Morning Coffee: CFA Institute whacked up exec pay as exam demand collapsed. Wild frustration of Citi's -$50m trader

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Morning Coffee: CFA Institute whacked up exec pay as exam demand collapsed. Wild frustration of Citi's -$50m trader

Now that crypto is a less desirable exit option post the Coinbase fracas, people who want to leave banking will need another alternative. One of those might be the CFA® Institute: it's finance-aligned, it's unlikely to demand 100-hour weeks, and it pays people who work there very well indeed.

On paper, CFA Institute is a not-for-profit organization on a special mission, and that mission is "leading the investment profession globally by promoting the highest standards of ethics, education and professional excellence for the ultimate benefit of society." Mostly, this means administering the famously difficult CFA exams. However, there are also membership fees to be collected and thought leadership tracts to be written by employees. 

As the Financial Times points out today, this business model seems to be floundering post-COVID. CFA Institute's annual report for 2021 showed the number of people taking its exams was down around 35% last year on the pre-COVID level of 2019, and the FT says it's down again this year: 93,000 people have taken CFA Level I exams this year, compared to 160,000 in the year to August 2019. Margaret Franklin head of CFA Institute, says the Chinese lockdowns are to blame. An unnamed Institute insider is less forgiving: they tell the FT that demand for CFA exams "is falling off a cliff", that the new generation don't want to study for an exam with a low pass rate that no one much cares about, and that CFA Institute hasn't kept up with "current learning practices." 

Irrespective of the cause, with exam fees plummeting, it might be supposed that CFA Institute would cut back on its notoriously generous staff pay, or at least wouldn't increase it at a rate that exceeds even the current elevated rate of inflation. Not at all. The Institute's newly released Proxy Statement instead shows that Franklin herself received a 52% pay rise last year, to $1.3m, and that the COO received a 65% rise to $590k. Part of Franklin's pay rise seems to been a deferred sign-on bonus, but even without that her pay would have been up 23%. 

While senior staff at CFA Institute seem to have been doing very well despite the difficult climate, other people there have not. Nearly 100 jobs at the Institute were cut last year. Median employee pay rose, but not by as much as for the Institute executives: there was an 11% increase in the median salary to $121k.

Franklin tells the FT that she's confident demand for the CFA exams will recover once Chinese lockdowns pass, and that Indian exam takers are already flooding back to the exam halls. But it could be that Gen Z are so scarred by recent years' exam cancellations and excruciatingly low pass rates that they never return. The leaders of CFA Institute will clearly be generously paid either way.

Separately, still more details are emerging of the fat finger trade that led to Citi losing up to $50m, and it seems that it wasn't related to a fat finger at all.

The Wall Street Journal reports that it was more a case of a frustrated trader overriding Citi's systems and that the trader, "went through several alerts before his order went live." 

Citi is declining to comment about what exactly went on, but various rumours internally suggest that it wasn't so much a case of "several" alerts as "hundreds." Some at Citi are saying that the trader, who was comparatively junior and has subsequently been put on leave while the error is investigated, in fact submitted the same order hundreds of times while sitting at home, and somehow overrode Citi's warning system in each instance.

Meanwhile... 

The value of initial public offerings in the US and Europe has fallen 90% this year. "Maybe if we come back from the summer holidays in September and for some bizarre reason things have suddenly turned for the better, maybe there will be more activity.”  (Financial Times) 

Wells Fargo thinks it can make another $1bn from its investment bank. (Reuters) 

Deutsche Bank is pushing into private credit and wants to raise $2.14bn for investments including corporate, real estate, and distressed credit. (Bloomberg) 

“If this credit bubble ever pops, it’s going to be the most catastrophic market failure that anyone has ever read about -- but let’s hope that doesn’t happen. We’ve gotten ourselves into a tough spot.” (Bloomberg) 

Jane Fraser says Citi has had a strong quarter in G10 rates and FX. (Seeking Alpha)

A Chinese trader at Credit Agricole won a race discrimination case after his boss was found to have commented that he didn't disclose losses because Asian culture meant he didn't want to lose face. (Daily Mail) 

Akshata Murty, wife of British chancellor Rishi Sunak, has a family office called Catamaran Ventures UK. (Bloomberg) 

Daniel Enriquez, the Goldman employee killed in the subway shooting, was known for doing genealogical charts for colleagues and leaving them in sealed envelopes on their desks. (WSJ) 

Former bond trader Will Frazer is now a teacher at a public high school in Gainesville, Florida. There, he's successfully created a pipeline of excellent mathematicians who get jobs at Citadel Securities and elsewhere. (Bloomberg) 

Photo by MChe Lee on Unsplash

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