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Peregrine clients lose patience as trustee seeks money

Peregrine Financial Group’s bankruptcy trustee has hired a team of forensic accountants to help figure out what money remains at the failed futures brokerage as impatient customers complain about delays in getting even some of their money back. “They’re not telling us anything, other than it’s going to be weeks before they tell us anything,” said Tim Rea, founder of New Zealand-based Transworld Capital Management Ltd, with about $900,000 in Peregrine accounts. Bankruptcy trustee Ira Bodenstein told Reuters on Wednesday he had hired PricewaterhouseCoopers to help figure out what remains at the failed futures brokerage after its founder’s arrest this month and confession to years of stealing from customers. Read CNBC report [...]

CFTC panel to weigh new customer fund safeguards

A commissioner charged with improving technology at the U.S. futures regulator plans to tell industry players that immediate action is needed to protect customer funds at an emergency advisory committee meeting on Thursday. Weeks after the revelation of a $200 million shortfall in customer money at collapsed brokerage Peregrine Financial Group, an industry panel created by the Commodity Futures Trading Commission will explore possible reforms, like giving regulators direct electronic access to customer accounts. The meeting was called days after the July collapse of PFGBest, as Peregrine is known, which drew instant comparisons to bankrupt brokerage MF Global Inc. That firm exploded in October, leaving a $1.6 billion hole in client funds. More in the Chicago Tribune [...]

UPDATE 1-Judge faults SEC oversight in Wall St. research accord

U.S. securities regulators drew sharp criticism from a federal judge who said they have failed to properly oversee a $55 million investor education fund created by a nearly decade-old settlement with Wall Street banks. The fund had been created as part of a roughly $1.5 billion regulatory accord in 2003 with Citigroup Inc (C.N), Goldman Sachs Group Inc (GS.N), JPMorgan Chase & Co (JPM.N) and other banks accused of publishing biased analyst research. U.S. District Judge William Pauley in Manhattan said the U.S. Securities and Exchange Commission has shown a “lack of oversight” and “indifference” toward how a nonprofit foundation charged with distributing the money has been managed. Read Reuters report [...]

Peregrine Has U.S. Futures Regulators on Defense in Congress

U.S. futures regulators, scrutinized for missing warning signs before the collapse of Peregrine Financial Group Inc., plan to defend their oversight to congressional lawmakers today and call for new rules. The U.S. Commodity Futures Trading Commission, the main U.S. derivatives overseer, identified lapses in financial controls in at least three reviews of Peregrine since 2000, Gary Gensler, the agency’s chairman, said in testimony prepared for a House Agriculture Committee hearing today. Gensler called for new reviews of self-regulatory organizations, including the National Futures Association, the company’s primary overseer. Peregrine “fooled us,” Dan Roth, president of NFA, said in his testimony. More on Bloomberg [...]

The F(iduciary) Word

One of the many provisions of the July 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act was the creation of the first new federal regulatory agency in a decade, the Consumer Financial Protection Bureau (CFPB), which consolidates most federal consumer financial protection authority in one place. Now approaching its first anniversary, the CFPB’s stated mission is: “to make markets for consumer financial products and services work for Americans.” Dodd-Frank and the CFPB cover a lot of ground, but the law punted on one issue that is near and dear to me: the concept of a “fiduciary standard.” The fiduciary standard requires financial professionals to act in the best interests of their clients. You may think that your broker or insurance agent is obligated to do so now, but they are generally held to a much looser standard, called “suitability.” In other words, the product they are selling needs only to be suitable for you, rather than in your best interests. See CBS News report [...]

Two U.S. Senators Propose Letting SEC Impose Bigger Penalties

U.S. senators Jack Reed and Charles Grassley introduced a bill to authorize the Securities and Exchange Commission to impose bigger sanctions after the agency said it didn’t have adequate tools to deter financial fraud. Under the proposed legislation, fines against individuals would be capped at $1 million per violation instead of $150,000 and penalties for firms would be limited to $10 million from $725,000 for each misdeed, according to a joint statement today by Reed, the Rhode Island Democrat who leads a subcommittee that oversees the SEC, and Grassley, the Iowa Republican. Read more on Bloomberg Businessweek here.
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Futures regulator calls for more customer protections

A U.S. futures regulator on Monday urged Congress to boost protections for futures customer funds, weeks after the revelation of a $200 million shortfall at bankrupt futures brokerage Peregrine Financial Group renewed calls for tougher safeguards. Bart Chilton, a Democratic Commissioner at the Commodity Futures Trading Commission (CFTC), asked top lawmakers to create a futures customer insurance fund to backstop customer losses if a brokerage fails. More on Reuters [...]

Finding Recourse When Investors Are Cheated

The financial scandals of recent weeks seem to involve the simple act of cheating. Whether it’s falsifying documents or fudging an interest rate quote, many of the actors of these schemes knowingly cheated in some form or another. But the federal government may need to find new ways of providing some recourse for investors who are victims of brazen fraud. The dictionary defines “cheating” as “to violate rules dishonestly.” It is a rather benign term. Who hasn’t fudged a bit on their taxes, or ignored the speed limit? Read New York Times report [...]

Former Stanford exec says in limbo as SEC case drags

Bernerd Young has waited more than two years for a final decision from U.S. securities regulators about whether he will be charged over his role as compliance officer at the brokerage owned by convicted Ponzi schemer Allen Stanford. In those two years, Young says his life has been put on hold as the cloud of the Securities and Exchange Commission probe has overshadowed his attempts to move on professionally. MGL Consulting, where he is currently chief executive officer, has lost 20 percent of its clients, filed for bankruptcy and had regulators kill the firm’s expansion plans – all driven by the stigma of the probe, Young says. More on Reuters here. [...]

Senate Bill Aims To Give SEC More Power To Punish Wall Street Crimes

U.S. Senators are planning to introduce a bipartisan bill on Monday to give the country’s securities regulator the authority to seek tougher fines for alleged Wall Street criminals. The bill, sponsored by Rhode Island Democrat Jack Reed and Iowa Republican Chuck Grassley, would boost the penalties that the U.S. Securities and Exchange Commission can seek from firms and individuals accused of wrongdoing and triple the cap on funds the agency can seek from repeat offenders. “If a fine is just decimal dust for a Wall Street firm, that’s not a deterrent,” Grassley said in a statement. “A penalty should mean something.” More in the Huffington Post [...]