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Judge Rakoff Orders FINRA Documents to Remain Sealed

Posted by Larry Doyle on February 17, 2010 9:26 AM |

Nobody ever said it was going to be easy.

The pursuit of truth, transparency, and ultimate integrity in our financial regulatory system can only be equated to a 15 round heavyweight fight. Yesterday, the  sting of opposing blows landed hard upon our face as Judge Jed Rakoff ordered FINRA documents relating to the very formation of this Wall Street self-regulatory organization to remain sealed.

Recall that the request to unseal these documents was made by attorneys representing Dow Jones, Bloomberg, and The New York Times. From the blogosphere, Sense on Cents also wrote to Judge Rakoff requesting that he order these documents to be unsealed.  The information embodied in the documents addresses an allegation made by attorneys representing a plaintiff, Standard Investment Chartered, in a lawsuit filed against FINRA. The crux of that lawsuit is that then FINRA head (and current SEC Chair) Mary Schapiro and her fellow FINRA executives lied verbally during roadshows and in writing via the proxy statement issued for the merger of the NASD and NYSE Regulation to form FINRA.

How big was Ms. Schapiro’s lie? Upon request of Judge Rakoff during a December hearing on the actual case (Standard Investment Chartered v. FINRA), plaintiffs’ attorneys stated the lie totaled a misappropriation of funds ranging between $175 -$350 million (approximate). FINRA’s attorneys contested that statement but rather than agreeing to the document being unsealed so the truth could be exposed, the defense attorneys have waged a fierce battle to keep the document sealed.

Yesterday the defense attorneys won this round, but the fight continues.

Why did Rakoff rule in this manner? As the brief addresses, Rakoff did not believe he was in a position to overturn a ruling by the Second Circuit Court of Appeals which upheld an initial ruling to keep the document sealed. Rakoff explicitly stated during a January hearing that he likely would have ruled differently than the then presiding, but since deceased, Judge Kram who ordered the document sealed. He hints at those feelings again in his ruling released yesterday. That said, Rakoff offers the legalese known as ‘vertical precedent’ as his reasoning for not ordering the documents unsealed.

Will this order be appealed by the news organizations? Perhaps.

Will this order cause Sense on Cents to stop writing about FINRA? Are you kidding me?

Do you think attorneys for Standard Investment Chartered would knowingly and openly lie in a court proceeding about information they have read in a FINRA dcument? What might be the ramifications for their careers if, in fact, they did knowingly lie and misrepresent this information? Game, set, match, career over, most likely.

What happened to the career of Ms. Schapiro after the successful completion of the merger to create FINRA? Welcome to Washington and your new position as SEC Chair.

Do you think America would like a peek at that document? I know I would. That said, we may never see the document. That does not mean that the case of Standard Investment Chartered v. FINRA can not proceed to trial and that America may not eventually learn that its SEC Chair is a liar as plaintiffs’ attorney Richard Greenfield alleged on my radio show last October 19th, Attorney Richard Greenfield Brands Mary Schapiro and FINRA Execs as “Liars.”

Nobody said it was going to be easy. That is just fine.

The best things in life, including the pursuit of real truth, transparency, and integrity in our financial regulatory system, are worth fighting for.

I’m still punching.

Hell, I’m not even winded.


For the overachievers in the audience, please click on the image below to access the 5-page order released yesterday by Judge Rakoff.

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