Posts Tagged ‘front-running’

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
continue reading


Tags: , , , , , , , ,




Merrill Lynch Accused of Same Fraud as Goldman Sachs; Tip of the Iceberg of Fraud Charges

Merrill Lynch Accused of Same Fraud as Goldman Sachs; Tip of the Iceberg of Fraud Charges

Courtesy of Mish 

Merrill Lynch now stands accused of the same fraudulent actions as Goldman Sachs. Please consider Merrill Used Same Alleged Fraud as Goldman, Bank Says

Merrill Lynch & Co. engaged in the same investor fraud that the U.S. Securities and Exchange Commission accused Goldman Sachs Group Inc. of committing, according to a bank that sued the firm in New York last year.

Cooperatieve Centrale Raiffeisen-Boerenleenbank BA, known as Rabobank, claims Merrill, now a unit of Bank of America Corp., failed to tell it a key fact in advising on a synthetic collateralized debt obligation. Omitted was Merrill’s relationship with another client betting against the investment, which resulted in a loss of $45 million, Rabobank claims.

“This is the tip of the iceberg in regard to Goldman Sachs and certain other banks who were stacking the deck against CDO investors,” said Jon Pickhardt, an attorney with Quinn Emanuel Urquhart Oliver & Hedges, who is representing Netherlands-based Rabobank.

Goldman Sachs, the most profitable securities firm in Wall Street history, created and sold CDOs tied to subprime mortgages in early 2007, as the U.S. housing market faltered, without disclosing that Paulson helped pick the underlying securities and bet against them, the SEC said in a statement yesterday.

The SEC allegations are “unfounded in law and fact, and we will vigorously contest them,” Goldman said in a statement.

“When one major firm becomes aware of the creative instrument of others, there is historically an effort to replicate them,” said Jacob Frenkel, a former SEC lawyer now in private practice in Potomac, Maryland.

SEC spokesman John Heine declined to comment on whether it is investigating Merrill’s actions.

Merrill loaded the Norma CDO with bad assets, Rabobank claims. Rabobank seeks $45 million in damages, according to a complaint filed in state court in June 2009. Rabobank initially provided a secured loan of almost $60 million to Merrill, according to its complaint.

No Surprise

That Merrill Lynch now stands accused should not surprise anyone. Nor will it be any surprise if Morgan Stanley and Citigroup are accused of similar dealings. Indeed, it may be interesting to see who is not accused.

Goldman’s statement The SEC allegations are “unfounded in law and fact, and we will vigorously contest them” is an interesting theoretical debate.

Accusations that Goldman…
continue reading


Tags: , , , , ,




Goldman Sacked?

Goldman Sacked?

Courtesy of George Washington

The Goldman fraud indictment is obviously huge news.

The Connecticut Attorney general wants to file criminal charges:  

Visit msnbc.com for breaking news, world news, and news about the economy

And New York might not be far behind

ProPublica points out that other major banks did the same thing as Goldman.

Shahien Nasiripour writes:

Securities fraud charges against Goldman Sachs are just the beginning as federal regulators and investigators comb through the wreckage of a fraud-induced recession, caused by a pervasive and systemic culture of deceit at Wall Street’s biggest firms, say Wall Street analysts.

Are the prosecutions finally starting? Is the dam finally breaking? Has Goldman really been sacked? 

Maybe.

But Tyler Durden thinks it’s all bread and circuses. 

And as Mish points out (edited slightly for readability): 

Here is a list of some of the things the SEC has ignored.

Geithner’s Illegal Money-Laundering Scheme Exposed; Harry Markopolos Says “Don’t Trust Your Government”  

77 Fraud, Money Laundering, Insider Trading, and Tax Evasion Investigations Underway Regarding TARP  

Secret Deals Involving No One; AIG Coverup Conspiracy Unravels 

Questions Geithner Cannot Escape 

Time To Indict Geithner For Securities Fraud 

Bernanke Guilty of Coercion and Market Manipulation 

Paulson Admits Coercion; Where are the Indictments? 

Bernanke Suffers From Selective Memory Loss; Paulson Calls Bank of America "Turd in the Punchbowl" 

Let the Criminal Indictments Begin: Paulson, Bernanke, Lewis

***

We need a complete ethics overhaul but we will not see it until people are thrown into prison and corporations have to choose which business they want to be in as opposed to the current state of affairs where anything for a profit is acceptable. 

