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Judge Rakoff Orders FINRA Documents to Remain Sealed

Posted by Larry Doyle on February 17th, 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. (more…)

Tags: Cuneo Gilbert Laduca, Douglas Cox of Gibson Dunn & Crutcher, Douglas Henkin of Milbank Tweed Hedley and McCloy, Dow Jones New York Times Bloomberg request FINRA document unsealed, FINRA, Gayle Sproul Nicole Auerbach of Levine Sullivan Koch and Schulz avn, Gibson Dunn & Crutcher, Judge Jed Rakoff, Mary Schapiro, regulatory, Richard Greenfield, Standard Investment Chartered, Standard Investment Chartered v FINRA, Thomas Golden of Wilkie Farr and Gallagher
Posted in FINRA, General, Jed Rakoff, Mary Schapiro, SEC | 6 Comments »

FINRA Defense: Exhaustion and Immunity

Posted by Larry Doyle on December 2nd, 2009 9:24 AM |

Let’s revisit the case of Standard Investment Chartered v. FINRA. While I have written extensively on a host of issues related to FINRA, I believe the issues embedded in this specific case drive to the very core of our financial regulatory system. For those unaware of this case, a recent memorandum (link provided at end of this commentary) filed on behalf of the plaintiff highlights:

At the core of the case is the FINRA Defendants’ issuance of a proxy statement on December 14, 2006 (the “Proxy Statement”), which contained out-and-out material falsehoods and omitted essential facts bearing on the Transaction and on a proposed “Special Member Payment” that was to be made upon its completion. The most important false representation was that federal tax authorities limited a payment to NASD Members to $35,000. Second Amended Complaint (“SAC” or the “Complaint”) ¶ 13. The FINRA Defendants magnified the falsehood that the Internal Revenue Service (“IRS”) limited NASD Member payments to $35,000 in many different forms, over and over, as if saying it enough times and wishing it to be true would somehow make it come true.

A claim of out-and-out material falsehoods against defendants, including then FINRA head and current SEC chief Mary Schapiro, is where the rubber meets the road. How have the defendants responded? Are they willing to embrace the virtues of transparency and integrity so badly needed to restore investor confidence? No, I don’t think so.

The defendants have filed a motion to dismiss this complaint. On what grounds do the defendants make their motion? The memorandum highlights: (more…)

Tags: did Mary Schapiro and FINRA lie in proxy statement, FINRA, FINRA defense against Standard Investment Chartered, FINRA exhaustion, FINRA immunity, FINRA integrity, FINRA motion to dismiss, FINRA transparency, formation of FINRA, MAry Schapiro liar, merger of NASD and NYSE Regulation, Standard Investment Chartered, Standard Investment Chartered vs FINRA
Posted in FINRA, General | 1 Comment »

Attorney Richard Greenfield Brands Mary Schapiro and FINRA Execs as “Liars”

Posted by Larry Doyle on October 19th, 2009 10:09 AM |

Is Mary Schapiro a liar? Are other FINRA executives also liars?

Fully appreciating that merely asking these questions is aggressive by its very nature, I do not ask them in a derisive fashion. The fact is, the answer to those questions in the eyes of Richard Greenfield is an unequivocal, “Yes!”

Who is Richard Greenfield? I had the distinct pleasure of chatting with Richard last evening on my weekly Sunday evening radio program. Richard Greenfield of Greenfield & Goodman is an attorney with over 40 years of experience in banking, securities, and consumer litigation. Amongst other legal venues, Attorney Greenfield has been admitted to practice before the Supreme Court of the United States.

Our conversation last evening was riveting. If you have an interest in the markets, our economy, developments on Wall Street and in Washington, I strongly encourage you to listen to the interview in its entirety. I will share with you some of the highlights which Richard provided. (The timing I provide for these highlights can be used in the audio player provided here.)

> 16:40: FINRA’s mindset has never been on major league enforcement, but rather relatively picayune broker-dealer violations and even then the violations are more technical than they are real. Greenfield said, “the big boys always seem to get away with murder.”

> 18:30: The NASD coming out of the 1930s initially did a good job, but over time it became less and less concerned with enforcement and more concerned with the appearance of enforcement.

