FINRA reviewing conflicts of interest at U.S. brokerages

Wall Street’s industry-funded watchdog wants to learn more about how brokerages are managing conflicts of interest, including compensation that may motivate brokers to push certain securities to investors, a top U.S. regulator said on Wednesday. The Financial Industry Regulatory Authority (FINRA) is in the process of collecting information about conflicts of interest from 14 brokerages, according to Susan Axelrod, head of FINRA’s member regulation unit. Meetings between FINRA and representatives from those brokerages are about to begin, she said during a seminar in New York hosted by the Practising Law Institute, a group that provides continuing legal education classes to lawyers. More on Reuters [...]

Rajat Gupta Gets Two-Year Sentence for Insider Trading

Rajat Gupta, the former Goldman Sachs Group Inc. (GS) director and McKinsey & Co. managing director who rose to the pinnacle of Wall Street, was sentenced to two years in prison for passing inside tips to his business partner. Gupta, who ran McKinsey from 1994 to 2003, was sentenced yesterday by U.S. District Judge Jed Rakoff in Manhattan for leaking stock tips to Galleon Group LLC co-founder Raj Rajaratnam. Gupta, 63, was convicted by a jury in June of one count of conspiracy and three counts of securities fraud. More on Bloomberg Businessweek [...]

Securities regulator questions need for new broker standard

A plan that could ultimately require certain securities brokers to act in their client’s best interests should not proceed unless an economic analysis demonstrates it is necessary, a top U.S. securities industry regulator said Tuesday. “I’m far from sure about” whether such an analysis would lead to that conclusion, said Daniel Gallagher, a commissioner with the U.S. Securities and Exchange Commission, in remarks on Tuesday. More on Reuters [...]

SEC’s Schapiro says not eyeing the exits

Mary Schapiro attempted to shoot down rumors that she’s close to wrapping up her tenure as the head of the U.S. Securities and Exchange Commission, saying on Tuesday that she has not thought about her post-SEC career plans. Speculation has ramped up in recent months that Schapiro, who is closing in on a tumultuous four years as SEC chairman, will head for the exits after the November 6 elections. Read Reuters report [...]

Ponzi Scheme Victims May Owe Triple Damages For Usury In Clawback Lawsuits – A New Tool In Ponzi Scheme Litigation?

Often, after discovering that they were invested in a Ponzi scheme, victims are left in a state of shock wondering how they became embroiled in such a travesty. Many reflect, concluding in hindsight that the investment was simply ‘too good to be true.’ That shock may later turn to disbelief for those unfortunate enough to have profited from their investment, when a court-appointed receiver or bankruptcy trustee pursues clawback litigation designed to, as the very name suggests, “claw back” any profits received in excess of an investor’s contribution. Logically, those who had invested in a scheme for a considerable period of time faced the prospect of being on the hook for hundreds of thousands, or even millions, of dollars in ‘false profits’, as well as pre-judgment interest. And, in a recent development, if several court-appointed receivers and trustees have their way, some clawback targets may soon be facing the prospect of not only owing their false profits, but triple damages based on violations of state usury laws. More on Forbes [...]

SEC Issues Notice of Intention to Cancel Registrations of 293 Investment Advisers — but Not Madoff

The Dodd-Frank Wall Street Reform and Consumer Protection Act required investment advisers managing less than $100 million to withdraw their registrations with the SEC and switch to registration with one or more state securities authorities by June 28, 2012. To date, more than 2,300 mid-sized advisers have reportedly transitioned from federal to state regulation. In an effort to finalize the transition, the Commission last Friday issued a notice identifying 293 advisers who the Commission believes that reasonable grounds exist for a finding that these firms may no longer be eligible for registration with the SEC. That is, according to the SEC, the firms may no longer be in existence, not engaged in business as investment advisers, or are prohibited from registering as investments advisers at this time because they manage less than $100 million. Read more in Forbes [...]

Rare Guitars Seized In Dallas Ponzi Scheme To Go Up For Auction

Last year William Anthony Rand and his three sons pled guilty to scamming 330 investors out of $68 million in a scheme disguised as a Dallas oil and gas company called Aspen Exploration. The crooks perpetrated their fraud during the time of record-high oil prices in 2008. They told investors that by investing in Aspen’s Texas oil leases they’d double their money in three years and multiply it further over 20 years of flows from the wells. Instead of drilling wells, however, the Rands bought real estate, boats, vehicles, an original Picasso, wine, jewelry, jade and musical instruments. Federal prosecutors sent the Rands to the pen, but the U.S. Marshalls Service kept the loot, which is now being put up for auction to pay back victims. Next weekend Heritage Auctions will sell the Rands’ instruments. Read Forbes report [...]

Fraud Claims Dog ‘Rebecca’ Broker

The man at the center of Broadway’s biggest scandal in years was already under investigation for allegations of professional misconduct as a stockbroker when he allegedly duped the producers of “Rebecca: The Musical” into believing he’d secured millions of dollars in financing for the production, according to securities regulators. The Financial Industry Regulatory Authority, a nonprofit organization that regulates stockbrokers, began investigating Long Island stockbroker Mark Hotton in 2009 after a customer complaint, said Nancy Condon, a spokeswoman for the organization. It was among 12 complaints and arbitration cases Mr. Hotton, 46 years old, faced in the four years before he was arrested last Monday on charges of money-laundering and fraud in connection with the “Rebecca” case and an alleged Long Island scam. The number of Finra complaints against Mr. Hotton was unusually high, the group said. According to a 2012 analysis by Finra, 0.03% of the 636,370 stockbrokers registered with the nonprofit have faced five complaints in the past five years. Read Wall Street Journal report [...]

MF Global ‘most traded bankruptcy claim’

MF Global has edged out Lehman Brothers as the most actively traded bankruptcy claim, the first time since 2008 that the failed investment bank has not held the top spot. A lively market emerged in billions of dollars’ worth of Lehman creditor claims after the company filed for bankruptcy four years ago. Claims in the collapsed bank have eclipsed those of all other companies, including Enron and Borders, ever since. But some 308 MF Global claims, worth $873m, switched hands in September, according to SecondMarket, which provides a trading platform and auction process for bankruptcy claims. That was 216 claims more, or $19m higher, than transfers in Lehman claims. Claims in MF Global were bought by 25 institutional buyers last month at an average price of $2.8m per claim, SecondMarket said. Click here for Financial Times [...]

Consumer Reports: Avoid being victimized by financial schemes and scams

The recent sentencing of Ponzi schemer R. Allen Stanford provided a useful, if costly, reminder of how today’s most successful scams often work. According to Consumer Reports Money Adviser, Stanford’s $7 billion swindle wasn’t based on baffling financial instruments, like credit default swaps or collateralized debt obligations, but on plain old certificates of deposit, although from an offshore bank. And the returns he promised on his bogus CDs were, while attractive, not so outrageous as to raise suspicions. Though Stanford’s 110-year sentence should keep him off the streets for a while, there are plenty more where he came from. Consumer Reports Money Adviser offers a few ideas on how to protect yourself: More in the Hartford Courant [...]