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Ultimate “Insider Trading” Is a Job for Serpico

Posted by Larry Doyle on February 29, 2012 6:27 AM |

Michael Douglas? Have we gone totally soft?

Does America need to call on Michael Douglas, as the FBI recently did, to promote that “greed really is not good”?

Call me unimpressed.

Who would Sense on Cents like to see as the 2012 face to counteract insider trading activity on Wall Street? Not Michael Douglas, but more on this later.

There are many others to whom America might care to listen to understand basic virtues and values. That said, while many in America may be somewhat amused to see Douglas’ face on the Wall Street Journal’s front page, let’s get a little more serious on this topic of insider trading. 

Insider trading on Wall Street circa 2012 encompasses activity engaged in by hedge fund traders who reside largely outside of the true inner sanctum of Wall Street. How might insider trading activity be defined for those who actually work within Wall Street’s innermost circles? Could we call it “insider insider trading”? Perhaps “extreme insider trading”? Personally, I like the catch phrase, “ultimate insider trading“.

Aside from the case entangling Goldman Sachs’ board member Raj Gupta, we do not seem to witness a lot of “ultimate insider trading” on Wall Street. Why is that? Are they all good little boys and girls? Are they just smart enough not to get caught? Are they protected and might they get tipped off? Who knows, but it is hard to believe that virtually ALL of the recent insider trading activity simply encompasses individuals within hedge funds and hardly ever enters directly into the large Wall Street firms . . . or even deeper.

One situation that I believe continues to scream for attention but was NEVER properly addressed by the Wall Street police, aka the SEC, is the liquidation of ~$650 million auction-rate securities from the portfolio of Wall Street’s self-regulator FINRA mere months before that market segment totally froze in February 2008.

I first addressed this “incredible” sale back in early 2009 and have addressed it extensively since then. I believe I connected more than enough dots in late 2010 to warrant an SEC investigation of this ARS liquidation by FINRA. I wrote then and welcome repeating now, How Did FINRA Know the ARS Market Was Failing Well Before 2007?:

Going on five years from the issuance of this Cease and Desist, and almost three full years from the date when the ARS market totally failed AND ~$135 BILLION of ARS still remain frozen. Along with those funds remaining frozen, so do the lives of so many individuals who were counting on their ‘cash equivalents’ to fund education, pay for retirement, and so much more.

While those individual lives are frozen, the regulator FINRA charged with protecting investors and overseeing those broker-dealers SOLD its own portfolio holdings of $647 million ARS mere months before the ARS market froze.

Who in our nation is calling FINRA to account? Who in the media? Who in the government?

Does anybody in those power structures have the balls to take on FINRA?

The dots are all connected.

Let’s see FINRA’s trade ticket.

This is America?

Michael Douglas? Come on.

Who should the FBI have rolled out? In light of all that has transpired on Wall Street and in Washington over the last few years, more and more Americans would care to see Al Pacino as Serpico….!!

Four full years since the ARS market failed. We STILL need to see FINRA’s ARS trade ticket.

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets, our economy, and our political realm so that meaningful investor confidence and investor protection can be achieved.

  • Popeye Doyle

    Great post…great clip…where is Serpico now? Check out this NYT article from 2010.

  • Bill

    Larry, expect SEC headed by Mary Shapiro to investigate FINRA formerly headed by Mary Shapiro? Mary Shapiro investigates Mary Shapiro. Surely you jest.

  • Sean

    Make Elliot Spitzer Chairman of SEC

  • Bill

    I’ve said before that a securities lawyer who represents plaintiffs/investors should be chairman of the SEC, maybe a class action lawyer who actually is in the habit of recovering money for class members. But, of course, the Wall St. paymasters of the Washington mafia would never stand for that.

  • Peter S.

    The courts have refused to identify FINRA’s exit from the ARS market, months before it crashed, as an event that legally could be examined.

    But JP Morgan Chase withdrawal of the bank’s $250,000,000 investment in Madoff feeder funds just a few weeks before the ponzi scheme became public (unlike the weakening of ARS market, no one saw Madoff’s scam coming, only JP Morgan got out!) is highly suspicious.

    JP Morgan Chase’s Chief Legal Counsel, Stephen M. Cutler, was our nation’s top cop in the Securities and Exchange Commission from 2000 – 2005. Cutler failed to uncover any of the financial frauds that plagued our nation at the time – Enron, WorldCom, bogus researches being peddled by Wall Street’s biggest banks, the mutual fund industry market-timing scandal, all were dumped on Cutler’s lap by either whistle-blowers, or the NY AG.

    As early as 2001, Cutler had Madoff in his cross hairs – yet refused to pull the trigger.

    SEC/2009. OIG-509/Exhibit-0526.pdf

    JP Morgan Chase begins doing big business in Madoff feeder funds just as Cutler join JPMC. JPMC invest $250,000,000 in Madoff feeder funds. JPMC has Madoff’s checking account. Madoff is said to have hand written all checks in the account. In the weeks leading up to Madoff being exposed as the world’s largest ponzi scheme, Madoff’s checking account activity certainly may have initiated the “pull button” for JPMC’s $250,000,000 investment. The only investor to escape the resulting catastrophic losses suffered by Madoff investor’s was Stephen Cutler’s firm – JP Morgan Chase – and just in the nick of time.

    We now know that Madoff was suspected by many in numerous financial circles as someone up to no good. And Cutler, as the SEC’s top cop, certainly was aware of the many concerns as early as 2001. So was JP Morgan Chase’s $250,000,000 investment in Madoff feeder funds secured by the bank’s ability to monitor Madoff’s payoffs through his checking account, or was JP Morgan Chase’s ability to recover of all of the bank’s investment in Madoff just before the ponzi scheme crashed just shit luck?

    Dumb question.

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