Posted by Larry Doyle on January 15th, 2010 10:22 AM |
“I’m not here to talk about the past.”
Mark McGwire, the steroid abusing home run hitting phoney, may have issued a massive mea culpa this week, but his career will forever be defined by his March 2005 Congressional obfuscation.
In my strong opinion, Mary Schapiro is the financial industry’s equivalent of Mark McGwire. How so? In McGwire’s 2005 testimony, he very much wanted to position himself as a positive influence for future developments regarding the use and abuse of steroids in baseball. Fast forward to January 14, 2010 and we witness Mary Schapiro very much trying to assume the same positive position in her testimony and answers to the Financial Crisis Inquiry Commission. In Schapiro’s opening statement, Testimony Concerning the Financial Crisis, she states as much:
To assist the Commission in its efforts, my testimony will outline many of the lessons we have learned in our role as a securities and market regulator, how we are working to address them, and where additional efforts are needed. I look forward to working with the FCIC to identify the many causes of this crisis.
Oh, how kind. (more…)
No Quarter Radio’s Sense on Cents with Larry Doyle Welcomes Richard Greenfield, Sunday Night at 8PM EDT
Posted by Larry Doyle on October 17th, 2009 2:31 PM |
UPDATE: This episode of NQR’s Sense on Cents with Larry Doyle has concluded. You can listen to a recording of the episode in its entirety by clicking the play button on the audio player provided below. Once the audio begins, you can advance or rewind to any portion of the episode by clicking at any point along the play bar.
The detonation of the bombs that have hit our economy may have been launched on Wall Street, but certainly the collateral damage has been experienced nationwide if not globally. While regulators were admittedly asleep at the wheel during these attacks, who in our country is now positioned to hold bankers and regulators accountable? The media? Please. Will regulators hold themselves truly accountable? Maybe on a going forward basis, at best. Then who?
Please join me this Sunday October 18th from 8-9pm EDT for No Quarter Radio’s Sense on Cents with Larry Doyle as I welcome Richard Greenfield for what will assuredly be a riveting conversation. Who is Richard Greenfield and what areas of expertise does his firm Greenfield and Goodman occupy? Why am I so excited to have him on my show?
Greenfield and Goodman concentrates its practice in complex financial litigation and, particularly, in corporate governance, banking, consumer rights and shareholder litigation. As a direct result of the efforts of the Firm and its predecessors, many millions of dollars have been recovered for defrauded investors and other persons injured by illegal corporate activities and obtained fundamental changes in corporate governance, particularly in the areas of control procedures and risk management. The Firm and its predecessors have also been responsible for obtaining a number of particularly noteworthy judicial opinions which have not only strengthened consumer and investor rights generally, but substantially aided in the prosecution of complex litigation to preserve such rights.
As for Mr. Greenfield himself, he has a resume that just won’t quit:
RICHARD D. GREENFIELD has been admitted to practice before the Supreme Court of the United States, the Courts of Appeals for the Second, Third, Fifth, Ninth and Eleventh Circuits, various federal district courts, as well as the Courts of the Commonwealth of Pennsylvania, the State of New York and the State of Maryland. Mr. Greenfield is a 1965 graduate of the Cornell Law School, where he was awarded a J.D. In addition, he has earned degrees in Accounting (B.S. Queens College) and Business Administration (M.B.A. Columbia University Graduate School of Business).
Mr. Greenfield is thoroughly experienced in banking, securities and consumer litigation, having served as Lead or Co-Lead Counsel for plaintiffs in shareholder class and derivative actions alleging violations of the federal securities laws and/or breaches of corporate governance standards, in class actions brought on behalf of trust beneficiaries against major trustee-banks as well as in a wide variety of banking and consumer fraud cases. Mr. Greenfield founded and was Senior Partner in a 48 lawyer Pennsylvania-based law firm that specialized in such litigation; it was disbanded in 1993.
Rather than listing the major periodicals and news outlets in which Mr. Greenfield has been featured, it would be easier to list those in which he has not.
In the midst of all of his other professional and philanthropic activities, Mr. Greenfield is currently representing Benchmark Financial, Standard Investment Chartered, and Amerivet Securities in complaints against the Wall Street self-regulatory organization FINRA.
In the spirit of continually pursuing transparency and integrity along our economic landscape, please join me this Sunday evening for what will assuredly be a fascinating discussion with Richard Greenfield.
