Jeff Schwartz, founder and managing partner of Corbel Capital Partners, has long been a vocal advocate for the potential of private debt markets. In his thoughtful leadership and industry contributions, Schwartz paints a compelling picture of this dynamic segment of the financial landscape, highlighting its growing role in fueling business growth and generating attractive returns.

With almost two decades as a principal investor and nearly 30 years in the financial services sector, Schwartz steers Corbel’s structured private debt and equity investments and serves on the boards of several Corbel portfolio companies.

But that wasn’t his dream when he graduated from the prestigious Wharton School with a degree in economics.

“When I was in school, I certainly didn’t think that finance would be the path for me,” he told Ideamensch. “I was going to business school to start my own business, not to specialize in private equity. But the truth is that entrepreneurs are more about the drive than the speciality. Once I had the expertise down pat, it was an easier transition to go from having employers to being one.”

Jeff Schwartz: ‘A Need for This Capital’

Schwartz identifies a turning point in the emergence of private debt: the global financial crisis of 2008.

In an interview on the Ontra “Dogs and Docs” podcast, Schwartz elaborated. “Post-2008 in the financial crisis, many of the banks, there was significant bank consolidation, and the regulatory and reserve requirements placed upon traditional lenders increased significantly, so banks were less inclined to aggressively lend to small businesses, and lenders or other institutional investors recognized that there was still a need for this capital that was not being filled in the marketplace and formed private lending institutions — effectively private banks that were unregulated or less regulated than the traditional banks.” Schwartz champions the "structured capital" approach within the private debt market. This methodology transcends the limitations of traditional loan structures, instead crafting bespoke financing packages tailored to the specific growth trajectories and risk profiles of individual companies.

“There were many, many, many small businesses looking for what we at the time called structured equity,” he noted. “Now, it’s turned into more structured debt, but a structured investment product that provided them capital to either grow or recapitalize their businesses and also a level of private equity support and sponsorship that certainly doesn’t exist from a normal lending institution.”

Jeff Schwartz: Benefits for Businesses and Investors Alike

Schwartz underlines the dual-pronged benefits of private debt. For smaller businesses, it offers a vital source of capital that can fuel expansion and innovation, without the immediate need to relinquish control or ownership. This can be particularly impactful for early-stage ventures or businesses navigating periods of rapid growth. For investors, private debt presents the potential for attractive returns and diversification, complementing broader portfolio strategies.

While optimistic about the future of private debt, Schwartz acknowledges potential roadblocks on the horizon. Rising interest rates and economic uncertainty are seen as factors that could impact the market, potentially curtailing access to capital for some businesses. However, Schwartz expresses confidence in the resilience of private debt, highlighting its ability to adapt to changing circumstances and innovate its service offerings.

“In a low-interest-rate environment, people are aggressively seeking yield and seeking return, and one way to do that is to lend more aggressively in a current cash-yielding product,” Schwartz said on the podcast.

“While investors were not able to earn any money in the money market or traditional municipal bonds or investment-grade credits, or even high-yield bonds, to a certain extent, there was a demand not only for this type of capital albeit higher costs for companies; there was a demand for investors to earn those higher yields in relatively low-risk security or investment, which has created the development, supported the development, both from the supply side and demand side of this private debt market.”

The European Commission recently published a proposal that aims to govern the conduct of financial service providers that deal in cryptoassets. The Markets in Crypto-Assets Regulation (MiCA) is defined as a framework of measures that will be implemented to enable and support digital finance in regards to innovation and competition while mitigating risk for all stakeholders. Work on this regulation framework began in 2018 with the end goal of harmonising the EU’s efforts towards regulating currently out-of-scope cryptoassets.

Instead of disregarding the innovation and rising popularity of cryptoassets, the European Commission has been exploring ways through which they can embrace the digital transformation that is currently taking place in economic markets worldwide. The implementation of MiCA is part of a bigger legislation process under the digital finance package, which consists of proposals around cryptoaassets. The main aim of the digital finance package is to facilitate creation, competitiveness and access to innovative cryptoaassets for trading services customers in Europe while ensuring financial stability and customer protection.

A summary of the regulatory objectives

The proposal also intends to create an environment that will foster innovation around cryptoaassets rather than installation of retrogressive guidelines that will stifle the rise of new technologies. Because there has been increasingly independent policing within European countries, it was necessary for the EU to step in and regulate the digital currencies markets.

What is being regulated?

