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Posts Tagged ‘Auction rate Preferred Securities scandal’

Does the Palace Guard Have No Clothes?

Posted by Larry Doyle on April 14th, 2009 5:30 AM |

I eagerly await the soon to be released 2008 Annual Report of the Financial Industry Regulatory Authority (FINRA). Prior to its release and in light of all the turmoil on Wall Street over the last 24 months, I thought it may be timely to review the mission and some recent history of the “palace guard,” known as FINRA.  From the FINRA website, we learn:

The Financial Industry Regulatory Authority (FINRA), is the largest non-governmental regulator for all securities firms doing business in the United States. All told, FINRA oversees nearly 5,000 brokerage firms, about 173,000 branch offices and approximately 656,000 registered securities representatives.

Created in July 2007 through the consolidation of NASD and the member regulation, enforcement and arbitration functions of the New York Stock Exchange, FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services.

While FINRA promotes investor protection and market integrity, the simple fact is there are still thousands of investors with an estimated hundred  BILLION dollars locked up in Auction Rate Securities. The ARS market has been designated as a fraud. FINRA not only did not protect the ARS investors, but participated in the ARS market as an investor themselves.  At year end 2006, FINRA had a $647 million position in ARS. Did they sell them? When? To whom? What price? If they did sell their ARS position, did they possess material non-public information and act upon it?  Will the 2008 FINRA Annual Report provide answers? I can only hope.  Aside from a few state attorneys general, who is truly looking to help these investors?

FINRA touches virtually every aspect of the securities business—from registering and educating industry participants to examining securities firms; writing rules; enforcing those rules and the federal securities laws; informing and educating the investing public; providing trade reporting and other industry utilities; and administering the largest dispute resolution forum for investors and registered firms. It also performs market regulation under contract for The NASDAQ Stock Market, the American Stock Exchange, the International Securities Exchange and the Chicago Climate Exchange. (more…)






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