BNY Mellon, is an American multinational banking and
financial services corporation formed on July 1, 2007
as a result of the merger of The Bank of New York and Mellon
The company has US$1.6 trillion in assets under management and
US$27.9 trillion in assets under custody and/or administration
thereby being the largest deposit bank in the world.
The company employs 51,400 staff as of March 2014
worldwide and operates in six primary financial services sectors
including advisory services, asset management, asset servicing,
broker-dealer, issuance services, treasury services and wealth
Man who fell from BNY Mellon building committed suicide
Pittsburgh Post-Gazette logo
9:30 PM MAR 30, 2010
An autopsy of a man who died Monday after falling from the BNY
Mellon Building Downtown confirmed that he committed suicide.
Thomas Senchisen, 37, of the North Side, was pronounced dead at 4:34
p.m., minutes after falling from the 54-story building near Ross
Street. Pittsburgh homicide detectives said their investigation
indicates Mr. Senchisen intentionally jumped to his death. An
autopsy performed Tuesday indicated that he died from blunt force
An emergency dispatch supervisor said initial reports were of a man
who had fallen from the building around 4:30 p.m.
Mr. Senchisen was a 10-year employee of the Mechanical Operations
Co., which provides maintenance for the building.
A spokeswoman said the company would have no comment on the death.
It is the oldest banking corporation in the United States, with
origins stretching back to the establishment of the Bank of New York
in 1784 by Alexander Hamilton.http://en.wikipedia.org/wiki/The_Bank_of_New_York_Mellon
Bank of New York came into existence in the year
1784, focusing on the needs of businesses and the management of
wealth in understanding the complexity of the world's financial
The bank merged with Mellon Financial Corporation in
2007 and till today the bank continues providing financial services
under the new name Bank of New York Mellon.
Headquartered in New York, BNY Mellon is a global
leading asset management and securities providing company, uniquely
intended to help individuals, organizations, institutions,
governments and several other clients manage their financial assets
and help thrive in the complex global market.
The bank has $21.8 trillion in assets under custody
and $1 trillion under management.
Operating in as many as 36 countries, the bank
serves in more than 100 market locations worldwide with a workforce
of more than 49,000 worldwide.
The bank provides a wide array of asset management,
asset servicing and securities services solutions to help
institutions and corporations build assets, enhance performance,
improve operating efficiency and reduce risk.
To the individuals the bank provides financial
solutions such as wealth management, private banking, mortgage
programs and shareowner services.
We have evolved in many ways since our founding in
1784, but our commitment to the true innovative spirit of our
founder, Alexander Hamilton, remains the same. It’s the driving
force behind our legacy of firsts and what continues to push us
forward into the future.
The Buck Started Here
Started by Alexander Hamilton in 1784, BNY Mellon is one of the
longest-lasting financial institutions in the world. We have
endured, been innovative and went on to prosper through every
economic event and market move over the past 230 years.
READ TRANSCRIPT (PDF - 169 KB)
When Citifinancial ,supposedly, paid off all owing Washington
Mutual- Mellow Bank sent Janice Sanford a check, dated March 15,
2007, for $1.70-with only
"Payoff Overage" on MEMO line-no account #.
I recently lost a
mortgage suit to Citifinancial..... who presented a computer
printout of payment history, with included, according to
Citifinancial wittiness, information that Washington Mutual Finance
had been paid off
Records on file in the Clerk of Court's off show that Washington
Mutual never filed mortgage release. The witiness also made the
claim that there were NEVER any assignment or sale of the mortgage
note- I have original letters to prove that was not true.
There is a doublewide trailer on the property, that was
foreclosed on, which I have the titles to in my possession.
Citifinancial(owned by Citigroup) lawyers even wanted that ADDED
on to the property being foreclosed on.
I presented the titles in court. Attached to the titles is this
note, apologizing ,my titles were found in back file.
A summery of what Magistrate judge said:
He could understand if I had argued that i should have been
I informed the court that, I had only recently learned, from
court records, that Washington Mutual's mortgages[ made prior to
Washington Mutual SWITCHING its name to Citifinancial]
had not filed any mortgage releases.
The court simply took Citifinancial's word that the Washington
Mutual mortgage had been paid off, someone just hasn't filed lien
To say the least, after setting in the courtroom and hearing the
judge, through his legal authority
take other people's home away from them, I was not surprised when
the he gave my daughter 90 days to leave the property.
Of course, with me holding the titles to the trailer and the note
showing that it is not apart of the property note being
foreclosed on, I got to keep the trailer [ which will cost 1000s of
dollars to moved the few hundred feet it needs to be moved...And
then there is the problem of keeping the property ,that it would set
on, from being taken away by the courts in the other mortgage
foreclosure case, which is presently in the court too.