  • Firms give advice based on how much profit the firms will make on it
  • Firms trade their own books to the detriment of clients
  • Firms make upgrades and downgrades after they take positions themselves
  • Firms front-run trades
  • Firms engage in dark pools
  • Firms deemed too big to fail take advantage by upping leverage
  • Firms like Goldman Sachs (which is nothing more than a giant hedge fund with no ethics) have access to Fed funds at low interest rates to do whatever the hell they please

Is someone finally standing up to the vampire squids of the world?

Or is this yet another p.r. stunt, where deals will be cut, a few low-level patsies will be convicted, and business as usual will continue?

Only time will tell …


Tags: , , , , ,




Rant of the Day: No Ethics, No Fiduciary Responsibility, No Separation of Duty; Complete Ethics Overhaul Needed

I’ve posted a lot on the Goldman Sachs fraud charges and hope it marks the beginning of change. Many of my favorite bloggers believe this is a mere distraction, and GS, the corporation, will get a slap on the wrist and a fine – which means essentially nothing happens to the people responsible for an ongoing parade of front-running, misrepresentations and frauds, even if the SEC is only permitted to file civil charges.  That said, here’s Mish on the subject. (My highlights) – Ilene 

Rant of the Day: No Ethics, No Fiduciary Responsibility, No Separation of Duty; Complete Ethics Overhaul Needed

AFIS BILLBOARD POSTERS ETHICAL BEHAVIOR DEFENSE BILLBOARD #21

Courtesy of Mish  

Goldman Sachs Shares Drop After Goldman Sachs Accused of Fraud in Mortgage Deals

Goldman Sachs, which emerged relatively unscathed from the financial crisis, was accused of securities fraud in a civil suit filed Friday by the Securities and Exchange Commission, which claims the bank created and sold a mortgage investment that was secretly devised to fail.

The move marks the first time that regulators have taken action against a Wall Street deal that helped investors capitalize on the collapse of the housing market. Goldman itself profited by betting against the very mortgage investments that it sold to its customers.

The suit also named Fabrice Tourre, a vice president at Goldman who helped create and sell the investment.

The instrument in the S.E.C. case, called Abacus 2007-AC1, was one of 25 deals that Goldman created so the bank and select clients could bet against the housing market. As the Abacus deals plunged in value, Goldman and certain hedge funds made money on their negative bets, while the Goldman clients who bought the $10.9 billion in investments lost billions of dollars.

“The product was new and complex, but the deception and conflicts are old and simple,” Robert Khuzami, the director of the S.E.C.’s division of enforcement, said in a statement. “Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party.”

In recent months, Goldman has repeatedly defended its actions in the mortgage market, including its own bets against it. “We certainly did not know the future of the residential housing market in the first half of 2007 anymore than we can


continue reading


Tags: , , , , , , , , , , ,




HFT “Flash” Orders: Nasdaq Admission?

HFT "Flash" Orders: Nasdaq Admission?

Courtesy of Karl Denninger at The Market Ticker


continue reading


Tags: , , , ,




High Frequency Trading Is A Scam

High Frequency Trading Is A Scam

Devil in the machineCourtesy of Karl Denninger at The Market Ticker


continue reading


Tags: , , , ,




High-Frequency Trading – My View

High-Frequency Trading – My View

Courtesy of Karl Denninger at The Market Ticker

Senator Schumer apparently believes this is an unfair practice, and I agree.


continue reading


Tags: , , , , ,




More Front-Running: Where Are The Cops?

Courtesy of Karl Denninger at The Market Ticker

More Front-Running: Where Are The Cops?


continue reading


Tags: , ,




 
 
 

Phil's Favorites

Q+A: Boris Johnson tests positive for coronavirus - what happens now?

 

Q+A: Boris Johnson tests positive for coronavirus – what happens now?

He’s felt better. PA.

Courtesy of Nicholas Allen, Royal Holloway

Boris Johnson, the British prime minister, has tested positive for the COVID-19 virus. In a recorded video message, Johnson said he had developed “mild symptoms” and is now in self-isolation. Here are the main issues at play for the UK in this time of crisis.

Will Boris Johnson continue as prime minister?

Johnson has made it clear that he will continue to oversee the government’...



more from Ilene

Zero Hedge

25-Year-Old California Man With No Underlying Conditions Dies Of COVID-19

Courtesy of ZeroHedge View original post here.

While coronavirus deaths have primarily been in those above 50-years-old, the disease has also been sending younger people to the ICU in larger than expected numbers - and in some cases, claiming younger victims.

In France, doctors have reported that 50% of ICU patients are under 60-years-old, while in the Netherlands, half are under 50.

