March 25, 2010

The Ontario Securities Commission has released the new edition of Perspectives, which provides information on regulatory initiatives.

We have a new poster-boy for the banks’ pursuit of mediocrity, rivalling Canada’s David Berry. Ladies & Gentlemen, let’s hear it for Raphael Geys!

Raphael Geys, former managing director of European fixed income sales for French bank Societe Generale, claims he was summarily dismissed without cause in November 2007.

He said that during his three years at the bank he was responsible for more than doubling the gross revenue of his division, from 205 million euros to 440 million euros.

Deputy Judge George Leggatt QC was told at a hearing earlier this month: “He was dismissed for being too successful in that role because the provisions in his contract were considered by the bank to be too generous.”

It was claimed that the bank’s termination of the contract “raised issues about the claimant’s entitlement to termination and other payments due under the contract. Very substantial sums are at stake”.

These have been reported as being 12.5 million euros (£11.3 million).

The bank claims he is not entitled to any “termination payment” under the contract because he has taken legal action.

And now, he’s passed the first milestone:

Societe Generale SA, France’s second-largest bank, lost a U.K. court decision over whether an 8 million-euro ($10.6 million) severance package it offered a former employee was less than what he was owed.

Raphael Geys, a former managing director of European fixed income sales at Societe Generale, sued and claimed at a trial that began last week in a London court that under his contract’s terms he was owed more severance than the bank offered.

If a severance value can’t be negotiated, a trial will be held to determine the amount, Judge George Leggatt said in the ruling today. Geys, who was fired in November 2007, said he was entitled to more than 12.5 million euros under his contract. Societe Generale argued it no longer owes Geys any severance because suing breached his contract.

“I reject the bank’s arguments that the claimant has lost any right to receive a termination payment, or any other payment, as a result of making or pursuing any claims,” Leggatt said.

The bank may have saved itself about 2.5 million euros had it “appropriately” worded a November 2007 letter firing Geys, according to the judge. Leggatt said the company didn’t properly end Geys’s contract until months later, meaning Societe Generale owed him a year-end bonus.

Sarah Butcher of eFinancial News reports It’s not unusual for banks to fire over-performers:

Bizarrely, lawyers say it’s not at all unusual for banks to eject high performers with large pay claims, even if they’re making a profit for the firm.

“You’d think that banks would recognise that it’s sensible to keep these people onboard,” says Charles Ferguson, a solicitor who specialises in the representation of traders. “However, there are some banks where there’s a limit to what they’re willing to pay. If someone takes them above that, they’ll look for an excuse to back out.”

Most banks include clauses in their contracts specifying that you need to be in employment and not under notice at the bonus date in order to be eligible for a payment. As a result, redundancies in the run up to bonuses are abnormally common.

Equally, Ferguson says some contracts specify that profit sharing entitlements will disappear if salespeople or traders are sacked for gross incompetence. He says this is also a favourite reason for dismissal.

Hah! Us proud Canadians can teach them a thing or two about justification for firing, eh?

The Ontario 2010-11 Budget was introduced today. Not a word about dividends – probably a good thing! More worrisomely, they proudly announce that the current deficit will be eliminated in a mere eight years – which stands a good chance of being the next completely unexpected and totally unforecasted recession. In that time, a mere $88.9-billion will be added to the provincial debt … and debt charges will rise from 9.35% of revenue to 11.3%.