MiCA intends to regulate every digital representation of value which has the capability of being shared using Distributed Ledger Technology (DLT), disregarding financial instruments that are deemed out-of-scope for existing regulatory framework such as MiFID and EMD. They should fall under the below categories:

• E-money tokens – cryptoassets with a stable value that is based on only one fiat currency whose purpose is to serve as electronic money would. Examples of these are Libra, Euro and USDC.
• Utility tokens – which are issued under a non-financial basis for the purposes of providing a third party with access to a predetermined resource or service. An example of this is a FileCoin Token.
• Cryptoassets – for example Bitcoin, Litecoin and Ripple.
• Asset-reference tokens – whose purpose is to maintain a stable value by referencing one or more currencies that are legal tender such as fiat currency. They can be used as a store of value or a means to purchase goods or services. An example of this is Libra Basket Coin.

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What are the new rules that apply to cryptoassets?

Under these proposed regulations, a Crypto-asset Service Provider (CASP) is defined as an entity that is involved in the provision of cryptoasset services to a third party on a professional basis.

Issuers of the cryptoassets are required to publish a definitive white paper and send it to the relevant financial services regulator for review and approval for example the BaFIN in Germany. The issuer of the cryptoasset can only proceed if the proposal is approved.

Service providers that deal with cryptoassets will also be required to seek approval from the relevant regulators in the jurisdiction in which they operate. The regulator requirements include things like minimum capital reserves, security of the infrastructure on which the cryptoasset is offered and corporate governance.

Of course, MiCA also spells out its position regarding issues that affect trading in securities such as insider trading and market manipulation.

Trailblazing in the EU

In essence, MiCA is taking the unbeaten path when it comes to regulation of crypto-assets. While some countries are banning these types of assets, it is commendable to see that the European Union is interested in fostering an environment that will promote innovation and still protect stakeholders. The intended result is to create a transparent and harmonised European crypto-asset market that invites global investors and customers to participate.

Imagine a world without law and order. No rules, no guidelines, no restrictions, no control, everyone having the liberty to do as they please. What comes to mind as the inevitable outcome? Chaos. Utter commotion. The same would be the fate of the forex market, with its $5 trillion worth, if it were left without regulation.

What is Forex Regulation?

Forex regulation is a system of checks that have been put in place to ensure that the forex market is a safe place to be. These checks include the setting up of legal and financial standards. For compliance with these checks to be ascertained or verified, watchdogs or overseers have been set up to monitor the behavior of industry players. These bodies are called regulators.

The primary purpose of regulation is to protect investors from fraud. Forex broker reviews can help answer questions such as is thinkmarket legit?   And can help to guide investors to forex brokers that are regulated.

Who Regulates the Forex Market?

There is no central regulatory body in charge of global forex regulations. Regulatory bodies are set up at local levels across the world. Each of these local regulatory bodies functions under the ambit of the laws governing their respective jurisdictions. However, all regulatory bodies in the EU can operate in all the countries on the continent. One of the most widely used regulatory bodies in Europe is the CySEC (Cyprus Securities and Exchange Commission) which is based in Cyprus. Other major regulatory bodies include the Australian Securities and Exchange Commission (ASIC), Securities and Exchange Board of India (SEBI), US Securities and Exchange Commission, Financial Services Authority (FSA) UK and the Autorité des marchés financiers (AMF) France.

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How the Forex Market is Regulated

Forex market regulators set guidelines for forex brokers to abide by. These guidelines protect investors and maintain order in the trading arena.

The regulator is saddled with the responsibility of conducting periodic audits, reviews, and inspection of the financial, legal, and customer-related activities of the forex market players. These guidelines ensure that brokers abide by a set of fair and ethical rules. When these guidelines are not met, a regulator has the power to enforce punishments on the erring broker.

Forex regulation is done in compliance with the prevailing laws of each jurisdiction. These laws spell out a host of requirements for forex brokerage and some elements of these regulations vary from one jurisdiction to another. However, some fundamental standards cut across every area or region of forex regulation. These are;

Registration and Licensing

Regulators are responsible for the registration and licensing of forex brokers. Only pepperstone regulated brokers are safe for investors.

Audits and Reviews

Periodically, regulators look into the books and general affairs of brokers to ensure that they comply with all financial and ethical standards. For example, there is lots of information that brokers are mandated to pass across to investors. Brokers who fail to do so are punished by regulatory bodies.

