Shawn Baldwin

Shawn D. Baldwin
Born	(1966-02-26)February 26, 1966 Dayton, OH
Nationality	USA
Occupation	Financier
Known for	Founder of Capital Management Group

Shawn D. Baldwin (born February 26, 1966) is an American financier, trader and investor, noted for founding and leading trading and investment firm, Capital Management Group (CMG).

Biography

The son of Carolyn (Watson) and Joseph Baldwin, a factory worker and utilities supervisor, Baldwin was a Head Start child who began his elementary education at public schools in Dayton, Ohio. He majored in Management at Antioch College and graduated with a B.A. before going to the University of Oxford’s Said School of Business where he completed a Masters in Financial Strategy. Baldwin is a member of Kappa Alpha Psi fraternity, Inc. Baldwin was the 2nd African-American member of the Chicago Stock Exchange, has series 7, 63 and 24 license designations. Baldwin is a member of the CFA Institute.

Baldwin has been featured in The Economist, Business Week, Forbes, Fortune, Money, and Investment Dealer’s Digest in which he was named one of the Top 40 Investment Bankers under 40. He was also named one of the Top 75 Blacks on Wall Street. Baldwin is a financial contributor to Fast Company magazine for Finance, Trading and Capital Markets. Mr. Baldwin is a speaker on Bloomberg, CNN, CNBC, NBC and CBS. Baldwin was the financial spokesperson for Blackberry and the subject of commercials and a print campaign that ran in Forbes, Fortune, Money, The Economist, BusinessWeek and Portfolio.

Professional career

Baldwin was heavily influenced in business by the late Reginald F. Lewis, who was a pioneering global financier that Baldwin idolized and patterned himself after. After reading Lewis’ book and following his career, Baldwin founded Capital Management Group (CMG), an investment advisory firm in 1999. CMG provides advisory/investment banking services to institutions. Baldwin quickly grew the money market mutual fund asset manager to manage over $1 billion dollars in 2001 after partnering with Bank of America, after growing the assets up to a peak of $1.8 billion he and his partners sold the business after becoming entangled in an argument about growing the business with additional partners, which Baldwin wanted to do and his partners did not. Baldwin then acquired an offshore broker-dealer for the basis of his hedge fund Stature and simultaneously acquired an Atlanta based municipal broker-dealer, Muni-Direct. Muni Direct was a $35 million revenue broker-dealer that had no previous corporate finance activities. During the crisis of September 11 Baldwin saw values plummet for financial firms and decided to purchase a broker-dealer with the focus being to insert the entity into corporate finance. Baldwin also figured that this would be the lowest cost point and was a bust section in the boom and bust cycle often quoted by George Soros whom Baldwin studied assiduously while running Optima Investment Research’s currency, volatility and options business in the United States and Europe during the 1990’s.

Baldwin also used Soros’s writings as a basis for his work as the Chief Operating Officer on building the publicly traded investment advisory Wall Street Strategies which he and his partner Charles Payne built up to $480 million market value in less than 2 years. Prior to working on Wall Street Baldwin worked for American Express and U.S. Bank respectively. After the acquisition of MuniDirect Baldwin promptly changed the name to Capital Management Group Securities (CMG) CMG’s investment bank participated in 75 capital markets transactions for over $68 billion. CMG participated in more new issue transactions than any other mid-sized investment bank from 2002-2005. CMG participated in 8 of the 10 largest IPO’s and 9 of the 10 largest secondaries. Baldwin maintained a returns track record of over 58% for five years in his hedge fund.

Baldwin then through CMG built a global network via its economic conferences of academics and institutional investors gathered to discuss macroeconomic trends in Chicago, New York, London and Qatar. Baldwin hosted the top institutional investors on the planet with financial superstars such as Thomas H. Lee and Lord Jacob Rothschild.

Baldwin was invited to the Forbes CEO Forum in Mackinac Island by Dennis Kneale the then-executive editor of Forbes magazine. Baldwin then became a regular invitee and attendee of the invitation-only Forbes Conferences.

Steve Forbes invited Baldwin to the invitation only Forbes CEO Middle East Conference in Doha, Qatar in 2005. Qatar at that point had been named the richest country on a per capita basis due to their oil and gas riches. Baldwin was introduced to the Emir of Qatar along with his wife and daughter. The Emir encouraged Baldwin to become with the evolving financial powerhouse country after a Q&A session where Baldwin was vocal about the country's prospects on the global scene. The Emir frankly asked Baldwin what would he have his country do to increase it's competitiveness and how would he specifically help. Baldwin decided to host a conference as he had in the United States and said that he would bring the asset managers to Doha, Qatar to develop business there rather than having the Qatari meeting managers in London. The Emir then had the Qatar Finance Center become the lead sponsor for a conference that Baldwin had with institutional money managers and bankers from around the world in Doha.