I was cautioned by the Magistrate judge that if I pursued the
matter, by disagreeing with his order, that I might lose not only
the property but my trailer as well.
I'm not an attorney. It is not the trailer that matters to me
.... America, truly is, being destroyed from within-by those who
took an oath of office, to defend her. The sad thing is Every
American now live under the threat of communism at its best..
to be continued......
BNY Mellon, A Vision of Growth
and a History of Performance
Through Good Times and Bad
BNY Mellon's history of providing distinguished
service spans 225 years. Founded in 1784, soon after
the birth of the new American republic, our history
is inextricably woven into the broader history of
Two of our leaders, during different centuries,
played key roles in the development of the American
government and economy, helping to shape the nation
and the prosperity enjoyed by its citizens and
Alexander Hamilton, one of America's founding
fathers and a highly respected New York attorney,
personally wrote the company's constitution and,
during the early years, remained the individual most
actively involved in the organization. Hamilton's
economic vision and firm grasp of financial
principles served the company well. Hamilton went on
to become the first U.S. Secretary of the Treasury
and a member of George Washington's first cabinet.
Less than a century later, this focus on driving
business development was amplified by Andrew Mellon,
whose willingness to fund and invest in new business
startups helped launch the American industrial
revolution. Mellon became one of America's foremost
financiers, industrialists and philanthropists. As
with Hamilton, in time Mellon was appointed U.S.
Secretary of the Treasury, a position he held under
three U.S. Presidents.
From the beginning, we have embraced the changes
and challenges that face our clients and helped them
navigate the increasing complexity of the world's
financial markets. This tradition of focusing on the
needs of businesses and the management of wealth has
served BNY Mellon well for 225 years. And it is our
goal to continue to do so well into the future.
Russia sues Bank of New York for 22.5 bln usd
05.17.07, 8:29 AM ET
MOSCOW (Thomson Financial) - Russia's Federal Customs Service has
filed a 22.5 bln usd lawsuit against the Bank of New York for money
laundering, a lawyer for the service told AFP.
'From 1996 to 1999, the Bank of New York (nyse: BK - news - people )
took part in a money laundering scheme in which the Russian
Federation suffered 22.5 bln usd worth of harm,' lawyer Maxim Smal
said after filing the suit at Moscow's arbitrage court.
Fortune Magazine: Legal Pad
Russia settles suit against U.S. bank for a pittance
After two years, a racketeering case is reaching what may be a
profitable conclusion for Bank of New York Mellon.
By Roger Parloff, senior editor
Last Updated: September 22, 2009: 11:25 AM ET
NEW YORK (Fortune) -- A bizarre and troubling civil racketeering
case filed against the Bank of New York Mellon by the Russian
customs service -- ostensibly brought under U.S. law but filed in a
Moscow court -- may be coming to an unexpectedly rational end.
In remarks this morning to the State Duma, the lower house of
Parliament, Russia's Finance Minister Alexei Kudrin announced that
the case, in which Russia had sought $22.5 billion from the bank,
would be settled for about six ten-thousandths of that sum, or $14
million, which Kudrin described as "trial expenses."
Once the case is settled, the bank has pledged to enter into a
five-year, trade finance agreement whereby it would extend $400
million in loans to Russian banks at a rate of 2.5% above LIBOR,
with debts coming due every six months.
In a report issued this morning by Rochdale Research, bank analyst
Richard Bove is calling the settlement "a home run" for the bank,
and the loan deal "a profitable piece of business" in itself.
Russia's lead lawyer in the case has been Steven C. Marks, an
American plaintiffs lawyer at Miami's Podhurst Orseck. But Finance
Minister Kudrin appeared to repudiate Marks' theory of the case in
his remarks to the Duma, according to both American and Russian wire
service reports, calling the evidence "insufficient to win this kind
Marks did not respond to Fortune's messages seeking comment.
The bank's lead outside lawyers -- Jonathan Schiller and Damien
Marshall of Boies Schiller & Flexner -- also had no comment, nor did
the bank's executive vice president and deputy general counsel
Matthew L. Biben, who has been overseeing the case.
Marks had theorized that the bank was criminally responsible for a
scandal perpetrated in the late 1990s by one of the bank's vice
presidents, Lucy Edwards. Edwards and her husband pled guilty in
2000 to having helped Russian depositors illegally wire transfer
$7.5 billion out of that country via Bank of New York accounts.
Though federal prosecutors investigated the bank for complicity,
they chose not to prosecute. Instead, in November 2005 the bank
accepted "responsibility" for having failed to adequately monitor
Edwards and agreed to pay the U.S. government a $14 million fine,
representing ten times its revenue from the wire transfer fees ($1.4
million) generated by Edwards's scheme. (The $14 million the bank
will now pay the Russian government is obviously a conscious echo of
the sum paid the U.S. government.)
