States are desperate for revenues. Now some are mulling the possibility of going after sales taxes for business conducted for clients within those states, adding yet another layer of fiscal burden for Broker Dealers and individual advisors registered in those states. David Sobel covers this developing story… (more…)

Wasting Away Again In Regulatorville…

Another day, another new Regulator or Czar appointed by the government.  The latest creation is the new and improved super regulator that will over see the SEC and FINRA as well as the institutions themselves.  Before we get into this latest and greatest Regulatory overhaul, I think is important to take a trip down memory lane. Let’s start with November 2006 when the folks at the NYSE and NASD Regulatory arms decided to merge into one Single super regulator known as FINRA… (more…)

By Larry Doyle

Everybody knows Auction Rate Securities (ARS) were cash or cash-like, right? FINRA certainly did NOTHING to protect investors from the ARS sales and marketing scam perpetrated on investors.

FINRA spokesman Herb Perone would like to wash his hands and those of FINRA of any negligence or incompetence in regard to FINRA’s investments in Auction Rate Securities. The easiest manner of washing one’s hands is to point the finger at the entity which initially made the investment, in this case the NASD (National Association of Securities Dealers). If you recall, FINRA was formed in mid-2007 from the regulatory arms of the NYSE and NASD. In any event, Perone tries to deflect culpability on FINRA’s part in the recently reported Bloomberg story (FINRA Oversees Auction-Rate Arbitrations After Exit) highlighting FINRA’s sale of their Auction Rate Securities prior to the market’s implosion leaving thousands of investors and billions of dollars frozen… (more…)

How to tell when the real Bottom has occurred

Lehman Brothers, Bear Stearns, AIG, Washington Mutual and Wachovia Failing, TARP programs, 4500 point Dow Drop, Housing Crash, Credit Crunch, Layoffs, Foreclosures, more Layoffs, Credit Crunch, More TARP money, Bankrupt Automakers, Government Takeovers, Pick a Ponzi, Bernie Madoff, Sanford, Harbor private funds, Wall Street Bonuses, 3 trillion in government spending, Wall Street Greed and Bonuses with TARP money, More TARP money, Hyperinflation on the horizon, more layoffs and finally…..The Mexican Swine Flu. (more…)

Let’s assume you own a broker dealer.

And lets also say that you have an Advisor who helps you manage your money, as most in your position would. Now -

What would you say if your Investment Advisor told you that his well considered opinion is that you should take your entire portfolio and allocate it like this: 55% Toxic Assets, and the remaining 45% into High Risk Hedge Funds?

Would you begin looking for a new Advisor? That is, after asking him for some of whatever it is that he must be smoking? (more…)

No, this is not an article about Bank America and Merrill Lynch and how the Regulators attempted to silence full and fair disclosure in offering materials to shareholders….why would I write about that anyway? At this point the level or lies, deception and fraud is so rampant on Wall Street and in Washington that it goes beyond beating a dead horse cliché.

The corruption at so many levels of our industry is a great time to announce our new affiliation with Financial Advisors Assurance Select (www.FAlegal.com) one of the leading providers of Errors and Omissions insurance. Why? Quite frankly because the SIPA is the leading voice of the Registered Rep and you need to be protected by outside sources. The largest firms on Wall Street are involved in a corrupt struggle with life and death due to toxic investments. Please do not think for a second that your head (and your commissions) won’t be served on a silver platter to the next lawsuit they face. Do not assume that your firm is going to protect you and your interests above theirs and more importantly, do NOT assume that just because your firm is deducting a monthly E&O payment from your commissions that the money is getting paid and the policy is up to date. FA Legal provides E &O insurance not just to Brokerage firms but to individual brokers as well. There are a host of reasons why you may want to consider E & O coverage from a non related entity, the least of which is to make sure that YOUR interests come first. We have heard from many brokers who have retold nightmare stories about how their firm basically turned over, cut a check out of the broker’s accrued commissions up to the deductible amount and left the broker in the whole 25K and with an ugly mark on his license. We have also heard that some firms are using, “ahem” errors to get out of sticky situations for the firm with nor regard for the broker. I am not a lawyer and I’m not giving legal advice here, but with that said, you would be absolutely nuts to not explore some options to cover you’re A#S!!!!

