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's Featured Articles, Books and Related Sites:
SEC Law.com IPO Information Center
Introductory
Materials:
Featured
Books:
Hedge
Fund Disclosure Documents Line by Line: A User's Guide to Private Placement
Memoranda for Funds Formed as Limited Liability Companies  -
a walkthrough of a private placement memorandum for a hedge fund, but
the concepts are applicable to any private placement memorandum.
Regulation
of Securities: Sec Compliance and Practice - Securities compliance
handbook for public companies, and those responsible for their compliance
issues. This is not an academic treatise, it provides straightforward
answers to real-world questions.
Commentary
Bear Brokers in Limbo
With all of Bear's
problems, its brokers are out looking for new positions. According to On Wall Street, recruiters say
they are seeing movement throughout the industry, due both to the Bear demise and changes
occurring at UBS, Goldman Sachs and Merrill Lynch. However, no firm would comment on whether
they are making overtures to Bear brokers. But do make sure to have an experienced securities employment
attorney review those new agreements!
Wal-Mart Sued Over 401(k) Fees
Like many
of the other suits that have been filed since 2006 against big employers such as Boeing, Deere
and General Dynamics, the suit against Wal-Mart—filed last month and currently seeking class-
action status—claims that the company breached its duties as a fiduciary by allowing its 401(k)
plan participants to be charged “unreasonably expensive” fees.
The suit alleges the fees were too high because Wal-Mart’s $9.5 billion 401(k) plan offered
participants retail mutual funds, as opposed to less expensive institutional funds, despite the
ready availability of reasonably priced options, the claim stated, particularly for a massive plan like
Wal-Mart’s with tremendous potential to leverage economies of scale.
Stoneridge and the Continued Reconceptualization of Implied Private Rights
of Action
In Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc., the Supreme
Court held that the private right of action implied under Rule 10b-5, the principal anti-fraud
provision of the federal securities laws, does not reach even deceptive conduct by secondary
actors. An examination of the decision by Mark Perry, from Wall Street Lawyer
UBS Writes Down $19
Billion
UBS has announced it will write down another $19 billion in the face of
deteriorating positions in its U.S. real estate and structured credit positions. In light of this news,
UBS chairman, Marcel Ospel, has also announced that he will step down.
SEC Fuels New Mark-to-Market
Conspiracy Theories
Interesting commentary from Bloomberg regarding the closure of
an accounting loophole and the opening of new issues.
Retail Financial Advisors’ Refrain: Let’s Kill The Traders
Brokers
are bitter—and for good reason. Since the sub-prime slaughter began this summer, many of those
at Merrill Lynch, Smith Barney, Morgan Stanley and the other wirehouse firms, have seen their net
worth, tied up largely in deferred stock, cut by a third or more. ...
Enforcement
Actions
FINRA's National Adjudicatory Council Affirms $5 Million
Fine Against American Funds Distributors for Violating FINRA's Anti-Reciprocal Rule
A $5
million fine imposed against American Fund Distributors for directed brokerage in 2006 will stand,
according to a ruling of the National Adjudicatory Council
Information and
Lists
FINRA Podcast - Preparing for a FINRA Cycle
Examination
This podcast, the audio version of a webcast developed for the "What to
Expect" series, focuses on what firms should expect during the cycle examination process and
how they can prepare.
Rulebook Consolidation Process
It is
going to be a long process. Following the consolidation of NASD and NYSE Regulation into FINRA,
FINRA established a process to develop a new consolidated rulebook, which is outlined in this
Notice. The new FINRA Rules will apply to all FINRA members and will be proposed in phases to
the SEC. As rules approved by the SEC become effective, they will replace the existing NASD Rules
and incorporated NewYork Stock Exchange (NYSE) Rules.
NASDR Notices to
Members
08-15 Foreign Research Analyst Exemption from the
Research Analyst Qualification Examination
Effective April 7, 2008, certain research
analysts employed by a member firm’s foreign affiliate who contribute to the preparation of a
member firm’s research reports are exempt from the Research Analyst Qualification Examination
per NASD Rule 1050 and Incorporated NYSE Rule 344. The rule change supersedes an existing
exemption that applies only to research analysts who are employed by foreign affiliates in certain
FINRA-approved jurisdictions
08-16 Member Firm Disclosure and Supervisory Review
Obligations
Effective April 7, 2008, an amendment to revise NASD Rule 2711(h)(13) and
Incorporated NYSE Rule 472(k)(4) modifies a member’s disclosure and supervisory review
obligations when it distributes or makes available third-party research reports. The rule change
creates a category of "independent third-party research" and eliminates certain supervisory review
requirements when a member distributes or makes available such research.