This show, as with all of my shows, is taped and archived along with being available as a podcast on iTunes.
Posted by Larry Doyle on October 15th, 2009 8:38 AM |
On October 6th, I attended a public hearing relating to complaints filed by Benchmark Financial and Standard Investment Chartered v FINRA (Financial Industry Regulatory Authority). This hearing was held in the United States Courthouse in New York City. The core of these complaints is the distribution that FINRA (NASD) made to its member firms from proceeds generated from the IPO (initial public offerring) of the Nasdaq Stock Exchange.
A major topic at hand in this case is the release of unredacted documents from FINRA. What are unredacted documents? Documents in which certain key segments are not edited or withheld.
These complaints were recently reassigned to Judge Jed Rakoff. He has received significant attention given his ruling in a case involving the SEC and Bank of America. Judge Rakoff commented that the business periodical Barrons had expressed an interest in the Benchmark and Standard Investment Chartered case versus FINRA. The point being that Barrons represents a public interest.
I sent a letter to Judge Rakoff yesterday requesting the release of unredacted documents from FINRA. I share my letter with you, the readers of Sense on Cents, in the spirit of full disclosure and because I believe strongly that our financial regulators must provide full transparency. I view that issue to be the core of this case and thus of significant public interest.
October 14, 2009
Honorable Jed S. Rakoff
United States Courthouse
500 Pearl Street
New York, NY, 10007
Re: Benchmark and Standard Investment Chartered v. FINRA
Dear Judge Rakoff,
Please allow me to introduce myself. I am currently a financial commentator. I operate my own website, Sense on Cents. The mission of my work and site is to help people ‘navigate the economic landscape.’ In light of the economic crisis and turmoil in our financial markets, I launched my site earlier this year in order to share my insights and experience with the public at large. What is my experience?
I am a Wall Street veteran of 23 years. I traded and sold a wide array of mortgage-backed securities. I worked at First Boston, Bear Stearns, UBS, Bank of America, and culminated my career in 2006 as the National Sales Manager for Securitized Products at JP Morgan. Having witnessed the decay in confidence in our financial system at large and our banks, brokers, and regulators specifically, I am hugely inspired to write and help people better understand the nature of our markets and economy. I certainly have not suffered from a lack of writing material.
I do not write for my former colleagues on Wall Street. My targeted audience is that cross–section of our country who wants to receive an unbiased and honest view of the markets and economy. My work has been extremely well received. In a relatively short time frame, I have thousands of people accessing my site. I take real pride in my work.
I am writing to you currently given my interest and that of many of my readers in the transparency or lack thereof in the financial industry overall. A keen area of interest for me and many readers is the lack of transparency specifically in the regulatory oversight of Wall Street. While working on Wall Street, I did not fully appreciate this lack of transparency. For the last eight months I have gained a real appreciation for it.
I have extensively studied the annual reports of FINRA and its parent organization, the NASD. I was flabbergasted to learn that this self-regulator is truly a large financial entity unto itself. In reviewing its finances, I have raised serious questions about potential conflicts of interests and questionable investment activities. At almost every turn, FINRA has largely rebuffed calls for real transparency. The public deserves to have a fully transparent regulator overseeing Wall Street.
Against this backdrop and having attended the hearing in your chambers on October 6th on the above referenced case (I was the only member of the public or the press in attendance), I would request that you release unredacted documents pertaining to these complaints. The release of those unredacted documents would be of real public service. That service entails the ongoing public cry for real transparency in our financial industry at this time. That cry for so many of our citizens seems to go unheeded all too often. I could share dozens of comments left at my site echoing that cry.
I truly believe if a real measure of confidence in our markets and our economy is to return, it must be based on true transparency and integrity. While I have written extensively on the lack of transparency and integrity in our country, I don’t pretend to think that my site will change the landscape on this front immediately. That said, I am never discouraged to continue digging deeper, writing more, and asking the hard questions. On this front, I sincerely hope the adjudication of this case will highlight these qualities for all to see.
I thank you for allowing me to share my feelings. I recall your having referenced Barrons back on the 6th. Sense on Cents is not Barrons, but for the thousands who have shared their passionate feelings with me on this topic, I am obliged to serve their interest as well as those who have yet to find my site.
With all due respect.
