December 31, 2009

Goldman Sachs Executives Sued by Pension Fund Over Bonuses

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A shareholder derivative complaint filed by Security Police and Fire Professionals of America Retirement Fund and Judith A. Miller Living Trust is accusing Goldman Sachs Group Inc. executives of breaching their fiduciary duties for failing to modify the investment firm’s compensation policies according to the best interests of shareholders.

Goldman’s usual policy is to place 44-48% of its net revenue in employee compensation, which includes bonuses. The plaintiffs say these breaches were even greater this year because of federal funding that the investment bank received in 2008 and 2009. According to the complaint, this means that although the firm's revenues are not related to employee performance, Goldman executives are still being rewarded for corporate performance.

Goldman Sachs is expected to pay its employees about $22 billion (including bonuses) this year. Now, the plaintiffs are seeking to recover billions of dollars in compensation.

Goldman Sachs was the recipient of a $10 billion TARP loan. Pension fund officials claim the investment firm’s revenue for the year can largely be attributed to taxpayer money. In 2008, Goldman generated $29 billion in cash by issuing debts that the Federal Deposit Insurance Company had insured. It then obtained money from contractual counterparties that got their assets from taxpayers.

Meantime, Goldman Sachs says the claim is without merit. Earlier this month, the investment firm announced that its 30 most senior executives would receive their bonuses in the form of restricted stock instead of cash.

Goldman Sachs CEO Lloyd Blankfein is one of the executives named as defendants in the lawsuit.

Related Web Resources:
Read the Shareholder Derivative Complaint (PDF)

Pension fund sues Goldman over executive pay, Pensions and Investments, December 15, 2009

Continue reading "Goldman Sachs Executives Sued by Pension Fund Over Bonuses" »

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Posted In: Financial Firms , Goldman Sachs

December 29, 2009

Judge Rejects ‘Fat Cat’ JPMorgan Chase’s $9,122 Bill for Producing Subpoenaed Documents

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A judge has turn down JPMorgan Chase’s request that a petitioner pay the investment bank $9,122 for providing subpoenaed documents to confirm an arbitration award. Instead, Judge Arthur Schack issued an 11-page ruling granting just $1.250.27 to JPMorgan Chase for producing 18,248 pages.

The investment bank had sought to bill Abraham Klein, who was granted a multimillion-dollar arbitration award against Caring Home Care Agency and Christine Persaud, $.25/page at $25/hour for 182 hours of research. JP Morgan Chase said it cost $4,550 to find and retrieve the documents and $4,580 to print them.

Schack called the astronomical bill an example of greed among Wall Street’s 'fat cat bankers.’ He noted that the court does not serve as a collection agency for making rich bankers even richer and called JPMorgan Chase head James S. Dimon the investment firm’s “fattest cat,” considering that he was compensated almost $20 million last year.

Schack reduced JPMorgan Chase’s bill by lowering the quoted hourly fee to $6.55, which is Indiana’s minimum wage. He also awarded the investment bank 1 cent/ page based on page prices found on major stationary supplier Web sites. He also said that because JPMorgan Chase posted 16,317 of the 18,248 pages online, rather than printing them, the bank should receive payment for labor and not supplies for those pages.

Klein says that not only did JPMorgan Chase seek reimbursement for documents it never produced, but also it sent over thousands of documents that hd did not request. JPMorgan Chase is denying the allegations.

There have been too many occasions involving investment banks that have sought to take financial advantage of investors and other clients. You can obtain compensation for the financial harm that you have suffered.

Related Web Resources:
Judge Slashes 'Fat Cat' Bank's Bill for Subpoenaed Documents, Law.com, December 28, 2009

Courts See Recession’s Toll; Judge Schack Strikes Again, The Wall Street Journal, December 28, 2009

Obama Slams 'Fat Cat' Bankers, Wall Street Journal, December 14, 2009

Judge Arthur Schack, NY Courts

Continue reading "Judge Rejects ‘Fat Cat’ JPMorgan Chase’s $9,122 Bill for Producing Subpoenaed Documents " »

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Posted In: Financial Firms , J P Morgan - Chase

December 28, 2009

SEC Accuses Austin Advisor, Triton Financial, and Triton Insurance of Texas Securities Fraud Scam Involving Former NFL Football Players

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The Securities and Exchange Commission has filed charges accusing Austin investment adviser Kurt B. Barton and his two firms, Triton Insurance and Triton Financial, of committing Texas securities fraud and raising over $8.4 million from about 90 investors. Former football stars were used as bait to target former NFL players as potential investment fraud victim.

