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Jun 15, 2016

DealBook Today's Top Headlines - June 15, 2016: MSCI Holds Off Adding China to Emerging Markets Benchmark | The Global Stakes of a Saudi Aramco I.P.O. | Wall St. Scion Had Gambling Addiction, Lawyer Says


Wednesday, June 15, 2016
TODAY'S TOP HEADLINES
By AMIE TSANG
MSCI HOLDS OFF ADDING CHINA TO EMERGING MARKETS BENCHMARK MSCI has decided not to add Chinese stocks to its influential emerging markets index, dealing a blow to despondent local investors and the Chinese government, Neil Gough and Landon Thomas Jr. report in DealBook.


"International institutional investors clearly indicated that they would like to see further improvements in the accessibility of the China A shares market before its inclusion in the MSCI Emerging Markets Index," Remy Briand, the global head of research at MSCI, said in a news release on Tuesday.

China has been pushing to increase its influence in financial markets and its efforts managed to get the renminbi included in the exclusive club of currencies at the International Monetary Fund. China's inclusion in the MSCI index could have paved the way for overseas money to pour into its markets, but it has not convinced MSCI that it is any easier for foreigners to buy and sell stocks.

In fact, the government's grip over the stock market has grown tighter. And its heavy-handed intervention has raised more questions about whether China's markets can pass muster with global investors and regulators. Chinese stocks have been off about 40 percent in the last 12 months, so a boost from extra money flowing in was needed.

"Accounting in China is a state secret," said Hugh Young, who oversees investments in Asia for Aberdeen, one of the world's largest emerging markets investors. "Our money goes into companies, and we have had trouble finding the right ones to invest in."

MSCI said investors were also bothered by the stiff limits imposed on foreign investors withdrawing their funds from China. It said it would reconsider Chinese A shares for inclusion in 2017.
THE GLOBAL STAKES OF A SAUDI ARAMCO I.P.O. The initial public offering of Saudi Arabia's state oil company could value the company at trillions of dollars, but the real eye-opener may be where the Saudi government chooses to list the shares, Steven Davidoff Solomon writes in Deal Professor.

It would be revolutionary to list anywhere except its home country exchange and it matters because this is arguably the I.P.O. of an entire country.

The company generated an estimated $180 billion in profit per year to the state, which represented over 40 percent of its economy before the recent slump in oil prices. About 90 percent of the government's budget comes from oil profits.

If Aramco lists only on the Saudi exchange, it will swamp the current market capitalization of the exchange, which is about $300 billion to $400 billion. This would make foreign shareholders uneasy as it would dominate trading and could set its own rules on disclosure and other regulation.

But there have been indications that the listing will be in New York, Hong Kong and London.

Aramco would be subjecting itself to the full array of United States securities laws, but it would allow American investors in, bringing the company and the country into the full financial sphere.

Subjecting Aramco to United States financial reporting would be a shock to the Saudi system - as if the entire country were to be suddenly regulated by outside capital markets. It would be a difficult task - audited financial statements would have to be prepared, which could take years. Aramco would have to decide which assets to keep and which would remain private. It would also have to adopt a board, possibly with outside members, and trim the company down.

Because of this, an I.P.O. is unlikely to happen soon, Mr. Davidoff Solomon writes. Saudi Arabia is still a closed government and is likely to remain so for some time, but an Aramco I.P.O. could be a victory for New York.
ON THE AGENDA BlackRock's investor day starts at 8 a.m. The Council on Foreign Relations will hold an event focused on Britain's possible exit from the European Union and what it means for Europe from 8:30 a.m. Business Roundtable will publish the results of its latest survey of chief executives at 9 a.m. The latest data on industrial production will be published at 9:15 a.m. The Federal Reserve Open Market Committee will make a statement on its latest monetary policy decision at 2 p.m.
WALL ST. SCION HAD GAMBLING ADDICTION, LAWYER SAYS The lawyer defending the former Wall Street executive Andrew Caspersen has said that his client was the victim of an uncontrollable gambling addiction, Matthew Goldstein and Alexandra Stevenson report in DealBook.

Federal prosecutors have accused Mr. Caspersen of running a Ponzi-like scheme to defraud friends, family and a hedge fund foundation of nearly $40 million. His lawyer contends that his addiction was so severe that he checked his phone throughout the day for updates on the stock market's direction and bets that ran into tens of millions of dollars.

Mr. Caspersen told Judge Jed S. Rakoff of Federal District Court on Tuesday afternoon that he had been treated for "compulsive gambling and mental health illness" issues, and pleaded not guilty to a criminal document that included one count of securities fraud and one count of wire fraud. Negotiations have continued for several weeks, however, and he is expected to plead guilty at a July 7 hearing.

Mr. Caspersen has been portrayed as a man of privilege who took advantage of his social and professional standing to fuel his trading addiction, but Paul Shechtman, his lawyer, said he was "remorseful and relieved."

"He had every intention of paying everyone back," Mr. Shechtman said. "This is a pathological gambling addiction."