Nearly 50% of c...



more from Tyler

Insider Scoop

'Psyched': Hawaii Considers Resolution For Shrooms, Champignon Eyes Ketamine Products

Courtesy of Benzinga

Psyched is a bi-monthly column covering the most important developments in the industry of medicinal psychedelics. We hope you follow us periodically as we report on the growth of this exciting new industry.

Champignon Brands Buys IP Company and Adds Ketamine and New Formulations To Its Portfolio

On March 19, Champignon Brands Inc. (CSE: SHRM) (OTC: SHRMF), a Canadian healt...



http://www.insidercow.com/ more from Insider

The Technical Traders

These Index Charts Will Calm You Down

Courtesy of Technical Traders

I put together this video that will calm you down, because knowing where are within the stock market cycles, and the economy makes all the difference.

This is the worst time to be starting a business that’s for sure. I have talked about this is past videos and events I attended that bear markets are fantastic opportunities if you can retain your capital until late in the bear market cycle. If you can do this, you will find countless opportunities to invest money. From buying businesses, franchises, real estate, equipment, and stocks at a considerable discount that would make today’s prices look ridiculous (which they are).

Take a quick watch of this video because it shows you ...



more from Tech. Traders

Kimble Charting Solutions

Broadest Of All Stock Indices Testing Critical Support, Says Joe Friday!

Courtesy of Chris Kimble

One of the broadest indices in the states remains in a long-term bullish trend, where a critical support test is in play.

The chart looks at the Wilshire 5000 on a monthly basis over the past 35-years.

The index has spent the majority of the past three decades inside of rising channel (1). It hit the top of this multi-decade channel to start off the year, where it created a monthly bearish reversal pattern.

Weakness the past 2-months has the index testing rising support and the December 2018 lows at (2).

Joe...



more from Kimble C.S.

Biotech/COVID-19

Coronavirus treatments and vaccines - research on 3 types of antivirals and 10 different vaccines is being fast-tracked

 

Coronavirus treatments and vaccines – research on 3 types of antivirals and 10 different vaccines is being fast-tracked

Scientific research on the novel coronavirus has progressed at unprecedented speed. Mongkolchon Akesin / Shutterstock

Courtesy of Ignacio López-Goñi, Universidad de Navarra

Just three months after China first notified the World Health Organization about a deadly new coronavirus, studies of numerous antiviral t...



more from Biotech/COVID-19

Chart School

Cycle Trading - Funny when it comes due

Courtesy of Read the Ticker

Non believers of cycles become fast believers when the heat of the moment is upon them.

Just has we have birthdays, so does the market, regular cycles of time and price. The market news of the cycle turn may change each time, but the time is regular. Markets are not a random walk.


Success comes from strategy and the execution of a plan.















Changes in the world is the source of all market moves, to catch an...

more from Chart School

Digital Currencies

Bitcoin Tested As A Safe Haven After Biggest Stock Crash Since 2009

Courtesy of ZeroHedge View original post here.

Authored by Horus Hughes via CoinTelegraph.com,

Gold and Bitcoin react to global panic

Amid all of yesterday's chaos in bond, commodity, and stock markets, with the yield on the 10-year US Treasury note dropping below 0.5% for the first time in history - a strong indicator that investors are desperately looking for safe harbors - two supposed safe-havens in 'alternative currencies' behaved qui...



more from Bitcoin

Members' Corner

Bloody Mob Sh*t: An Interview with Lincoln's Bible

 

Bloody Mob Sh*t: An Interview with Lincoln's Bible

We talk Trump, Mogilevich, Epstein, Giuliani, Fred Trump, Roy Cohn, and more.

Courtesy of Greg Olear at PREVAIL, author of Dirty Rubles: An Introduction to Trump/Russia

(Originally published on Feb. 21, 20.)

...

more from Our Members

ValueWalk

Entrepreneurial activity and business ownership on the rise

By Jacob Wolinsky. Originally published at ValueWalk.

Indicating strong health of entrepreneurship, both entrepreneurial activity and established business ownership in the United States have trended upwards over the past 19 years, according to the 2019/2020 Global Entrepreneurship Monitor Global Report, released March 3rd in Miami at the GEM Annual Meeting.

Q4 2019 hedge fund letters, conferences and more

The Benefit Of Entrepreneurial Activity ...

more from ValueWalk

Promotions

Free, Live Webinar on Stocks, Options and Trading Strategies

TODAY's LIVE webinar on stocks, options and trading strategy is open to all!

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.  

...

more from Promotions

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 ...



more from Lee

Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

more from M.T.M.





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...

Learn more About Phil >>


As Seen On:




About Ilene:

Ilene is editor and affiliate program coordinator for PSW. Contact Ilene to learn about our affiliate and content sharing programs.