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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
Wealthy Investors Favor Private Equity
Well-known high
net worth individuals have benefited from putting their surpluses into private equity/venture capital
funds early, reports Sify.com.
Reacting to the Paulson Redesign
As
Treasury unveils its regulatory blueprint, has the time come for a massive consolidation of
securities regulators? That is the question that is being asked as the industry moves through the
proposals. I am a big fan of the concept that bigger is not always better, but we do have an
overabundance of regulators. OTOH, it is going to take FINRA years to get its act together in the
merger of the NASD and the NYSE. Can you imagine how long it will take to merge the CFTC and
the SEC?
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.
Comment Period For Motion To Dismiss Ban Is April
10
As everyone now knows, FINRA has a rule proposal pending to eliminate motions to
dismiss in arbitrations. The comment period ends on Thursday, and very few comments have
been submitted. The ones that have been made are almost uniformly in favor of the rule.
FINRA's proposal will effectively eliminate motions to dismiss in arbitrations prior to the
presentation of Claimant's case. While those motions are rarely granted, some are granted, and
motions made during the course of discovery are also granted. Such motions are a valid part of the
arbitration process, and serve to limit the scope of a proceeding, or the length of a hearing.
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.
FIA
Responds to the U.S. Treasury’s “Blueprint for Regulatory Reform
The FIA commends
the Treasury Department for taking a comprehensive look at the U.S. regulatory system and for
recognizing the many benefits of the regulatory system that now applies to U.S. futures markets
administered by the Commodity Futures Trading Commission. The FIA has long agreed with
Treasury’s view that modern market realities compel the CFTC and the Securities and Exchange
Commission to enhance their coordination and cooperation efforts.
Remarks by Mary L. Schapiro, Chief Executive Officer,
FINRA at CCO Outreach Event
Comments at the CCO outreach conference in
Washington DC on March 7, 2008
Call Compliance! SEC’s ADV Proposal Could Be
Costly
Registered Rep's take on the proposed changes to Form ADV
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
FINRA Disciplinary Actions for March
2008
Firm expelled for conducting private placements while suspended from
participating in offerings, others sanctioned for late trading, unreasonable mutual fund fees, 3070
violations, unfair pricing, brokers sanctioned for misrepresentation, mutual fund suitability, and the
typical OATS, TRACE and other reporting violations
Information and Lists
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
08-20 FINRA Requests Comments on Proposed
Changes to Forms U4 and U5
FINRA requests comment on proposed changes to Forms
U4 and U5. The proposed changes, which were developed by a working group composed of
regulators and industry participants (the Working Group), are intended to benefit regulators,
investors and the industry. Proposed revisions, among other things, would require firms to report,
as customer complaints, allegations of sales practice violations made in arbitration claims and
civil lawsuits against registered persons who are not named as parties in those proceedings. The
proposals also include revisions to Forms U4 and U5 designed to ease, clarify or facilitate
reporting requirements and other technical and/or conforming changes
08-17 Reporting of Customer Complaints Relating to
Auction Rate Securities
FINRA has added three new product categories for use by
member firms in reporting customer complaints relating to auction rate securities. NASD Rule
3070(c) and incorporated NYSE Rule 351(d) require all members and member organizations to
report, on a quarterly basis, statistical information regarding customer complaints. This
information is required to be filed by the fifteenth calendar day of the month following the end of the
quarter.
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.
08-07 FINRA and NYSE Filed Rule Changes with the SEC
to Amend FINRA's Gross Income Assessment and Eliminate Certain NYSE Fees
On July
30, 2007, NASD and the New York Stock Exchange (NYSE) consolidated their member regulation
operations. The combined organization, renamed FINRA, was funded by the legacy NASD fee
structure and certain fees collected under NYSE authority and remitted to FINRA. As part of the
ongoing consolidation, FINRA has proposed a series of changes to its funding structure. This
regulatory pricing proposal, if approved, and prior rebate commitment would result in savings to
the securities industry of approximately $25 million dollars annually.
08-06 SEC Approves Amendments to NASD Rule 11810(i)
to Mandate the Use of the Automated Liability Notification System of a Registered Clearing
Agency
Effective March 13, 2008, when issuing liability notices in connection with certain
securities transactions, firms are required to use the automated liability notification system of a
registered clearing agency, provided that both parties to the contract are participants in a registered
clearing agency that has such an automated system.
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 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 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 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.
FINRA Hearing Panel Dismisses 2004 Sales Practices
Complaint Against H&R Block Financial Advisors
In a decision that is surely causing
concern at FINRA, a FINRA Hearing Panel dismissed a complaint against H&R Block Financial
Advisors alleging sales practices and supervisory violations relating to sales of Enron Corporation
bonds during the one-month period immediately preceding Enron's filing for bankruptcy protection
on Dec. 2, 2001.