FINRA Disciplinary Actions Reported for
February 2008
Net capital, books and records, sales contests, operating while
suspended, advertising violations, TRACE violations, OATS violations, and more
News
Items
SEC Stops Multi-Million Dollar Fictitious Currency Trading Program
The SEC
has announced that it has obtained a court order to stop a $27 million Ponzi scheme involving
investors in the United States, Canada, and other countries. The SEC charged Las Vegas-based
Gold-Quest International and its three principals for the alleged misuse of investor funds in a
scheme that promised incentives to investors who recruited "friends and family" into the system.
The SEC alleged that Gold-Quest and its owners misrepresented that investor funds would be
pooled and invested in foreign currency exchange trading and would generate annual profits of
87.5 percent. No investor money was actually invested in foreign currency exchange trading.
SEC Staff Recommends Commission Action to Facilitate Investment in Small
Business
The SEC's Division of Investment Management has prepared a
recommendation for consideration by the Commission to increase the availability of capital to
certain smaller companies that do not have ready access to the public capital markets or other
forms of conventional financing. The Division has recommended that the Commission adopt an
amendment to a rule that defines the types of companies in which business development
companies (BDCs) may invest most of their assets. Congress in 1980 established BDCs, which
are publicly traded investment companies, to help make capital more readily available to small
developing and financially troubled businesses.
SEC Charges Two Former Monster Worldwide Executives for Backdating
Options
The SEC has charged two former senior executives at Monster Worldwide, Inc.,
for their alleged participation in a multi-year scheme to secretly backdate stock options granted to
thousands of Monster officers, directors and employees.
SEC Charges Birmingham Mayor and Friends for Undisclosed Payment Scheme in
Municipal Bond Deals
The SEC has charged Birmingham Mayor Larry Langford and two
of his friends in connection with undisclosed payments to Langford related to municipal bond
offerings and swap agreement transactions Langford directed on behalf of Jefferson County, Ala.
Also charged was the Alabama broker-dealer firm that reaped millions of dollars in fees from the
deals.
SEC Announces $30 Million Fair Fund Distribution to Investors Affected by Undisclosed
Market Timing in RS Investments Mutual Funds
The SEC announced the distribution of
approximately $30.6 million to more than 250,000 investors who were affected by undisclosed
market timing in certain RS Investments mutual funds.
The Fair Fund distribution includes $25 million in disgorgement and penalties paid by RS
Investment Management, Inc. and RS Investment Management, L.P. (RS Investments) in an SEC
enforcement action, approximately $3.3 million in disgorgement and penalties from Banc of
America Capital Management LLC, BACAP Distributors LLC, and Banc of America Securities LLC
related to a separate unlawful market timing matter that affected RS Investments investors, and
accumulated interest.
SEC Charges Wall Street Short-Seller With Spreading False Rumors
The SEC
has charged Paul S. Berliner, a Wall Street trader formerly associated with Schottenfeld Group
LLC, with securities fraud and market manipulation for intentionally spreading false rumors about
The Blackstone Group's acquisition of Alliance Data Systems while selling ADS short.The SEC
alleges that five months ago, Berliner disseminated the false rumor through instant messages to
numerous individuals, including traders at brokerage firms and hedge funds. The false rumor also
was picked up by the media.
Heavy trading in ADS stock ensued, and within 30 minutes the false rumor had caused the price of
ADS stock, trading at approximately $77 per share, to plummet to an intraday low of $63.65 per
share - a 17 percent decline. In response to the unusual trading activity, the New York Stock
Exchange temporarily halted trading in ADS stock. Later in the day, ADS issued a press release
announcing that the rumor was false. By the close of trading, the price of ADS stock recovered to its
pre-rumor price of approximately $77 per share. Berliner profited by short selling ADS stock during
its precipitous decline
UBS puts its investment banking unit on a tight
leash
Private bank will no longer fund i-bank; capital 'must be generated under its own
steam'
Merrill files claim against Nat City over First
Franklin
Claim arises from i-bank’s purchase of subprime mortgage originator from Nat
City in 2006
SEC and PAUSE help to warn investors
of securities fraud
The SEC is stepping in to protect investors against fraudulent sales
pitches and other investment related scams. Their new initiative, "PAUSE," which stands for Public
Alert: Unregistered Soliciting Entities, aims to educate investors about current company
complaints, questionable activities, boiler room fraud, phone solicitations, and other shady
practices being used by money hungry scam artists.