The SEC claims the defendants used salespersons, stockbrokers, and former football players, including previous Heisman trophy winners and ex-NFL players, to sell Triton securities to potential clients. The agency says that the use of ex-football stars allowed Barton and Triton to appear legitimate and gain investors' trust.

Potential investors were allegedly told that their money would be used to buy an insurance firm. The SEC claims such representation were bogus. Instead, the agency claims that investors' funds were used to pay for daily expenses at the two companies.

The Texas State Securities Board began investigating Triton’s business following an article that was published earlier this year in Sports Illustrated describing the defendants’ alleged actions, which included having an ex-NFL quarterback send a mass-email to a number of former NFL players. The SEC contends that during the probe, the defendants gave the TSSB bogus and altered documents.

The defendants have agreed to an asset freeze. The SEC wants to obtain financial penalties and disgorgement of ill-gotten gains from them.

Barton and Triton are not admitting to or denying the SEC allegations. However, in addition to agreeing to permanent injunctions from future securities fraud violations, they will not destroy documents and will provide an accounting.

Texas securities fraud law firm Shepherd Smith Edwards and Kantas is working with investors that were victimized by this scam. “We are exploring additional avenues of recovery of funds for our clients, in addition to those that are made available through the efforts of regulators,” says Texas securities fraud attorney William Shepherd. “Victims should contact me personally regarding this situation.”

Related Web Resources:
Read the SEC Complaint (PDF)

Texas State Securities Board

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Posted In: SEC Enforcement , Securities Fraud , Texas Securities Fraud

December 23, 2009

Texas Securities Fraud: SEC Freezes Assets of Fourth Person Involved in Alleged $485 Million Ponzi Scheme

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Earlier this month, the US Securities and Exchange Commission was able to get a temporary restraining order to the freeze the assets of Joseph Blimline, the fourth person accused of masterminding a $485 million Ponzi scheme involving Provident Royalties LLC. The SEC charged three other individuals, Brendan Coughlin, Paul Melbye, and Henry Harrison, in July. Their assets were also frozen.

In its amended complaint, the SEC alleged that Provident, owned by the four defendants, advanced approximately $93 million of investor funds to Blimline and entities that he controlled for the purchase of gas and oil interests. The fund repayments and the title, however, frequently did not go to Provident. The SEC also accuses Blimline of failing to disclose that he received the funds, was involved with Provident management, and had been sanctioned in the past by Michigan securities authorities.

The SEC’s amendment complaint charges the four men with violating the Securities Act of 1933 (Section 17a) and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The SEC is seeking preliminary and permanent injunctions, financial penalties, disgorgement of ill-gotten gains, and prejudgment interest.

Director and officer bars are also being sought against the four defendants for allegedly committing Texas securities fraud. 36 affiliated entities are named as relief defendants for disgorgement purposes.


Related Web Resources:
SEC OBTAINS ASSET FREEZE OF JOSEPH S. BLIMLINE FOR HIS INVOLVEMENT IN THE PROVIDENT ROYALTIES $485 MILLION NATIONWIDE OFFERING FRAUD, SEC, December 4, 2009

SEC Accuses Provident Royalties in $485 Million Ponzi Scheme, Bloomberg, July 7, 2009

Securities Act of 1933 (PDF)

Continue reading "Texas Securities Fraud: SEC Freezes Assets of Fourth Person Involved in Alleged $485 Million Ponzi Scheme" »

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Posted In: Broker Fraud , Ponzi Scams , SEC Enforcement , Texas Securities Fraud

December 22, 2009

New Judge in Securities Fraud Case Involving Former Brokers Previously Affiliated with Capital Growth Financial, Wachovia Securities, and VSR Financial Services

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A new judge will preside over the case against two former brokers accused of defrauding over 130 Nebraska investors of over $20 million. Gage County District Judge Paul Korslund takes over for Sarpy County District Judge David Arterbur, who recused himself over possible conflicts.