The panel ruled that FINRA's Department of Enforcement failed to show by a preponderance of
evidence that H&R Block registered representatives misrepresented or omitted material facts in
connection with sales of Enron bonds, or that the firm failed to implement adequate supervisory
systems and procedures. Specifically, the Panel "found no evidence" that the firm "engaged in
other wrongful conduct."
A FINRA hearing panel finds "no evidence" to support FINRA charges against a BD? While this
raises a number of concerns regarding the quality of the investigative process at FINRA and its
decision making process in commencing litigation, the proceeding was undoubtedly a significant
expense for the respondents, as the hearings consumed 24 days of testimony.
We are seeing an increasing number of hearing panels dismissing all or parts of enforcement
cases. FINRA needs to examine the quality of its investigative procedures, and to re-examine its
perception of brokers and brokerage firms, which may be clouding its collective judgment in
commencing cases where there is no evidence of any wrongdoing.
The panel issued a detailed, 54-
page decision.
Nuveen struggles to cash out its ARS
holders
Fund giant looking to liquefy $15 billion in preferred auction-rate securities;
investors may have to wait months
BlackRock bails out its auction-rate
holders
Good news for holders of Auction rate securities. Joining Nuveen and Eaton
Vance, BlackRock, the second-largest manager of closed-end funds in the U.S., said that it would
restructure $1.9 billion of ARPs issued by both taxable and tax-exempt closed-end funds.
That means that the holders of the ARS will not have a loss on their investment. Of couse, this
all assumes that Blackrock follows through. Reports say that it has obtained 1.9 billion in financing
for the bail out, but Blackrock has over 9 billion dollars in ars in its mu
Congressmen question fund companies’
treatment of ARS holders
Letter to SEC's Cox labels resistance to cashing out closed-
end ARS funds an 'apparent conflict'
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 settles with Wall Streeter accused of
spreading rumors about Alliance Data
Trader allegedly profited from text messaging lies
about LBO offer; 'info' was soon picked up by media outlets
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
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
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'
BlackRock bails out its auction-rate
holders
Second-largest closed-end fund manager considers adding a put to $1.9 billion
worth of frozen securities to make them more salable
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.
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.
Melvyn Weiss Pleads Guilty in Class Action Kickback
Scheme
Melvyn I. Weiss, co-founder of a prominent New York law firm, pleaded guilty
Wednesday to a racketeering conspiracy charge in a kickback scheme.
Mr. Weiss, 72, entered his plea under an agreement with prosecutors. He has been ordered to pay
nearly $10 million in fines and forfeiture penalties, and could be sentenced to up to 33 months in
prison at a later hearing.
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.
Statement of FINRA CEO Mary L. Schapiro Regarding
Treasury Secretary's Blueprint on Revamping Financial Services Regulation
Why bother
to even put out a press release - the standard FINRA footer is longer than the statement itself.
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.
Unregistered BD Defrauds Day Traders
The SEC
has announced that it obtained an emergency court order against an unregistered securities day-
trading firm in La Jolla, Calif. Not only was the firm unregistered, it was diverting assets from day
traders to cover losses of other day traders
SEC Warns Public Pension Funds About Inadequate Compliance
Procedures
The Securities and Exchange Commission today issued a report reminding
public pension funds of their responsibilities under the federal securities laws, and warning them
that they assume a greater risk of running afoul of anti-fraud and other provisions if they do not
have adequate compliance policies and procedures in place to prevent wrongdoing in their money
management functions.
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 Charges Three Promoters for Victimizing Military Families in Real Estate
Investment Scheme
The Securities and Exchange Commission today charged three
promoters who targeted military families in a multi-million dollar investment scheme that forced
victims into personal bankruptcy and their homes into foreclosure. The scam also targeted other
affinity groups, including the Southern California Filipino community and fellow church
members.
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).
SEC Charges Former Dow Jones Board Member, Three Other Hong Kong
Residents in $24 Million Insider Trading Settlement
The Securities and Exchange
Commission today announced settled insider trading charges against four Hong Kong residents
for illegal tipping and trading in the securities of Dow Jones & Company, Inc. in the weeks before
the public disclosure on May 1, 2007 of an unsolicited $60 per share acquisition offer for Dow
Jones by News Corporation. The alleged tip originated with David Li Kwok Po ("David Li"), who
served on the Dow Jones board of directors. David Li is the Chairman and Chief Executive Officer
of the Bank of East Asia and a member of Hong Kong's Legislative Counsel and Executive
Committee.
The complaint is online here
Related Sites
Subprime-related lawsuits clogging
courts
Cases mounting quickly, may eventually surpass number of suits filed in S&L
scandal; on average, two suits filed every day
Personal
Finance News Stories
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