Marks had theorized that by entering into this non-prosecution
agreement in 2005, the bank had admitted criminal culpability in
Edwards' scheme. Though nothing in the non-prosecution agreement
said that, a government press release issued at the time did
mistakenly contain language to that effect. (In August 2008, more
than a year after Marks filed suit, the Manhattan U.S. Attorney's
Office corrected the press release -- deleting the language Marks
frequently quoted -- and affirming in a separate letter that the
bank had never admitted criminal liability. Nevertheless, Marks
never altered his position.)
In May 2007, Marks, whose retainer agreement calls for him to
receive 29% of any recovery, brought a civil suit on behalf of the
Russian Federal Customs Service under the U.S. Racketeer Influenced
and Corrupt Organizations (RICO) Act, seeking $22.5 billion. But
rather than file it in federal court in Manhattan, the expected
venue, he brought it in the Moscow Arbitrage Court, a Russian
Marks' suit alleged, among other things, that Russia had been
cheated out of tax and customs duties on the depositors' funds that
had been transferred. (Russia never identified any taxes actually
evaded, however. Indeed, when the scandal originally broke in 1999,
Russian officials downplayed the gravity of what Edwards had done,
suggesting that most of her transfers hadn't violated Russian law.)
Had Marks filed the case in Manhattan, it would have faced severe
obstacles, including, first, an apparently expired four-year
statute-of-limitations and, second, a federal judicial doctrine
barring foreign taxing authorities from using U.S. courts to collect
foreign tax and customs duties.
By bringing the case in the Moscow Arbitrage Court -- one of a very
few instances in which anyone has tried to bring a RICO case outside
the United States court system -- these problems were averted.
Indeed, the choice of forum was deeply concerning for the bank,
because many experts on Russian law believe that arbitrage courts
simply lack the judicial independence to be able to rule against the
Russian government in a high-stakes case. (For a feature story I
wrote in Fortune about this case in September 2008, click here.)
The suit has now been seemingly stuck in the ordinarily fast-moving
arbitrage court for more than two years, with the judge, for many
months now, urging the parties to settle.
Piecing together wire service accounts from Reuters and Novosti RIA,
Kudrin appears to have said the following in his remarks this
morning to the Duma:
"Previously, the US Government had brought a case against Bank of
New York for money laundering but never found the bank to be guilty
of laundering. . . . As a result Bank of New York paid the
Government for costs associated with the court case, for mistakes
made by some of its employees. This was not a payment in recognition
of having committed laundering; in this case the sum would have been
much greater. . . . Subsequently, the Russian Federal Customs
Service decided to try to prove in a Russian court that laundering
took place in the United States with the alleged participation of
Russian companies. This type of data or material, simply on the
basis of the original legal proceedings in the United States, is
insufficient to win this kind of court case. This is why at the
moment, as far as I know, the two sides needed to settle, and to pay
for certain costs."
Kudrin also characterized the bank's commitment to make the
trade-finance agreement as an "act of good will, to demonstrate the
bank's desire to work with Russia." He added, "guilt has not been
proven and the settlement will be signed.
Read the complete Legal Pad archive To top of page
First Published: September 16, 2009: 4:23 PM ET
Bank of New York's $22.5 billion headache
The Russian government is suing the Bank of New York for smuggling
cash out of the country. Can a U.S. bank get a fair trial in Moscow?
By Roger Parloff, senior editor
Last Updated: September 24, 2008: 7:22 AM ET
(Fortune Magazine) -- Inside a rundown government building on Novaya
Basmannaya Street in Moscow, a bizarre lawsuit is playing out
involving $7.5 billion in illicit money transfers and America's
The Russian government is suing the Bank of New York Mellon (BK,
Fortune 500) under the U.S. civil RICO statute - the Racketeer
Influenced and Corrupt Organizations Act - seeking $22.5 billion.
And what a cast of characters. Russia is represented by a Miami
plaintiffs lawyer who specializes in airplane crash cases, whose
experts include Harvard law professor Alan Dershowitz. The bank's
defense is being led by Jonathan Schiller, a founding partner of
super-lawyer David Boies's law firm, Boies Schiller & Flexner, and
he has assembled his own phalanx of experts, led by former U.S.
Attorney General Richard Thornburgh.
In the suit the Russian Federal Customs Service seeks to recover
taxes it says it should have collected on the $7.5 billion that one
of the Bank of New York's employees helped smuggle out of the
country about a decade ago. The bank maintains that the case has no
What makes the dispute unique is that Russia has filed the suit not
in "any appropriate United States district court," as the RICO
statute contemplates, but in a Russian court. Moscow's commercial
court is widely regarded as not only a place susceptible to
corruption but one in which judges simply lack the judicial
independence required to rule against important state interests.
