Wall Street’s industry-funded watchdog said it was beefing up oversight of its 6,500 securities arbitrators after one of them was criminally indicted and suspended from the practice of law but failed to properly disclose those legal run-ins. The Financial Industry Regulatory Authority’s new policy comes after Reuters asked questions about the background of Demetrio Timban, a Medford, New Jersey-based arbitrator who has become a central figure in a lawsuit between Goldman Sachs Group Inc and a wealthy investor. “In light of your questions, we reexamined our paneling process and initiated this change,” a FINRA spokeswoman said in an email. More in the Chicago Tribune [...]
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In the latest legal setback to efforts by the court-appointed trustee seeking to recoup money for victims of Bernard Madoff’s Ponzi scheme, an appeals court has blocked his ability to sue major financial institutions for roughly $30 billion. More in the Wall Street Journal [...] A federal appeals court dealt the trustee working to recover money for Bernard Madoff’s investors a setback Thursday, ruling that he doesn’t have legal standing to make claims against major financial institutions that Madoff’s burned customers could make themselves. The 2nd US Circuit Court of Appeals in Manhattan upheld earlier district court decisions barring trustee Irving Picard from pursuing tens of billions of dollars from JPMorgan Chase, USB AG, and other institutions. More on Boston.com [...] In the past month bankers and lawyers from Citigroup, Goldman Sachs and JPMorgan Chase have streamed into a dark brick Washington office building where the future of finance is being shaped. The high-powered visitors to the home of the Commodity Futures Trading Commission testify to its rise from an obscure US government agency to a global watchdog of financial derivatives, the scandal-hit Libor lending benchmark and physical commodities from oil to silver. More in the Financial Times [...] The U.S. Securities and Exchange Commission will seek more admissions of wrongdoing from defendants as a condition of settling enforcement cases, the agency’s chairman said. SEC Chairman Mary Jo White said the change in policy would probably apply to cases in which investors were significantly harmed and the alleged fraud was egregious. The former federal prosecutor said last month she was reviewing the practice of settling cases without requiring defendants to admit misconduct. “We are going to in certain cases be seeking admissions going forward,” White said yesterday at a Wall Street Journal CFO Network event in Washington. “To some degree, it can turn on how much harm has been done to investors, how egregious is the fraud. So I think you will see going forward some change in that space.” More on Bloomberg [...] A North Carolina hedge fund manager used a personal post-office box and forged bank statements to hide his theft of about $6 million over a seven-year period, U.S. regulators and prosecutors said on Monday. James Shepherd, who ran a commodity fund that traded contracts at CME Group Inc and IntercontinentalExchange Inc, was charged with the fraud in federal court in Charlotte on Monday. In a related action, the Commodity Futures Trading Commission sued Shepherd for fraud and misuse of customer funds. The charges were reminiscent of a larger scam uncovered last year that was perpetrated by Russell Wasendorf Sr., the founder of Peregrine Financial Group. He used similar tools to steal $215 million from clients over nearly 20 years. More on Reuters [...] Bernard Madoff’s London operation acted as a “warehouse” for “stolen money” as he “abused” the company “as a cover for his Ponzi scheme”, the High Court has been told in a case that will shed further light on the fraudster responsible for the largest Ponzi scheme in history. The liquidators of Madoff Securities International (MSI) are suing MSI’s former London directors including Stephen Raven, the former chief executive, and Madoff’s son Andrew in an attempt to recover about £33m. More on FT.com [...] A regional director for the securities industry’s self-regulatory agency resigned several weeks after the organization received a letter revealing the official had pleaded guilty two decades ago to charitable bingo fraud. The letter, which was reviewed by Reuters, was sent on May 21 by former securities broker David Evansen to Richard Ketchum, the chief executive officer of the Financial Industry Regulatory Authority and Susan Axelrod, FINRA’s executive vice president of regulatory operations. The four-page letter said Mitchell C. Atkins, who up until this week was a regional director and head of FINRA’s District 7, which is based in Boca Raton, Florida, was indicted in 1993 in Louisiana “for felony theft and charitable bingo fraud.” More on Reuters [...] In December, 1919 Charles Ponzi established The Securities Exchange Company in Boston. Investors were promised a 50% return in 90 days. Ponzi claimed that because of currency devaluations in Europe, he could buy postal coupons for a penny in Europe and exchange them in the U.S. for four cents worth of U.S. postage stamps. There is no evidence that Ponzi made any investments in postal coupons. In May, 1920, he opened an account at the Hanover Trust Co. — the bank which became his willing accomplice by hiding the truth of Ponzi’s activities from state bank regulators. By midsummer 1920, reports by early investors of their 50% return spread like wildfire. Ponzi’s operation expanded throughout New England, New York and New Jersey and it is estimated that he was receiving new deposits of $1 million per week — $11 million today’s dollars. More on MarketWatch [...] Wall Street’s industry-funded watchdog warned investors on Tuesday about the risks associated with so-called alternative mutual funds. Alternative funds choose more exotic strategies and asset mixes than their traditional counterparts, and they have been particularly popular in recent years as investors have sought to squeeze out extra yields and protect themselves from a 2008-style market rout. More in the Chicago Tribune [...] |
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