Cantor Tightens Ban on Windhorst, Tells Brokers ‘No Exceptions!’

(Bloomberg) -- Howard Lutnick’s Cantor Fitzgerald is tightening a ban on dealings with Lars Windhorst, first introduced four years ago and predating a succession of crises and lawsuits involving the German financier.

Cantor and sister company BGC Partners are reviewing their blacklist of entities associated with Windhorst every two weeks and are seeking to identify new activity related to him, according to a memo to staff seen by Bloomberg.

Cantor Tightens Ban on Windhorst, Tells Brokers ‘No Exceptions!’

The list mentions Shard Capital and ADS Securities, which were involved in trading securities issued by businesses with links to Windhorst, according to the memo. It also lists bonds from more than 20 firms, including real estate companies, airlines and an Italian lingerie brand, with direct or indirect ties to him.

“These bonds may be held by your existing clients so please remain vigilant. NO EXCEPTIONS!’’ the memo said.

The tightening of scrutiny at Cantor comes after European asset manager H2O was tipped into crisis over holdings of unrated bonds linked to Windhorst and his businesses that saw clients withdraw 8 billion euros ($8.9 billion) over three weeks. It also means Windhorst has fewer options to carry out his business activities, many of which depend on brokerages to match buyers and sellers of securities issued by his companies.

In addition to Cantor Fitzgerald, the restriction applies to affiliated broker BGC.

Officials at Cantor Fitzgerald and BGC declined to comment on the list.

A spokesman at ADS declined to comment. Shard said it has “only ever acted as settlement agent and custodian on a purely execution basis,” in relation to Windhorst entities.

Windhorst has presided over a succession of booms, busts and comebacks since achieving fame in Germany as a teenage entrepreneur in the 1990s.

A representative for Windhorst’s investment vehicle Tennor Holding declined to comment on the blacklist.

In 2016, ADS reneged on a payment to buy back securities, leaving Goldman Sachs Group Inc. temporarily on the hook for $85 million, according to a lawsuit brought by an ex-Goldman employee dismissed the following year. ADS has said it only acts as an intermediary and can’t comment on clients’ activities. Schnigge, a German broker, was forced to close down after a late settlement of a trade in 2016.

The blacklist includes bonds sold by firms controlled by Windhorst’s holding company, such as Italian fashion brand La Perla and oil company Trent Petroleum.

Windhorst has financed much of his business empire by selling bonds that are rarely traded, which means they can be hard to liquidate by an asset manager needing to keep pace with client redemptions during a downturn.

European investment firms are facing wider pressure from clients and regulators over what they hold in their portfolios following a series of upsets at some of the region’s biggest fund managers.

When Morningstar Inc. put one of H2O’s funds under review last month over its holdings of illiquid securities, clients rushed for the exits. The firm had 1.4 billion euros tied up in non-rated bonds issued by companies linked to Windhorst’s Tennor Holding.

Unrelated to Windhorst, GAM Holding AG dismissed a senior executive last year over allegations of shortfalls in documenting trades and handling risk. British celebrity investor Neil Woodford, last month gated his flagship fund when client withdrawal requests started coming in faster than illiquid underlying assets could be sold.

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