In the Canadian preferred share market, volume was heavy AGAIN, Perpetual Discounts were down AGAIN (losing 21bp) and FixedResets were up AGAIN (gaining 5bp). Yields on FixedResets are now at 3.38%.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 2.61 % 2.73 % 59,156 20.84 1 1.8868 % 2,113.4
FixedFloater 4.94 % 3.06 % 50,216 20.10 1 2.2305 % 3,198.4
Floater 1.93 % 1.72 % 44,167 23.26 4 -0.1470 % 2,387.2
OpRet 4.84 % 1.26 % 111,554 0.18 12 -0.0965 % 2,313.1
SplitShare 6.36 % 6.05 % 137,742 0.08 2 0.1538 % 2,144.6
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0965 % 2,115.1
Perpetual-Premium 5.95 % 6.02 % 119,154 13.75 7 -0.0630 % 1,871.5
Perpetual-Discount 5.99 % 6.01 % 180,510 13.90 71 -0.2061 % 1,767.2
FixedReset 5.34 % 3.38 % 348,962 3.67 43 0.0488 % 2,212.1
Performance Highlights
Issue Index Change Notes
W.PR.H Perpetual-Discount -1.88 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-03-25
Maturity Price : 21.89
Evaluated at bid price : 21.89
Bid-YTW : 6.42 %
TD.PR.P Perpetual-Discount -1.70 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-03-25
Maturity Price : 22.47
Evaluated at bid price : 22.61
Bid-YTW : 5.90 %
IGM.PR.B Perpetual-Premium -1.44 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-03-25
Maturity Price : 24.49
Evaluated at bid price : 24.70
Bid-YTW : 6.13 %
TD.PR.R Perpetual-Discount -1.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-03-25
Maturity Price : 23.90
Evaluated at bid price : 24.11
Bid-YTW : 5.90 %
CM.PR.K FixedReset -1.23 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-08-30
Maturity Price : 25.00
Evaluated at bid price : 26.51
Bid-YTW : 3.76 %
IAG.PR.E Perpetual-Premium 1.23 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-03-25
Maturity Price : 24.40
Evaluated at bid price : 24.61
Bid-YTW : 6.12 %
BAM.PR.E Ratchet 1.89 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-03-25
Maturity Price : 22.64
Evaluated at bid price : 21.60
Bid-YTW : 2.73 %
BAM.PR.G FixedFloater 2.23 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-03-25
Maturity Price : 25.00
Evaluated at bid price : 22.00
Bid-YTW : 3.06 %
Volume Highlights
Issue Index Shares
Traded
Notes
MFC.PR.C Perpetual-Discount 191,429 Nesbitt crossed blocks of 100,000 and 73,300 at 18.58.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-03-25
Maturity Price : 18.50
Evaluated at bid price : 18.50
Bid-YTW : 6.13 %
BNS.PR.T FixedReset 132,410 CIBC bought 10,000 from National at 28.28; RBC crossed 50,000 at 28.31. CIBC bought another 13,600 from National at 28.32; anonymous bought 10,000 from TD at 28.39.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-05-25
Maturity Price : 25.00
Evaluated at bid price : 28.36
Bid-YTW : 3.09 %
BNS.PR.X FixedReset 116,804 CIBC bought 48,200 from National at 28.35, then another 10,000 from anonymous at the same price. Desjardins sold 20,000 to anonymous at 28.35; CIBC bought another 20,000 from National at 28.35 again.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-05-25
Maturity Price : 25.00
Evaluated at bid price : 28.40
Bid-YTW : 3.07 %
TD.PR.K FixedReset 112,270 CIBC bought 43,500 from National at 28.35. TD sold 23,300 to RBC at 28.35, then crossed 25,000 at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-08-30
Maturity Price : 25.00
Evaluated at bid price : 28.35
Bid-YTW : 3.26 %
RY.PR.P FixedReset 92,243 National crossed 50,000 at 28.09, then bought 17,000 from TD at 28.20.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-26
Maturity Price : 25.00
Evaluated at bid price : 28.16
Bid-YTW : 3.06 %
SLF.PR.A Perpetual-Discount 86,888 RBC bought 18,700 from Dundee at 19.31, then crossed 50,000 at the same price.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-03-25
Maturity Price : 19.24
Evaluated at bid price : 19.24
Bid-YTW : 6.21 %
There were 52 other index-included issues trading in excess of 10,000 shares.

One Response to “March 25, 2010”

  1. […] would be sufficiently unethical that neither party would have anything to do with such a thing (maybe). But a lot can be done with nods and winks … the SEC desperately needs a scalp … and […]

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