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The Morning Brief: Sandell Hits Back at JDS Uniphase

New York-based activist hedge fund firm Sandell Asset Management has accused JDS Uniphase Corporation of engaging in “troublesome governance practices” that entrench management — and it’s given the company two weeks to fix them. In a letter to the company’s board of directors, Sandell says a new rule for submitting a shareholder notice or resolution makes it nearly impossible for a shareholder to get it to the board in a timely matter. “The fundamental impropriety” of the provision “is self-evident,” Sandell states, stressing that it gives the company “tremendous latitude” to “game the system.”

In November, Sandell initially criticized JDS Uniphase, which makes fiber optic networking equipment, for announcing the date of its annual meeting with exactly 60 days notice, which Sandell argued “rendered it effectively impossible” for the firm to submit its director nominations in time, since JDS Uniphase’s bylaws require these nominations to be submitted at least 60 days prior to the meeting. In Tuesday’s letter, Sandell also called on JDS Uniphase to explore “all options” to unlock the value of its extensive net operating loss carryforwards (NOLs), which it estimates have a book value in excess of $2.3 billion.

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Shares of troubled mortgage servicer Ocwen Financial Corp. plunged another 36 percent or so on Tuesday after an LA Times report said California is seeking to suspend the company’s mortgage license. We earlier noted that at the end of the third quarter, Matthew Iorio’s Greenwich, Connecticut-based White Elm Capital Partners fund still owned Ocwen and Altisource Portfolio Solutions, which was spun off from Ocwen. Altisource lost 39 percent on Tuesday. Since the beginning of 2014 Ocwen has fallen by 86 percent, while Altisource tumbled 89 percent.

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The Securities and Exchange Commission said that in 2015 its Office of Compliance Inspections and Examinations will more closely scrutinize alternative products offered to retail investors, including private funds, illiquid investments and structured products.

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