This Week in ESG and Impact Investing

Author William Michael Cunningham will discuss his new book at the HUB on February 14th from 5-7pm. About the Book: On April 5, 2012, President Barack Obama signed the Jumpstart Our Business Startups Act, better known as the JOBS Act. The act is designed to “reopen American capital markets to small companies,” defined in the act as Emerging Growth Companies. This is one of the most significant legislative initiatives in finance since the Securities and Exchange Acts of 1933 and 1934, and it opens up fund ing to a slew of companies previously shut out of the capital markets. How can you get in on the new funding opportunities? That’s what The JOBS Act: Crowdfunding for Small Businesses and Startups is all about. Investment expert William Michael Cunningham shows how the new law will enable you to use the internet to raise significant amounts of capital funding for your startup. RSVP: http://tweetvite.com/event/JOBSAct

The Black Male Achievement (BMA) Fellowship is a new fellowship program established by Open Society Foundations and Echoing Green dedicated to improve the life outcomes of black men and boys in the U.S. It is the first fellowship program of its kind that targets social entrepreneurs who are starting up new and innovative organizations in the field of black male achievement. The application for the 2013 BMA Fellowship will be available online from December 4th 2012-January 7th 2013. http://www.echoinggreen.org/bma-fellowship#Assessment

(Photo from: The JOBS Act: Crowdfunding Guide to Small Businesses and Startups by William ... https://www.amazon.com/dp/B01MT104U1/ ) Since President Obama signed the Jumpstart Our Business Startups Act last spring, the most successful crowdfunding campaign — for an e-paper wristwatch called Pebble Watch — raised $10 million. Another campaign — this one for a video game, raised $6.3 million from 90,000 fans online — shows that companies with innovative products and services can raise significant amounts of money online. In about six months, the beleaguered Securities and Exchange Commission will put forward rules that will govern how companies can raise equity capital using crowdfunding. It has been slow going. The SEC, staggered by its role in the financial crisis, is extraordinarily cautious now. The agency remains under the influence of the industry it regulates, which is frightened by crowdfunding. Industry officials have built obstacles in the SEC’s path to creating crowd...

I thought we would post, from 2008 and 2009, some of the first infographics  we created: Global Market Turmoil Graphic and Financial Crisis Calendar Graphic , by Creative Investment Research, Inc., December, 2008 and November, 2009.

A recent announcement by a very large private equity/venture capital firm stated as follows: "In 2006 affiliates of Cerberus Capital Management, L.P. made a financial investment in Freedom Group." Freedom Group manufactures the Bushmaster Rifle. The Bushmaster was used to kill 26 people in Newtown, Ct., including twenty 6 and 7 year old children. As the firms' press statement noted, "established in 1992, Cerberus Capital Management, L.P. is one of the world's leading private investment firms. Cerberus has more than US $20 billion under management invested in four primary strategies: distressed securities & assets; control and non-control private equity; commercial mid-market lending and real estate-related investments." In seeking social credit for moving quickly to sell its investment in Freedom (Firearms) Group, Cerberus makes a number of spurious and disingenuous claims. Among these are the following: "As a Firm, we are investors, not s...

According to recent news reports , "Despite Hurricane Sandy and the nationwide shutdown of Hostess Brands Inc., with many of the Twinkie company's 18,500 workers laid off, the nation's payrolls expanded by 146,000 jobs while the unemployment rate dropped to 7.7 percent, the U.S. Labor Department reported." These numbers are in line with our October 31, 2012 forecast. As we said then "The consensus forecast is for a 7.8% to 8.0% unemployment rate. Our Fully Adjusted Return (TM) Model, combining social and financial data, predicts a 7.7% (unemployment) rate." Unemployment was 7.9% for October. On November 2, 2012 , we noted that "As is often the case, the Fully Adjusted Return (TM) methodology is early. ( On December 22, 2003 and February 6, 2006, we warned the S.E.C. and other regulators that statistical models created by the firm using the Fully Adjusted Return (TM) Methodology signaled the probability of system-wide economic and market failur...

Gary Brouse, ICCR and Mary Schapiro, SEC. SEC Open Meeting, 2011.  Photo by William Michael Cunningham. We note, with more than a little regret, Mary Schapiro's exit from the Securities and Exchange Commission. How her departure will impact the Dodd/Frank Section 342 initiative and Crowdfunding is unclear. She was in a tough and thankless job. In her favor, she did save the Agency. The question is, save it for what? Will it take the more aggressive stance required to repair the financial system? It seemed to be moving in that direction . My concerns with the Agency are well known , but Ms. Schapiro was cordial and professional every time I met her. I thank her for her service and wish her well.