Prosecutors are accusing Brian Schuster and Rebecca Engle, previously affiliated with Wachovia Securities LLC, Capital Growth Financial LLC, and VSR Financial Services Inc., of improperly selling risky investments to former clients when they worked together between 2000 and 2007. The two of them entered not guilty pleas to eight felony counts of securities fraud.

The investments under dispute were sold to investors while Capital Growth employed the two brokers. Investors say they bought securities in American Capital Corp. and Royal Palm. PrimEdge Inc. eventually bought both companies and Schuster became PrimEdge chief executive and president.

Over 200 investors will share a settlement of approximately $900,000 to be paid by the brokers’ ex-employers. Quanta Specialty Lines Insurance Co. will pay for most of it on behalf of Capital Growth. However this recovery is just a small portion of the over $20 million dollars in broker fraud losses that investors are claiming.

The majority of investors that have filed securities fraud lawsuits and arbitration claims were either nearing retirement or already retired when they were defrauded. They had wanted to make stable, low risk, conservative investments and they claim that the former brokers made investments for them in risky ventures without fully explaining what was involved. Engle and Schuster, however, say they shouldn’t be prosecuted for securities fraud because investors acknowledged the risks in writing.

Related Web Resources:
Judge appointed in fraud cases of ex Neb. Brokers, AP, December 22, 2009
Insurer to Pay Bulk of $900K Settlement in Nebraska Fraud Case, Insurance Journal, July 23, 2009

Continue reading "New Judge in Securities Fraud Case Involving Former Brokers Previously Affiliated with Capital Growth Financial, Wachovia Securities, and VSR Financial Services" »

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Posted In: Financial Firms , VSR Financial Services , Wachovia

December 22, 2009

Merrill Lynch Must Pay $26 million to States to Resolve Charges of Failure to License Associates

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As a result of a widespread multi-state investigation which began in May 2008, Merrill Lynch Pierce, Pierce, Fenner & Smith Inc. has agreed to pay more than $26 million to settle claims that certain client representatives were not properly licensed in states where sales efforts were undertaken. The investigation, coordinated by the North American Securities Administrators Association (NASAA), discovered that 60 percent of the firm’s “client associates” were registered only in their home state, or in only one additional state.

States require that persons at securities firms involved in sales to client or prospective clients must be licensed in the states in which the persons contacted reside – with some de minibus exceptions. Although the Merrill Lynch associates were assisting the firm’s financial advisors, they were undertaking duties which required state licenses.

While states issue licenses based on a single multi-state examination, each also charges an annual fee for each representative of a firm licensed in that state. A financial advisor with a brokerage firm may have clients or prospective clients in a number, or even dozens, of states. If an advisor’s assistant is communicating with those clients or prospects in a sales capacity, he or she must be licensed in and a fee must be paid to each state as well.

it was reported by a NASAA's working group that the $26 million will be paid by Merrill Lynch for fines, penalties and sanctions and will be shared by the 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. The firm has also agreed to implement a new internal system to ensure registration compliance in the future.

Merrill Lynch Pierce, Fenner & Smith Inc. was acquired by the Bank of America last year and is now a wholly owned subsidiary of that Bank. Both firms had been provided with billions of dollars in federal “bail-out” funds, and the acquisition has since been the subject of news stories, litigation and Congressional inquiry.

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Posted In: Bank of America , Merrill Lynch , NASAA

December 21, 2009

Attention Schwab Yield Plus Investors: Deadline for Opting Out of Class Action So You Can File Your Own FINRA Arbitration Claim is December 28

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One of the leading private advocacy groups in the country is urging investors who lost money in the Charles Schwab YieldPlus funds to opt out of the class action lawsuit so they can file individual arbitration claims. The Wall Street Fraud Watchdog sees no reason why you should accept up to 20 cents on the dollar when you can get back more with an individual claim filed with the Financial Industry Regulatory Authority. The deadline for opting out is Monday, December 28, 2009.

Investors that may qualify as class members acquired Schwab YieldPlus Fund shares between May 31, 2006 and March 17, 2008. In California, residents who held shares from this fund beginning September 1, 2006 also are part of this class action.