Click on the link and find out a little more for yourself and always remember who is looking out for your best interests?

In the wake of Madoff and other frauds, the SEC warned on March 9 that “the staff has determined that, in order to perform a valid verification of Assets, the staff must request independent confirmation of investor assets from various third parties” including your clients themselves.

We can only imagine just how reassuring a call from an SEC investigator will be for clients. They’re hearts are sure to be warmed – to the point of their blood boiling. And while there are, no doubt, some few advisors who actually like scaring the bejeezus out of clients every once and a while (you know the markets are just too boring) we still can’t figure out how this will assist regulation.

But the SEC brings up Madoff, and says heightened measures are necessary, since Madoff got away with his scam for some two decades. Of course, the SEC fails to consider that news of the Fraud had been brought to the SEC numerous times, and that the SEC decided it was better to simply ignore the claims – rather than act on them. But the SEC wasn’t alone.

In fact, Madoff had been audited by the FINRA numerous times as well, and no discrepancies were found by the FINRA either, Despite that fact that apparently no trades had been done by Madoff’s fund in some two decades of operation.

So obviously, of course: what we need is more regulation, right? More rules and procedures for both the regulated and the regulators to follow. Because we have seen how well they have done in the past.

But let me ask you: Could the chief regulators blood hounds have been so very unskilled that they were unable to catch scent that something was wrong at Madoff – when there were no trades? Are we really supposed to accept that the reading comprehension skills of the SEC’s Staff is so very poor that it failed to ascertain the meaning of the title of Mr. Kostapopulos’s document “Madoff Is A Ponzi Scheme Fraud And Must Be Stopped”? Even when brought to them on numerous separate occasions?

Maybe we are dealing with the Supernatural. Maybe the minds of all of those auditors, with all of their forensic training, just went ga-ga when in the presence of Madoff’s books and records. Maybe the laws of financial accounting and Physics cease to apply when in the presence of those books. Maybe Madoff got his books from the same guy who sold Jack his beanstalk!

No. And the sooner we stop farting around and get to the issues the better. There is no magic here. The answer is much more simple. For whatever reason, those charged with the duty to investigate Madoff did not do their jobs. Simple as that.

“Call it what you want – but when the quarterback chokes and won’t throw the ball, it doesn’t matter how sophisticated the plays you come up with. You replace the quarterback, you don’t re-write the rules of the game.”

Might I mention – the regulations, such as they were, were already considered to be over-burdensome. And the regulations, such as they were, did provide for the oversight of financial institutions; it’s just that for whatever reason, the regulators FAILED to do their jobs. And finally, the regulations, such as they were, did provide for the prosecution of these frauds under the law. Additional regulation, such as this silly idea of calling customers is purely knee jerk, and will waste taxpayer money while failing to uncover any meaningful insight. However, it will scare the hell out of customers.

A Knee Jerk Reaction

This author believes that the regulators are in full CYA mode. And this bodes well for no one. As I’ve written about in the past, reactionary regulation often serves not to increase the effectiveness of regulation, but rather complicates and makes it overly burdensome with makework provisions designed to show the public that the legislators are not standing idly by, they are taking action.

We must fight the desire to do something, anything, in order to satiate the public’s demand for action. Cool thought and thoghtful consideration must win the day, if we are to prevent the problems of the past from rearing their ugly heads again. Think of Sarbains Oxley, and the damage done there; a good example of reactionary regulation made of the best intentions- disastrous for an industry.

Reactionary regulation is a slippery slope; as soon as one new ineffectual reg is legislated in, others are sure to follow, hamstringing the ability of the industry to adjust or react. Particularly in times of crisis such as these.