Baldwin brought the Chairmen of U.S. Institutional Investors such as the $120 billion New Jersey Investment Council and the $108 billion Texas Teachers Retirements to the conferences in Qatar.The conference was held in May 2007 and had over $400 billion in investment managers present along with a number of sovereign funds and banks from the Middle East. CNBC covered the events live at the 4 Seasons Hotel in Doha, Qatar.

During the preparation for the event Baldwin worked with the Qatar Finance Center and Jack Anderson, a column writer on Global taxes for Forbes magazine and they effectively dropped the taxes within the business zone to almost zero—within 6 weeks. The new tax position of Qatar was published in Forbes just before the conference in May 2007.

It was there that Baldwin then decided to focus on Islamic Finance (Shari'ah) to augment his knowledge and completed a masters thesis on Islamic finance at Oxford in England.

Baldwin then built a Global Investment Advisory focused on structuring, risk management and portfolio allocation. He named the entity Capital Management Group Investments and constructed a board of his former professors: "Dr. Chris Geczy" finance professor at Wharton and Director of the Wharton Wealth Management Initiative, "Dr. Paul Gompers" the Eugene Holman Professor of Business Administration at Harvard Business School, Tim Jenkinson [1] Professor of Finance at Oxford’s Said Business School and Director of the Oxford Finance Research Centre. Baldwin added David Thomson the ex-McKinsey, best selling author of "Blueprint to a Billion" as a valuation expert.

Finally he added his long time friend and business acquaintance Jack Anderson the global tax specialist lawyer from Ernst & Young with a focus being to add global tax expertise to the practice. The advisory targets advising sovereign funds, super high net worth individuals and multinational corporations.

FINRA

Baldwin and CMG have been both expelled and barred from FINRA (3) times on the basis of 8210 violations for not forwarding documents to the FINRA regulator. Baldwin shut down operations of the broker-dealer in the United States in December of 2005 upon hearing of the proceeding. Baldwin called a meeting through his attorney James Arpaija of Vedder Price with the FINRA officials and SEC officials to complain about mistreatment in his offices at 123 N. Wacker. Baldwin apparently yelled at the FINRA regulator during the meeting and ordered the FINRA officials out of his office per 2 articles on the subject. Baldwin contacted the SEC and the Government Accountability Office (GAO) in 2004 and 2005 to notify them of mistreatment by Harris. The GAO governs both the U.S. Securities and Exchange Commission (SEC) and FINRA. Per an article in Crains Chicago, Baldwin began yelling in a December 2005 meeting that Baldwin requested (*9), in which he yelled at the regulator, cursed at him and ordered him out of his trading room offices in front of the SEC, his employees and other regulators.

The proceeding began in January of 2006 and resulted in a bar and expulsion. The FINRA regulator stated that he didn’t receive specific documents on a loan that Baldwin arranged for the broker-dealer. Baldwin countered that he provided the FINRA regulator with all information and that his attorney sent it to the SEC’s head of Enforcement 30 days prior to FINRA as proof. FINRA expelled and barred Baldwin and the broker-dealer, Baldwin appealed stating that the documents were sent to the regulator and that the regulator was requesting documents from a non-regulated entity. The bar was subsequently overturned by the appeals panel due to three (3) of the senior officials in the Chicago office being found to be lying under oath by the panel. The appeals board also found that the FINRA regulator did not submit all of the documents it received from Baldwin. Although the FINRA officials stated that they did not receive documents from Baldwin, however with the admittance from the SEC that they had received the information from Baldwin’s attorney prior to the proceedings the FINRA officials were later forced to recant and correct their testimony. The panel also noted deep concerns of the inconsistent nature of the testimony by the staff which was described as “incongruent”[10] During the regulatory hearings, 3 of the top regulators – including Phil Harris, were found to have lied under oath and had to recant their testimony, so Baldwin was readmitted.

FINRA followed with 2 additional proceedings based on the same concept of an 8210 violation in 2007 and 2008. Baldwin withdrew capital and stopped reporting information to FINRA in 2007 and the broker-dealer was expelled due to no financial reporting in November of 2007 pursuant to rule 9552. Baldwin was given a 2 year suspension and bar for not providing all the information. Baldwin appealed this process but no decision has been rendered as of yet.

