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The Agency That Barely Mov

As the Justice Department, Federal Reserve, and other regulators across the globe prepared the final details of a multibillion-dollar criminal settlement with five Wall Street banks over currency rate rigging, all eyes were on one agency that had the power to throw a wrench into the entire deal. Though a bit player in the negotiations, the politically divided Securities and Exchange Commission had to approve waivers each bank needed to continue to do normal business. The pressure on SEC Chair Mary Jo White was almost palpable, two people involved in the negotiations say, as defense lawyers and prosecutors barraged her staff with inquiries and fellow commissioners weighed in with threats to vote against some of the waivers. Determined not to let the squabbling scuttle the broad settlement, White called a private commission meeting on May 19, when all the waivers were approved. The settlements were announced the next day. More on Bloomberg here.

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ALERT:

H.R. 1982 New CoSponsor
Congressman Christopher “Chris” Smith [R-NJ4] has signed on to support H.R. 1982!
If you reside in Congressman Smith’s district, please take a moment and send a Thank You letter by clicking here.

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ALERT

H.R. 1982 New CoSponsor
Congressman Cedric Richmond [D-LA2] has signed on to support H.R. 1982!
If you reside in Congressman Richmond’s district, please take a moment and send a Thank You letter by clicking here.

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FINRA to Toughen Sanctions on Fraud, Unsuitability

The Financial Industry Regulatory Authority said Tuesday that it will call for tougher sanctions for those who commit fraud or make unsuitable recommendations to clients. Plus, it will increase suspensions under the self-regulator’s suitability rules from one year to two years. FINRA said that its National Adjudicatory Council is amending its “overarching principles” that apply to sanctions determinations and is revising its Sanction Guidelines to advise FINRA adjudicators to “strongly consider” barring an individual respondent or expelling a firm for cases involving fraud. More on ThinkAdvisor here.

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SEC reveals factors behind how it picks courts it uses

The U.S. Securities and Exchange Commission released guidance on Friday about how it decides whether to pursue a case in federal court or before an in-house judge, amid complaints by some defendants that the agency’s administrative court violates their rights. The SEC said that while no strict formula exists, it considers factors including what claims it is pursuing, whether a defendant is associated with a registered entity, and the costs and time involved in litigating in a particular forum. The SEC said it also considers bringing a matter before an administrative law judge if a case raised “unsettled and complex” issues under federal securities laws, given the commission’s “expertise concerning those matters.” More on Reuters here.

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Frank DiPascali Is Dead, Four Months Before His Sentencing; Bernie Madoff’s ‘Sammy the Bull’ Was 58

It’s been barely two months since the Madoff Five—the only employees of Bernard L. Madoff who have been convicted of crimes at trial—began serving their prison terms. The government’s chief turncoat in the case was Frank DiPascali, Jr., who served as Madoff’s right hand. He was scheduled to be sentenced this September for his role in what Judge Laura Taylor Swain called “the biggest Ponzi scheme known to man.” But fate has ruled otherwise. Frank DiPascali died on Thursday night, his attorney, Marc L. Mukasey, just told me. “He was proud of the work he had done to make amends,” says Mukasey, a partner at Bracewell & Giuliani LLP. “The family requests privacy at this time.” More in Forbes here.

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‘Flash Crash’ Overhaul Is Snarled in Red Tape

A giant data project at the center of the regulatory response to the 2010 “flash crash” that sent the Dow plummeting nearly 1,000 points is years behind schedule and mired in red tape. The Consolidated Audit Trail, or CAT, originally was conceived as a way to enable regulators to monitor stock and options orders in real time and zero in on manipulators quickly. After the flash crash—which occurred May 6, 2010, and saw some big stocks lose nearly all their value before markets rebounded—the CAT was seen as a crucial step in protecting the markets from future swings. Yet the 10 organizations overseeing the process, including Nasdaq OMX Group Inc. and Intercontinental Exchange Inc., which operates the New York Stock Exchange, still haven’t chosen a firm to build and run it, and a final plan hasn’t been approved by the Securities and Exchange Commission. More in the Wall Street Journal here.

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SEC Backlog Delays Whistleblower Awards

As part of its popular whistleblower program, the Securities and Exchange Commission promises to move swiftly on useful information about potential wrongdoing. But the agency isn’t as speedy when it comes to paying off its tipsters. Of the 297 whistleblowers who have applied for awards since 2011, about 247—or roughly 83%—haven’t received a decision from the SEC, according to data obtained by The Wall Street Journal in response to a public-records request. Some of the award claims have been delayed more than two years. More in the Wall Street Journal here.

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Wall Street’s regulatory chief says data collection plan on hold

A controversial proposal by Wall Street’s industry-funded regulator to collect massive amounts of customer account data will not proceed until the industry’s concerns are addressed, the regulator’s chief executive will tell lawmakers Friday. “To be clear, we will not move ahead with the present form of the proposal and will not move forward with an amended version until we conclude that the concerns… have been addressed,” Financial Industry Regulatory Authority (FINRA) CEO Richard Ketchum said in prepared testimony seen by Reuters. More on Reuters here.

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SEC Urged to Beef Up FINRA Oversight: GAO

The Securities and Exchange Commission is failing to adequately oversee the Financial Industry Regulatory Authority, the Government Accountability Office said Thursday. In its report, “Securities Regulation: SEC Can Further Enhance Its Oversight of FINRA,” Congress’ investigative arm states that while the securities regulator has taken some actions since GAO suggested in 2012 that the agency beef up its oversight of the self-regulator, the SEC has yet to develop “specific performance goals and measures, with corresponding targets to monitor its progress toward the goal of enhancing” FINRA oversight. More on ThinkAdvisor here.

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