> 20:00: Most state attorneys general don’t have resources to devote to securities regulations. It’s the rare state, California and New York for example, which undertakes real enforcement activities. (LD’s comment: I would add that Massachusetts has also aggressively undertaken serious enforcement of securities regulation.)

> 22:00: Too Much Wall Street money finds its way into campaign warchests with the result that its special interests rival those of the insurance and defense industries and as a result Congress and many state government initiatives have been subverted.

> 25:00: Every major financial institution has ‘cooked their books’ for the last five years.

At the 29 minute mark or thereabouts, our conversation truly elevates from the general nature of financial regulation to the very specific details of the cases Richard Greenfield and colleagues from the Washington D.C. based firm of Cuneo, Gilbert, and LaDuca are bringing against FINRA. I STRONGLY encourage you to listen to the next twenty minutes.

> 29:30: Greenfield provides background information on the complaint filed on behalf of the California based FINRA member firm, Standard Investment Chartered against FINRA.

> 32:00–44:00:
– Greenfield comments on some interesting connections between Bernie Madoff and Mary Schapiro, former head of FINRA and current head of the SEC.

– Documents provided by the NASD (now known as FINRA) to Greenfield and his colleagues show unequivocally that the NASD defendants lied to the NASD member firms regarding distribution of funds from the sale of the Nasdaq. Greenfield reiterates that these individuals lied blatantly and unequivocally. They intentionally lied. The lies are repeated over and over in a proxy statement provided to the member firms. The lies were repeated at roadshows which took place all around the country.

Who is they? Who lied? Who repeated the lies?

Mary Schapiro and senior officers in the NASD (FINRA)!!!

> The primary lie is the misrepresentation of the maximum proceeds that could have been paid to the NASD member firms. That figure was represented as being $35k when in fact it could have been much, much higher.

> Greenfield also highlights the fact that FINRA failed to perform in protecting investors from the Auction-Rate Securities scandal while liquidating its own ARS investment position in 2007.

> Greenfield sheds some light that he believes New York AG Andrew Cuomo is investigating FINRA’s liquidation of its Auction-Rate Securities investment.

>47:00

– Greenfield repeats his assertion initially made on September 3rd while appearing on America’s Nightly Scoreboard on Fox Business News (video clips can be seen here) that, based upon information and belief obtained from a source which Greenfield and colleagues believe to be reliable, FINRA had made investments with Bernie Madoff!!

– Greenfield believes that FINRA may have to be disbanded and the self-regulation of Wall Street may have to be scrapped because the self-regulatory model for this industry has failed.

– Greenfield concludes that Mary Schapiro talks a tough game, but is truly a non-regulator.

While Greenfield makes some serious allegations and charges in the course of this interview, he has unquestioned credibility and experience which comes from 40 years of fighting these battles.

Will the truth and transparency being sought in these complaints and which the American public so badly needs at this time come out? Do not discount the power of information. Please share this information which Richard Greenfield so descriptively and professionally detailed last evening with your friends and colleagues.

I thank you.

Questions, comments, constructive criticisms always appreciated.

Tags: Andrew Cuomo, banking securities consumer litigation, Bernie Madoff, Bernie Madoff and Mary Schapiro relationship, confidence in regulators of financial system, Cuneo Gilbert Laduca, distribution of proceeds from sale of Nasdaq, Economy, faith in financial system, FINRA, FINRA executives lied, FINRA investment with Bernie Madoff, FINRA sale of auction rate securities, Greenfield & Goodman, markets, Mary Schapiro, Mary Schapiro lied, NASD enforcement, Richard Greenfield, securities regulation of state attorneys general, self-regulatory model for Wall Street, Standard Investment Chartered, trust in financial system, truth transparency and integrity on Wall Street, Wall Street, Wall Street enforcement, Wall Street lobbying, Washington D.C.
Posted in FINRA, General, Mary Schapiro, regulation, SEC, Wall Street, Washington D.C. | 7 Comments »

My Letter to Judge Jed Rakoff in re: Benchmark and Standard Investment Chartered v. FINRA

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 6^th 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.

Sincerely,
Larry Doyle
Sense on Cents
http://www.senseoncents.com/about/

P.S. If you care to sample some of my recent work, I respectfully submit:
>> Is Wall Street On the Up and Up? (October 3, 2009)
>> Is the Wall Street Cop, FINRA, Ready To Talk? (September 22, 2009)