While a judgment in Moscow might well not be enforceable in the
U.S., the Bank of New York does business in more than 100 countries,
and the judgment would almost certainly be enforceable in some of
them. Moreover, as a multinational operation, the Bank of New York
does not relish the prospect of defying any country's judiciary.
After an 80-year presence in Russia, it also dreads the prospect of
having to pull out now, when Russia is the world's sixth-largest
economy, its second-largest producer of oil, and a global superpower
The case raises a larger issue: Can any Western company get a fair
shake in the Russian court system when the adversary is the Russian
In recent years Russia has often used the selective enforcement of
its laws to advance policy objectives - most notably the
nationalization of natural resources. From 2003 to 2006 it cited tax
claims as the basis for seizing the assets of Yukos, then its
largest oil company; in 2006 it alleged environmental violations in
forcing Shell (RDSA), Mitsui (MITSY), and Mitsubishi (MSBHY) to
cough up half their stake in their Sakhalin Island oil franchise;
and in recent months it has invoked transgressions of labor,
migration, and tax laws to wring concessions from the Western half
of the TNK-BP (BP) oil joint venture, including the ouster of its
American CEO, Richard Dudley.
Yet the Bank of New York suit might also reflect a quirkier,
narrower agenda. Russia's President, Dmitry Medvedev, has
acknowledged that his nation's courts sometimes become the tool of
powerful individuals. As the Financial Times reported in June -
citing Moscow sources - "the Bank of New York case could not have
got this far without support from a high-level 'sponsor' in
government, the security services, or business - or one well
connected in all three areas."
How high up in the Russian government hierarchy does one need to go
to get approval to sue an American bank for $22.5 billion? Louise
Shelley, an expert on the Russian legal system at the George Mason
School of Public Policy in Arlington, Va., says, "The head of the
customs service wouldn't have approval to do something like this on
his own." Approval probably came, she says, from "somewhere in the
Kremlin." [NOTE: IT WAS 4 PAGES LONG BUT 3 HAD BEEN REMOVED.0]http://archive.fortune.com/2008/09/23/news/companies/parloff_bank_new_york.fortune/index.htm?postversion=2008092407
Bank of New York Mellon
Bank of New York Mellon logoBank of New York Mellon Corp. (BNY
Mellon) is a global financial services company formed on 1 July 2007
as result of the merger of The Bank of New York and Mellon Financial
Corporation. BNY Mellon is a leading provider of financial services
for institutions, corporations and high-net-worth individuals,
providing superior asset management and wealth management, asset
servicing, issuer services, clearing services and treasury services
through a worldwide client-focused team. Total assets: US$ 325.27
billion (as of December 31, 2011). Net income: US$ 2,518 million
(2010), US$ 2,516 million (2011)
We are BNY Mellon
BNY Mellon is a global investments company dedicated to helping its
clients manage and service their financial assets throughout the
investment lifecycle. Whether providing financial services for
institutions, corporations or individual investors, BNY Mellon
delivers informed investment management and investment services in
35 countries and more than 100 markets. As of December 31, 2013, BNY
Mellon had $27.6 trillion in assets under custody and/or
administration, and $1.6 trillion in assets under management. BNY
Mellon can act as a single point of contact for clients looking to
create, trade, hold, manage, service, distribute or restructure
investments. BNY Mellon is the corporate brand of The Bank of New
York Mellon Corporation (NYSE: BK). Additional information is
available on www.bnymellon.com, or follow us on Twitter @BNYMellon.
Headquarters One Wall Street
New York, NY 10286
Ticker Symbol NYSE: BK
Client Assets US $1.6 trillion under management*
US $27.6 trillion under custody or administration*
Locations 35 countries, serving more than 100 markets worldwide*
Chairman and CEO Gerald L. Hassell
Employees 51,100 worldwide*
Key Facts and Financials BNY Mellon At a Glance
*As of December 31, 2013
The Bank of New York Company, Inc. (NYSE: BK) is a global leader in
providing a comprehensive array of services that enable institutions
individuals to move and manage their financial assets in more than
worldwide. The Company has a long tradition of collaborating with
deliver innovative solutions through its core competencies:
servicing, treasury management, investment management, and
regional banking services. The Company's extensive global client
includes a broad range of leading financial institutions,
government entities, endowments and foundations. Its principal
The Bank of New York,
founded in 1784, is the oldest bank in the United States
and has consistently played a prominent role in the evolution of
The Company has executed a consistent strategy over the past decade
focusing on highly scalable, fee-based securities servicing and
businesses, with top three market share in most of its major product
The Company distinguishes itself competitively by offering the
of products and services around the investment lifecycle. These
advisory and asset management services to support the investment
extensive trade execution, clearance and settlement capabilities;
securities lending, accounting and administrative services for
portfolios; and sophisticated risk and performance measurement tools
analyzing portfolios. The Company also provides services for issuers
equity and debt securities. By providing integrated solutions for
needs, the Company strives to be the preferred partner in helping
succeed in the world's rapidly evolving financial markets.