PAUSE currently lists 56 unregistered soliciting entities and phone agencies that investors should
avoid. The SEC plans to update the list regularly, and hopes that individuals will visit the site
before making any investment decisions.
Ex-Brookstreet brokers file $36M
claim
According to InvestmentNews, five brokers at the center of the collapse of
Brookstreet Securities Corp. have filed a $36 million arbitration complaint against Brookstreet’s
former clearing firm, National Financial Services LLC, alleging that hundreds of millions of dollars
that clients lost in highly leveraged collateralized mortgage obligations were directly attributable to
National Financial Services’wrongful conduct.
Bear Stearns, Deloitte Sued Over Hedge
Fund
The problems for Bear Stearns seem to keep on coming. After its fire sale to JP
Morgan, today's news is that the liquidators of two of its hedge funds that collapsed last year, have
filed suit against the company and its auditor, Deloitte & Touche seeking to recover over $1 billion
in losses.
Fed Monitoring Brokerage Firms
According to the Wall Street Journal,
the Federal Reserve has set up shop inside brokerages to monitor their financial condition,
perhaps the beginning of an expanded role for the central bank and additional regulation for Wall
Street. Reuters adds that the Fed has its personnel inside brokerages including Goldman Sachs
and Bear Stearns to monitor their financial state.
FINRA Issues Guidance to Investors Caught in ARS
Auction Failures
The Financial Industry Regulatory Authority (FINRA) today spelled out the
options available to investors holding unexpectedly illiquid auction rate securities (ARS) because
of recent developments in the credit market that have resulted in many ARS auctions failures.
Investors tap retirement savings to make real
estate bets
Amid housing woes, use of self-directed IRAs is on the rise
Self-Regulators Warn Against Spreading False Rumors
and Other Abusive Market Activity
The SROs are coordinating efforts to heighten the
monitoring and investigation of trading activity in issuers that may be subject to credit market-
related volatility.
The regulators are reminding brokers of the prohibitions in NYSE Rule 435(5) and NASD Rule
5120(e) against the circulation in any manner of sensational rumors that might reasonably be
expected to affect market conditions, as well as their obligations under NASD Rule 2110 and NYSE
Rule 476 to refrain from any conduct or activity inconsistent with just and equitable principles of
trade.
FINRA Settles with Five Firms for Supervisory Failures,
Improper Mutual Fund Sales to More than 5,300 Households; Tens of Millions of Dollars to be
Returned to Customers
FINRA announced today that it has settled cases against five
firms for mutual fund sales and supervisory violations - including improper sales of Class B and
Class C mutual fund shares and failure to have supervisory systems designed to provide all
eligible investors with the opportunity to purchase Class A mutual fund shares at net asset value
(NAV) through NAV transfer programs.
To resolve the NAV violations, Merrill Lynch, Prudential
Securities, UBS and Wells Fargo agreed to remediation plans for eligible customers who qualified
for, but did not receive, the benefit of NAV transfer programs. It is estimated that total remediation to
customers will exceed $25 million.
For the share class sales violations, FINRA imposed an $800,000 fine against Prudential
Securities and a $750,000 fine against UBS Financial Services, Inc. for improper sales of Class B
and Class C mutual fund shares. A $100,000 fine was imposed against Pruco Securities for
improper sales of Class B shares. In resolving the Class B and Class C share matters, these
firms also agreed to remediation plans that will address over 27,000 fund transactions in the
accounts of 5,300 households.
SEC Makes Analyzing Corporate Performance Easier for Investors
Securities
and Exchange Commission Chairman Christopher Cox today announced the launch of the
“Financial Explorer” on the SEC Web site to help investors quickly and easily analyze the financial
results of public companies. Financial Explorer paints the picture of corporate financial
performance with diagrams and charts, using financial information provided to the SEC as
"interactive data" in eXtensible Business Reporting Language (XBRL).
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