Posts Tagged ‘auction rate securities’

FINRA, Fess Up

FINRA, Fess Up

Interview with Larry Doyle at Sense on Cents, by Ilene 

Here’s the hypocrisy of the Financial Industry Regulatory Authority* (FINRA); it dumped a portfolio of Auction Rate Securities* (ARS) before the ARS market froze up in early 2008. People are asking legitimate questions and FINRA is refusing to answer. When FINRA wants its questions answered, it knows how to get the answers through its subpoena power. Why won’t FINRA fess up and be transparent about its dealings in the ARS market?

I recently caught up with my friend Larry Doyle and asked him whether there had been any progress in uncovering the events behind FINRA’s timely liquidation of its ARSs in 2007 since our last conversation. Here’s a transcript of our conversation about FINRA and FINRA’s ARS sales. Larry touches on a number of important topics including transparency, the incestuous relationship between Wall Street and Washington, the absurdity of self-regulation and twisted logic of granting a quasi-government entity government-style immunity, while allowing it to be free from the reach of the Freedom of Information Act.  

FINRA’s Timely Auction-Rate Securites (ARS) Sales

Before we continue, please read my previous interview with Larry Doyle here. Excerpt: 

"The ARS market operated smoothly until the credit markets seized up.  First signs of trouble emerged in 2007 when the spreads started to blow out (widen significantly). Spreads widened because dealers realized the true nature of the risks and backed away from supporting the market. Selling intensified as investors were trying to get out in the late spring and summer of 2007.  Investors stopped buying, though the dealers maintained an intermediary market for a while.  Finally, sellers so overwhelmed buyers that Wall Street had to stop serving as an intermediary.  This developed over a period of months, but was not shared with the clients.  Wall Street was trying to lay these ARSs out on investors.  When the market collapsed in February 2008, the “cash equivalency” disappeared."

[...]

Going into 2007, FINRA had $647 million dollars of ARSs.  It was holding ARSs as the credit markets started to freeze in mid 2007.  FINRA says it did nothing nefarious when it sold its ARSs. But that fails the smell test.  It sold its ARS holdings before the markets collapsed. Meanwhile, investors got stuck with approximately $150 billion of ARSs.

One would have to be exceptionally naïve to think FINRA officials did not have material,


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The FINRA Fiasco

The FINRA Fiasco  

FINRA may have potential massive conflicts of interests in its dealing with its internal investment portfolio. A clear example is FINRA’s behavior with its Auction Rate Securities. Evidence suggests FINRA sold its Auction Rate Securities months before the market collapsed. Insider information or really good luck?

By Ilene 

Interview with Larry Doyle at Sense on Cents

INTRODUCTION 

Background Information: 

Financial Industry Regulatory Authority (FINRA)

The Financial Industry Regulatory Authority, Inc., or FINRA is a private corporation which functions as a self-regulatory organization (SRO, an organization that exercises regulatory authority over an industry or profession). It is not a government agency.  FINRA was formed by the merger of the enforcement arm of the New York Stock Exchange, NYSE Regulation, Inc., and the National Association of Securities Dealers, Inc. (NASD). The merger was approved by the Securities and Exchange Commission (SEC) in July, 2007.

FINRA performs market regulation under contract with brokerage firms and trading markets. It focuses on regulatory oversight of all securities firms that do business with the public. FINRA regulates by adopting and enforcing rules and regulations governing its members’ business activities. It often provides advice to the U.S. Securities and Exchange Commission.  (See FINRA’s website is at http://www.finra.org/.  Also FINRA, http://en.wikipedia.org/wiki/FINRA).

derivativesAuction Rate Securities (ARS)

An auction rate security (ARS) refers to a debt instrument (corporate or municipal bonds) with a long-term nominal maturity for which the interest rate is regularly reset through a dutch auction. (Auction rate preferreds are similar in nature but are shares in a fund and as such are not tied to an underlying longer term maturity loan.)

The auction failures in February 2008 led to widespread freezing of the ARS assets in clients’ accounts. Currently, the instruments trade in a secondary market but at a significant discount to par. A renewed investigation of the ARS industry was led by Andrew Cuomo, the Attorney General of New York, and William Galvin, Secretary of the Commonwealth of Massachusetts. These investigations found industry-wide violations of law. Investors in ARSs maintain these instruments were misrepresented as liquid cash alternatives and allege that broker dealers failed to disclose the liquidity and credit risks involved.  (See also http://en.wikipedia.org/wiki/Auction_rate_security.)

INTERVIEW 

Ilene: Larry, I read your recent article, “FINRA Fraud Team Must Look in the Mirror” (April 16, 2010), in which you discuss FINRA’s “new initiative to target
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Zero Hedge

Hedge Funds Have Never Been More Concentrated Into The Same Handful Of Stocks

Courtesy of ZeroHedge View original post here.


Sun, 05/24/2020 - 15:25

Six years ago, back in 2013, we presented what we then viewed (and still view) as the best trading strategy of the New Abnormal period, when we said that buying the most shorted names while shorting the names that have the highest hedge fund concentration and institutional ownership is the surest way to generate alpha, to wit:

... in a world in which nothing ...



