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Attorney Claims Wall Street’s Cop, FINRA, Invested in Madoff

Posted by Larry Doyle on September 15, 2009 3:23 PM |

On the heels of President Obama’s speech on Wall Street in which he called for meaningful financial regulatory reform, I welcome submitting to him and the American public the following video clips. These clips are from Fox Business News “America’s Nightly Scoreboard” with David Asman on September 3rd.

While President Obama and Congress may believe financial regulatory reform needs to focus on the SEC, the Federal Reserve and assorted other governmental agencies, I would remind the President and his Congressional colleagues that Wall Street is regulated not only by the SEC but to a great extent by the self-regulatory organization known as FINRA (Financial Industry Regulatory Authority).

This discussion on “America’s Nightly Scoreboard” is separated into two parts.

Highlights from the videos include:

1. Richard Greenfield, an attorney representing Amerivet Securities, makes the claim that FINRA under the leadership of Mary Schapiro failed to protect investors.

2. Former SEC chair Harvey Pitt defends Shapiro and FINRA

3. Greenfield indicates that a FINRA insider claims FINRA invested in Madoff!!

4. In Part II of the video clips, your host here at Sense on Cents joins the panel and provides details as to why FINRA, via its parent the NASD, did have responsibility to oversee Madoff. I also comment on the nature of the relationship between Wall Street and Washington, FINRA’s investment and timely liquidation of its Auction-Rate Securities position, and the need for total transparency at FINRA.

4. Head of the Madoff Victims Coalition for Investor Protection, Ronnie Sue Ambrosino, weighs in that the entire regulatory structure from the SEC to FINRA to SIPC (Securities Investor Protection Corporation) have failed to protect investors.

In my humble opinion, the conclusion of this show highlights the screaming need for FINRA to open its books and records for a full and thorough independent analysis and review. In so doing, hopefully investors specifically and the American public at large can regain a degree of confidence in the badly shattered Wall Street regulatory process.

If you care about the markets and our country, I beseech you to watch this 18 minute video in its entirety.

Thoughts, comments, questions always welcome and appreciated.




  • Bill

    Larry, I fear we’re headed toward a more serious financial conflagration down the road in the not too distant future. Before the crash you ha Goldman Sachs engaged in high risk trading earning billions, paying out multi million $$ bonuses. After the crash you have Goldman Sachs engaged in high risk trading earning billions, paying out multi million $$ bonuses. What has changed, other than GS having less competition? And their remaining competitors like Citi are doing the same thing. Any meaningful reform of the regulatory process will be derailed by big bucks contributions to the pols in Washington by the likes of GS and their ilk. Let a little time go buy, and the leverage will be back up there with all the attendant risk.

  • coe

    LD – to be bluntly alliterative – pretty pathetic Pitt performance! Parsing technicalities while skirting the point – classic! Remember the lawyers’ bumper sticker “Eschew obfuscation”…time for plain talk, common sense, accountability, and honor…too bad the interviewer allocated so much time to Pitt, and less to the rest of you folks…do I have it right that FINRA lost tens of millions of dollars and sent Mary on her merry way with a multi-million dollar parting gift package – why does this scenario sound familiar?

  • Larry Doyle

    FINRA lost hundreds of millions in 2008…and Mary received a nice big bonus on her way to Washington.

    Great country America…eh!!??

  • Kevin Hunt

    WTF? Markopolos first contacts the SEC in 2000. Pitt becomes SEC Chairman in 2001 and steps down in 2003.

    If FINRA has a conflict of interest inherited from NASD, doesn’t Harvey Pitt also have a conflict of interest as well?

    In the video, it is very apparent that Pitt makes obvious attempts to either miss the point or to just flat ignore it. And his closing statement was complete BS …. something akin to “I agree we need more transparency as long as some information remains private while he are secure in the knowledge that someone is keeping an eye on things in a regulatory fashion.” Yeah Harvey, all well and good as long as that someone is not the SEC!

    Another thing that struck me, which seemed to have eluded Harvey … if the SEC is the FINRA watchdog, and if the SEC wasn’t smart enough to poor piss out of a boot in regards to discovering the greatest ponzi scheme of all time, why would the SEC then come down on FINRA for being (possibly) guilty of shortcomings remarkably similar to their own? It would seem to me (and yes, I can pour piss out of a boot just marginally) that the SEC would have an obvious interest in obfuscating the investment practices of FINRA.

    • Larry Doyle

      Kevin….only the Shadow knows as to where all these dots once connected may lead us….but they must be connected.

      I am working to get this video clip spread as far and wide as possible in hopes that the transparency may bring the truth along with it.

      Thanks for your comments….they are deeply appreciated.

  • Jim Rockford

    To Hunt’s point in his last paragraph (above) from:

    “Pitt said the SEC isn’t properly staffed to ferret out fraud. “You can’t take young people, two, three, four years out of college, pay them $50,000, $60,000, $70,000, and expect them to have the sophistication to assess a $20 billion hedge fund,” he said. Later, he said there is “a lack of real sophistication” at the SEC. “I can say this as a lapsed lawyer…the SEC is overlawyered in the sense that it’s heavily dependent on lawyers. There aren’t enough economists, there aren’t enough MBAs, there aren’t enough market specialists in the agency providing the kind of additional sophistication” that the SEC needs. ”

    Pitts logic therefore is: Transparency is good; however, regulation by unsophisticated, overworked, ill equipped wannabe-regulators is sufficient, while still offering the protection of “private material”.

