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Featured
Article - Lehman
Principal Protected Notes Arbitrations - arbitration claims arising
from the marketing of Lehman Principal Protected Notes are on the rise as
investors seek recover from other firms and brokers for their losses. Analysis
of the issues and the claims by Mark J. Astarita, Esq.
Introductory
Materials
Recommended
Books
Personal
Finance For Dummies-
From Amazon - "Personal Finance for Dummies offers sound and practical
advice for those who want to get control over their personal financial
lives. Author Eric Tyson points out the most common mistakes that we all
make in our approach to money and prescribes ways to save and invest for
a secure future. Using worksheets, the book helps you to measure your
own financial health by looking at factors such as how much debt you carry,
your savings rate, as well as investment and insurance checkups. The book
looks at how you should invest your retirement account, approach taxes,
and provides a good overview on how to buy real estate."
Commentary
Testimony by Chairman and CEO Richard G. Ketchum Before the Committee
on Financial Services
SEC Continues Mark Cuban Fight
The SEC is in
trouble. We all know that, and they need to show that they are active, aggressive and enforcing the
securities laws. So, we get surprise examinations, a flurry of press releases and other assorted
activity. Good for them, they need to regroup and recover from their recent failures.
FINRA Seeks Further Erosion of Broker Rights -
BrokerCheck Forever
FINRA has proposed rule SR-FINRA-2009-050 under which it
would permanently disclose a condensed record for any broker who has been fined, suspended or
barred by securities regulators on its Internet based Broker-Check system. The proposed rule
was published in the Federal Register on August 17, 2009 and the SEC solicited comments for
submission on or before September 8, 2009.
No More 50% Pay Cuts?
Sallie Krawcheck, Bank of
America Corp.’s head of wealth management, said she won’t do "stupid things" to pay policies that
might spur financial advisers to leave the bank. I guess we don't be seening any more 50% pay
cuts or insulting retention bonuses from BofA/Merrill that caused so many brokers so much
harm.
Enforcement Actions
SEC Freezes Assets of French Citizens Within Days of Insider Trading
The
Securities and Exchange Commission has obtained an emergency asset freeze against two
French men it charged with insider trading the day after they tried to illegally profit from a Paris-
based manufacturer’s acquisition of another health care products company located in
Chattanooga, Tenn.
SEC Charges U.S. Subsidiary of World's Largest Inter-Dealer Broker for Displaying
Fictitious Trades and Misleading Customers
ICAP Securities USA LLC to Pay $25 Million
to Settle SEC Findings
FINRA Disciplinary Actions for August 2009
Advertising violations,
loans from customers, gifts from customers and more
NASDR Notices to Members
10-04 SEC Approves Consolidated FINRA Rules Governing Clearly
Erroneous Transactions
On December 1, 2009, the SEC approved FINRA's proposed
rule change to adopt a new set of rules governing clearly erroneous transactions in the
consolidated rulebook. The new FINRA Rule 11890 Series replaces NASD Rule 11890, IM-11890-
1 and IM-11890-2 and was adopted as part of a market-wide effort by multiple self-regulatory
organizations to provide transparency and finality with respect to clearly erroneous executions.
Among other things, the new rule series includes a new general rule defining "clearly erroneous"
transactions, separate provisions for the determination of clearly erroneous transactions
depending upon whether the transaction involves an exchange-listed security or an over-the-
counter equity security and procedures for appealing FINRA clearly erroneous determinations. In
addition, the new rule series codifies minimum numerical criteria necessary for a transaction to
qualify as clearly erroneous.
09-74 SEC Approves Changes to Arbitration Rules on Definition of
Associated Person, Distribution of the FINRA Discovery Guide and Applicability of Hearing Session
Fees
Effective January 18, 2010, amendments to the Customer and Industry Codes of
Arbitration: 1- clarify the definition of "associated person" and make it conform to the same term in
the FINRA By-Laws; 2-streamline a case administration procedure; and 3- clarify that customers
could be assessed hearing session fees based on their own claims for relief in connection with
an industry claim.The amendments will apply to claims filed on or after the effective date.
09-73 FINRA Reminds Firms of Their Sales Practice Obligations Relating
to Principal-Protected Notes
The retail market for principal-protected notes (PPNs) has
grown in recent years, in part because they are often marketed as combining the relative safety of
bonds with a potential for growth not available with traditional fixed income products. However,
these products are not risk-free, and their terms and structures can be complex. Firms must
ensure that their promotional materials or communications to the public regarding these products
are fair and balanced, and do not overstate either the level of protection offered or an investment's
potential returns. Firms also have a duty to ensure that their registered representatives understand
the risks, terms and costs associated with these products, and that they perform an adequate
suitability analysis before recommending them to a customer.