The Company has grown both through internal reinvestment as well as
execution of strategic acquisitions to expand product offerings and
market share in its scale businesses. Internal reinvestment occurs
increased technology spending, staffing levels, marketing/branding
initiatives, quality programs, and product development. The Company
consistently invests in technology to improve the breadth and
quality of its
product offerings, and to increase economies of scale. With respect
acquisitions, the Company has acquired 93 businesses since 1995,
exclusively in its securities servicing and fiduciary segment. The
acquisition of *Pershing in 2003 for $2 billion was the
largest of these
As part of the transformation to a leading securities servicing
the Company has also de-emphasized or exited its slower growth
banking businesses over the past decade. The Company's more
actions include selling its credit card business in 1997 and its
business in 1999, and most recently, significantly reducing
corporate credit exposures by 47% from December 31, 2000 to December
Capital generated by these actions has been reallocated to the
higher growth businesses.
The Company's business model is well positioned to benefit from a
of long-term secular trends. These include the growth of worldwide
assets, globalization of investment activity, structural market
increased outsourcing. These trends benefit the Company by driving
levels of financial asset trading volume and other transactional
well as higher asset price levels and growth in client assets, all
which the Company prices its services. In addition, international
offer excellent growth opportunities.
Pershing is committed to supporting the success of our
clients. We provide you and your investors with a strong foundation
for growth, and deliver industry-leading technology and innovative
solutions to help you grow your business without limits.
Pershing is the industry's largest global business solutions
provider, with more clients who clear with us than with any other
firm1. We offer unequaled experience built over seven decades of
serving financial organizations of every size and business model.
You can gain confidence from our financial position. Pershing has
over $1 trillion* in global client assets. Our parent company, BNY
Mellon has $27.6 trillion* in assets under custody and/or
Pershing's market leadership enables us to make an exceptional
investment in your success. We offer state-of-the-art technology, a
highly reliable and scalable infrastructure, and a host of
innovative products and services to help you expand your offering.
We exclusively serve financial organizations, money managers, and
registered investment advisors, with no retail lines of business to
distract us, and no proprietary trading for our own book of
business. Our success completely depends on yours.
Our story begins and ends with our people. Pershing invests in a
high-touch, dedicated service model, and takes a consultative
approach to helping you succeed. Our long associate tenures let you
build lasting relationships with experienced professionals who know
Caring is the foundation of our commitment to serve our clients
worldwide, and each other. Our Client Care Standards help each of us
fulfill a personal responsibility to deliver service excellence.
1.We strive to anticipate our clients' needs and provide
personalized, reliable service.
2.We take pride in our work and seek to continually enhance our
3.We always aim to treat our clients with dignity and respect and
look to demonstrate a high regard for their diverse points of view.
4.We continuously aspire to take ownership for client satisfaction.
5.We work as a team and with a collaborative spirit across the firm
to deliver service excellence in all that we do.
We are the industry's largest global outsourcing provider, serving
more than 300 international financial organizations and doing
business in more than 60 markets. Turn to us for a one-stop,
full-service global solution with integrated, multicurrency clearing
and execution, plus a full range of global resources.
1 Source: Investment News datebook, 2013
* As of December 31, 2013.
Surprise: Citigroup replaces Smith Barney with Pershing, not
Posted by RJ & Makay on December 16, 2010
citigroup, custody-agent, deborah-mcwhinney, fidelity, mark-tibergien,
pershing, ria, weatlh-management
Surprise: Citigroup replaces Smith Barney with Pershing, not
Citigroup surprised the financial world recently when it announced
Jersey City, N.J.-based Pershing, LLC would be its clearing/custody
agent as well as the backbone of its RIA business. Fidelity, which
is located in Boston, had originally been named as the front-runner
for the job.
As part of the deal, Pershing's RIA custody arm, Pershing Advisor
Solutions, will support a Citigroup referral network that advisors
have long been anticipating. Deborah McWhinney, Citigroup’s
president of personal banking and wealth management, said the
Citigroup plans to refer high-net-worth customers on the banking
side to RIAs that Citi Personal Banking and Wealth Management
chooses. Because Pershing is managing the referral network, it may
be better able to get its advisors named as recipients of those
The goal, said McWhinney, is to revive Citigroup's ability to serve
affluent clients, which suffered greatly after the Smith
Barney/Morgan Stanley merger in 2009. Because of the merger,
Citigroup lost its large sales force and was no longer in a position
to handle the avalanche of leads its $30 billion in assets under
management could potentially generate.
