ALERT: New York State Residents

NOW is the time to write Senator Schumer, thank him for his leadership and encourage him to engage his fellow Senators to join him in supporting S.1725, Restoring Main Street Investor Protection and Confidence Act. Submit your letter by clicking here.

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ALERT: 2 New Co-sponsors Sign on to H.R.3482 – Restoring Main Street Investor Protection and Confidence Act

Congressman Mario Diaz-Balart [R-FL25] and Congressman Tom Cotton [R-AR4] have signed on to co-sponsor H.R.3482, bringing the number of co-sponsors to 55!
Click here for a current list of co-sponsors. If your Representative is not yet a co-sponsor, please urgently call and write your representative to get them to sign on. Letters can be submitted on-line at www.fixsipcnow.org, where you can also find a Congressional directory for phone contact information.

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When Banksters Buy Regulators and Prosecutors

Two of our nation’s top attorneys, Helen Chaitman and Lance Gotthoffer, just released Chapter 3 of their riveting and free book, JPMadoff – The Unholy Alliance Between America’s Biggest Bank and America’s Biggest Crook. All Americans concerned about financial fraud and the role of our regulators and politicians in sustaining financial fraud need to read this book at www.jpmadoff.com.
The book, which incorporates exclusive interviews with Bernie Madoff, focuses on JP Morgan Chase ’s 20-year role in laundering money for Madoff. Money laundering, as everyone knows, is a big-time criminal offense. Yet no one at JP Morgan Chase (JPMC) who was involved, year after year, in taking in Madoff’s huge client deposits and watching him transfer them to a small number of special “clients” rather than invest them in the securities he claimed he was buying, bothered to pick up the phone and inform anyone in law enforcement. Indeed, according to the authors, the New York office of JPMC failed to report anything amiss even after its London office conveyed an explicit warning that Madoff was perpetrating a fraud. More on Forbes here.

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Head of municipal securities office at U.S. SEC to leave agency

The director of the office of municipal securities at the Securities and Exchange Commission, John Cross, will leave his post in November to return to the U.S. Treasury Office of Tax Policy, the agency said on Tuesday. Cross was named head of the newly formed office barely two years ago after becoming a leading figure in the $3.7 trillion municipal bond market through his role as associate tax legislative counsel in the Treasury’s tax policy arm. More on Reuters here.

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U.S. regulators adopt new risk rules for securitization

U.S. regulators on Tuesday issued a rule requiring banks that sell loans to investors to keep part of the risk on their own books, a measure aimed at preventing the sloppy loans that sparked the 2007-09 credit crisis. The rule was mandated by the 2010 Dodd-Frank Wall Street reform law. After years of debate over its parameters, the 553-page measure was adopted by three of the six agencies that need to sign off on it. More on Reuters here.

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Madoff Trustee, Investor Strike Settlement

A real-estate developer who invested with Bernard Madoff agreed to return $32.75 million in cash and surrender $29.35 million in claims against the convicted Ponzi-scheme operator’s investment firm under a new settlement. Irving Picard , the court-appointed official tracking down money for victims of the biggest Ponzi scheme ever, on Friday filed papers in bankruptcy court outlining a settlement with developer Edward Blumenfeld, his New York real-estate company and his family. More in the Wall Street Journal here.

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SEC Is Steering More Trials to Judges It Appoints

The Securities and Exchange Commission is increasingly steering cases to hearings in front of the agency’s appointed administrative judges, who found in its favor in every verdict for the 12 months through September, rather than taking them to federal court. The winning streak comes amid a marked shift at the agency toward trying cases that are more complex before its administrative law judges. Historically, the SEC had more often turned to these judges for relatively straightforward legal actions, such as barring stockbrokers who had been convicted of criminal fraud. Thanks in part to enhanced powers granted in the 2010 Dodd-Frank financial-reform bill, the SEC lately has been using the administrative judges for complicated cases, including several involving insider trading. More in the Wall Street Journal here.

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Do we really need more deliberation on the fiduciary standard, commissioner?

In a recent speech before the National Association of Plan Advisors, SEC Commissioner Michael Piwowar suggested the commission needs to take “a measured and deliberative approach” to the question of whether brokers who offer personalized investment advice to average mom-and-pop investors should have to act in the best interests of those investors. Since the Securities and Exchange Commission has been actively deliberating the “standard of care” for nearly a decade now, I think we can check that box. Moreover, given the questionable arguments Mr. Piwowar puts forward against rule making, it is hard to believe further “deliberation” would make any difference to his views. Mr. Piwowar started his speech with what has become a signature line: “As demonstrated by the endurance and passion of arguments on all sides, this question is not just really hard to answer. It is really, really, really hard — with three “reallys.’” However, the broker-dealer trade associations that once adamantly opposed a best-interests standard have now embraced it. The Securities Industry and Financial Markets Association, a trade group of securities firms, for example, has publicly declared its support for SEC rule making to impose a uniform fiduciary standard on broker-dealers and investment advisers. Other major stakeholder groups representing investors, broker-dealers, investment advisers, financial planners and state securities regulators have all agreed that Section 913 of the Dodd-Frank Act provides an appropriate framework for commission rule making. It is true that important differences remain over details of how a regulation should be drafted, but when is that not the case? More in Investment News here.

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How High-Frequency Trading Firms Can Rig the Game

“Let’s make sure we don’t kill the golden goose,” a manager warned cohorts at New York high-frequency trading firm Athena Capital Research, which had developed a rapid-fire, complex algorithm code-named “Gravy” to fraudulently manipulate the closing prices of tens of thousands of big-name U.S. stocks, such as eBay (EBAY) and Northern Trust Corp. (NTRS). The internal email followed an automated alert received by the multimillion-dollar fund from the Nasdaq stock market informing it that “suspicious orders or quotes that are potentially intended to manipulate the opening or closing price will be reported immediately.” More on Newsweek here.

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SEC approves securities arbitration fraud intervention rule

SEC approves securities arbitration fraud intervention rule. The U.S. Securities and Exchange Commission has approved a rule that will let securities arbitrators immediately report frauds that may threaten the investing public if they learn about them in the middle of a case. The agency’s approval, published in the Federal Register on Wednesday, ends years of controversy about the proposal, which was sparked by multibillion-dollar Ponzi schemes orchestrated by Bernard Madoff and R. Allen Stanford. More on Reuters here.

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License to invest

Last week, the Securities and Exchange Commission’s (SEC) Investor Advisory Committee — on which I currently serve — recommended, over my objection, that the SEC change the way it assesses who qualifies as an “accredited investor.” Although sensibly challenging the existing approach to accreditation, the committee’s approach was too conservative. Instead, the committee should have called for a more fundamental reconsideration of whether existing investment restrictions are consistent with investor protection. Under existing law, companies can raise funds through public and private offerings. A public offering involves registration of the offering with the SEC and compliance with an ever-expanding list of regulatory requirements. Anyone can buy shares in a public offering. A private offering, by contrast, is subject to a much shorter regulatory checklist, but — with limited exceptions — only accredited investors are able to buy shares. More on The Hill here.

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Rep. Garrett to FINRA: Hold Off on CARDS

Rep. Scott Garrett, R-N.J., chairman of the House Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises, told the Financial Industry Regulatory Authority on Tuesday to hold off on its “costly and burdensome” plan to collect broker-dealer account data through its Comprehensive Automated Risk Data System (CARDS). “After a preliminary reading of the proposed rule, I remain far from convinced that this new, costly and burdensome proposal is needed,” Garrett said in a statement. More on Think Advisor here.

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