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Phil's Favorites

A doctor shares 7 steps he'll review to decide when and where it's safe to go out and about

 

A doctor shares 7 steps he'll review to decide when and where it's safe to go out and about

The Inn at Little Washington in Washington, Virginia, shown May 20, 2020, plans to use mannequins in its dining room to enforce social distancing when it reopens at the end of the month. Olivier Douliery/AFP via Getty Images

Courtesy of William Petri, University of Virginia

As we return to some degree of normalcy after weeks of social distancing, we all need a plan. As an immunologist, I’ve given this a lot of ...



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Biotech/COVID-19

A doctor shares 7 steps he'll review to decide when and where it's safe to go out and about

 

A doctor shares 7 steps he'll review to decide when and where it's safe to go out and about

The Inn at Little Washington in Washington, Virginia, shown May 20, 2020, plans to use mannequins in its dining room to enforce social distancing when it reopens at the end of the month. Olivier Douliery/AFP via Getty Images

Courtesy of William Petri, University of Virginia

As we return to some degree of normalcy after weeks of social distancing, we all need a plan. As an immunologist, I’ve given this a lot of ...



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Chart School

Is this your local response to COVID 19

Courtesy of Read the Ticker

This is off topic, but a bit of fun!


This is the standard reaction from the control freaks.








This is the song for post lock down!







What should be made mandatory? Vaccines, hell NO! This should be mandatory: Every one taking their tops off in the sun, they do in Africa!

Guess which family gets more Vitamin D and eats less sugary carbs, TV Show



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ValueWalk

Hazelton Capital Partners 1Q20 Commentary: Long Renewable Energy Group

By Jacob Wolinsky. Originally published at ValueWalk.

Hazelton Capital Partners commentary for the first quarter ended April 30, 2020, discussing their current portfolio holdings Renewable Energy Group, Apple and Berkshire Hathaway.

Q1 2020 hedge fund letters, conferences and more

Dear Partner,

Hazelton Capital Partners, LLC (the “Fund”) returned -23.8% from January 1, 2020 through March 31, 2020. By comparison, the S&P 500 returned -19.4% during the same quarter.

Before reviewing the 1st quarter of 2020 and Hazelton Capital Partners’ portfolio, my sincere hope is that everyone, their family, friends, a...



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The Technical Traders

Gold Stocks Are Overbought. You Don't Want Prices to Go Straight Up

Courtesy of Technical Traders

Bill Powers of MiningStockEducation.com talks with a professional trader and market commentator Chris Vermeulen says gold stocks are overbought and need a breather which would be good for the overall upward trend.

Chris shares how he has and is trading the junior gold sector. He called the recent February 24th top in the gold stocks before the March crash. And now he is warning to a top in some gold-stock positions during an expected pullback.

Chris also addresses whether a lot of the gap-up’s in many gold...



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Kimble Charting Solutions

Doc Copper Counter-Trend Rally Could Peak Here, Says Joe Friday

Courtesy of Chris Kimble

Could ole Doc Copper be sending an important message about the overall health of the global economy and the stock market in the next couple of weeks? It appears it could!

This chart looks at Copper futures on a weekly basis over the past 7-years. Doc Copper looks to have double topped in late 2017 and early 2018. After the double top, Copper has continued to create a series of lower highs, which sends a bearish divergence message to stocks.

Numerous highs and lows have taken place along the line (1) over the past 5-years. The rally off the March lows ...



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Digital Currencies

Blockchains can trace foods from farm to plate, but the industry is still behind the curve

 

Blockchains can trace foods from farm to plate, but the industry is still behind the curve

App-etising? LDprod

Courtesy of Michael Rogerson, University of Bath and Glenn Parry, University of Surrey

Food supply chains were vulnerable long before the coronavirus pandemic. Recent scandals have ranged from modern slavery ...



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Members' Corner

Coronavirus, 'Plandemic' and the seven traits of conspiratorial thinking

 

Coronavirus, 'Plandemic' and the seven traits of conspiratorial thinking

No matter the details of the plot, conspiracy theories follow common patterns of thought. Ranta Images/iStock/Getty Images Plus

Courtesy of John Cook, George Mason University; Sander van der Linden, University of Cambridge; Stephan Lewandowsky...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
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  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
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Promotions

Free, Live Webinar on Stocks, Options and Trading Strategies

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Feb. 26, 1pm EST

Click HERE to join the PSW weekly webinar at 1 pm EST.

Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

This week, we also have a special presentation from Mike Anton of TradeExchange.com. It's a new service that we're excited to be a part of! 

Mike will show off the TradeExchange's new platform which you can try for free.  

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Lee's Free Thinking

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

 

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

Courtesy of  

The repo market problem isn’t the problem. It’s a sideshow, a diversion, and a joke. It’s a symptom of the problem.

Today, I got a note from Liquidity Trader subscriber David, a professional investor, and it got me to thinking. Here’s what David wrote:

Lee,

The ‘experts’ I hear from keep saying that once 300B more in reserves have ...



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How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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