Finance Brief: Week in Review & What’s Ahead

Week in Review

Executive branch

  • The Treasury Department said in a notice that beginning this year it will not permit investments held in S corporations to be exempt from a requirement that such funds be held for three years before qualifying for the carried interest tax break, which allows taxpayers to take the lower capital gains rate on investment income that is otherwise subject to a higher rate. The move is aimed at preventing investment-fund managers from getting around new limits on the break contained in the tax law that was enacted in December.
  • The Securities and Exchange Commission sent numerous subpoenas, as well as requests for information, to firms involved in the cryptocurrency trade, marking a significant step forward in regulators’ actions against initial coin offerings, according to unnamed people familiar with the matter. The subpoenas include requirements that firms send over data about the structure of ICO sales, the sources said.
  • Companies whose representatives met with Jared Kushner, Trump’s son-in-law and a senior White House adviser, lent millions of dollars to Kushner’s family businesses following the meetings, sources said. A $325 million loan came from Citigroup Inc. in the spring of 2017, not long after Kushner met with Chief Executive Officer Michael L. Corbat to discuss trade and financial issues, according to unnamed people briefed on the meeting.
  • The New York Department of Financial Services asked Deutsche Bank AG, Signature Bank and New York Community Bank to hand over information about their relationships with Kushner, according to unnamed people familiar with the issue. The request, which the sources described as broad, also relates to Kushner’s family and his family’s business, Kushner Cos.

Financial services

  • Wells Fargo & Co. revealed in a regulatory filing that its board has launched a probe into whether the bank’s wealth management unit engaged in inappropriate referral practices, a move that was forced on the bank by the Justice Department following reports of wrongdoing from whistleblowers, according to people familiar with the matter. The San Francisco-based bank said that the review is still in a preliminary phase, and unnamed sources said the law firm Shearman & Sterling LLP is conducting the probe.
  • Deutsche Bank agreed to pay $240 million to settle a private antitrust lawsuit related to its alleged manipulation of the London Inter-bank Offered Rate. The deal makes Deutsche Bank, which denied any wrongdoing, the third lender to settle Libor allegations with “over-the-counter” investors, following Citigroup’s $130 million settlement in July 2017 and Barclays Plc’s $120 million settlement in November 2015.
  • Equifax Inc. disclosed in a regulatory filing that the card-payments industry might end the company’s access to data on customers, or impose fines, if Equifax does not adequately address deficiencies that led to last year’s massive data breach. Equifax said that if access is cut off, its ability to offer consumer products would be curbed.
  • Left-leaning justices on the Supreme Court indicated they are skeptical of an American Express Co. requirement that bars contracted credit card merchants from promoting competing cards with lower fees. The Trump administration and some states governments have argued that the practice violates federal antitrust law.

What’s Ahead

  • Richard Clarida, an economist at Columbia University and a managing director at Pacific Investment Management Co., is set to be President Donald Trump’s nominee for vice chair of the Federal Reserve, according to unnamed sources familiar with the deliberations. In 2011, Clarida was reportedly a final candidate for a seat on the Fed’s seven-member board of governors, but he withdrew his name from consideration.
  • Treasury Secretary Steven Mnuchin and Commodity Futures Trading Commission Chairman Christopher Giancarlo will testify before two separate House Appropriations subcommittees this week regarding their agencies’ budget requests.
  • Financial regulators are looking into changes they might make to the Volcker rule, an element of the 2010 Dodd-Frank Act that limits risky trading at banks that take federally insured deposits, according to unnamed sources. Some of the changes under consideration include clarifying what types of funds banks cannot invest in, as well as permanently exempting foreign funds and putting a lead regulator in charge of enforcement of the Volcker rule.

Events Calendar (All Times Local)

Institute of International Bankers Washington conference 8:45 a.m.
Institute of International Bankers Washington conference 9 a.m.
Senate Finance Committee hearing on e-commerce and counterfeits 10 a.m.
House Appropriations subcommittee hearing with Treasury’s Mnuchin 10 a.m.
House Appropriations subcommittee hearing with DOL’s Acosta 10 a.m.
House Financial Services Committee markup of budget views and estimates 10 a.m.
RegTech Data Summit 9 a.m.
House Appropriations subcommittee hearing with CFTC’s Giancarlo 10 a.m.
House Financial Services subcommittee hearing on state insurance regulation 10 a.m.
Joint Economic Committee hearing with CEA’s Hassett 2 p.m.
House Financial Services subcommittee hearing on data security 2 p.m.
Wilson Center event on TPP 2 p.m.
Managed Funds Association Legal & Compliance Conference 7:50 a.m.
Politico event with Mark Calabria of Vice President Pence’s office 8:30 a.m.
SEC Investor Advisory Committee quarterly meeting 9:30 a.m.
No events scheduled

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