Like the Wall Street Fraud Watchdog, our stockbroker fraud lawyers believe it is unfair that investors should get so little back for so much investment. Shepherd Smith Edwards & Kantas LTD LLP represents investors throughout the US who suffered financial losses from investing in Schwab YieldPlus funds. Investors say they were deceived about the risks involved when the funds allegedly were marketed and sold as cash alternatives. Investors also have accused Schwab of leaving out key information in the YieldPlus funds disclosure and registration statements. Schwab denies the allegations.

Even with the holiday season in full swing, now is NOT the time to delay opting out of the class action complaint. You don't want to give up your right to file a private FINRA arbitration claim. Submit a statement asking that you be excluded from the class-action lawsuit, date and sign your request, and mail by the due date:

Notice Administrator
Re: Schwab Corp. Secs. Litigation Exclusions
c/o Gilardi & Co. LLC
P.O. Box 808061

To find out about filing your individual FINRA arbitration claim, contact our investment fraud law firm and request your free case evaluation.


Related Web Resources:
The Wall Street Watchdog Urges Investors with Schwab Yield Plus to Opt Out of the Class Action Before 12-28-09, PR Web, December 21, 2009

Wall Street Fraud WatchDog

FINRA

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Posted In: Financial Firms , Schwab Corporation

December 19, 2009

Credit Suisse to Pay $536 Million Settlement For Violating US Sanctions With Secret Transactions from Iran, Libya, Cuba, Burma, and Sedan

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The Justice Department says Credit Suisse will pay a $365 million settlement for violating US economic sanctions. According to US Attorney General and Manhattan District Attorney Robert Morgenthau, the bank carried out secret transactions from Cuba, Libya, Iran, Burma, and Sedan that allowed “rogue players access to US dollars.”

The Justice Department says Credit Suisse admits to violating the International Emergency Economic Powers Act. The probe has resulted in about $1 billion in fines for the banks involved in the case. Credit Suisse reportedly stopped doing this kind of business in 2005, cooperated with investigators, and took additional measures to prevent this type of activity from happening again.

Under Credit Suisse’s deferred prosecution deal, however, the investment bank could be subject to further prosecution if more problems arise.

Holder says Credit Suisse showed clients how to transfer payments without capturing the attention of US authorities. He also claims that Credit Suisse profited by disregarding the law. Among the illegal activities, according to the Manhattan’s district attorney’s office, Credit Suisse,

• Between 2002 and 2006, processed over $700 million in payments that were in violation of US sanctions.
• Processed $1.1 billion in payments while concealing their Iranian ties.
• Illegally invested $150 million for two banned state-affiliated banks, one in Sudan and another in Lebanon.

Several other banks are under investigation for disregarding US sanctions. Morgenthau promises these banks are facing harsh penalties. Earlier this year, Lloyds TBS agreed to pay $350 million for helping Sudan and Iran despite US sanctions. Last month, federal authorities confiscated about $500 million in real-estate and bank deposits from Alavi Foundation for allegedly facilitating intelligence and financial activities for Iran. In 2008, a Manhattan federal court froze $2 billion that Citigroup was allegedly holding for Iran.

Related Web Resources:
Credit Suisse fine bigger w/o cooperation- US, Forbes/Reuters, December 16, 2009

Credit Suisse's Secret Deals, The Wall Street Journal, December 17, 2009

International Emergency Economic Powers Act

Continue reading "Credit Suisse to Pay $536 Million Settlement For Violating US Sanctions With Secret Transactions from Iran, Libya, Cuba, Burma, and Sedan " »

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Posted In: Credit Suisse , Financial Firms

December 18, 2009

Citigroup, J.P Morgan Chase, Morgan Stanley and Other Firms Added to Investigation of Goldman Sachs over "Front-Running" of Research

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The Financial Industry Regulatory Authority ( FINRA) has launched an investigation into improper trading in advance of stock research and ratings at Citigroup, J.P. Morgan Chase, Morgan Stanley and ten other financial firms, it was reported today by the Wall Street Journal and Reuters News Service.

FINRA - formerly the National Association of Securities Dealers (NASD) – has since August examined weekly meetings at Goldman Sachs where research analysts offer tips to traders and then to big clients. According to the Wall Street Journal, this examination has now been expanded to include ten other firms and FINRA is now seeking information concerning any meetings where unpublished research opinions or trading ideas were disclosed to non-research employees or clients.

