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HomeFROM THE ARCHIVES: Attorney Claims Wall Street’s Cop, FINRA, Invested in Madoff
Posted by Larry Doyle on January 29th, 2010 8:31 AM |
Time.
The policies implemented in Washington are trying to buy time in hopes that our economy recovers. Japan took the ‘buying time’ approach and twenty years later they are still waiting for real recovery.
Moving forward.
The approach being taken by those within our financial regulatory structure (SEC and FINRA) is to ‘move forward.’ Well, unless the critically unanswered questions and issues embedded within these organizations are fully exposed and addressed, America can never truly move forward with confidence in the markets and those overseeing them.
President Obama wants real financial regulatory reform. Then Mister President, compel your chair of the SEC, Mary Schapiro, to open the books and records of FINRA. Mr. President, compel Ms. Schapiro to unseal documents regarding the very formation of FINRA itself.
America knows something still smells on Wall Street. What is it? (more…)
Wall Street Journal Goes in the Tank for FINRA
Posted by Larry Doyle on September 25th, 2009 9:18 AM |
When did real journalism move from asking the hard questions and demanding answers to the mere parroting of a party line? Recent polls indicate a lessened confidence in the media in our country. Why? Journalism has largely abdicated its responsibility to be the public conscience. I see evidence of this ‘parroting’ in today’s Wall Street Journal, which reports After 27% Fall, FINRA Plays It Safe.
FINRA, the Wall Street self-regulatory organization, has been under increasing pressure lately with the spotlight focused primarily on its investment portfolio activities. FINRA has provided virtually little to no transparency and, as such, currently faces 3 lawsuits by member firms. There is no doubt in my mind that today’s WSJ article is an attempt by FINRA to display a degree of transparency in order to keep the wolves at bay. Is FINRA fully transparent? Not in my opinion.
Did the WSJ pursue this story or was it conveniently placed to deflect the heavy criticism and charges FINRA faces in the lawsuits? Make no mistake, the WSJ has been largely absent in aggressively covering developments in and around FINRA. The returns generated by FINRA’s investment portfolio and its shift to a conservative strategy have been widely disseminated over the last few months and were highlighted here at Sense on Cents on June 29th when I wrote “FINRA 2008 Annual Report: A Special Type of Hubris”:
I personally believe it is very important for a financial self-regulatory organization, such as FINRA, to be totally transparent in every regard. Why? Very simply, transparency promotes confidence and FINRA’s position as a financial regulator should begin and end with that goal.
Against that backdrop, FINRA should not directly manage any of their own funds. To do so is an open invitation for conflicts of interest. FINRA’s own investment portfolio, managed by an Investment Committee, generated a negative 26% return in 2008. In April 2009, the FINRA portfolio shifted to a lower volatility approach but in 2008 it continued to have exposure to hedge funds, fund of funds, and private equity. As much as I believe this is a very big deal, it pales in comparison to the major issue I, and others, have with FINRA: their involvement with Auction-Rate Securities.
Why do I feel so strongly that the WSJ is serving as a mouthpiece for FINRA rather than truly digging for total transparency? Let’s zero in on how the WSJ addresses this auction-rate securities angle. As we do this, please recall the following:
1. $165 billion ARS remain frozen in investor accounts
2. A federal judge has designated the sales and marketing of ARS to be a fraud
3. FINRA did not post on its own website the failing nature and ultimate total failure of the ARS market until 2008, well after it liquidated its own position.
The WSJ, a proud financial periodical, provides less than cursory coverage to this piece of the FINRA story, in writing:
Finra used an outside consultant, Jeffrey Slocum & Associates of Minneapolis, to help choose money managers. In 2006, Finra hired as chief investment officer Boris A. Wessely, then treasurer at the Rockefeller Brothers Fund. Ms. Schapiro succeeded Mr. Glauber as the agency’s CEO in mid-2006.
One early step by Mr. Wessely’s team was the mid-2007 sale of about $650 million of auction-rate securities. The sale wasn’t influenced by any sign of weakness in the auction-rate market, which froze in 2008, but instead was a move to diversify Finra’s short-term investments away from such a niche product, people with knowledge of the move say. (LD’s highlight)
People with knowledge of the move say?? That is the best the WSJ can do to pursue what truly happened with FINRA’s sale of ARS? That statement is the equivalent of FINRA or whomever the ‘people with knowledge’ stating, ‘you’ll have to trust us on this.’
I would put forth that the days of blind trust are over and that for the thousands of investors sitting with those $165 billion in frozen ARS the days of verification are upon us.
I reiterate my longstanding call that FINRA must reveal all the details surrounding its ARS liquidation. Those details include the date of liquidation, the proceeds, the dealer or dealers through whom FINRA liquidated the ARS, and most importantly whether FINRA possessed material, non-public information and acted upon it.
I fully appreciate that my writing and questions here are aggressive, but at this point in our country’s history the American public deserves nothing less than full and total transparency from its financial regulators. Regrettably, both FINRA and the WSJ fall woefully short in providing it.
Comments, questions, constructive criticisms always appreciated.
LD
Finra Talking Tough on Fraud, but ‘Talk Is Cheap’
Posted by Larry Doyle on June 24th, 2009 2:01 PM |
We can’t live in the past. It is not healthy to overly dwell on the past. Life is about the landscape in front of us. That said, unless we address, expose, and expunge the errors and omissions of the past, can we truly achieve the full potential of our future?
Our recent financial past has been filled with pitfalls and frauds. Wall Street’s self-regulator Finra is fully cognizant of investor concerns on this front. Finra recently launched a marketing campaign to address investor concerns. From Finra’s own website, Finra Launches Enhanced Investor Protection and Education Programs:
“Informing and educating investors is an essential component of our investor protection mission,” said FINRA Chairman and CEO Richard G. Ketchum. “The recent market turmoil makes it more important than ever that investors be aware of FINRA and the tools and resources that we provide to help them plan their financial futures, protect their interests and make informed investment decisions.”
The video, “Tricks of the Trade: Outsmarting Investment Fraud,” is a 60-minute broadcast-quality presentation on preventing investment fraud. Using profiles of victims and perpetrators, the video highlights the persuasion tactics that con artists use to defraud their victims and the basic tools investors need to defend against fraud. A trailer of the video is available at www.saveandinvest.org/tricksofthetrade; the full video will be released in July, but can be pre-ordered. “Tricks of the Trade: Outsmarting Investment Fraud” will also be distributed in public libraries throughout the country and shown at movie premieres in selected states.
Any legitimate initiatives to counteract fraudulent activities should be embraced. I welcome this initiative by Finra and hope it proves overwhelmingly successful. The Wall Street Journal expanded on this Finra initiative in writing, New Finra Ad Campaign Talks Tough On Fraud:
Do you think your broker a total fraudster? Afraid your retirement is in jeopardy?
Then meet Finra.
That still relatively unknown acronym stands for the Financial Industry Regulatory Authority, the self-funded watchdog for the brokerage industry. And in its new national advertising campaign, Finra is seeking to restore investor confidence by talking tough against the brokers that don’t “play by the rules.”
“If brokers don’t play by the rules, we can fine them, suspend them – even put them out of business,” a male voice says in one ad, which displays black and white images of ordinary Americans against the backdrop of solemn guitar music. “We believe the markets don’t work unless they work for everyone.”
Pretty tough talk!! We need some tough regulators in order to root out fraudulent activity. We also need regulators who will pursue total transparency and integrity at every turn. Will Finra carry this torch? If so, it will have to address its own reputation in the process. The WSJ offers more: (more…)