Although Baldwin was very successful with his investment bank in terms of capital raising, trading and capital market transactions, he had a very tumultuous relationship with FINRA and specifically the head of examiners, Phil Harris where there seems to have been a deep seated personality conflict.. It is worth noting that Baldwin maintained a perfect track record with absolutely no complaints or marks of any type on his record for any of the licenses he held (Series 7,63,24) at prior organizations or the boom years that he transacted, literally billions of dollars of transactions in his own firm. During the period of 2002 to 2005 Baldwin and CMG Institutional Trading LLC participated in over $60 billion dollars of capital market transactions in senior positions for companies such as Travelers, General Electric, Seagate Technologies, The New York Stock Exchange, The Chicago Mercantile Exchange and Google. During this period neither the firm, nor any of it’s’ employees or Baldwin ever received any complaints, fines or any disciplinary actions.

Baldwin and CMG’s tenure with FINRA is worth noting because he was expelled and barred—twice . This makes him the only person in the history of the organization to have been barred and expelled twice with zero securities activity between these actions. A bar of course, would make a person ineligible to be admitted again making a second bar a moot point. However, this was made possible because the previous bar and expulsion was found to be unjustified and egregious by the national office who said that the panel had over-stepped their boundaries(3). The panel also noted deep concerns of the inconsistent nature of the testimony by the staff which was described as “incongruent” During the regulatory hearings, 3 of the top regulators – including Phil Harris, were found to have lied under oath and had to recant their testimony, so Baldwin was readmitted.

Baldwin never had any proceedings for any malfeasance, theft, misappropriation of funds or deception(*1). All of his proceedings stemmed from actions by Phil Harris, the Head of Examiners for FINRA District 8, consistently stating that he didn’t receive documents Baldwin . The FINRA National Adjudicatory Counsel found these claims to be unfounded and reinstated Baldwin—twice.(*2) These proceedings were said to be a vendetta for (2) two reasons:

1. Baldwin contacted the SEC and the Government Accountability Office (GAO) in 2004 and 2005 to notify them of mistreatment by Harris. The GAO governs both the U.S. Securities and Exchange Commission (SEC) and FINRA.# for Baldwin yelling in a December 2005 meeting that Baldwin requested (*9), in which he yelled at the regulator, cursed at him and ordered him out of his trading room offices in front of the SEC as well as other regulators and in front of Baldwin’s employees.

This episode has been written about in several articles and the case has been a subject with many law professors who seem to think that there was no justification for the proceedings. Baldwin for his part was upset because he alleged Harris had caused him over $75,000 the week before and $30,000 that week in trading due, to questions about net capital that were unfounded. Baldwin had began the day by having his attorney demand the presence of both the SEC and FINRA officials to discuss what he saw as less than amicable treatment and more importantly as treatment “not within the guidelines”, that was causing him additional suffering in his earnings. CMG’s net capital was always over the required amounts by hundreds if thousands of dollars, he saw the regulator living up to his reputation of being overly onerous. However Baldwin was going to put an end to that with the meeting. Subsequently Baldwin lost his temper after discovering the second trade and the loss caused by Harris. In the presence of the attorney’s Harris lied and Baldwin unloaded on him.

Baldwin then began a full dress down of Harris in front of his trading desk and per his employees said, “You are a liar! You work for me-you have the equation wrong. I will not allow you to steal money from my employees that THEY earned. Take a look at these people around you, Phil, they are mothers and father of families….they have to provide for their families…and you with your petty bias is affecting that. I will not allow you to affect their earnings. I am not afraid of you and I will not let you treat me how you feel. I could give less than a damn if you are a regulator or not. You are unscrupulous and you have low integrity!! You WILL treat me with respect and dignity. I don’t give a damn if you like me or not. I definitely don’t like you—you are the problem with America and why we aren’t as great as we could be...don’t ever try to intimidate me! Get the F*(K out of my trading room! Get out of my F*ing office! For all of the people who couldn’t speak up…who were afraid—I am not. Get the hell out of my office!”(3)

CMG employees sat quietly while Baldwin raged, the SEC officials and other FINRA officials came running into the room after hearing the commotion and Baldwin’s yelling which could be heard throughout the office. Harris said nothing but turned deeply red and glared at Baldwin. The SEC and other FINRA members asked for Baldwin to calm down and return to the meeting. Baldwin would have none of that and ordered Harris out immediately. Baldwin said it was his office and he called the meeting and forced everyone to come to the meeting—therefore they all had to leave. The regulator was not providing an exam and could not stay. Period. Baldwin told the other regulators that they could stay but Harris had to leave. All members of FINRA left, while the SEC staff stayed, as Baldwin recanted how he had been continually mistreated for the last four years and that he, “…wasn’t going to take it anymore from any of the agencies”.