"FINRA does not reveal names of firms that have received sweep letters," said its spokesman Herb Perone to Reuters. Citigroup, JPMorgan and Morgan Stanley could reportedly not be reached immediately for comment.

Continue reading "Citigroup, J.P Morgan Chase, Morgan Stanley and Other Firms Added to Investigation of Goldman Sachs over "Front-Running" of Research" »

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Posted In: Citigroup , Goldman Sachs , J P Morgan - Chase , Morgan Stanley

December 15, 2009

Securities Fraud: Broker Sentenced for Selling High-Risk Short Term Funds to Four Pennsylvania School Districts

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The broker who pleaded guilty to one count of securities fraud for selling risky securities to four school districts in Pennsylvania has been sentenced to one year and a day in federal prison. Robert Bradbury, 63, must also pay a $10,000 fine.

The Pennsylvania school districts that were the victims of Bradbury’s investment fraud scam are Red Lion, North Penn, Boyertown, and Perkiomen Valley. The securities fraud scheme cost taxpayers over $10 million.

From 1998 to 2004, Bradbury illegally sold bond-anticipated notes for the Whitetail golf project. According to Eastern District of Pennsylvania’s U.S. Attorney Pat Meehan, the broker, who had worked with the school districts for three decades, took advantage of their trust when he underwrote and sold them the notes but failed to fully disclose the nature of the investments and the risks involved. While the four school districts are only allowed to make investments that fall under certain conservative categories.

Upon the notes’ maturity, the Hummelstown General Authority defaulted and ended up selling the golf course for $3.8 million. In 2008, the US Securities and Exchange Commission sued Bradbury and his broker-dealer, Dolphin & Bradbury Incorporated, for defrauding the school districts.

“A large number of school districts have been defrauded in this manner,” said securities fraud attorney Robert Kantas of Shepherd Smith Edwards & Kantas, LLP. “Our stockbroker fraud law firm currently represents five such districts that have been collectively exposed to more than $200 million in losses. We are also investigating “Ponzi” schemes and fraud that caused municipal and other pension funds losses. Those who oversee taxpayer’s assets and pension funds have a fiduciary duty to take action to recover such losses!”


Related Web Resources:
Broker sentenced in Pa. school fraud scheme, Associated Press, December 15, 2009

West Chester man sentenced for securities fraud in school districts case, BizJournals, December 15, 2009

Grand Jury Indicts Robert Bradbury for Defrauding Pennsylvania School Districts, SEC.gov, December 13, 2009

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Posted In: Securities Fraud

December 14, 2009

Lehman Brothers Sues Barclays for Billions Over Windfall Profit From Asset Sale Transaction

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Lehman Brothers Holdings Inc. has filed an adversary complaint against Barclays Capital Inc. requesting the return of billions of dollars in extra profit that it says the latter made when buying Lehman’s North American brokerage business last year. Lehman says that Barclays failed to disclose that it received an illegal payment of at least $5 billion as part of the asset sale transaction. Barclays says that the asset sale terms were delineated in documents that Lehman executives signed.

Lehman is alleging breach of contract, aiding and abetting breach of fiduciary duty, and several violations of the US bankruptcy code. Lehman is seeking punitive damages, compensatory damages, post-judgment interest, return of excess assets, avoidance of excess asset transfers, disgorgement of ill-gotten gains, and, pursuant to Bankruptcy Code Section 502(d), disallowance of Barclays claims against Lehman Brothers Holdings Inc.

According to the adversary complaint, Lehman and Barclays executives made an agreement that Barclays would buy Lehman’s US brokerage business, key real estate pieces, and related support systems. A bankruptcy court approved the deal.

Now, however, Lehman claims that the Sale Transaction were secretly put together in a manner that gave Barclays a huge, immediate windfall profit: Specifically, an undisclosed $5 billion off the book value of assets that were moved to Barclays and later, the undisclosed transfers of billions of dollars in ‘additional value.’

Barclays, however, says that the $5 billion “discount” is in fact the difference between the $45 billion it paid and the $49.7 billion nominal value of Lehman collateral that Barclays assumed and paid for the Lehman assets.

