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Media Attention Increases Heat on Mary Schapiro and FINRA

Posted by Larry Doyle on October 25, 2009 1:44 PM |

Is the American public about to get a wider view into the relatively concealed world of Wall Street self-regulation? I believe so. The momentum towards real transparency is “heating up.” How is the temperature rising in the kitchens of SEC chief Mary Schapiro and her former colleagues at the Wall Street self-regulatory organization FINRA?

The widely read and enormously respected financial periodical Barron’s writes at length this weekend about a specific case which Sense on Cents has been addressing for the last few months. This case (Standard Investment Chartered v FINRA, NYSE Group, Mary Schapiro et al) is highlighted in Barron’s reporting of Suit Puts SEC Chief on the Hot Seat:

Did Securities and Exchange Chairman Mary Schapiro, in her former role as head of the National Association of Securities Dealers, approve a misleading proxy that helped boost her pay and those of other NASD executives?

I highlighted the points raised in the Barron’s article this past Thursday in writing “Nasdaq Sale: Why Would Schapiro and FINRA Execs Lie?”

I am heartened by Barron’s reporting. Why? I have written extensively about Ms. Schapiro and FINRA over the last ten months. I have been asked by dozens upon dozens of readers and friends as to why the mainstream media has not focused more attention on topics and questions which strike me as having enormous importance.

I believe the issues embedded in the questions I have raised are potentially explosive in terms of their impact on the entire financial regulatory structure in our country. Given their explosive potential, I believe many media outlets have not wanted to address them for fear of running the wrath of the power structure on Wall Street. That said, heat and pressure appropriately applied typically produce results. I believe the Barron’s article will go a very long way toward producing the much needed truth and transparency in our Wall Street regulatory structure. This development is outstanding. That said, the questions Ms. Schapiro and FINRA need to face go well beyond the topics addressed in the Barron’s article.  What other questions must be fully addressed? I submit the following:

1. America deserves to know the full extent of FINRA’s internal investment activities.  Did FINRA invest in Bernie Madoff as alleged in a lawsuit filed by Amerivet Securities v FINRA this past August? I submit from September 15th, 2009: “Attorney Claims Wall Street’s Cop, FINRA, Invested in Madoff.”

2. America deserves to know whether FINRA possessed material non-public information and utilized it in the liquidation of its own $647 million Auction-Rate Securities position in mid-2007. Those unaware should know that the ARS market was failing at the time. Additionally, federal judges have designated the sales and marketing of ARS as to have occurred in a fraudulent fashion. Thousands of investors with upwards of $160 BILLION in ARS remain unable to access their funds. FINRA was charged with protecting investors. They did anything but protect. I submit from May 21st, 2009: “U.S. Attorney and SEC Investigating Lehman’s Auction Rate Securities Sales; They Should Also Investigate FINRA’s.”

If the specific case referenced by Barrons proceeds, Ms. Schapiro may very well have to recuse herself since the SEC, which she currently heads, would likely be involved in the investigation of FINRA, her former employer. As such, I repeat my question from a few months ago in regard to whether Ms. Schapiro would recuse herself. Her recusal would take real courage. I submit from June 4th, 2009: “How Courageous Is Mary Schapiro?”

If in the process of discovery and investigation Ms. Schapiro and her former FINRA colleagues are not cooperative in the public pursuit of truth and transparency, it may then very well be that President Obama and his financial advisers will be faced with an “Independent Investigation Required” much as I had written on April 21st , 2009 and repeated on May 21st, 2009 in writing “Mary Schapiro Still Not Being Questioned; Independent Investigation Still Required.”

As the temperature rises in Ms. Schapiro’s kitchen, Sense on Cents will continue to monitor developments very closely and continue to press for real transparency in the process.


  • Alana

    With respect to FINRA’s recent Report of the Special Review Committee dated 10/2/09, in particular the Stanford scandal, the associate director who managed FINRA’s Dallas District office during the Stanford scheme is still employed at FINRA in SFC. It is sickening how this person can face his staff everyday when everyone knew it was him who dropped the ball.

    • Larry Doyle


      Thanks for sharing that point. When people are not held accountable others see and feel that as well.

      Legitimate organizations would tell a person such as this, “don’t let the door hit you on the way out.”

      Over and above that, though, I believe the powers that be higher up within FINRA very likely stonewalled any real investigation of Madoff.

      The question about Stanford seems to be whether the Department of Justice was using Stanford as a front to track illegal drug-related money laundering activities. Little did the DOJ appreciate that Stanford was running a de facto Ponzi scheme.

      Ultimately it could very well be that the Madoff and Stanford scams were effectively “inside jobs.”

  • Tony Ryals

    My thanks as well Larry for bringing this subject to the fore.I would really like you to address the fact that the Sheikh Mohamed Al Rashid is a major if not the major owner of NASDAQ and how that came to be particularly in light of American dissent against his controlling U.S.port security shortly before he took over NASDAQ.Who were all those reponsible for giving him the U.S.NASDAQ in light of the fact Dubai is still considered a money laundering center of the world and it appears at $175,000 was sent to Mohamed Atta in Venice,Florida from Dubai pre 9/11 ? How much does he make off penny stock fraud between the U.S. and Israel that mainly defrauds Americans seeing as how he also got the OTCBB scam market as well ?
    Pleae give us your insights.

    • Larry Doyle


      I know nothing on this topic. I looked to see if I could find a listing of Nasdaq shareholders but had no luck.

      Do you know of any sites that may have that info?

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