    So Mr. Joe Sixpack, when all the money is on the table, what would you prefer? Transparency? Regulation? or Transparency AND Regulation?

  • Larry Doyle


    Great link. Thanks for sharing it.

    Unless and until we open the books and records we will not fully understand what has happened at FINRA and for that matter the SEC.

    Ignorance and inexperience is never an acceptable excuse.

  • Jim Rockford

    Harvey L. Pitt = former senior partner at Fried, Frank, Harris, Shriver, & Jacobson

    Judge Jed Rakoff = former partner at the same firm (?)(I have yet to confirm this, but seen a reference that he was “removed” as a partner at Fried Frank, circumstances unknown)

    BTW – New Weil article out today on bloomberg

  • Jim Rockford
  • John Rausch

    Have you looked at the FINRA claim results for Auction Rate Security cases? While any state that has taken the time (mine, Ohio, has not) has had no big troubles getting the sellers of ARS to settle and buy them back, the tiny number of arbitrations heard thus far have almost all denied the claims. This is an unbelievable look into how FINRA arbitrations really don’t do anything for scammed investors except provide the final blow to them.

    My wife and I were sold ARS by H&R Block Financial in August 2007 by a broker who knew we were setting on cash to build a retirement home. He knew this because we had turned down his pitch to become caretaker of out retirement savings and IRAs a few months earlier while he was at Smith Barney. I told him construction was at least six months away and I was looking for some short-term CDs to safely put the money. He told me about these 7, 14 and 28 day auction rate securities that were just like CDs — at the end of the term, you decide whether to keep them for another term or take them out. Many other untrue answers to my questions about them that I will not go into here, such as “why haven’t I heard of them?”, “who buys them?”, and more.

    Of course we know what happened when we went to get our money in early March 2008. A FINRA arbitration was filed in May 2008, one of the earliest and before the ARS “special” procedures. The hearing was finally scheduled for October, but H&R Block Financial failed to provide all of the documents we asked for in disclosure. By the way, we provided documents about subjects totally unrelated that would stack a few feet high if they would not have accepted them electronically. We manged to get them to withdraw their request for all of our credit cards bills for the past several years!

    Of course, this required a postponement! We are now scheduled for a hearing in April 2010, near two full years after filing. Does this sound like the way FINRA should operate? What is everyone involved with this claim doing right know? Working on ways to convince the panel that all of these settlements against firms selling this trash could not possibly be related to them? That they were the one firm in the country that “did it right”? Baloney!

    If you search for claim results prior to 2008 that contain the word AUCTION, you will find zero. If you look for claims after the ARS freeze date up to know, you will find about 10, most every claim denied, or nearly denied. FINRA claims they have a “flood” of ARS claims. Where the hell are they? What chance do people who were told these were like cash or CDs have of getting a common-sense judgement from a FINRA panel?

    One more thing. When it came time to pick the panel members, I went to an attorney friend who who has sat on more FINRA arbitration hearings that almost anyone else (according to him). He recognized most of the names and had been on panels with them. He was very helpful — I think. But, and this is the big surprise, when he asked me what the claim was about and I told him, he said he had never heard of auction rate securities! This guy is a securities attorney who is near retirement age, well-respected by his peers, and he has never heard of auction rate securities.

    Is it any wonder we are screwed?

    • Larry Doyle


      Thanks for sharing your story. Regrettably, your story is much like many other ARS investors who were not only screwed by the brokers but certainly not protected by the regulators, primarily FINRA.

      This debacle has miles to go and I can only hope that all the details of FINRA’s ownership and liquidation of its own ARS position come out.

      You, every other ARS investor, and the American public deserve nothing less.

      I am glad you found Sense on Cents. You should be able to track many developments in ARS here and certainly please keep us apprised with news that you see and hear on this biggest of all Wall Street frauds.

  • I am going through an absolute nightmare arbitration claim with FINRA, the Financial Industry Regulatory Authority. Paid for by the industry, for the industry. My hearing has been delayed time and time again. We had an arbitrator who had fraudulent degrees – a MA and PhD from a degree mill. I had to PUSH to get this guy off the panel– FINRA was going to let him stay as the chair — and to the best of my knowledge, he is still a FINRA arbitrator and chair! so, someone else could get him next… the respondent filed a retaliatory lawsuit against me – that was dismissed and he was sanctioned – but i spent tens of thousands of dollars fighting and wasted time with it. Check out my blog, to read my story. and what is wrong with mandatory arbitration clauses. and FINRA – this is the only place for relief for investors and associated persons. and it is completely industry driven and run. it’s shameful… it’s time for congress to take over finra and have real regulation of the financial services industry… the commercials they are running? a joke. i haven’t been able to get a job in 19 months because of this – and they want me to wait another 4-6 months to get my day in court. Now the arbitrators have issued a gag/confidentiality order that goes against FINRA code and is a potential violation of my first amendment rights.

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