Mr. Shechtman said Mr. Capsersen's addiction started with casino gambling and sports betting, which turned into stock market bets while he was studying at Harvard's law school. He said reports characterizing him as a man driven by greed and self-interest were wrong. "This is not about Wall Street greed," he said. "This is about addiction and mental illness."
MERGERS & ACQUISITIONS »
Employees at Advocate Health Care. The F.T.C. had tried to block its proposed merger with NorthShore University HealthSystem. Federal officials said they had not decided whether they would appeal the judge's decision.
Judge Rejects F.T.C. Effort to Block Health System Merger The decision is a significant setback in the agency's attempt to police the industry during a flurry of deals among hospitals and physician groups.
ChemChina Said to Add Time to Its Deal Review China National Chemical Corporation refiled its submission for a review by the Committee on Foreign Investment in the United States of its planned takeover of Syngenta, giving it more time to complete the process, Bloomberg reports, citing people familiar with the matter.
INVESTMENT BANKING »
Maurice Spagnoletti, once a top executive of Doral Bank, was shot to death while driving home on June 15, 2011.
F.B.I. Asks Help in Investigating Banker's Killing in Puerto Rico The agency said it had possible suspects in the death of Maurice Spagnoletti, a top executive at Doral Financial, in June 2011.
Goldman Banker Said to Have Used Prostitutes to Build Links with Libya A Goldman Sachs banker procured the services of two prostitutes to help cement closer ties with officials at the Libyan sovereign wealth fund, a lawyer for the fund contended at a trial in London.
Deutsche Bank's Chief for Asia-Pacific to Leave Gunit Chadha, the chief executive for the Asia-Pacific region, will leave the bank in July, but it was unclear who would succeed him.

For the latest updates, go to NYTimes.com/DealBook
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VENTURE CAPITAL »
Alexander Ljung, chief executive of SoundCloud.
Twitter Invests $70 Million in SoundCloud Music Service The deal will mean money for SoundCloud, which has had losses despite its popularity, and it could clarify how Twitter deals with entertainment.
An Uber chauffeur in Munich. The company sees a potential opportunity to raise perhaps $2 billion through leveraged loans.
Uber Sets Sights on Leveraged Loans for Even More Money The ride-hailing company could issue $2 billion in loans, a fund-raising gambit that would not alter its valuation or dilute investors.
Venture Capitalist Expects Big Exits for Tech Start-Ups With mature tech companies sitting on piles of cash and the valuations of some start-ups beginning to come down, the technology landscape was rich for deal making, the venture capitalist, Marc Andreessen, said.
Crowdfunding Sites Battle with Venture Capital Firms The crowdfunding industry was worth just $880 million six years ago, but the World Bank estimates that it could reach $90 billion a year by 2020.
LEGAL/REGULATORY »
David Connors walked away from the scene of the Sandy Hook Elementary School shooting in Newtown, Conn., in 2012 with his children. Twenty-six people died in the attack, including 20 children.
Surprising Progress in Newtown Families' Suit Against Maker of the AR-15 Rifle A lawsuit brought by relatives of the shooting victims in Connecticut argues that the AR-15 is a weapon of war and should never have been marketed to civilians.
Court Backs Rules Treating Internet as Utility, Not Luxury An appeals court panel affirmed the Federal Communications Commission's rules about net neutrality, clearing the way for stricter oversight of broadband providers.
Senator Elizabeth Warren, one of the authors of the report.
U.S. Chamber Out of Step With Its Board, Report Finds A Senate report says no board members explicitly backed the chamber's campaign against antismoking laws and curbs on global warming.
Donald J. Trump, the presumptive Republican presidential nominee.
Gawker Article on Trump's Hair Draws Lawsuit Threat The lawyer who represented Hulk Hogan in an earlier suit demanded a retraction of an article that mentioned his new client, a hair treatment clinic.
Timothy G. Massad, the chairman of the Commodity Futures Trading Commission.
Regulator's Plan to Rein In Trading Risks Raises Concerns The Commodity Futures Trading Commission wants the power to see the source codes of trading firms without a subpoena, but its request is overreaching, Gina Chon writes in Breakingviews.
Britain's chancellor of the Exchequer, George Osborne, center, with Jamie Dimon, chief executive of JPMorgan Chase, seated behind him, spoke about the referendum in Bournemouth, England, this month.
The Financial Plan for a 'Brexit'? Cross Your Fingers As the odds increase that Britain will leave the European Union, major banks and policy makers are trying to plan for potential market panic.
How China Won the Keys to Disney's Magic Kingdom Plans for the $5.5 billion Shanghai Disney Resort, which opens Thursday, were in limbo until Disney dialed back its demands to the Communist Party.
John A. Koskinen, the commissioner of the Internal Revenue Service, testified on May 25 at a House Ways and Means subcommittee's hearing.
Head of I.R.S., Facing Censure, Relishes a Job Few Could Love John A. Koskinen became the nation's top tax collector in 2013 to steady an agency rattled by political upheaval, but critics say he has obstructed justice and misled Congress.
Hillary and Bill Clinton at the Memorial Day parade last month in Chappaqua, N.Y. Mrs. Clinton's economic strategy reflects her husband's.
For Hillary Clinton, a Risk of Excess Caution in Economic Policy Some of the proposals by the presumptive Democratic presidential nominee could help lift employment, but her focus seems to be anachronistic, Eduardo Porter writes in the Economic Scene.
Sumner Redstone Makes Rare Appearances at CBS, Paramount Sumner Redstone paid a visit to Viacom's Paramount Pictures movie studio in Hollywood, according to a letter made public by Viacom's lead independent director on Tuesday. A person familiar with the matter also told The Wall Street Journal that he had visited the West Coast headquarters of CBS.
Appeals Court Endorses S.E.C. Rules for Small Offerings Qualified investors may buy up to $50 million in securities without first seeing detailed financial data that everyday investors would expect in a public offering.