Crisis Of Confidence

We simply cannot engage in activity that creates the impression that everything is out of control. Calling individual clients will do nothing more than scare clients, and create the perception that there is no confidence even at the regulatory level. Confidence is the bedrock of our financial system, like it or not. Anything that serves to diminish confidence in this environment must be avoided like the plague – because that is what a crisis in confidence is, a plague. And this industry needs healing.

CALL TO ACTION:

Reps, please comment your thoughts below. We at the SIPA want to forestall future reactionary regulation, and plan to go to the lawmakers with the voice of the industry behind us. So we need to know what you are thinking in order to make this happen. Take five minutes and give us your thoughts. Now the enforcement actions associated with levying blame for the financial crisis are beginning, and you are likely not immune. Work needs to be done right now to ensure that the legislators do not run roughshod and further destroy an already hurting industry.

We appreciate your support, and ask for it again. Tell your friends to comment, and to join the SIPA. There are a number of trade organizations – but the SIPA is dedicated to you,the individual working in financial services – rather than the firm, or the several can’t fail institutions. Remember, the voice of 600K Advisors can’t be wrong. Commit to commenting. Be Heard!

The SIPA wishes a heartfelt congratulations to Mr. Alan Davidson of Zeus Securities, upon his election to represent the interest of small firms in the National Adjudicatory Council (NAC). The NAC reviews FINRA disciplinary decisions. The election is of special significance because it was contested and Mr. Davidson ran as an independent candidate. 

Despite the opposition supporting the FINRA nominee, Mr. Davidson won. And so, Mr. Davidson’s victory is truly a victory for small independent firms, which made their voices heard loud and clear.

The SIPA spoke with Mr. Davidson this morning:

SIPA: Congratulations. On behalf of the SIPA membership, we’re all excited about your win. Especially at this particular moment in time.

Davidson: Thank you. I’ve got a strong agenda, and I want to make sure that small firm owners and registered persons know that I will do whatever I can for small firms, and will work hard to get that agenda across.

SIPA: What particular issues do you see as a focus?

Davidson: Leveling the playing field. Sanction guidelines need to be reduced, and the limit needs to be raised for actionable issues; smaller issues need to be downplayed…

SIPA: What smaller issues?

Davidson: Well, for example, rule based violations that do not affect the customer. These issues need to be addressed more appropriately – letters of caution, for example.

SIPA:  That’s great. That’s certainly something we hear a lot about.

Davidson: And then there is the participation of small firms on the committees and boards of the FINRA. I’m going to encourage active involvement. Members of small firms should participate, and I encourage them to contact me, and to seek office too. I think it’s time to create a level playing field.

SIPA: Thank you for taking time to talk with us. We all look forward to your efforts going forward.

Davidson:  It’s been a pleasure!

###

Rantings From A Confused American 

Is President Obama this Dumb?  Or is he Dumber?  The President is “outraged and shocked by the obscene bonuses AIG officials gave as bonuses to top employees”

Shocked?  Really?  President Obama, with all due respect, you are in for a very long four years if you are this naïve.  Obama, along with John “ I’m suspending my losing campaign” McCain both supported the TARP plan and the blank check for over one trillion dollars that went to the Banks and Brokerages. The SIPA at the time made it clear that “ These are poorly run, poorly managed, Corrupt Firms who should be laid to rest”

Everyone agreed that these firms were corrupt and unethical and were poorly managed with little or no vision other then to have million dollar rugs and gold faucets.  Now six months after pumping all this money into corrupt companies hands….you are “shocked “ that they took the money and spread it out amongst the all male club and ran???  What’s next?  President Obama will be “ shocked and outraged” that Iran has enriched some uranium, North Korea tested a long range missile and Brett Favre has decided he doesn’t want to retire??