The role of regulators is crucial to the safety of your funds. Questions about regulation should be a priority for every investor. Broker reviews should be properly consumed by traders before working with any broker. If a broker isn't regulated, steer on the side of caution and avoid them. 

US Treasury Secretary Janet Yellen is calling a meeting of several key financial regulators this week to discuss market volatility driven by retail trading in GameStop and other equities favoured by online investors.

Yellen will convene the heads of the Securities and Exchange Commission (SEC), the Federal Reserve, the Federal Reserve Bank of New York and the Commodity Futures Trading Commission, Reuters first reported on Tuesday.

Yellen sought a waiver from ethics lawyers prior to calling the meeting, according to a document seen by Reuters. Her decision to seek permission follows reports that she received $700,000 in speaking fees by hedge fund Citadel, a key player in the GameStop saga, potentially creating a sticking point for Yellen.

A Treasury official, who declined to be named by Reuters, said the meeting would be held this week, potentially as early as Thursday.

“Secretary Yellen believes the integrity of markets is important and has asked for a discussion of recent volatility in financial markets and whether recent activities are consistent with investor protection and fair and efficient markets,” said Treasury spokesperson Alexandra LaManna in a statement to Reuters.

The move by Yellen follows a week of unprecedented market volatility as retail investors piled into stocks that had been targeted by short-sellers. Brick-and-mortar video game retailer GameStop saw the most trading activity, with its stock price rising more than 1,600% from its state at the beginning of the year, though other struggling outlets including AMC, BlackBerry and Bed Bath & Beyond were also affected.

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The investors’ coordinated push against short-sellers cost hedge funds billions of dollars, with the resulting volatility causing Robinhood to restrict purchases of the focal stocks – a move which also caught the attention of lawmakers, who subsequently called for an investigation into the platform.

Not only your business structure but also registering for paying tax, permits and license are crucial to operate it legally. The necessary documents are required to form your business. Following proper procedure will help you to launch successfully. Once you are ready, you can run your business according to the law.

The US Small Business Administration (SBA) provides support and guidelines to start up a new small business.

How to Start a Business

• Do market research
• Make a plan
• Generate funds/capitals
• Choose location
• Register your business along with business structure and business name
• Get State as well as Federal Tax ID
• Get license/permit
• Open business bank account

Steps to Register a Small Business

The following 5 steps will help you to understand how to register your business.

1. Choose a Business Structure

You can register your business at three levels: federal, state, and local agency level. Depending on it, you can proceed to register your business structure. The main business structures are:

• Sole Proprietorship: If you own an unincorporated business, you are considered as sole proprietorship. That means you’re not registered with any other business. You’ll have full control over the business. Also, you’ll be solely responsible for any debt or legal obligations in this individual proprietorship.
• Partnership: A partnership is a mutual relationship between two or more owners of a business. This means fewer legal obligations, more capitals, and the ability to share burdens, but ownership can’t be controlled by any individual.

You can register your business at three levels: federal, state, and local agency level.

In a Limited Partnership, one can have unlimited liability while others have limited. Limited liability partners have limited control over business and also pay self-employment taxes. In a Limited Liability Partnership (LLP), liability is the same for every owner. Here everyone has an active role in business.

• Limited Liability Company (LLC): Owners are not personally liable for any debt or bankruptcies. It mostly protects your personal belongings like vehicles, house. But an LLC is more expensive than the previous two.
• Corporation: Costlier than the other structures. It make profits, is taxed, and offers protection to personal liabilities. Corporation is a good choice while raising higher capital through generating funds. The four types of corporations are: C Corp, S Corp, B Crop and Non-Profit.

2. Choose Your Business Name

Your business name represents your brand identity. There are four ways to register business names:

• Entity name: Register your business name under state Government. Once your entity name is legally registered under the state, no one can use it in the state.
• Doing Business As:You can register your business name as “Doing Business As” following the state or country name. It enables you to conduct business in a different name rather than using your personal name.
• Trademark:Trademark protects your business name on the national level. This name structure distinguishes products from one another. It can be a name, symbol, logo or figure.
• Domain Name: For registering an online business, use domain name. Your unique URL or website address can’t be used by other once it’s registered.

3. Get Federal Tax ID/EIN

Not all business comes under IRS (Internal Revenue Service) regulations. If you have a corporation or partnership business, you may need to register under Federal tax. You will receive a unique EIN or Employee Identification Number. It is a social security number for your business.

