Criminal Law

SEC Charges Goldman Sachs in CDO Fraud

Posted on April 16, 2010
In a complaint filed in the Southern District of New York, the SEC has filed civil charges against Goldman Sachs, alleging that it structured and marketed a synthetic collateralized debt obligation (CDO) that hinged on the performance of subprime residential mortgage-backed securities (RMBS)...

Schwab Continus ARS Fight

Posted on April 12, 2010
Charles Schwab Corp. continues its fight with New York Attorney General Andrew Cuomo over its sales of auction-rate securities to investors.Cuomo claims that Schwab sold the securities fraudulently. Cuomo made similar claims against 14 other securities firms, which settled with him...

Fifth Third Gives President $2 Million Raise with TARP Money

Posted on April 07, 2010
Fifh Third Bancorp, which received $3.4 billion in TARP funds, which have not been repaid, just gave its CEO a 56% raise, to $5.2 million. I thought this was an April Fool's joke, but no, here it is, in a Reuter's article.The article also points out that PNC Financial, Regions Financial and KeyCorp, all of which owed billions of dollars to taxpayers at the end of 2009?also increased their chiefs' pay...

Facebook Tells Employees Not to Sell Shares

Posted on April 05, 2010
Facebook has an interesting problem - it is in danger of having too many shareholders, an outcome that is being made possible by online trading sites like Sharespot.com, which allows shareholders in private companies to sell their shares to others.There are plenty of issues surrounding these sites for private companies, including not knowing who your shareholders are, and having your shares too widely dispersed...

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Mark Cuban Says SEC Tampered With Witness

Posted on April 05, 2010
 We followed the Mark Cuban SEC case with great interest. My thoughts at the time were that it was a lousy case, and the SEC was making a mistake in bringing it. (See my prior Mark Cuban SEC posts.) Many other securities attorneys and commentators expressed the same opinion...

Logos Multi-Strategy and Donum Fund Managers Plea Guilty

Posted on April 05, 2010
According to an FBI press release five church leaders from Long Island plead guilty to consipracy to commit securities fraud in connection with two hedge funds, Logos Multi-Strategy I, LP and the Donum Fund, LP. The press release states that the defendants admitted that they conspired to market the hedge funds to prospective investors, including numerous members of their own church, employing material misrepresentations and omissions contained in private placement memoranda and other marketing materials concerning the management, supervision, and historical and expected trading performance of the funds...

So that's what they were doing! SEC Staff Viewing Porn

Posted on March 30, 2010
Upfront - this piece is a bit unfair, but the allegations are amazing. A story has been floating around for a few weeks about SEC staffers watching porn on government computers on government time. But Compliancex has a story that claims that no fewer than 16 investigations are currently underway into SEC employees who have spent up to an hour and a half a say viewing online pornGovernment employees spending any time viewing porn while at work is bad enough, but what is more troubling is the fact that there are at least 16 investigations into it! What the heck does that mean? Are they investigating 16 SEC staffers, or are there really 16 separate investigations?More>>>

Ex-IBM exec Moffat pleads guilty to securities fraud

Posted on March 30, 2010
Lest anyone believe that tipping without trading is not a big deal, a lesson to be learned. Robert Moffat, a senior executive at IBM pleaded guilty yesterday to conspiracy to commit securities fraud and securities fraud, in connection with his involvement in what is being called the largest insider trading case involving a hedge fund fraud in history...

Mutual Funds and Social Media

Posted on March 30, 2010
Doug Cornelius has a blog post examing the use of social media by mutual fund companies. I didn't view every example that Doug has collected, but Putnam appears to be doing a pretty good job with Twitter. It looks like they have been at it for at least 6 months, updating with news about the company, webinars and other publicity posts...

GOP to Dems: Will you join us in voting to ban Viagra for sex offenders?

Posted on March 24, 2010
Is everyone as tired of the political games being played by our elected officials? Left, right, Democrat or Republican our government has become a morass of self-interested politicians who don't care about the country, or their constituents. They simply care about keeping their jobs, getting re-elected, and bashing the other party...

Advisors Allowed To Get Social

Posted on March 22, 2010
My article from On Wall Street this month, on use of social media by financial advisers.There are numerous issues involved, and contrary to the statements made by some, this is not as simple as storing tweets. We are developing compliance and supervisory procedures for firms to use, building on FINRA's social media release, and the issues are numerous...

Toyota Hybrid Horror Hoax

Posted on March 15, 2010
Forbes looks at a potential bogus story of a stuck accelerator in a Pirus, full of 95 MPH driving, a police chase to stop the car, and a "victim" who is deeply in debt, and who owes Toyota money. More>>>

Regulators are from Mars, Investors are from Venus?

Posted on March 14, 2010
Interesting post over at The Conglomerate, identifying the differences between the regulators' view of the world and the investors' view of the world. It makes a good point - the financial markets cannot be regulated with more regulation, we need more investor education...

How Lehman Hid Its Problems While it Collapsed

Posted on March 12, 2010
The New York Times is reporting on a report, complied by an examiner for Lehman, that finds that it failed from multiple causes, including bad mortgages. That is not too much of a surprise, but what is telling is the finding that Lehman used "materially misleading" accounting gimmicks to hide its financial problems...

Keeping Your Signing Bonus May Get Easier?

