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Entrepreneurs and start-up companies looking for investors will be able to solicit over the Internet from the general public under a new proposal issued yesterday by U.S. regulators, Reuters reported. The "crowdfunding" proposal, if adopted by the Securities and Exchange Commission, would be a major shift in how small U.S. companies can raise money in the private securities market. Private companies are currently allowed to solicit only accredited investors — those with a net worth of at least $1 million, excluding the value of their homes, or annual income of more than $200,000. The crowdfunding rule would let small businesses raise up to $1 million a year by tapping unaccredited investors.

The clearinghouse that handles all U.S. options trading was hit with a wide-ranging critique of the way it manages risk and handles compliance, following an examination by the Securities and Exchange Commission, the Wall Street Journal reported today. Regulators found flaws in the way that Chicago-based Options Clearing Corp. prepares for market freeze-ups and measures financial risks facing its members, according to the results of two-and-a-half years of examinations by federal market authorities. Options Clearing's board also failed to sufficiently supervise the clearinghouse's senior management and hasn't properly managed conflicts of interest, according to a letter sent by regulators to Options Clearing management, dated Sept 18. Options Clearing processes trades for all 12 U.S. options exchanges as well as a handful of futures markets. As a clearinghouse, Options Clearing gathers collateral from its member firms, which is used as a backstop for outstanding trades. If a major market player collapses or can't make good on its trades, clearinghouse funds can be drawn to insulate other traders from losses.

President Barack Obama announced that he will nominate Janet Yellen as chairman of the Federal Reserve, which would put the world’s most powerful central bank in the hands of a key architect of its unprecedented stimulus program and the first female leader in its 100-year history, Bloomberg News reported yesterday. Obama turned to Yellen, vice chairman of the Fed since 2010, after the other leading candidate, former Treasury secretary and White House economic adviser Lawrence Summers, withdrew from consideration amid mounting opposition from Democrats on the Senate Banking Committee. As a top deputy to Bernanke, Yellen supported the central bank’s unprecedented bond buying programs and was a driving force behind a new strategy adopted in 2012 to commit the central bank to goals on inflation and unemployment. As the Fed’s No. 2 official, she has articulated the case for maintaining highly accommodative monetary policy. In a series of 2012 speeches, she outlined why interest rates could remain near zero into late 2015, and in a 2011 speech she justified the Fed’s first two rounds of large-scale asset purchases with an estimate that the programs would create 3 million jobs. Yellen, 67, would succeed Ben S. Bernanke, whose term expires on Jan. 31.

Securities and Exchange Commission Chairman Mary Jo White yesterday criticized attempts to encroach on the agency's independence, saying recent moves by Congress and the courts inappropriately circumvent the SEC's expertise and judgment, the Wall Street Journal reported today. In a dig at judges who have questioned the SEC's rules and its historic practice of allowing firms to settle cases without admitting wrongdoing, White suggested the courts were acting beyond the scope of their roles and should instead "defer to the agency's reasoned judgments. We recognize that, under the law, a court can review a settlement," she said. "But a court that reviews a settlement that a law enforcement agency like ours enters with a defendant has a more limited task."

The fate of the Dodd-Frank Act’s ban on banks trading for their own accounts — one of the final pieces of the U.S. effort to prevent a repeat of the 2008 financial crisis — may rest with a cluster of economists at the Securities and Exchange Commission, Bloomberg News reported today. The agency’s 50 economists are attempting to calculate the costs and benefits of the Volcker rule, a linchpin of the Dodd-Frank Act that would curb the kind of high-stakes proprietary trading that could lead to crippling losses or bailouts at banks like JPMorgan Chase & Co. or Citigroup Inc. Court challenges that overturned other Dodd-Frank regulations because of faulty cost-benefit analysis have increased pressure on the SEC economists, led by Craig M. Lewis, a veteran finance professor on leave from Vanderbilt University. Their work may determine whether the rule could withstand a similar lawsuit — an option banks and trade groups say is under consideration.

JPMorgan Chase & Co. is poised to pay about $900 million to settle U.S. and U.K. claims that lax internal controls led the bank to provide inaccurate information about last year’s record trading loss to the board, investors and regulators, Bloomberg News reported yesterday. The bank announced deals yesterday with four regulators over its handling of the trades by an employee known as the "London Whale" because his bets were so large. Separately, the firm may also pay less than $80 million to settle two watchdogs’ probes tied to consumer lending practices.

Two former JPMorgan Chase & Co. traders were indicted for engaging in a securities fraud to hide trading losses that eventually surpassed $6.2 billion on wrong-way derivatives bets last year, Bloomberg News reported yesterday. Javier Martin-Artajo, who oversaw trading strategy for the synthetic portfolio at the bank’s chief investment office in London, and Julien Grout, a trader who worked for him, were named in the indictment, unsealed yesterday in federal court in Manhattan. The U.S. announced preliminary charges against the men in August. Both were indicted by a grand jury on five counts, including securities fraud, conspiracy, filing false books and records, wire fraud and making false filings with the U.S. Securities and Exchange Commission. The pair, along with unidentified co-conspirators, are accused of engaging in a scheme to manipulate and inflate the value of position markings in the synthetic credit portfolio, or SCP. They face prison terms of up to 20 years if convicted of securities fraud, the most serious charge.

The Securities and Exchange Commission plans to roll out a plan today that would require companies to disclose how much more their chief executives are paid than their other employees, the Washington Post reported today. The SEC has been struggling with the initiative since 2010, when it was tucked into the Dodd-Frank Act in response to public outrage about excessive executive pay. Earlier attempts to get the plan off the ground faltered after fierce opposition from corporate lobbyists, who cast the mandate as overly burdensome. If approved, the proposal would require all public companies to disclose their chief executives’ total compensation, the median compensation of all other employees, and the ratio between the two. Congress inserted the 18-line mandate into the 2,300-page law, known as the Dodd-Frank Act. But the law left it up to the SEC to decide on the logistics. The agency plans to gather comments from the public before finalizing a plan.

JPMorgan Chase has agreed to pay about $800 million to a host of government agencies in Washington, D.C., and London — and make a groundbreaking admission of wrongdoing — to settle allegations stemming from a multibillion-dollar trading loss, the New York Times Dealbook blog reported yesterday. The settlements, expected this week, will help the nation’s biggest bank move beyond last year’s $6 billion blunder and mend frayed relationships with regulators. Senior JPMorgan executives also avoided charges in the case, another victory for the bank, despite initial questions about whether they misled investors about the risk of the trades. An admission of wrongdoing with the Securities and Exchange Commission and other regulators — a reversal of a longtime policy that has allowed banks to “neither admit nor deny” misconduct — will be a rare stain on the reputation of a bank that prides itself on managing risk. It may also expose JPMorgan to private litigation. JPMorgan will acknowledge that it should have caught the problem faster. The settlement, which reflects a somewhat tougher line now being taken by the SEC in seeking admissions from defendants, also will require the bank to admit that its lax controls allowed traders in a unit in London to build the risky position and cover up their losses.

Billionaire hedge-fund manager Philip Falcone’s $18 million settlement with U.S. regulators that includes a five-year ban from the securities industry and an admission of wrongdoing was accepted by a federal judge, Bloomberg News reported yesterday. U.S. District Judge Paul A. Crotty said yesterday in a written order that the agreement reached last month with Falcone and Harbinger Capital Partners LLC is “appropriate and proportionate to the defendants’ admitted wrongful conduct.” The SEC accused Falcone, who became a billionaire by betting against the U.S. housing market in 2006, of improperly borrowing money from his fund to pay his personal taxes and said that he gave preferential treatment to some of his investors in returning their money.