Reuters has published an article by Geraldine Fabrikant, who is identified by Reuters as "a senior writer for Business Day at The New York Times," about the "comeback" of the money manager and investment banker Steven Rattner. The article struck me as interesting for two reasons.
First, it includes the sentence, "Some journalists at both the New York Times and the Financial Times believe that Rattner should not be permitted to write for them after his controversies with the government." So you have a New York Times journalist writing for Reuters about how her New York Times colleagues don't think their own paper should be printing pieces from Mr. Rattner. It seems a somewhat unusual public airing of internal dissent at the Times.
Second, it reports that Mr. Rattner "works actively" managing about $5 billion of Mayor Bloomberg's money with a team of his former colleagues called Willett Advisors. Then the article says, "At the time of the settlement he was not allowed to be paid for his work at Willett Advisors, although that ban has since been lifted."
The ban to which the article refers is apparently what the SEC refers to in a November 18, 2010 press release by saying, "Rattner also consented to the entry of a Commission order that will bar him from associating with any investment adviser or broker-dealer with the right to reapply after two years."
The SEC tells me that the bar is still in place. Perhaps Mr. Rattner's work helping to manage $5 billion of Mr. Bloomberg's money doesn't technically qualify as working as an "investment adviser" or associating with one because Willett Advisors qualifies as a "family office" that, under an SEC rule approved June 22, 2011, grants family offices an exclusion from the Investment Advisers Act of 1940.
I've been one of the very few voices arguing all along that Mr. Rattner has been getting a raw deal from regulators, particularly from then-attorney general Andrew Cuomo. At the time the SEC settlement was announced, however, the fact that Mr. Rattner couldn't be paid for his work at Willett seemed to be a kind of punishment. As the New York Times's Peter Lattman put it in 2010, "The S.E.C.'s two-year ban currently prohibits him from being paid by Willett and participating in some investment activities at the firm."
If, in fact, the June 22, 2011, SEC rule defining a family office exemption under Dodd-Frank had the effect of changing the terms of the November 2010 SEC settlement so that Mr. Rattner could now be paid when he couldn't be paid before, thus turning a two-year ban into a seven-month ban, Steven Rattner may be one of the few people in the financial services industry whose personal finances will be helped by Dodd-Frank rather than hurt by it.
And if, in fact, the SEC was going to bar Mr. Rattner from associating with investment advisers for two years, but it was going to allow him to earn money during that two-year period — potentially a lot of money — managing $5 billion for Michael Bloomberg, you'd think they might have included that in the press release touting the settlement. The significance of it probably depends on the justification for the two-year ban. If the point was to punish Mr. Rattner, then the Bloomberg-family office loophole really undermines the punitive effect of the ban. If the point was to protect unsuspecting members of the investing public from being preyed on by Mr. Rattner, then the loophole is probably less significant, because Mr. Bloomberg is a sophisticated investor who is well aware of Mr. Rattner's history.
Update: Some follow-up questions that might occur to reporters inclined to pursue this story further could include:
When did Mr. Rattner start getting paid for his work at Willett?
How much has he been paid?
Is the SEC aware that he has been getting paid and does it agree with or dispute the idea that this paid work doesn't fall under the bar imposed by the 2010 settlement?