Related Web Resource:
Read the Lehman Brothers Lawsuit

Continue reading "Lehman Brothers Sues Barclays for Billions Over Windfall Profit From Asset Sale Transaction" »

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Posted In: Barclay's Bank , Financial Firms , Lehman Brothers

December 11, 2009

Edward Jones and Merrill Lynch Brokers Like Where They Work, While UBS Representatives are the Least Happy

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According to Registered Rep magazine’s latest Broker Report Card, 98% of Edward Jones brokers say their securities firm is the best place to work. 78% of Merrill Lynch brokers ranked their investment firm as the number the one workplace.

Findings were compiled from Internet surveys taken by 898 captive brokers last October. Other results:

• 73% of Morgan Stanley Smith Barney representatives gave their firm the top spot.
• 53% of Wells Fargo Advisors (includes Wachovia Securities and AG Edwards) brokers said their place of work was #1.
• UBS received the least accolades from its workers, with just 1/3rd of its brokers ranking it as the best securities firm workplace.

However, UBS brokers were at the top of the heap for self-reported metrics. According to UBS advisers, they claim an average $101.2 million for assets under management and gross production of $696,032. Other firms:

• Merrill Lynch representatives: $655,250 average gross production; $97.1 million under management
• Morgan Stanley Smith Barney brokers: $84.9 million under management ; $619,961 in production
• Wells Fargo representatives: $80.2 million in client assets; $542,350 in production
• Edward Jones representatives: $364,258 in average production; $58.6 million in assets under management

Yet, as Shepherd Smith Edwards & Kantas, LLP founder and stockbroker fraud lawyer William Shepherd points out, “securities brokers at large firms with average production receive about 30% of their gross production in pay. Brokers at Edward Jones receive about half. Thus, the take home pay for the brokers is not as different as is indicated. In any event, it is notable that the average stockbroker earns about $200,000 per year, a college degree is not required to gain a license, and the training takes only 4 months.”

Related Web Resources:
UBS Reps Least Happy Among Big-Firm Brokers, Wall Street Journal

Registered Rep

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Posted In: Edward D. Jones , Financial Firms , Merrill Lynch , Miscellaneous , Morgan Stanley , UBS , Wells Fargo

December 9, 2009

UBS Loses Lehman Arbitration Note Claim by Small Investor

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In an arbitration case that could affect numerous cases that are still pending, a Financial Industry Regulation Authority panel awarded a small investor $200,000 after finding that a UBS Financial Services broker acted inappropriately when he sold high-risk Lehman Brothers Holdings Inc. principal-protected notes to the claimant.

The case involving Lehman notes is one of the first to be decided by a FINRA panel. While the ruling won't establish a precedent, it could be an indication of how similar rulings may go in the future. “There are many cases pending against UBS and other firms that sold Lehman notes shortly before Lehman failed,” said stockbroker fraud attorney William Shepherd, whose firm, securities fraud firm Shepherd Smith Edwards & Kantas LTD LLP, is handling a number of such cases. “These cases often involve misrepresentations and omissions as well as unsuitability, since the investments were sold to clients who sought safety and income,” he added.

The claimant filed the arbitration claim accusing UBS of recommending structured products that are not suitable for “unsophisticated investors.” The broker purchased for the client a $75,000 return optimization note and a $225,000 guaranteed principal protection note. The FINRA panel determined that the claimant should be compensated for the principal protected note, in addition to legal fees and interest.

Although the amount awarded is less than what the investor hoped to recover, a UBS spokesman said the securities firm was disappointed that the claimant was awarded any damages and maintains the investor’s financial losses were a result of the collapse of Lehman Brothers.

