Criminal Law

2009 Good Year for Most Hedge Funds

Posted on January 25, 2010
Although more than 20% of hedge funds shut down in the past two years, as 1,500 funds were liquidated in 2008 and 900 more in 2009, the Morningstar 1000 Hedge Fund Index ended the year up an impressive 19.5%, just missing 2003?s 20.3% rise, according to preliminary data from Morningstar, and the currency-hedged Morningstar MSCI Hedge Fund Index, finished the year up 14...

FINRA Releases Social Media Guidance For Brokers

Posted on January 25, 2010
FINRA released its Regulatory Notice on Communications with the Pubic Through Social Networking Web Sites today, a full month ahead of schedule. The notice will undoubtedly become the standard by which firms, and FINRA, will gauge compliance in the use of sites such as LinkedIn, Facebook and Twitter...

TARP Payback Widens Losses At BofA

Posted on January 20, 2010
Bank of America lost $5.2 billion over the last three months of 2009. Things aren't going so well over there. Losing 5 BILLION dollars in three months is quite an accomplishment. Howeve, $4 billion of that was in charges related to its repayment of $45 billion in TARP loans...

Compensation Cuts Leads to Broker Transitions

Posted on January 19, 2010
In my practice I have seen a huge increase in the number of wirehouse brokers who are changing firms, as those firms consolidate and attempt to increase their profits.Unfortunately for some, the wirehouses are ramping up profits at the expense of their brokers, and ultimately, their customers...

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Nationwide Financial Tells Advisors To Find New BDs

Posted on January 18, 2010
Nationwide Financial has advised its independent financial advisers to find new broker-dealer relationships before April 30, according to InvestmentNews.The article states that the move is intended by Nationwide to focus its efforts on its proprietary sales force and to expand its insurance business...

SEC Charges Father-Son Team in Hedge Fund Fraud

Posted on January 12, 2010
 According to the lead paragraph in the SEC's press release, they are charging an investment adviser  with securities fraud for misleading investors about the financial condition of their funds, and that they were controlling the investmen decisions of the funds, when same were controlled by a third party...

SEC Charges Father-Son Team in Hedge Fund Fraud

Posted on January 12, 2010
 According to the lead paragraph in the SEC's press release, they are charging an investment adviser  with securities fraud for misleading investors about the financial condition of their funds, and that they were controlling the investmen decisions of the funds, when same were controlled by a third party...

Custodial Firm Not Liable for RIA's Alleged MisManagement

Posted on January 12, 2010
Clearing firms, those entities which perform back office, bookkeeping, accounting, custodian and record-keeping functions for other broker-dealers, hedge funds and investment advisers, are not liable for the investment losses of their client's customers...

SEC Charges Adviser in Fraudulent Scheme Utilizing Football Stars

Posted on December 26, 2009
he Securities and Exchange Commission filed securities fraud charges against an Austin, Texas investment adviser and two businesses he controls for operating a multi-million dollar scam that used former professional football players to promote its offerings...

SEC Charges Another Attorney in Insider Trading Scheme

Posted on December 22, 2009
Yesterday the SEC charged another attorney from Ropes & Gray LLP in the agency's ongoing investigation into a $20 million insider trading ring involving Wall Street traders, lawyers, and hedge fund managers. Last month the Commission charged two Ropes & Gray attorneys for tipping information, and charged 6 others in a scheme that allegedly involved $20 million dollars...

More Private Placements Under Fire

Posted on December 22, 2009
FINRA has announced that it fined Pacific Cornerstone Capital Inc. and its former chief executive, Terry Roussel, a total of $750,000 for making misleading statements and, in some cases, omitting facts in connection with the sale of two private placements...

House scraps amendment to place B-D advisers under Finra - Investment News

Posted on December 11, 2009
Hopes for a more streamlined regulatory system for dual registered investment advisers and brokers at brokerage firms were dashed today as the House of Representatives has killed the proposal to have FINRA regulate investment advisers who are also registered representatives as a brokerage firm...

SEC Charges Another Attorney in Insider Trading Scheme

Posted on December 11, 2009
Yesterday the SEC charged another attorney from Ropes & Gray LLP in the agency's ongoing investigation into a $20 million insider trading ring involving Wall Street traders, lawyers, and hedge fund managers. Last month the Commission charged two Ropes & Gray attorneys for tipping information, and charged 6 others in a scheme that allegedly involved $20 million dollars...

UBS To Reward Reps for Loyalty and Growth

Posted on December 11, 2009
Competition for brokers - or rather their assets - has intensified over the past two years as firms consolidate. My firm has seen a significant increase in the number of broker transition cases we are handling, both in brokers who are being forced out of their positions, and in those who are voluntarily changing firms...

SEC Blocks Early-Stage Ponzi Scheme

Posted on December 09, 2009
Sometimes good things come from a massive failure. Ever since the mis-steps of the SEC have come to light, the SEC has been pouncing on various frauds and schemes and taking swift action. It was typical for the SEC to be the last one on the scene, franticly trying to close the barn door after all of the horses had left and were scattered to parts unknown...