Indeed, Citigroup had only about 600 advisors after the merger and,
in June, the company said the number would drop even lower -- to
around 450 -- after attrition and layoffs of low producers and new
hires. The attrition was due in part to the imposition of fee-based
compensation in place of transactional-based pay. According to
anonymous sources, Citigroup said it would charge a flat annual 20%
of an RIA’s fee on the referred assets.
Although the Citigroup-Pershing deal was a surprise, both companies
could benefit greatly from it. As an exclusive arrangement, the deal
may be particularly helpful in expanding Citi's already large asset
base and boosting its brand. Pershing could win big because the deal
improves its ability to attract RIAs who want referrals to the
Notably, McWhinney is a close friend of Mark Tibergien, CEO of
Pershing Advisor Solutions, so it’s not surprising that she would be
comfortable choosing Pershing. The two executives knew each other
when McWhinney was head of Schwab’s RIA custody business until 2007
and Tibergien headed the practice management consulting business at
Citigroup has not yet specified how many RIAs would be joining its
referral network, but said it was in “advanced discussions” with top
RIA firms around the United States. It did reveal that New York and
San Francisco would likely be the initial two test markets for the
Critics of the Citigroup-Pershing deal have said McWhinney is trying
to pull off a referral scheme that has often been attempted with
only limited success. Schwab, TD Ameritrade, and Fidelity, for
example, have all tried something similar and found it very
Pershing wins Citigroup account and will support its RIA referral
network ( http://www.riabiz.com/a/4911038
RJ & Makay
Was Billionaire Ackman Right To Sell Citigroup, Buy Procter &
Oct. 4, 2012 10:13 AM ET | About: C, Includes: BAC, JNJ, JPM, PG
By Matt Doiron
In July, billionaire Bill Ackman wrote to investors in Pershing
Square Capital Management that it had sold all of its shares of
Citigroup Inc. (C) and used the capital to take a position in The
Procter & Gamble Company (PG). Pershing Square had begun carrying
out this plan during the second quarter of 2012 - at the end of June
it only owned 1.1 million shares of Citigroup, down from 26 million
at the beginning of April, and has initiated a position of 22
million shares in Procter & Gamble.
At the time, we didn't think that this was a good substitution,
concluding that Ackman was likely expecting a global recession (in
which case a consumer staples business would be an obvious pick over
a financial stock) but that even low to moderate growth would lead
to a rebound at Citigroup. Since the news of Ackman's sale of
Citigroup Inc. broke on July 12, the stock is up 33%; since the end
of June, it is up 23%; since the middle of the second quarter, it is
up 21%. The Procter & Gamble Company? Up 8% since July 12, 13% since
the end of June, and up 8% since the middle of the second quarter.
Even if P&G is credited for its larger dividend yield (3.2% on an
annual basis) its returns have fallen well short of Citi's. True,
Pershing Square has taken less risk in the process - Ackman
specifically referred to problems in the financial sector, which
emphasized that one bad event could cause large declines in Citi's
stock price, and actually still thought the bank was cheap - but at
this point the trade looks like a loss.
Even after the gains in its share price, Citigroup Inc. still trades
at only half the book value of its equity. It probably does warrant
a discount to book value, but joins its peer Bank of America Corp (BAC)
as likely still being priced too low in terms of book value (Bank of
America trades at about 40% of book value). In terms of forward
earnings Citigroup is clearly cheaper than its peers, with its P/E
multiple of 7 comparing favorably with Bank of America's 10 and
JPMorgan Chase & Co.'s (JPM) 8. JPMorgan Chase also trades much
closer to the book value of its equity, at a P/B of 0.8. Admittedly
Citigroup is losing revenue and earnings, with both down in its most
recent quarter compared with a year ago, and JPMorgan Chase is in
the same boat as well. Still, we actually like all three of these
banks at their current prices, as they are considerably cheaper than
others in the industry. Andreas Halvorsen's Viking Global increased
its stake in Citigroup during the second quarter to a total of 8.4
Procter & Gamble's revenue was about flat last quarter compared with
the same period in the previous year, but earnings surged 45%. The
company now trades at 19 times trailing earnings; even with the
dividend yield, and taking into account that the stock's beta of 0.3
limits an investor's downside, this suggests that the market is
pricing in high growth in the future. The forward P/E is 16, which
would represent something pretty close to what we think would be
fair value if the company can hit that target. Warren Buffett's
Berkshire Hathaway (BRK.A) was a major shareholder at Procter &
Gamble at the end of June, though the holding company did sell
shares during the second quarter. The Procter & Gamble Company is
best compared with Johnson & Johnson (JNJ), which saw a large
decline in its earnings in the second quarter versus Q2 2011and now
trades at 22 times trailing earnings. The sell-side expects a return
to normalcy, and the forward P/E of 13 beats Procter & Gamble's
(again, assuming the company can meet expectations). The 3.5%
dividend yield is also about in line with its peer. Even after the
recent rise in financial stocks, we would prefer any of the three
banks - including Citigroup - to either of these companies.