According to the SEC, "In coordination with the federal-state Residential Mortgage-Backed Securities Working Group, the Securities and Exchange Commission today charged J.P. Morgan Securities LLC and Credit Suisse Securities (USA) with misleading investors in offerings of residential mortgage-backed securities (RMBS). The firms agreed to settlements in which they will pay more than $400 million combined.." What's interesting is that this represents a marked increase in the amount of money firms are required to pay, given the size of the estimated damages. According to the SEC, "J.P. Morgan received fees of more than $2.7 million, and investors sustained losses of at least $37 million on undisclosed delinquent loans. J.P. Morgan also is charged for Bear Stearns' failure to disclose its practice of obtaining and keeping cash settlements from mortgage loan originators on problem loans that Bear Stearns had sold into RMBS trusts. The proceeds from this bulk settle...

According to the Washington Post, "Businesses picked up their pace of hiring in October and the unemployment rate rose as more people started looking for work, according to new government data that offer a glimmer of optimism for the long-ailing job market on the eve of the presidential election. Employers reported adding 171,000 jobs in October, beating both analysts’ expectations (125,000 jobs added) and September’s job creation (a revised 148,000). The unemployment rate rose to 7.9 percent, up from 7.8 percent, but the reason behind the uptick also points to an improved job market. Some 578,000 more Americans counted themselves as part of the labor force, and only 410,000 more people reported having a job. In one particularly welcome sign, the proportion of the population reporting that they had a job rose one-tenth of a percent to 58.8 percent." We forecast a 7.7% rate . We'll stand by our number. As is often the case, the Fully Adjusted Return (TM) methodology...

The U . S . Employment Situation report will be released on Friday at 8:30 am. According to the Department of Labor, "Based on the Household Survey, the unemployment rate measures the number of unemployed as a percentage of the labor force." The consensus forecast is for a 7.8% to 8.0% unemployment rate. Our Fully Adjusted Return (TM) Model, combining social and financial data, predicts a 7.7% rate. As noted in the Washington Post, "Hurricane Sandy could complicate Friday’s release of the October U.S.  jobs  report, the final snapshot of employment before the presidential election. Labor Department officials are still hopeful that they can release the report as scheduled at 8:30 a.m. Friday. But they acknowledged Monday that the storm could cause a delay." While the storm may impact the report release date, it will have no impact on the report itself. The storm will influence the November jobs figures, to be released on December 7th. Recent Forecast Track Recor...

According to the Washington Post, "forecasters estimate that the U.S. economy grew at a 1.9 percent annual rate during the third quarter, from July through September..GDP is the broadest measure of the nation’s economic activity, aiming to capture the value of goods and services produced in the United States during a given time period." GDP will be released on Friday at 8:30am. Our Fully Adjusted Return (TM) models predict GDP will be 2.1%. Consumer spending will drive most of the growth. Housing has recovered, adding additional strength to the economy. Government spending and business investment will lag, but will be higher than expected. 

Submitting a brief to the Supreme Court There is a case before the Supreme Court that will allow every person responsible for the recent financial crisis to escape punishment. The case is  Gabelli v. Securities and Exchange  Commission  and   "a decision is expected in the court's upcoming term, which ends in June." I have decided to file a research paper (called an Amicus Brief) with the Supreme Court explaining why letting these guys go might be a bad idea for the rest of us, but I need your help. http://www.indiegogo.com/ supremecourt

On July 25, 2012, Sandford I Weill, former Chairman of Citigroup, said it’s time to break up the largest banks to avoid more bailouts.  Mr. Weill, you'll recall, spearheaded the Citibank/Travelers, sparking the creation of super large financial institutions and creating the "too big to fail" dilemma. Mr. Weill accomplished this by getting policymakers to first ignore and then repeal the Glass-Steagall Act, a Depression era law designed to separate commercial from investment banks. In an interview on CNBC, Mr. Weill stated that “ 'What we should probably do is go and split up investment banking from banking'..Have banks do something that’s not going to risk the taxpayer dollars, that’s not going to be too big to fail.' ” No kidding. Thank you, Mr. Weill. I suppose 5,151 days late is better than never at all. An article about this matter on Bloomberg.com quoted  Thomas Hoenig , a Federal Deposit Insurance Corp. board member and former head of the Kans...