Investor Wins Lehman Note Arbitration, Wall Street Journal, December 5, 2009

FINRA awards US investor in Lehman notes $200,000, Reuters, December 5, 2009

Continue reading "UBS Loses Lehman Arbitration Note Claim by Small Investor" »

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Posted In: Arbitration , Financial Firms , Lehman Brothers , UBS

December 7, 2009

Even as FINRA Lost $696.3 Million in 2008, its Executives Made Millions

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Last year, 13 current and ex- Financial Industry Regulatory executives made over $1 million each, even as the regulatory organization posted a $696.3 million loss ($439 million in investment losses). Compensation included salary, retirement plan awards, and bonuses. This data, reported in Investment News, is found in FINRA’s latest tax reforms and annual report. Among the executives who received such hefty compensation in 2008:

• Michael D. Jones, former FINRA chief administrative officer: $4.43 million

• Mary Schapiro, now Former FINRA chief executive officer and now SEC Chairman: $3.3 million and $7.2 million for accumulated retirement benefits

• Elisse Walter, SEC commissioner: $3.8 million

• Douglas Shulman, who left the SEC in March 2008 to become Internal Revenue Service Commissioner: $2.7 million

• Susan Merrill, FINRA enforcement chief: Over $1 million

• Grace Vogel, FINRA member regulation’s executive vice president: Over $ 1 million

All employee compensation packages over $1 million was approved by FINRA’s management compensation committee.

FINRA’s compensation and benefits costs for its 2,800 employees went up 21.4% ($541.7 million) in (2008 from 2007) due to $30.3 million in benefit costs (including severance) from a larger retiree medical and savings plan and a voluntary retirement savings program. Also in 2008, another 400 employees joined FINRA’s payroll because of the company’s merger with NYSE Regulation.

Robert Ketchum, FINRA’s new chief executive , says that like everyone else, the SRO took a serious financial hit because of the credit crisis.

However, according to Shepherd Smith Edwards & Kantas LTD LLP founder and securities fraud lawyer William Shepherd: “This is yet another chapter in the saga of ‘Who regulates the regulators?’ But first, you should know that FINRA is no ‘authority’ at all. Instead it is a non-profit corporation owned by each and every securities firm that it regulates! How many of us are regulated by an ‘authority’ that we literally own? This also means that just before she became Chairman of the SEC, Mary Schapiro received $10 million that was mostly tax deferred as a parting gift from all the securities dealers! Now there's a real incentive to be tough on Wall Street! Oh, and did I mention that FINRA runs its own ‘court system’ for anyone that wants to sue a broker or securities firm? Sometimes I feel like I live in Oz.”

Related Web Resources:
Finra execs pocketed millions in '08, while SRO was in the red, Investment News, December 3, 2009

FINRA

Continue reading "Even as FINRA Lost $696.3 Million in 2008, its Executives Made Millions" »

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Posted In: FINRA

December 5, 2009

Texas Securities Commissioner Not Convinced SEC Has Reformed Itself Since Madoff Ponzi Scam

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Denise Voigt Crawford, the Texas securities commissioner and current North American Securities Administrators Association president, says it isn’t evident that the US Securities and Exchange Commission has implemented key reforms to the issues that allowed the agency to fail to detect Bernard Madoff’s $50 billion ponzi scheme for almost 20 years. Speaking at the National Press Club on Friday, she accused the SEC of not doing enough to support legislation intended to increase investor protection.

Crawford claims staffers that work for the SEC hardly interact with investment fraud victims. Because many SEC employees would like to work on Wall Street, she contends that this makes it difficult for agency members to properly oversee a securities firm that could potentially become a future employer.

Seeking to make a number of changes to the financial-overhaul bill currently moving through Congress, NASAA wants states securities regulators to have jurisdiction over securities firms that manage up to $100 million in assets. It also wants broker/dealers, and not just investment advisers, to be subject to a fiduciary standard when giving investment advice. NASAA wants to terminate mandatory pre-dispute arbitration clauses that make investors to pursue their securities fraud claims in arbitration proceedings run by Financial Industry Regulatory Authority.

Responding to Crawford’s comments, SEC spokesperson John Nestor called her statements “uninformed” and cited the agency's proposal of the Investor Protection Act, its hiring of senior management, reforms made to internal operations, new rulemaking that is focused on investors, and an increase in investigations and penalties as among the numerous “dramatic” changes that the SEC has implemented since Madoff’s massive ponzi scam was discovered.