Lehman Note Investor Obtains 1/2 an Award

Posted on December 07, 2009
A FINRA arbitration panel has awarded damages against UBS in favor of an investor who purchased Lehman principal protected notes.While the WSJ is presenting the award as a significant win for the investor, and an indicator of the outcome of other cases relating to the Lehman notes, I am not so sure this is that big a win...

FINRA Execs Pockets Millions

Posted on December 07, 2009
I knew about the issue of FINRA executive compensation, as it came out in a case that I am marginally involved in, but did not have the time, or resources to verify the information that I was given. However, the story of the multimillion dollar salaries for FINRA executives is starting to gain momentum...

Black Box Options Backdating Case Settled

Posted on December 07, 2009
The SEC's options backdating cases are not over yet. The Securities Law Professor Blog's recent post, Black Box and Two Former Officers Settle Back Date Charges with the SEC, and notes that the Commission announced that it filed a civil action in the United States District Court for the Western District of Pennsylvania against Black Box Corporation ("Black Box"), a Lawrence, PA technical services provider, its former Chief Executive Officer Frederick C...

Hackers Liable for Insider Trading?

Posted on November 19, 2009
I posed a question in an earlier post as to the liability of computer hackers for insider trading when they break into a company's computer systems, obtain material non-public information, and then trade on that information. There are a number of problems with that legal theory, as there is no fiduciary relationship between the hacker and the company...

FBI Says Hackers Targeting Law Firms

Posted on November 18, 2009
According to the NYT, hackers are increasingly targeting law firms and public relations companies with a sophisticated e-mail scheme that breaks into their computer networks to steal sensitive data, often linked to large corporate clients doing business overseas...

New AIG Chief Threatens to Quit Over Pay

Posted on November 11, 2009
It's tough working for the government, with politicans making business decisions.Unhappy over constraints imposed by U.S. government overseers, AIG Chief Executive Robert Benmosche told the company's board last week that he is considering stepping down, according to the Wall Street Journal...

Bear Stearns Hedge Fund Managers Not Guilty

Posted on November 11, 2009
n a stunning defeat for the Justice Department, a federal jury in Brooklyn, N.Y., found two former Bear Stearns hedge fund managers not guilty of fraud charges Tuesday, only a day after jurors received the case.According to The New York Times, the jury found that Matthew Tannin and Ralph Cioffi did not lie to investors in painting a rosy picture of the health of two funds backed by subprime mortgages which later collapsed and cost investors $1...

Former SEC Attorney Pleads Guilty in Dreier Case

Posted on November 10, 2009
A lawyer pleaded guilty Monday to impersonating representatives of both a hedge fund and a pension fund in order to assist disgraced ex-attorney Marc S. Dreier in selling a phony promissory note.The surprise plea and the lawyer's agreement to cooperate with prosecutors raised the possibility there might be more arrests in the investigation of Dreier, the former sole equity partner of 250-lawyer Dreier LLP who is serving a 20-year sentence for peddling hundreds of millions of dollars in bogus notes to investors...

Rep. Frank Vows to Limit Expansion of FINRA Power

Posted on November 10, 2009
Barney Frank, chairman of the House Financial Services Committee, said he will defeat a controversial measure that would expand the Financial Industry Regulatory Authority's power over financial advisers. Investment advisory groups, as well as consumer advocates and state regulators, praised Frank's promise...

Congress to Give FINRA Authority over RIAs

Posted on November 02, 2009
According to InvestmentNews.com, there has been an amendment to the Investor Protection Act which gives FINRA authority over the advisory activity of any broker-dealer that it regulates.The bill would affect anyone who is dually registered as an investment adviser and a broker, and would greatly expand FINRA's authority over the financial markets...

Getting Arbitration Facts Wrong

Posted on November 02, 2009
Litigation 2009 - Home Court Disadvantage at American Lawyer attempted to put together an article about the large cases being won before FINRA arbitration panels, but in doing so demonstrates a marked bias in the media against arbitration. Or, perhaps just an abject failure to fact check...

Hedge Funds On Wall Street Talent Hunt

Posted on October 30, 2009
From Financial Planning.com - Less than a year after the credit crisis forced the closure of some 1,000 hedge funds, these firms are back out looking for capital and hiring professionals from Wall Street firms. In addition to poaching from investment banks, the funds are bringing in professionals from endowments, foundations, and traditional asset managers, according to a recent report More>>>

Merrill Exec to Head UBS Wealth Management

Posted on October 27, 2009
After months of speculation, UBS today named Robert McCann as its new head of wealth management in the Americas.Mr. McCann, the former head of the brokerage business at Merrill Lynch & Co., left Merrill in January after the acquisition by Bank of America...

Branch Managers Being Forced to Produce

Posted on October 26, 2009
There are hundreds of producing branch managers at the wirehouses, and over recent years, the wirehouses have been pushing their BOMs to drop production and concentrate on supervision. There is some appeal to using a non-producing manager, but the firms seemed to miss an important issue - compensation...

SEC Charges Broker for Manipulation Using Internet

Posted on October 26, 2009
Once again, the SEC is moving quickly. It is a welcome change, as they have always been known for closing the barn door after the horse has bolted.Only three weeks after an alleged fraud began, the SEC charged a securities broker with securities fraud for repeatedly creating and then distributing fake press releases to manipulate the stock prices of multiple publicly traded companies...

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