Sense on Cents
Posted by Larry Doyle on October 8th, 2009 4:03 PM |
Big money makes for a very strange bedfellow. Is FINRA sleeping well these days? A pending lawsuit against FINRA would like to pull back the covers and check to see if the money in the FINRA mattress was allocated appropriately. Let’s enter the sitting room and take a peek into this corner of the FINRA household.
In the process of consolidating the NASD with NYSE Regulation to form FINRA, the NASD allocated capital proceeds to its member firms. This capital was generated via the initial public offering of the Nasdaq. Did the NASD, now known as FINRA, significantly underallocate capital proceeds to its member firms? This alleged underallocation, known as being ‘picked off’ on Wall Street, is the basis for a lawsuit brought by two FINRA member firms, Benchmark and Standard Investment Chartered.
Why am I concerned about the arcane inner workings and legal issues of a Wall Street self-regulatory organization? For the very same reason that I’m concerned about that regulator’s internal investment portfolio activities. Transparency or the lack thereof and the resulting confidence or lack thereof that the American public has in our entire financial regulatory system. Those goals strike me as worthy especially in light of the systemic risks embedded in an array of organizations which this regulator was charged to oversee. Yes, a large amount of exposure and transparency is badly needed at this point in our economic history. Against this backdrop, let’s navigate and see what we can learn about this lawsuit.
The law firms of Cuneo, Gilbert & LaDuca along with Greenfield and Goodman are representing the plaintiffs. From the former’s website we learn:
Along with our co-counsel Greenfield & Goodman, LLC, we currently represent members of the Financial Industry Regulatory Authority (“FINRA”) (formerly known as the National Association of Securities Dealers or “NASD”) in United States District Court and Court of Appeals litigation. The complaints, which are based on state law, allege that defendants, among other things, obtained the NASD members’ vote in support of the consolidation of NASD and NYSE Regulation through an inaccurate and deceptive proxy statement and solicitation process. (LD’s highlight) At issue in the suit is whether NASD could have distributed to its members a larger share of the approximately $1.5 billion of NASD members’ equity. As members will recall, NASD repeatedly asserted that the IRS imposed a $35,000 “hard cap” on what the NASD could pay its members.
Wow. With a $1.5 billion pie, we are talking big money. In light of that, a charge labeled as ‘inaccurate and deceptive proxy statement and solicitation process’ is aggressive especially for an industry’s regulatory organization. Whatever happened to embracing accuracy and clarity? Let’s continue.
Some documents from the litigation that shed light on the truth of these statements are now public. However, FINRA has insisted that the key fact – the amount the Internal Revenue Service (“IRS”) told NASD it could distribute – remain secret, that is, under seal.
Secret? Under seal? Those terms aren’t synonymous with transparent. I thought under the ‘change’ being promoted by the Obama administration transparency would be embraced. What this looks like is more ‘business as usual’ on Wall Street. Navigating further we learn,
>The IRS did not limit the payment to member firms to $35,000 as NASD and its officials insisted.
>The IRS did not issue a formal ruling on the payment to members until March 13, 2007 – approximately two months after the member vote on the bylaws occurred.November 21, 2006.
>NASD Board Minutes demonstrate that the NASD Board discussed the $35,000 limit stating, “regardless of the amount agreed upon, it was paramount that the figure not be subject to negotiation.”
At this juncture, if I could be so bold as to steal a line from Ricky Ricardo in engaging Lucy, I would say to Mary Schapiro who headed FINRA, “you got some ‘splainin to do.”
For any legal beagles and overachievers in the audience, I am happy to submit the following legal documents pertaining to this case:
Rest assured, I will be monitoring developments in this case closely.
Posted by Larry Doyle on October 3rd, 2009 11:57 AM |
The core of that question resides within the regulatory oversight of our financial industry. The American public is beginning to learn a lot about this financial regulatory oversight. How so? A month ago, SEC Inspector General David Kotz released a report, Investigation of Failure of the SEC to Uncover Bernard Madoff’s Ponzi Scheme (embedded here). Yesterday, the Wall Street self-regulatory organization, FINRA, released Report of the 2009 Special Review Committee on FINRA’s Examination Program In Light of the Stanford and Madoff Schemes.