Related Web Resources:
State regulator: Jury still out on SEC post-Madoff, AP/Yahoo! News, December 4, 2009

2nd UPDATE:Texas Securities Regulator:'Jury Is Still Out' On SEC Reform, Wall Street Journal, December 4, 2009

Texas State Securities Board

North American Securities Administrators Association

Continue reading "Texas Securities Commissioner Not Convinced SEC Has Reformed Itself Since Madoff Ponzi Scam" »

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Posted In: Madoff Ponzi Scheme , SEC Enforcement , Securities Fraud , Texas Securities Fraud

December 3, 2009

SEC Submits Amended Complaint Against Bank of America Over Merrill Lynch Merger and Executive Bonuses

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The US Securities and Exchange Commission’s amended complaint regarding the acquisition of Merrill Lynch by Bank of America Corp. last January includes one new assertion. In addition to the SEC’s original allegations against Bank of America, the agency now says that the investment bank was in violation of proxy regulations when it did not provide a merger agreement schedule, as well as a list identifying what would have been included in the schedule.

At the center of the SEC lawsuit is Bank of America’s proxy disclosure to shareholders that it wouldn’t pay year-end bonuses to Merrill executives. Yet, even as Merrill posted a record $27.8 billion loss last year, its executives were paid $3.6 billion.

BofA and the SEC initially attempted to settle the allegations for $33 million. Federal Judge Rakoff, however, wouldn’t sign off on what he considered both a swift resolution to an embarrassing situation for the bank and an attempt to make it appear as if the SEC was engaged in enforcement.

Rakoff accused SEC of not being hard enough on Bank of America, which it is supposed to regulate, even as shareholders suffered. He also accused the defendant of neglecting to take responsibility for its actions, which forced taxpayers to bail out the investment bank. A trial is scheduled to begin on March 1.

The US Congress and New York Attorney General Andrew Cuomo are also investigating the merger between Bank of America and Merrill Lynch.

Throughout the US, our securities fraud law firm represents investors who have suffered financial losses because of broker-dealer misconduct.

Related Web Resources:
SEC's Amended BofA Complaint: New Claims, but No New Defendants, Law.com, October 23, 2009

Judge Rejects Settlement Over Merrill Bonuses, NY Times, September 15, 2009

SEC Fines Bank Of America $33 Million Over Bonuses, Consumer Affairs, August 3, 2009


Continue reading "SEC Submits Amended Complaint Against Bank of America Over Merrill Lynch Merger and Executive Bonuses" »

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Posted In: Bank of America , Financial Firms , Merrill Lynch , SEC Enforcement

December 2, 2009

The Investor Protection Act is Approved by House Financial Services Committee

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The US House Financial Services Committee has voted to pass the Investor Protection Act, which is part of a package of bills focused on widening financial industry oversight and investor protection. The bill increases the US Security and Exchange Commission’s authority and doubles the agency’s funding, giving it another $1.115 billion for the 2010 fiscal year.

HR 3817 has a clause that would exempt businesses with a $75 million or lower value from a Sarbanes-Oxley requirement that auditors must verify management’s declaration regarding a concern’s internal controls over financial reporting. The SEC had exempted small businesses from SOX”s Section 404(b) attestation requirement, and the exception was to be lifted in 2011. Another amendment added to the bill would confirm the SEC’s authority to rule on shareowners' right to vote on corporate board directors.

The Investor Protection Act also terminates the inclusion of mandatory arbitration in contracts in the event that investors wish to file securities fraud claims. It also enforces the fiduciary obligation that investment advisers and broker dealers have to make client’s interests their priority.

Whistleblowers would be given incentives for cases leading to sanctions of over $1 million. The SEC would be able to pay a reward of up to 30% of sanctions to the informants involved. The agency could also issue fines for cease-and-desist cases. It would also have greater subpoena powers.

The House Financial Services Committee has recommended other bills compelling a number of derivatives that are privately traded “over the counter” to pass through regulated exchanges and clearing houses. The bill also calls for dealers to be subject to more extensive transparency, business conduct, and capital requirements. It lets investors file lawsuits against investment firms that recklessly or knowingly publish ratings that are inaccurate and compels private equity and hedge fund advisers to register with the SEC.

Financial Services Committee Approves Investor Protection Act, House.gov, November 4, 2009

House Committee Approves Investor Protection Act, SocialFunds.com

House Financial Services Committee

Sarbanes-Oxley Act 2002

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Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Miscellaneous

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