Sense on Cents

My heartbeat accelerated this morning upon reviewing page 2 of The New York Times. As I perused the headlines of the lead articles, I saw Investors Without a Lifeline in the Sunday Business section. Could this be the article that would fully expose the fraud involved in the sales and marketing of Auction-Rate Securities? Would investors finally get some satisfaction in publicly exposing all those involved in Wall Street’s greatest fraud?

While I am heartened by any public attention regarding the ARS fiasco, this report by The New York Times falls woefully short. Let’s reveal color and analysis that The New York Times and every other credible business outlet should feel obligated to provide.  In doing so, I can only hope that investors still holding ARS, whether sold by Raymond James or any other entity, can move one step closer to a return of their capital along with interest and penalties.

The New York Times hardly lands a blow on Raymond James in the ARS fiasco. In fact, I would define the reporting as the equivalent of a ‘kiss’ in what should be a brawl. The reporter, Gretchen Morgenson, does not even venture to ask who is supposed to protect investors before making an investment or a lifeline after the fact. The answer to those questions are the SEC and FINRA (Financial Industry Regulatory Authority).

While Raymond James has $800 million in ARS exposure, that figure only represents approximately .5% of the total outstanding exposure. Why does Ms. Morgenson focus strictly on Raymond James and not the entire industry?

Ms. Morgenson somewhat paints a picture that Raymond James actually has a choice as to whether to return investors funds or not. The fact is, federal judges have already designated the sales and marketing of ARS as fraudulent. I have yet to see or hear any financial intermediary that did not fraudulently sell ARS as anything but a cash surrogate and money-market type security.

Regular readers of Sense on Cents know where I am going with this story, but for our newer readers and especially ARS investors, I hope the information I share with you can be used to pressure Raymond James, FINRA, and the SEC.  What information is that?

FINRA, the Wall Street self-regulatory organization charged with protecting investors, not only did not perform their duty on that front, but FINRA was involved in the ARS market as an investor. FINRA owned $647 million of auction rate securities as of year end 2006 and sold that position in 2007. Did they sell ARS which an investor ultimately purchased via a Raymond James broker? Perhaps.

The New York Times can write about Raymond James or any other entity involved in ARS.  However, the ARS fraud deserves to be the lead story for every credible business periodical.

FINRA’s lack of oversight and conflict of interest in the ARS market may very well be the most blatant case of regulatory malfeasance throughout our current financial nightmare.

I have written extensively on this topic over the last 6 months. All my work can be accessed via the search window on any page of Sense on Cents.  You will be busy if you care to review all of my work pertaining to auction rate securities, so allow me to provide a few links to some of my posts which I believe cover a lot of the bases.

I strongly encourage anybody interested or involved in the ARS fraud to share this information with every media outlet imaginable. All information referenced in my work is in the public domain.

LD

Related Sense on Cents Commentary:
“An Open Letter to the Board of FINRA Regarding Auction-Rate Securities” July 27, 2009
“Wall Street’s Greatest Fraud” July 20, 2009
“U.S. Attorney and SEC Investigating Lehman’s Auction-Rate Securities Sales; They Should Also Investigate FINRA’s” May 21, 2009
“NASD Knew Auction Rate Securities Weren’t Cash” May 11, 2009
“FINRA Is Supposed to Police the Market” April 29, 2009
“Does the Palace Guard Have No Clothes?” April 14, 2009

This entry was posted on Sunday, August 2nd, 2009 at 3:34 PM and is filed under ARPS, ARS, Auction Rate Securities scandal, General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.