FINRA Disciplinary and Other FINRA Actions for December
2009
FINRA has taken disciplinary actions against the following firms and individuals for
violations of FINRA rules; federal securities laws, rules and regulations; and the rules of the
Municipal Securities Rulemaking Board (MSRB).
09-71 SEC Approves Consolidated FINRA Rules Governing Financial
Responsibility
The SEC approved FINRA's proposed rule change to adopt a new set of
financial responsibility rules for the consolidated rulebook (the Consolidated FINRA Rulebook).
FINRA Rules 4110, 4120, 4130, 4140 and 4521 are new consolidated rules governing financial
responsibility that are based in part on, and replace, provisions in the NASD and Incorporated
NYSE Rules. The rule change also amends FINRA Rules 9557 and 9559 to, among other things,
provide members served with a notice under the financial responsibility rules an expedited appeal
process, and makes certain conforming revisions to Section 4(g) of Schedule A to the FINRA By-
Laws.
09-70 FINRA Requests Comment on Proposed Consolidated FINRA
Rules Governing Registration and Qualification Requirements
As part of the process of
developing a new consolidated rulebook (the Consolidated FINRA Rulebook), FINRA is requesting
comment on a proposal to streamline and amend the FINRA registration and qualification
rules.
09-66 SEC Approves Changes to FINRA's BrokerCheck Disclosure Rule to
Retain and Make Publicly Available Information About Final Regulatory Actions Against Former
Brokers
Beginning November 30, 2009, information concerning final regulatory actions
against brokers—as well as certain administrative information (e.g., employment and registration
history) and information about qualification examinations, if available, and the broker's most
recently submitted comment, if any—will be permanently available in BrokerCheck,® regardless of
when they were employed in the securities industry.
09-60 SEC Approval and Effective Dates for New Consolidated FINRA
Rules
Following the consolidation of NASD and the member regulation, enforcement and
arbitration functions of NYSE Regulation into FINRA, FINRA established a process to develop a
new consolidated rulebook (Consolidated FINRA Rulebook), which FINRA has discussed in
previous Information Notices. FINRA is proposing new consolidated rules in phases for approval
by the SEC as part of the Consolidated FINRA Rulebook. In August and September, the SEC
approved eleven new consolidated FINRA Rules. The new rules, except for FINRA Rule 3310 (Anti-
Money Laundering Compliance Program), take effect on December 14, 2009. FINRA Rule 3310
takes effect on January 1, 2010.
09-59 FINRA Provides Guidance on Pandemic Preparedness
n
response to the outbreak of influenza A (H1N1) or swine flu, FINRA conducted a survey of certain
firms to determine pandemic preparedness. This Notice describes the results of the survey, and is
designed to help firms understand the concerns and risk-mitigating actions and take appropriate
measures to prepare for the effects of a pandemic. This Notice also addresses areas of regulatory
guidance that FINRA has provided during previous significant business disruptions.
The information in this Notice does not create new rules or obligations on firms, nor does the
implementation of any or all of the guidance create a "safe harbor" relative to any FINRA rules or
other securities regulations.
09-58 SEC Approves Amendments
Regarding Best Execution and Interpositioning
The SEC approved amendments to NASD
Rule 2320's requirements concerning a firm's best execution obligations and interpositioning. As
amended, the rule applies the standards in Rule 2320(a) to the execution of all customer orders,
including those involving interposed third parties. The changes became effective September 8,
2009.
The text of the amendments can be found in the online FINRA Manual at www.finra.org/finramanual
09-57 SEC Approves Amendments Expanding TRACE to Include Agency
Debt Securities and Primary Market Transactions
The SEC approved major amendments
to the TRACE Rules (FINRA Rule 6700 Series) and FINRA Rule 7730 relating to TRACE fees that
will increase the number and type of securities and transactions that will be reported to TRACE.
The changes become effective March 1, 2010.
09-55 FINRA Requests Comments on Proposed New Rules Governing
Communications with the Public
FINRA requests comments on proposed new FINRA
rules governing communications with the public. These new rules would replace current NASD
Rules 2210 and 2211, the Interpretive Materials that follow NASD Rule 2210, and portions of
Incorporated NYSE Rule 472.While the proposed rules are based upon these rules' current
provisions, the new FINRA rules would employ new communications categories and require the
filing of certain types of communications that currently are not required to be filed. The proposal
also would make a number of other changes to the communications rules.
09-53 Increased Margin Requirements for Leveraged Exchange-Traded
Funds and Associated Uncovered Options
Effective December 1, 2009, FINRA is
implementing increased customer margin requirements for leveraged ETFs and uncovered
options overlying leveraged ETFs, in accordance with NASD Rule 2520 and Incorporated NYSE
Rule 431.