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4. Get State Tax ID

The next step is to get a state tax ID. You have to register your business in the state revenue office to pay state taxes. State tax registration is important to set up any small business to obey the state income tax.

The top three states with highest income tax are: New York, Massachusetts and Connecticut. There are also seven states which don’t have state income tax: Alaska, South Dakota, Nevada, Florida, Washington, Texas and Wyoming.

So, before you start your business you can research the location. You may find that you do not need to pay state/local income tax.

5. Apply For License and Permit

You need a Government permit or license to operate your business even if it is a small business. The license cost depends on the business type and the agency giving you the license or permit. For an example, annual license fees for animal dealers range between $30 and $750, issued by the US Department of Agriculture. Registering for and receiving the license may take 1-6 weeks.

To know the license laws and regulation, you can use the Permit Me search tool from the US Government. This will provide you with details of registration along with permits and licenses depending on your desired business structure and location.

Overview

Follow each and every step discussed above to register your business set-up. Though it is a lengthy process, once you get registered you can run it legally. The unique trademark or entity name allows you to conduct business separately from competitors as no one else can use that name. The US Small Business Administration website will guide you thoroughly.

Article prepared in cooperation with LOCAL MARKET.

Big Four accountancy firm PricewaterhouseCoopers (PwC) plans to sell its fintech unit amid mounting scrutiny on its potential conflicts of interest within the sector.

The unit, eBAM, uses PwC-developed technology to automate regulatory risk analysis for around 10 major London-based finance firms. It is set to be acquired by its management and rebranded as LikeZero in a deal backed by UK-based private equity firms Souter Investments and Manfield Partners.

Michael Lines, PwC’s former head of contract solutions, will become CEO of LikeZero. Speaking with Financial News, he said that the unit’s sale was prompted by regulations limiting the services that Big Four firms could provide to the financial institutions and listed companies they audit.

Specifically, restrictions introduced by the Financial Reporting Council – the UK audit watchdog – prohibit PwC from selling its own technology to their audit clients. The FRC also prohibits non-audit PwC clients from continuing to use PwC-developed technology if they become customers of the firm’s audit business.

“In the current environment, PwC [is]... not really the right home to turn LikeZero into a proper global business,” Lines said.

In 2016, the FRC introduced measures restricting Big Four firms from providing audit clients with fintech solutions as part of an initiative to reduce conflicts of interest in the financial services sector. It built on these measures in 2019 by banning auditing firms from providing certain clients, including banks and insurers, with advisory services such as remuneration and tax advice. The move was intended to strengthen auditor independence following a number of scandals, including the collapse of department store chain BHS and outsourcer Carillion.

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Chris Biggs, Partner at Theta Global Advisors, commented on the announcement: "This announcement is another move by a Big Four firm to realign its business model with the FRC regulations to prevent a conflict of interest with its auditing clients.”

“The global pandemic has shone a light on the practices of the Big Four and their interests in the auditing and non-auditing space. Now, they are beginning to sell-off businesses that could be deemed to go against regulations and this is unlikely to be the final announcement in the space.”

eBAM’s technology allows financial institutions to automatically search complex legal documents potentially thousands of pages long for risks that could arise from significant regulatory events, such as Brexit.

The value of the deal is not yet known, and is set to be announced later today.

Below Finance Monthly hears from Brian G. Sewell, Founder of Rockwell Trades, on the prospects of cryptocurrencies moving forward. Brian argues that cryptocurrency is still in the run for driving the future of commerce.

I would rather see the SEC make a methodical decision, with thoughtful guidelines, to approve a cryptocurrency ETF than a rash decision to reject one. And though the agency may not reach a final decision until next year on the proposed SolidX Bitcoin Shares ETF, I think the agency will eventually approve it. The proposal (requiring a minimum investment of 25 bitcoins, or $165,000, assuming a BTC price of $6,500) seems to meet the SEC's criteria -- on valuation, liquidity, fraud protection/custody, and potential manipulation.