This webinar will provide a social investing summary of the law,  along with a summary of how investors and businesses can use the law to enter the Crowdfunding market.  We will also review current developments. All paying attendees will get a copy of my book:  The JOBS Act: Crowdfunding for Small Businesses and Startups  [Paperback - Published 9/26/12]  The law targets emerging growth companies and defines them as an  issuer with “total annual gross revenues of less than $1,000,000,000  (one billion dollars)..during its most recently completed fiscal year.”  For potential investors, providing a platform for the sale of emerging company securities does not require registration as a Broker/Dealer, given certain exemption qualifications.  To become a funding platform, vendors must  fulfill 12 requirements.  Equity issuers are subject to certain restrictions/limits.  There are four trading restrictions and three exe...

SRI News   IRF Conference identifies responsible investing as key issue for retirement funds ITInews Responsible Investing (RI) has been identified by government as key focus on the horizon for the retirement fund industry and may even become regulated in the near future. ... "Communication in this regard needs to include how the investment strategy ... See all stories on this topic » ITInews

SRI News   Research and Markets: Sustainable Investing for Institutional Investors . Risk ... The Herald | HeraldOnline.com Sustainable Investing for Institutional Investors: Risk, Regulation and Strategies explores the key issues related to " Socially Responsible Investment " (SRI) for institutional investors and trustees, including investment strategies, risk and returns ... See all stories on this topic »

The above is from the SEC's meeting on Rule 506 of Regulation D. This is an important provision that will allow small firms to raise up to $50 million under the JOBS Act. The result of the meeting is that a draft rule will be posted to the SEC website concerning the mechanics of this provision later today. 

News   Enbridge alienating socially responsible investors Globe and Mail The U.S. declaration that Enbridge Inc. ran a river spill cleanup like "Keystone Kops" has cost it a small investor , and a measure of credibility, after Vancity Investment Management said the pipeline company no longer meets its criteria for socially ... See all stories on this topic » Will Social Impact Investing Finally Pay Dividends? Pro Bono Australia There is now a shift from ethical and socially responsible investing – based on screening out investments associated with social and environmental damage – to social impact investing where commercial returns are blended with the creation of social and ... See all stories on this topic » Pro Bono Australia

SRI News   Hedge fund firms accepting screens to get faith-based business Pensions & Investments Hedge fund managers hungry for institutional assets are increasingly willing to incorporate exclusionary screens into their investment approaches to keep portfolios in line with the socially responsible investment values of church-affiliated investors. See all stories on this topic » Pensions & Investments

Mary Schapiro, Chair, SEC and Darryl Issa (R-CA) Chairman, Committee on Oversight and Government Reform, at JOBS Act Hearing, June 26, 2012. Photo by William Michael Cunningham As C-SPAN noted, "The JOBS Act ( Jumpstart Our Business Startups Act), designed to help small companies raise investment capital, was signed into law by President Obama on April 5, 2012.  On June 26th, the TARP Subcommittee of  the House Oversight held a hearing on the Security and Exchange Commission's (SEC) efforts to implement the Act. The SEC had 270 days from the signing of the Act to set forth rules. Rep. Patrick McHenry (R-NC) chaired the hearing. The JOBS Act relaxes some of the regulations put in place by the Sarbanes-Oxley Act and establishes the creation of Internet funding portals to facilitate 'crowd funding,' the collective pooling of money to support business projects. Critics worry that the JOBS Act's relaxed regulations will encourage fraud."  We at...

U.S. Treasury Secretary Timothy Geithner testified before the House Financial Services Committee this morning. Most of the questioning concerned the growing LIBOR scandal.  Representative Mel Watt noted the declining number of African American car dealers and asked if there was anything Treasury could do, given its large holding of GM stock, to reverse this situation. Rather than giving a solution, the Secretary promised to get back to him.  We suggested a solution as far back as 2008: there is nothing to stop Treasury from filing a shareholder resolution with GM on the matter.  On LIBOR, Representative Scott Garrett (R-NJ) noted that " Geithner had four years, and meeting after meeting, to bring the LIBOR issue to Congress' attention and it just wasn't done. " Mr. Geithner appeared unflapped . He has, after all, done this before. He noted, in prepared remarks, that “The American financial system has regained its footing since the crisis of a few y...