News Items
FINRA Fines Pacific Cornerstone Capital, CEO $750,000 for Private
Placement Offering Failures
$750,000 in fines for failing to include full and complete
information in private placement offering documents and marketing material. FINRA also charged
Pacific Cornerstone and Roussel with advertising violations and supervisory failures.
SEC Charges California Firm and CEO With Defrauding Customers in Sales of Risky
Mortgage-Backed Securities
he Securities and Exchange Commission charged Irvine,
Calif.-based Brookstreet Securities Corp. and its President and CEO Stanley C. Brooks with fraud
for systematically selling risky mortgage-backed securities to customers with conservative
investment goals. The fraud cost many Brookstreet investors their savings, homes, or retirement
cushions, and eventually caused the firm to collapse.
SEC Blocks Early-Stage Ponzi Scheme Involving Purported Investments in Personal
Injury Settlements
The Securities and Exchange Commission has halted a Ponzi
scheme involving a New York firm that solicited investments involving personal injury lawsuit
settlements but instead shipped the money overseas. The SEC obtained a court order freezing the
assets of the firm, its president, and several companies holding money from the scam that began
several months ago.
FINRA Expels Meeting Street Brokerage, Bars Broker, Sanctions Firm's
Owner for Market Manipulation, Other Violations
All Three Schemed to Create Artificial
Price and Trading Volume for Relay Capital Corporation
SEC Charges Former Officers of Subprime Lender New Century With
Fraud
The Securities and Exchange Commission charged three former top officers of
New Century Financial Corporation with securities fraud for misleading investors as New Century's
subprime mortgage business was collapsing in 2006. At the time of the fraud, New Century was
one of the largest subprime lenders in the nation.
SEC Obtains Asset Freeze Against Co-Founder of Canopy Financial in $75 Million
Offering Fraud
The Securities and Exchange Commission announced that it has filed
fraud charges against a Chicago-based health care financial services company and has frozen the
assets of its co-founder who allegedly provided investors with forged financial statements to lure
them into a $75 million investment scheme.
The Top 40 Advisors Under 40
In On
Wall Street's third annual ranking, a new class of young advisors emerges from the market
meltdown. Here's how this year's top 40 advisors under 40 conquered a tough market.
FINRA Fines Terra Nova Financial $400,000; Firm Made Over $1 Million in
Improper Soft Dollar Payments
Three Former Employees Also Sanctioned
FINRA Fines MetLife Securities and Affiliates $1.2 Million for Email
Supervision Failures
Investigation of Broker Misconduct Continuing
FINRA Wins Okay for Major Expansion of BrokerCheck, Will Permanently
Disclose Disciplinary Actions Against Former Brokers
Permanent Disclosure Cited as
Welcome Boost to Investor Protection
SEC Charges Broker for Manipulation Using
Internet
Once again, the SEC is moving quickly. It is a welcome change, as they have
always been known for closing the barn door after the horse has bolted. Only three weeks after an
alleged fraud began, the SEC charged a securities broker with securities fraud for repeatedly
creating and then distributing fake press releases to manipulate the stock prices of multiple
publicly traded companies.
Morgan Stanley Plans to Double High Net Worth
Advisors
Morgan Stanley Smith Barney announced the integration of Smith Barney’s Citi
Family Office into its own ultra-high-net-worth division, which will now be called Morgan Stanley
Private Wealth Management. Unlike the old family office, the newly combined unit will exclusively
serve clients with a minimum of $20 million in assets. Morgan said it plans to add more advisors
to PWM through a combination of "organic growth and selective acquisitions."
Schwab Receives Wells Notice For Mutual
Funds
In an 8-K filing, Charles Schwab Corp. disclosed that it has received a Wells
Notice from the SEC. Accordign to the filing, the Company has been responding to civil litigation
claims and regulatory investigations regarding two fixed income mutual funds, the Schwab
YieldPlus Fund(R) and the Schwab Total Bond Market Fund(TM). The Wells Notice reflects that the
SEC staff intends to recommend the filing of a civil enforcement action against Schwab
Investments, Charles Schwab Investment Management, Charles Schwab & Co., Inc. and the
president of the funds for possible violations of the securities laws with respect to the two funds.
FINRA to Expand Program Evaluating
All-Public Arbitration Panels
More Firms, Additional Cases to Result in Nearly 50 Percent
Increase in Eligible Claims. The firms participating in the program are Citigroup Global Markets,
Merrill Lynch, Morgan Stanley Smith Barney, UBS Financial Services and Wells Fargo Advisors,
Ameriprise Financial Services, Charles Schwab, Edward Jones, Fidelity Brokerage Services, LPL
Financial, and TD Ameritrade.
Personal
Finance News Stories
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