Cryptocurrency’s Challenges and Potential
Since 2010, when it emerged as the first legitimate cryptocurrency, bitcoin has been declared “dead” by pundits over 300 times. Critics have cited the cryptocurrency’s hair-raising price volatility, it’s scalability challenges, or the improbability of a central bank ceding monetary control to a piece of pre-set software code. Yet since 2009, bitcoin has facilitated over 300 million consumer payment transactions, while hundreds of other cryptocurrencies have emerged, promising to disrupt a host of industries. Granted, no more than 3.5% of households worldwide have adopted cryptocurrency as a payment method. But I think cryptocurrency will transform how the world does business as developers, regulators, and demographics resolve the following key issues:

1. Approval of a Bitcoin ETF
   I think the US investment community will not rest until they satisfy SEC criteria for a bitcoin ETF. Approval would represent another milestone in the validation of cryptocurrencies. This bodes well for the global financial system, because cryptocurrency promises to create financial savings and societal benefits -- by streamlining how the world transacts for goods and services, updates mutual ledgers, executes contracts, and accesses records.
2. Comprehensive U.S. Regulation Can Improve Protection, Innovation, and Investment
   Demand is mounting for a larger, more comprehensive U.S. and global regulatory framework that protects consumers and nurtures innovation. Those institutional investors who are assessing the cryptocurrency risk/reward proposition are also awaiting regulatory guidance and protections to honor their fiduciary duties. How, if at all, for example, will exchanges be required to implement systems and procedures to prevent hacks and protect or compensate investors from them? Effective cryptocurrency regulation requires a nuanced set of rules, a sophisticated arsenal of policing tools, sound protocols, and well-trained professionals. I think U.S. regulators will eventually get it right. And if institutions become more confident that regulations can help them meet fiduciary duties, even small cryptocurrency allocations from reputable organizations could unleash a new wave of investment.
3. Bringing the Technology to Scale
   Bitcoin and other cryptocurrencies cannot yet process tens of thousands of transactions per second. I think developers working on technology -- such as Plasma, built on Ethereum, and the Lightning Network, for bitcoin and other cryptocurrencies -- will sooner or later bring leading cryptocurrencies to scale. This could unleash an explosion of new applications, allowing cryptocurrency to integrate with debit and credit payment systems, developing new efficiencies in commerce -- whether B2B, B2C, or B2G -- in ways we can’t fully anticipate.
4. Developing World Incentives and Demographics
   Cryptocurrency adoption as a payment method could grow fastest in emerging markets. Many consumers and entrepreneurs in such regions have a strong incentive to transact in cryptocurrency -- either because their country’s current banking payment system is inefficient and unreliable, and/or they are one of the world’s 1.7 billion “unbanked.” Two-thirds of the unbanked own a mobile phone, which could help them use cryptocurrency to transact, and access other blockchain-based financial services.

Data underscores the receptiveness of Developing World consumers to cryptocurrency. The Asia Pacific region has the highest proportion of global users of cryptocurrency as a transaction medium (38%), followed by Europe (27%), North America (17%), Latin America (14%), and Africa/The Middle East (4%), according to a University of Cambridge estimate. Although the study’s authors caution that their figures may underestimate North American cryptocurrency usage, they cite additional data suggesting that cryptocurrency transaction volume is growing disproportionately in developing regions, especially in:

• Asia (China, India, Malaysia, Thailand)
• Latin America (Brazil, Chile, Colombia, Mexico, Venezuela),
• Africa/The Middle East (Kenya, Saudi Arabia, Tanzania, Turkey)
• Eastern Europe (Russia, Ukraine).

Demographics will also likely drive cryptocurrency adoption in the Developing World, home to 90% of the global population under age 30.

Remember The Internet - Investment Bubbles and Bursts Will Identify The Winners
High volatility is inherent in the investment value of this nascent technology, due to factors including technological setbacks and breakthroughs, the impact of pundits, the uneven pace of adoption, and regulatory uncertainty. Bitcoin, for example, generated a four-year annualized return as of January 31st 2018 up 393.8%, a one-year 2017 performance up 1,318% -- and year-to-date, a return of down over 50%. Bitcoin has previously experienced even larger percentage drops before resuming an upward trajectory.

In my view, bitcoin and other cryptocurrencies will experience many more bubbles and bursts, in part, fueled by speculators. But the bursting of an investment bubble may signal both a crash and the dawn of a new era. While irrational investments in internet technology in the 1990’s fueled the dotcom bust, some well-run companies survived and led the next phase of the internet revolution. Similarly, I believe a small group of cryptocurrencies and other blockchain applications, including bitcoin, will become integrated into our daily lives, both behind the scenes and in daily commerce.

Although “irrational exuberance” will continue to impact the price of cryptocurrencies, this disruptive technology represents not only the future of money, but of how the world will do business.