It was at this point that Baldwin contacted the SEC again after first contacting SEC Commissioner Roel Campos in 2004 and the GAO (6) subsequently testifying under oath before them about the regulators ill treatment. Baldwin alleged that he received tremendous mistreatment during his entire tenure with the regulators. True to Baldwin’s direct style he called the regulators to put them on “notice” along with faxing them the documents that he forwarded the GAO and made them aware of his on the record testimony. It is worth noting that prior to this there were no actions against Baldwin or his firm. He had completed a record year in revenues and transactions in 2005. CMG had co-managed the highly prestigious Google transaction and over $9 billion of transactions for General Electric, Baldwin was named one of the top investment bankers under 40 by the industry experts at Investment Dealers Digest and had secured a national, multi-million dollar advertising spot with Blackberry as their financial spokesperson replete with ads in national magazines and television commercials. he would in fact have had no reason to not to comply with the regulators since he had turned the organization into a multi-million dollar firm in just 3 years.

Baldwin stated that he was the subject of bias from the beginning and treated very unfairly. He also stated that Phil Harris purposely did things to reduce his revenue and work on a detrimental basis to his business and credibility.

Some credence should be given to Baldwin for a few factual reasons:

1. Baldwin’s/CMG’s process was delayed for 12 months for no apparent reason by a consistent prolonged request process from Phil Harris- Head Examiner and FINRA;
2. Examinations are supposed to be every 2 years, last 2 weeks and have a response in 30 days by law. Baldwin/CMG had examinations every year and these lasted from 6 weeks to 4 months with responses as far as 7 months out;
3. Harris always seemed to question the net capital of CMG Institutional Trading LLC and wanted to add costs from Baldwin’s other businesses to the balance sheet of the broker-dealer even though these items were contractually bound to another separate legal entity under the law;
4. Review of CMG’s Financial Operations Combined Uniform Statements (FOCUS) reports on file with the Securities Exchange Commission, reveal that CMG was never out of net capital. In fact, CMG only needed $10,000 and had at minimum levels $250,000 and maximum levels $500,000 in net capital. Baldwin often transferred over $100,000 from his own personal account at least three times;
5. Harris and two other top officials were found lying under oath and reprimanded for their actions and forced to recant their testimony at proceedings.

From Harris’ perspective Baldwin was extremely arrogant and dis-respectful; the two things the regulator felt were counter to effective regulation. Harris also felt that Baldwin was too demanding and did not like Baldwin’s brashness at questioning his motives or actions. Baldwin’s penchant for sending letters with cited codes and specific answers for questions did not sit well with the regulator. It is believed that this is why he assigned Baldwin a Special Investigators during his entire membership. This by itself is seen as a problem in the financial community, it is worth noting that the regulators never found any problems with the practices books or records when he was involved in the transactions for hundreds of millions of dollars.

Baldwin for his part decided that he would suffer no more of Phil Harris or FINRA, upon learning of the regulator deciding to begin regulatory proceedings he vowed in December 2005 to not do another transaction in his United States regulated broker-dealer and only would do business in his offshore businesses. Baldwin effectively shut down a multi-million dollar business. He seems to be a man of his word and has not done another transaction in it since. Baldwin started to focus on the Middle East with his FSA regulated entity and has enjoyed great success with no regulatory incident.

Harris and FINRA followed with two additional proceedings after losing the cases when Baldwin and CMG were not active in the regulated business in the United States. Baldwin closed down the broker-dealer and the hedge fund and has focused intently on his domestic private equity business and his international transactions. Baldwin stopped all regulated practices and often is quoted saying , “ my integrity is not for sale or lease and I refuse to be intimidated”. Baldwin has refused to comment in any press and is completely unapologetic for ordering Harris out of his offices, stating he would do so again.