What did we learn from yesterday’s report? Plenty. For that, I commend all those involved in this effort. With all due respect to FINRA employees who have legitimately tried to fulfill their obligations to the best of their abilities, yesterday’s report is nothing short of a massive indictment of FINRA’s management, FINRA’s board, and the SEC which is charged to oversee FINRA. Why? Having read this report twice and studied critical components of it, FINRA is exposed as nothing more than a collection of crossing guards . . . said with all due respect to crossing guards. Have the supervisors of the crossing guards been so heavily influenced by Wall Street so as to render large parts of the FINRA mission ineffective? Many believe this to be true, including me.
Why so harsh? Let’s navigate and be a little more aggressive than the mainstream financial media in analyzing this report. In the process, I think you will appreciate my assessment and also realize there are many more questions which need to be answered.
The FINRA report is largely divided into the organization’s dealings with the financial frauds encompassing Allen Stanford and Bernard Madoff. Referencing the massive regulatory failings on FINRA’s behalf in these two cases, the authors provide recommendations which FINRA’s management will present for approval or ratification at the December 2009 Board meeting.
For purposes here, I will not regurgitate the numerous individual failings of FINRA examiners and management in each of these cases. Rather, I will highlight those failings which I find most egregious. In turn, I want to focus on highlighting the recommendations so the American public can truly understand how woefully inept, incompetent, and ill-prepared this financial self-regulatory organization has been and currently is to uphold its mission to protect investors. Against that backdrop, I will then lay out questions which I deem to be critically important for FINRA to answer if the American public can ever regain a degree of confidence in the oversight of Wall Street.
>> Stanford Case
1. In 2003, the Stanford broker-dealer generated 68% of its revenues from the sale of Stanford International Bank CD’s. Are you kidding me? Red Flag!! That finding did not prompt the examiner to dig deeper?!
2. A 2003 Anonymous Tip Letter laid out the Stanford scheme in detail.
3. In 2005, a FINRA examiner learned that the Stanford broker-dealer is paid an annual fee of 3% of the deposit sum for every CD. Another red flag! Standard practice would have bankers or securities salespeople earning a one-time fee of maximum .25%.
At this point, Stanford International Bank had raised approximately $1.5 billion in what would grow to a $7.2 billion scam.
With all due respect to FINRA employees who may have continued to look into Stanford over the 2005-2008 time period, truth be told FINRA did not further aggressively pursue this case until the Madoff situation broke in December 2008.
>> Madoff Case
1. FINRA largely limits its review of the Madoff scam to the 2003-present time period. Why not go back further? FINRA had longstanding oversight of the Madoff enterprise.
2. FINRA largely reduces the extensive relationships between Bernie Madoff and family members with FINRA to nothing more than a footnote. That footnote on page 46 provides a cursory approval of FINRA’s relationship with the Madoff firm and family. Why aren’t these relationships more deeply explored?
3. The report acknowledges what we always knew about FINRA having oversight of Madoff’s operation. FINRA representatives, including Mary Schapiro, have willingly and intentionally misrepresented the fact that FINRA had oversight of Madoff’s enterprise. Did Mary Schapiro perjure herself on this topic during her confirmation hearings to be Head of the SEC? Well, she may not have perjured herself, but she and others have willingly misrepresented FINRA’s required oversight of Madoff over the long time period when Madoff was strictly a registered broker-dealer and ran this massive Ponzi scheme within that framework.
4. FINRA failed to detect the full breadth of the relationship between Cohmad Securities and Madoff. Bernie Madoff and his brother Peter owned 24% of Cohmad, and the Cohmad broker-dealer operated within the same office space as Bernard Madoff Investment Securities. Cohmad was largely a front for feeding customers into Madoff’s scam. The report provides:
Cohmad was registered as a broker-dealer and reported having approximately 750 to 850 customer accounts, which were held by and cleared through Bear Stearns Securities Corporation. These accounts usually generated roughly 300 transactions per month, mostly in equities and, to a lesser extent, municipal bonds.
I would very much like to know more details about these municipal bonds. Were they municipal auction rate securities?
5. How did FINRA miss the Madoff scam? This report acknowledges the fact that FINRA examiners merely took Madoff and his representatives at their word that Madoff was running nothing more than a broker-dealer. Are you kidding me? It was common knowledge that Madoff had a money management business. FINRA maintains that the FINRA ‘crossing guards’ checked the little boxes on their Madoff review sheets and went on their way. (more…)