TARP has been an unmitigated disaster and ALL of the Washington gang is to blame.  George Bush is the one who listened to the ‘Goldman Gang” in the first place and started bailing out, taking over and doing everything a Cuban Marxist would expect him to do.  Obama , like most in Congress followed suit and rubber stamped BILLIONS in tax payer money that was spent on bonuses to Goldman, Merrill and AIG employees.   This same circle of friends having been running amok of rules and regulations for 20 years yet now we are shocked that they took the money and ran?  This reminds me of an old fable about the Farmer and the Snake…

One winter, a Farmer found a Snake stiff and frozen with cold. He had compassion on it, and taking it up, placed it in his bosom. He brought the snake home, put it by the fire and rubbed oil onto its skin. The Snake was quickly revived by the warmth, and resuming its natural instincts, bit its benefactor, inflicting on him a mortal wound. The Farmer cried out in his last breath “why would you do that to me after I just took care of you and saved you”?

The snake replied” Because I’m a Snake”

Welcome to Wall Street’s elite Mr. President. 

CYA In These Crazy Times

As one of the leading voices of Registered Reps and their rights to Life, Liberty and the pursuit of higher returns, The SIPA has had an out pouring of e-mails and phone calls from Individual registered Representatives who are now being made the brunt of this cruel Bail-out Blarney.  As everyone knows by now, Bernie Madoff wasn’t the only one in town who figured the regulators weren’t looking.  Recently the SEC revealed that another Ponzi scheme in Texas was being perpetrated by none other than Alan Stanford.  The scary thing about this is not that he stole money for years without any regulatory intervention, but rather the fact the honest hard working Brokers tried to stop this and were turned away.  Click the image below to see the interview in its entirety.

Here is an honest and hard working Broker who is concerned for his clients, concerned for his firm and when he goes to his Compliance Officer he is shown the door and more shocking is that when he went to his regulator he was ignored.  Every broker should be taking steps right now to document each and every conversation and concern you have with your Supervisors and your Compliance officers.   Do not for a second assume that just because your compliance officer signed off on something that your job is done.  Right now it’s every man for himself and it appears that brokers may be the easiest thing to throw under the bus.  For instance, we recently heard from a top five Wall Street firm Broker that he had his Form U-4 marked for the first time in 20 years due to a complaint that he “bought FNMA preferred stock for his client three years ago”! It was recommended by this will known company and was triple A rated yet due to the collapse on Wall Street, he is now being treated like he is a boiler room caller in Long Island selling time shares for land in Wyoming!.

When your company touts a company…You need to seriously check out their motives.  Many brokers for large firms have this crazy notion that as long as my company is pushing a particular investment it must be in the best interest of the client.  WRONG!!!!  Just remember that if you are brought up on charges of unsuitable investments you can count on two things:

1. You Company will NOT have your back and
2. The Trial attorney would love it if they did

Why is this?  When these over zealous trial lawyers get going they are like sharks smelling a wounded whale.  They know that the more blood that is in the water the greater the bounty.  Your company will not have your back because they do not want a class action suit against them or commercials about their firm and investments running early in the morning.  As for the lawyers, they would love nothing more then to get their claws into one of these companies that does get your back and admits that they encouraged all reps to buy a particular stock.  Don’t believe me?  Without giving too much free publicity, check out the name of this web site:  www.SueMorganStanley.com

If you do get a customer complaint, we would urge you to do two things, let your compliance officer know and then contact your own outside counsel.  In-house counsel is paid to protect the firm first and foremost and anything that can open the firm up to exposure will be avoided.  This means that even if they know you did nothing wrong they may sit there mum and do nothing because you are just a pawn in their greater scheme.  We would urge all Reps to especially review and begin asking harsh and blunt question of their management in they helped raise capital for any hedge funds…especially if they were proprietary hedge funds.  You should demand total transparency of these funds and the fees and if they are unwilling to provide it….seek legal counsel immediately.  The SIPA is not a law firm nor are we offering legal advice…but if you drop us an e-mail we do know some quality lawyers with integrity and chutzpah