Posted on March 10, 2010
A recent article at a financial adviser publication ran this headline, without the question mark, reporting on a broker's win on a promissory note case as if it was a major breakthrough in the financial world. It's not.Certainly the award against the broker of approximately $20,000 on a $142,000 note is a win, but the broker also had to pay $13,000 in forum fees, presumably because he filed a third party claim against two individuals (on which he did not receive any award)...

Phony Web Site Targets Madoff Investors

Posted on March 10, 2010
The SEC has issued a press release warning investors of a phony web site that is attempting to obtain information from Madoff victims. The site asks for information in order to obtain a refund from funds allegedly collected by the fraudulent company.The company's website and name is very close to SIPC's name and web site, and hopefully investors will not be fooled by the scam...

Judge Dismisses Suit Against FINRA for Misleading Members

Posted on March 02, 2010
I am still waiting for a copy of the decision, but according to InvestmentNews.com, Judge Rakoff of the SDNY has dismissed the suit brought by two member firms against FINRA for misleading its members in connection with the merger with NYSE Enforcement...

Continued Pursuit of New Defendants for Lehman Losses

Posted on February 22, 2010
The collapse of the financial markets that began in mid-2008 has spawned quite a bit of litigation, and at the forefront of much of that litigation is Lehman Brothers. That is not too much of a surprise, given the fact that the government refused to prevent its bankruptcy...

Finra Cracks Down On Arbitrator Credentials

Posted on February 19, 2010
According to Financial Advisor Magazine, FINRA is plugging a loophole that has allowed many of its 6,200 arbitrators to serve on its panels without first checking their credentials. According to the article, FINRA began background verification of arbitrators in October 2003...

Brokers Being Trashed Again By FINRA

Posted on February 17, 2010
We all know that FINRA, along with the SEC, has been taking a beating over the past year for its failures to uncover significant frauds that have costs investors millions of dollars. There is no need to re-hash all of that, but now FINRA is attempting to do something to fix its image...

Advisers Sue State Securities Regulator

Posted on February 08, 2010
Years ago I wrote a column for Research Magazine titled Fight Back, an analysis of a litigation strategy for advisers when faced with frivolous customer complaints. The article created something of a stir among securities lawyers, which was a good thing...

Wells Fargo To Add 1,400 Advisors

Posted on February 08, 2010
Stories about Merrill adding trainees surfaced last week, now we learn that Wells Fargo Advisors is looking to add 1,400 financial advisors. A published report said that the advisors will be a combination of 1,000 recruits from other firms and 400 trainees...

Raiding Case Costs Raymond James $12 Million

Posted on February 07, 2010
In a case involving 20 advisers in 4 branch offices, a securities arbitration panel has ordered Raymond James Associates Inc. to pay $12.1 million to Wells Fargo Advisors LLC for alleged raiding.The award does not provide any detail of the case, but ordered 10,500,000 in compensatory damages, 1,500,000 in attorneys fees and costs...

Bad Advice -Ignore FINRA Social Media Guidance

Posted on February 05, 2010
Securities regulation is a big deal for those in the industry. The mix of rules, regulations and regulators is a dangerous web of potential violations, fines and suspensions. But those who are in the industry know that the regulators are serious, that they are looking for violations, and will bring actions for those violations...

Investors Filing Claims Against Lehman Brokers

Posted on February 04, 2010
Investors are starting to file arbitration claims against their Lehman brokers, in an attempt to collect their losses on investments in Lehman principle protected notes. I warned of this eventuality some time ago, as customers who lost money in the notes are going to look to recover those losses...

Merrill Hiring Rookies

Posted on February 04, 2010
In order to combat the mass of brokers who left ML since the BofA takover, Bank of America plans to rebuild its brokerage force in 2010 by adding rookie advisors rather than competing for talent in the industry?s expensive recruiting war according to a story in Registered Rep and Financial Times...

FINRA Fines Firm $300,000 For Failing to Verify Account Identity

Posted on February 02, 2010
For those readers who think that the requirement to verify the identity of account holders is not a big deal, think again. FINRA has fined Pinnacle Capital Markets $300,000 for failing to do exactly that.The FINRA press release does not have any comments from the firm, but I suspect that because the accounts were sub-accounts, the firm may have believed that verification was not necessary...

Brokers, Advisers, LinkedIn and Twitter

Posted on February 02, 2010
I was a panelist in January for a webinar on Investment Advisers and LinkedIn. We were all set to go, my slides were all prepared and submitted, and the day before the webinar FINRA released Regulatory Notice 10-06 ? Guidance on Blogs and Social Networking Web Sites...

Obama's Hedge Fund Tax

Posted on February 02, 2010
I am certainly no tax maven, but do represent hedge fund managers. According to Bloomberg News "[t]he budget proposes to require general partners at private-equity firms and other investment partnerships such as venture-capital firms and hedge funds to pay ordinary income-tax rates on their compensatory share of profits called ?carried interest,? which currently qualifies for the 15 percent capital-gains treatment...

President Obama's Budget Contains $1.9 Trillion in Tax Increases

Posted on February 02, 2010
From the Tax Professor Blog: Follow the link for a roundup of press and blog coverage of the tax increases: * Associated Press, Obama Budget Would Impose Host of Tax Increases * ataxingmatter, Obama's FY 2011 Budget * Bloomberg, Obama Budget Drops Plan for $87 Billion Tax Rise on Companies * Bloomberg, Obama Seeks $1...

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