Source: Was Billionaire Ackman Right To Sell Citigroup, Buy Procter
Pershing wins Citigroup account and will support its RIA referral
The win is 'huge' and affirming of NetX360 because the account is
big, branded and exclusive, analysts say
Thursday 12.16.10 by Brooke Southall
NetX360 | Pershing | Smith Barney | Citigroup | McWhinney |
Palaveev | Tim Welsh
In a surprise move, Citigroup has chosen Pershing LLC as its
clearing agent and the backbone of its RIA business.
The New York-based money center bank will use the Jersey City,
N.J.-based clearing and custody company to replace Smith Barney in
2011 after its merger with Morgan Stanley. Fidelity had originally
been named as the front-runner for the deal that appears to involve
tens of billions in assets now and potentially much more in the
future. Boston-based Fidelity declined comment.
Pershing Advisor Solutions, the RIA custody arm of the clearing
firm, will support a referral network that’s been much anticipated
in the advisory community. The plan was first laid out in October
2009 by Deborah McWhinney, Citi’s president of personal banking and
She said Citi plans to refer high net worth customers on the banking
side to RIAs that Citi Personal Banking and Wealth Management
chooses. (McWhinney, 55, has moved to another position within
CitiGroup since then and no replacement has been named.)
Because Pershing is managing the referral network, it may have a leg
up in getting its advisors named as recipients of the mega-bank’s
leads, according to an analyst.
McWhinney’s move is designed to ramp up the capacity of her company
to serve affluent clients. Smith Barney’s merger meant that Citi
lost its big sales force. In October of 2009, when McWhinney
disclosed the plan, Citi had only 600 branch brokers and $30 billion
of assets under advisement which is not nearly enough manpower or
expertise to handle the volume — and in some cases sophisticated
needs — of a potential avalanche of leads. See:Citigroup puts RIAs
at the center of its strategy to retain banking clients
In June, the company said that after attrition, layoffs of low
producers and new hires, Citi would have even fewer advisors: 450,
according to an article by Jed Horowitz in InvestmentNews. The
attrition related in part to the imposition of fee-based
compensation in place of transactional-based pay. Citi said it would
charge a flat annual 20% of an RIA’s fee on the referred assets,
according to the InvestmentNews article. This information was from
an anonymous source in the article. See: Citi advisors seek
potential suitors after McWhinney’s tectonic pay shift
Citigroup had not responded to email and phone requests for an
interview by the time of publication (though if we hear today, we’ll
add the company’s thoughts). Pershing Advisor Solutions, which has
about $80 billion of assets in custody, also declined requests for
an interview. But Pershing’s spokeswoman Barbara Gallo issued a
statement to RIABiz confirming the deal and what her company’s role
will be in it.
“Pershing is delighted to have the opportunity to expand its
relationship with Citi…by supporting its global Private Bank and
Wealth Management businesses as they transition from self clearing
to a fully disclosed relationship with Pershing,” she says.
“Pershing will be supporting aspects of Citi’s global brokerage,
advisory and corporate RIA services. Pershing Advisor Solutions will
support the referral network planned for its RIAs.
“We look forward to delivering our comprehensive breadth of
investment product choices, services and technology solutions to
help their private bankers continue to serve their diverse client
base well and grow their businesses.”
The deal is a watershed for Pershing and Citi, according to two
“Because it’s an exclusive arrangement, it’s a big brand and a big
asset base at Citi, it’s a huge win for Pershing,” says Timothy
Welsh, president of Nexus Strategy of Larkspur, Calif.
The deal is a major affirmation of all the work that Pershing has
done to create a multi-faceted platform (encompassing NetX360) for
fee and transactional business, according to Philip Palaveev,
president of Fusion Advisor Network. Looking ahead, it’s potentially
even bigger because it adds a new dimension to Pershing as it seeks
to attract RIAs to its own platform, he added.