Harris continues to state that being able to have effective dialogue is highly important in regulation but refuses to respond to questions on lying under oath or why FINRA would pursue someone for a period of 4 years after they were not active. District 8’s Enforcement counsel Pamela Shu stated that the agency had a “responsibility to protect the public” and has no comments for the regulators lying under oath. When pressed about why the office is spending so much time with Baldwin when bad actors like Bernard Madoff and Allen Stamford have stolen billions, Shu’s response was “..we have to pursue people like Baldwin so that not only the big fish..”. many feel that he is being made an example of for having the audacity to reprimand the regulator to other members. The SEC would seem to echo this sentiment –they gave Baldwin a $25,000.00 fine as an example to be equitable with regulators. Baldwin bridled since the regulators weren’t performing duties but in his office at his insistence. To this day Baldwin has never been charged with the misappropriation of funds or any theft of any kind. The sole failure that Baldwin has in the eyes of FINRA was the inability to produce a deposit ticket for a wire transmission, something which he stated doesn’t exist. CMG still has $2.8 million dollars frozen in a foreign exchange brokerage account that the regulators have refused to release.

The hedge fund scandal of the year, per Stocks, Futures and Options December 2007 occurred right in Illinois while FINRA and the SEC staff were focused on Baldwin. The firm, Sentinel management Group stole more than $350 million along with overly stating their assets of being $1.5 billion when in fact having less than $700 million. When either Counselor Shu or Supervisor Harris are asked about these instances the responses were “no comment”. It seems that the greatest malfeasance at Sentinel occurred between 2004 and 2007, right when the regulators were most focused on Baldwin. Baldwin continues to do transactions in private equity and international transactions and other non-FINRA regulated businesses. The SEC never filed any action against Baldwin or CMG Institutional Trading LLC.

Politics

A supporter of democratic politics but avowed independent thinker, in 2003 Baldwin allowed then State Senator Barack Obama during his bid to become Senator to speak at one of his economic conferences at the Chicago Stock Exchange which had numerous institutional money managers. Baldwin also gave the maximum amount to Obama’s campaign and later sponsored a dinner.

Charity and causes

Baldwin sat as a global director and was a substantial financial contributor for Building with Books alongside Leon Cooperman of Omega Advisors- Building with Books built over 125 schools throughout the world. Baldwin rebuilt the defunct Chicago chapter of the National Association of Securities Professionals and became its President. During his tenure he built it into the largest chapter in the United States. Baldwin has donated and been associated with the National Foundation of Teaching Entrepreneurs and he is an active member of the RFL Foundation.

External links

• "CBS News 2003/01/17" Chris Hawke. "Civil Rights Frontline: The Wealth Gap" CBS News (1/17/05).
• "MONEY Magazine 2003/08/01" Joan Caplin; Ellen McGirt; Amy Wilson. "Fortune Hunters Meet seven people with vision and daring who are making their own success" MONEY Magazine (2003/08/01).
• "Fortune Magazine 2003/10/27" Kimberly L. Allers "A Dream Deferred A savings gap means many African Americans are jeopardizing their retirement" Fortune Magazine (2003/10/27).
• "BusinessWeek 2003/01/10" "Bush's Plan: The Reviews Are In" BusinessWeek (2003/1/10).
• "NBC News 2009/01/26" "Five Things to Know to Handle the Financial Crisis" (2009/01/26).
• "The Peninsula 2007/11/04" "Qatar hosts CMG’s summit on alternative investments" (2007/11/04).
• "MONEY Magazine 2003/09/01" Nick Pachetti "Renewing The Spirit Of The American Investor The industry's best and brightest gathered at MONEY's second annual Summit to tackle the issues facing investors today" (2003/09/01).
• "Major Alternative Investments Conference Held in Qatar" Qatar Financial Centre Press Release.

References

15.Financial Week A Star Broker fades http://www.financialweek.com/apps/pbcs.dll/article?AID=/20070611/REG/70607004/-1/FWIssueAlert01

16.Black Enterprise Shawn Baldwin is building a financial services firm one acquisition at a time... http://www.thefreelibrary.com/On+the+fast+track:+Shawn+Baldwin+is+building+a+financial+services...-a084212955

17.Investment Dealers Digest Top 40 Investment bankers http://www.innovation-capital.com/news/061127.pdf

18.Milken Institute Global Conference Islamic Finance panel http://www.milkeninstitute.org/events/gcprogram.taf?function=detail&EvID=1574&eventid=GC09

19.Fast Company http://www.fastcompany.com/blog/shawn-baldwin/financetrading-and-global-capital-markets/shawn-baldwin-cmg-discussing-finance-da

20. Britannica Top 75 Blacks on Wall Street http://www.britannica.com/bps/additionalcontent/18/22733349/75-most-powerful-blacks-on-wall-street