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Finra’s 2008 Annual Report

Posted by Larry Doyle on June 27, 2009 11:21 AM |

June 27, 2009

At long last, Finra has released its 2008 Annual Report.

I will provide a more thorough review of this report within the next 48 hours but I want to quickly provide some commentary on Finra’s assessment of their own involvement with Auction-Rate Securities.

1. They provide NO details on the liquidation of their own $647 million ARS position in Spring 2007. No surprise there but given that the U.S. attorney in Brooklyn and the SEC are investigating executives from Lehman Bros. for potentially front-running the market in liquidating ARS in the same time period, I believe this issue remains unresolved.

2. In my opinion, Finra’s review of their own handling of developments within the ARS market is akin to “the best defense is a good offense.” How so? Finra is touting a successful return of +/-1% of investor capital as a ‘flag waving’ event. WOW!!

Finra has been involved with 9 settlements totaling a return of $1.2billion dollars. Meanwhile thousands of investors with tens of billions of dollars remain frozen. Wall Street professionals involved in the ARS market have shared with me that as much as $170 billion in funds remain frozen. If that number is accurate, Finra’s “success” amounts to a batting average of .7 of 1%. If that is success, then the bar is obviously being held exceptionally low.

Dozens of ARS investors have contacted me to share their frustration in attempting to engage Finra.

3. Finra’s investment returns within their own internal portfolio were -26%. No details provided on which hedge funds or fund of funds.

As indicated previously, I will more thoroughly review the report within the next few days. On first blush I see no material increase in transparency necessary to inspire increased investor confidence.


  • Lots of shady business going on here.

  • TeakWoodKite

    LD, with all the great work you’ve done exposing the fraud at FINRA, how on Earth can this statement be credible?

    Vigorous enforcement of rules and regulations is a cornerstone of FINRA’s work to protect



  • TeakWoodKite

    In April 2009, based on a comprehensive Investment
    Committee review of FINRA’s investment policy, strategy and
    risk tolerance, the Board of Governors decided to shift FINRA’s investment assets to a lower volatility with the objective of a lower risk portfolio.


    This CYA speak. Any chance of getting the commitees “review”?

  • TeakWoodKite

    Who are the the members of the “Investment Committee”?

    John J. Brennan
    Richard F. Brueckner
    James E. Burton
    William H. Heyman
    Scott C. Malpass
    Richard C. Romano
    Kurt P. Stocker
    Foxes in the hen house?

  • Kathy

    Larry, $170 billion still frozen?! I had heard $110.

    Can anyone explain why $170 billion isn’t a frontburner issue for Finra, the SEC, state securities agencies, and oh yeah, Congress?

    That’s about 10 auto industry bailouts, and Congress screamed bloody murder over that.

    • Kathy,

      I received that number from an individual on Wall Street who is actively involved in tracking the ARS market on a daily basis.

      Given Finra’s amazing hubris in touting their success on the ARS front, I am compelled to take this ARS topic to the next level, that is Finra’s Board of Directors. Stay tuned.

  • Kathy

    Just want to add this: I’m not a conspiracy theorist, but I really am left to wonder what the above parties have to hide. $170 billion is still a lot of money. How come nobody wants to find it?

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