“It should generate opportunities for Pershing to attract RIAs who
want to be recipients of referrals. Advisors went to Schwab,
Fidelity and TD Ameritrade for referrals (from their retail
NetX360 is the platform technology that Pershing is using as part of
its efforts to show that it can handle the holistic needs of
broker-dealers who need RIA capabilities. Suresh Kumar, Pershing’s
managing director, chief information officer and a member of the
executive committee heads the effort. See:Pershing believes its case
for NetX360 as the Apple equivalent for advisors is solid
In an earlier interview, McWhinney had named Fidelity as having the
inside track on winning the Citi clearing and custody account
because it could couple its offering with National Financial
Services. At the time, Charles Goldman, who worked under McWhinney
at Schwab, was head of the custody unit at Fidelity. He left there
McWhinney and Tibergien ties
McWhinney is also very close personally with Mark Tibergien, CEO of
Pershing Advisor Solutions, so it’s not surprising that Pershing
would also be a comfortable choice for her, Welsh said. The two
executives knew each other when McWhinney was head of Schwab’s RIA
custody business until 2007 and Tibergien headed Moss Adams’
practice management consulting business. See: Mark Tibergien is
making Pershing an industrial strength custodian with an RIA service
Citi is building the referral bridge to RIAs because its trust
department and a private banking unit is geared to the
ultra-affluent — not the merely high net worth investor, according
to what Alex Samuelson, spokesman for Citi, said in an interview
At the time McWhinney declined to specify how many RIAs would join
in the referral program but Citi said that the company was in
“advanced discussions” with top RIA firms around the United States.
The two test markets for these referrals are likely to be New York
and San Francisco, according to McWhinney
“We’ll see how many we need,” she said.
Still Palaveev cautions that McWhinney is trying to pull off a
referral scheme that has been oft attempted and met with limited
“It’s going to be challenging as Schwab, TD and Fidelity have shown
but they have an ambitious business plan and we can all keep our
fingers crossed,” he said.
BNY Mellon has a History with Russia
October 7th, 2011
from-russia-with-love Econintersect: Yesterday GEI News reported on
the suits by New York City, New York State, the U.S. Attorney’s
office in New York and several other states to recover damages from
Bank of New York Mellon for currency trading fraud alleged over a
ten-year period. Reader RH has brought to our attention another
interesting case brought against BNY Mellon four years ago by the
Russian government, who accused the bank on money laundering.
According to Global Research (May 18, 2007):
The Federal Customs Service filed a lawsuit in Moscow on Thursday
seeking $22.5 billion in damages from the Bank of New York for
suspected money laundering, the service and its lawyer said.
The lawsuit could be linked to the money laundering charges brought
against former Yukos chief Mikhail Khodorkovsky and his business
partner Platon Lebedev earlier this year, a member of their defense
The bank, the world's second-largest custodian of investor assets,
dismissed the claims as being "totally without merit" and promised
to mount a vigorous defense.
Customs service lawyer Maxim Smal accused the bank of involvement in
"an illegal scheme" that helped Russian businesses bring money into
Russia without paying taxes from 1996 to 1999, Interfax reported. He
filed the lawsuit with the Moscow Arbitration Court.
The customs service confirmed the filing of a lawsuit against the
Bank of New York in a statement later in the day, and said it would
reveal more details at a news conference Friday.
The lawsuit stems from a confession by former BNY vice president
Lucy Edwards in 2000, which followed a lengthy U.S. investigation
into suspicious transactions at the bank, Smal said.
Several accounts that existed at the bank in the 1990s, Edwards
said, were part of an illegal network that allowed Russian
businesses to defraud their government of customs duties and tax
revenues by transferring funds in and out of Russia in violation of
Twenty-eight months later, the New York Times reported on September
16, 2009 that the BNY Mellon and the Russian government agreed to
settle the case for the payment of Russia’s legal fees plus an
additional $14 million. The Times indicated that this was far less
than the $1 billion settlement that the Russian government had
That is quite a comedown from the initial complaint for $22.5
billion in 2007.
The NYT gives some additional background. It seems that the Russian
complaint was filed some two years after the U.S. government settled
a different money laundering suit against the bank:
The[Russian] case spun out of the bank’s huge money laundering
scandal of the late 1990s. A group of trial lawyers in Miami took
the case on a contingency fee for the Russian government after the
Bank of New York reached a $14 million settlement with the American
government in 2005.
The bank conceded a rogue employee had laundered $7.5 billion from
Russia through the bank in the 1990s, but said it had admitted no
It is curious that the going “kickback” from BNY Mellon for
multibillion dollar money laundering schemes seems to be $14
Another excerpt from the NYT discloses an additional curiosity:
Separately, the Bank of New York agreed to offer a line of credit to
Russian state banks to finance import and export business, the
finance minister, Aleksei L. Kudrin, said in testimony to
Parliament. The $400 million loan on favorable terms, though, would
be an “act of good will” not formally linked to the settlement, he
said. “It has nothing to do with costs of the court case, and is not
an admission of guilt.”
Source: Global Research.ca and The New York Times
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