Chairman of the Fed Benjamin Bernanke testified before the House Financial Services Committee today. In his prepared remarks he hewed closely to his July 17th testimony before the Senate Banking Committee. A surprising number of questions focused on the LIBOR scandal. One question in particular seemed to go to the heart of the matter. A Committee member read a transcript of a conversation between a Barclay's trader and a staff member at the Federal Reserve Bank of NY. The transcript seemed to show the trader acknowledging his complicity in the commission of fraud. The Congressman then read the definition of fraud to the Chairman. This matched what the transcript revealed. The Committee member then asked the Chairman if he thought this combination was enough to justify a charge of fraud against Barclays. The Chairman was, predictably, reluctant to agree. Fiscal cliffs, twists and sequesters are irrelevant in the face of this type of  clearly defined uneth...

As we have noted for some time, " For blacks, the picture since the recession has been particularly grim. They disproportionately held subprime mortgages during the housing boom and are facing foreclosure in outsize numbers. That is raising fears among consumer advocates, academics and federal regulators that the credit scores of black Americans have been systematically damaged, haunting their financial futures." The Washington Post has a good article describing the problem. And keep in mind that banks like " Wells Fargo targeted black communities for shoddy loans. " Which means this did not have to happen. Free market, indeed...

(Photo from: The JOBS Act: Crowdfunding Guide to Small Businesses and Startups.  https://www.amazon.com/dp/B01MT104U1/ ) In April, President Obama signed the Jumpstart Our Business Startups Act. A provision in the law establishing crowdfunding as a mechanism to spur start-ups has the potential to significantly help minority firms. Large financial institutions, which are supposed to take small deposits from a large number of savers and use those funds to make fair and honest loans to individuals and small businesses, sometimes are not doing so. One only need look at Wells Fargo to see that credit decisions by large financial institutions are not always made in a racially or gender neutral manner. In 2011, a jury in Los Angeles found, according to the court document, that “the bank consistently and knowingly discriminated against borrowers in minority neighborhoods, resulting in these borrowers paying more for their loans than borrowers in nonminority areas.” Small-bus...

This week, a number of organizations submitted "Friend of the Court" briefs in SEC v. Citigroup Global Markets. (United States Securities & Exchange Commission v. Citigroup Global Markets Inc. - UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT, docket number 11-5227- cv .) The case is now in an Appeals Court after a lower Court Judge threw out a settlement reached between the SEC and Citi. The National Association of Shareholder and Consumer Attorneys (NASCAT), the Securities Industry and Financial Markets Association (SIFMA), the Business Roundtable, Occupy Wall Street and the US Chamber of Commerce have all either filed or are seeking permission to file briefs in this case. Of course, industry groups, like SIFMA, believe that, if the lower Court ruling is upheld, the wheels will come off the economy. It will be the official End of the World. (We note that one of the attorneys for SIFMA, Annette L. Nazareth of DAVIS POLK & WARDWELL LLP, spent a...

Selected highlights from the Appeals Court Brief filed yesterday by the SEC: "As one example, the same district judge who rejected the consent  judgment here approved a consent judgment in which Worldcom agreed to  injunctive relief—and later, a $750 million penalty, one of the  largest ever obtained  by the Commission—without admitting or denying the fraud allegations in the  complaint." Irrelevant, since they refer to a different time and industry. More  importantly, a $750 million dollar fine in 2002 translates into a $962  million dollar fine in 2012. Or a $285 million dollar fine is only  $223 million in 2002 dollars. The SEC notes that "BP resolved charges that it violated the Clean Air Act in connection  with the Texas City refinery explosion, which killed 15 people and  injured 170, by entering into a consent judgment that ordered it to  undertake an array of remedial measures and pay one of the largest  civil...

Review of Office of Minority and Women Inclusion (OMWI) Performance: Opportunities for Minority and Women firms, Implications for Policymakers Friday, June 8, 2012 from 1:30 PM to 2:30 PM (ET). $100.00. Register by clicking on the link above.  

A recent article  on United Bank in Philadelphia appeared in the Philadelphia Inquirer today. While the article accurately quotes some of our research, it carefully ignored other points. Here is what we submitted to the paper: Consider something as small as the House dress code being applied differently  to the Chairman of the Congressional Black Caucus. And  there is the more important fact that "redistricting could mean the  CBC’s four most senior – and oldest – members will soon be gone." This  is an unprecedented level of anti black hostility and threatens to  turn the Congressional  racial clock back to pre-reconstruction days.  And finally, five of the eight cases before the House House Ethics  Committee involve blacks. While I might not agree with their alleged  behavior, I know that Black congressmen are not committing 62% of the  ethical violations on Capitol Hill. That much is certain. I believe  many of these inve...