Penalty Bid Rule needs to be overhauled

July 18, 2011

It is illegal to fix the price or control the price of any security; that rule is one of the basics of a fair marketplace, and the function of government regulation, i.e. FINRA, is to make, or create, the perception that the market is fair to all bidders. With the vast amount of cash looking for a home the expected boom in underwriting and new issues is exploding, and market makers have sounded the call for FINRA to change the Penalty Bid Rule. Pitting market makers and issuers of new securities against savvy investors, this will be a bloody battle. Penalty bidding permits the underwriter to fix the bottom price on any new issue during initial distribution. Also known by its evil-twin name “pegging” it is permitted under SEC Rule 10b-7 but only for syndicate managers and underwriters of new issues. Fixing prices of securities is the antithesis of fair markets and the implausible arguments used by FINRA to support the Penalty Bid Rule are under attack. Keep tuned for more follow-up on this page. If your financial advisor has been pegging your account then you have the right to file a complaint. Contact a securities fraud lawyer in South Florida for more information about abuses and corrupt practices of financial advisors if you feel like you have been the victim of securities professional.

Madoff Fraud hit out of the ball field and into the courtroom

February 16, 2011

In a fight for his team NY METS Owner, Fred Wilpon, may have to seek additional funding for the New York baseball team. The major securities fraud case against Madoff may have seen some of the money taken from fraud victims by Madof’s enterprise filtered into the Mets baseball team. Wilson’s money may be tied up in court as part of the Madoff litigation suit. Some report that the team owners should have known the fraud was occurring as the owners were more than likely aware that Madoff was not in the business of trading. The team owners were named as part of the litigation filed by New York attorney, Irving Picard, the bankruptcy trustee representing the victims of the Madof fraud. Irving alleges the team owners cashed out more than they put in, and called them “net winners” therefore, they should have to release some of the funds as part of the recovery in the suit.
Stock broker fraud can be misrepresentation of the risk associated with an investment to theft of your savings. South Florida has seen stock brokers misdeeds from churning to inappropriate investments of the savings of investors here in Fort Lauderdale and Boca Raton.
If you believe your South Florida stock broker has committed a fraud contact a Florida securities fraud attorney for a consultation.

FINRA acts to stem High-Frequency trading abuses

January 6, 2011

FINRA chairman Richard Ketchum has acted decisively to increase supervision of and enforcement because of recent complaints about Hedge funds activity in high-frequency trading venues. In a recent case FINRA censured and fined Trillium one million dollars and suspended eleven employees in connection with “illicit high-frequency” trading strategies. Calling these matters “troubling” FINRA has begun to act to reassure investors that inside traders cannot skim markets or drive markets improperly. The complaint arises from the widely perceived but much denied advantage afforded to high-frequency computer driven trades. Although South Florida has not had any cases in 2010 arising from Fort Lauderdale or Miami on this issue, South Florida stockbrokers are aware that the trading activity diminished investor perception of a level playing field for all investors.
FINRA accused Trillium of manipulating of stock and equity prices by creating and executing orders that were not true trades but had the effect of increased activity and volume liquidity which has the effect of accelerating price changes. The device will draw investors to securities because of exceptionally high trading volume. Fort Lauderdale and Boca Raton stockbrokers and their wire houses monitor markets for out-of-the ordinary trading volumes: once identified as active trading stocks many investors will be drawn into taking positions, either short or long, thus creating volume driven price changes. The high-frequency computer driven traders then skim small gains from volume driven stocks and by that device generate profits from their questionable devices. Many South Florida stockbroker fraud attorneys are aware and seeking clients to file FINRA complaints. If you believe a stock you are trading has seen unusual trading activity you should address those concerns with your Financial Advisor and possibly seek a consultation with a South Florida stockbroker fraud attorney.


November 2, 2010

STRUCTURED notes were a major component of profitability for some of the banks that were too large to fail. The Bank of America became the poster boy for this problem in October when it was reported in a New York newspaper that some of his employees were allegedly overselling complex derivative products. Structured notes can be very profitable to the dealers who market and remarket those notes. It became a major problem when Bank of America reportedly told investors that the products were of lesser risk than they turned out to be. Structured notes are derivatives, which are financial contracts which have sometimes been referred to as “bets”; on the volatility or sales price of stocks and bonds or other securities. Structured notes are usually for a specific period of time. The problem for Bank of America was the accusation that they aggressively pushed some of these derivative products on their own customers. It gets worse: the period in question is right in the middle of the great financial problems of 07 and 08, and the allegation is that the warnings were not commensurate with the risk involved in the purchase of those derivatives.

Depositor’s hoodwinked by Big Banks

November 1, 2010

We see them lining up at teller’s windows to make their deposits. Small deposits into low yield accounts for the backbone of America: working folk. But the “too big to fail” banks can stoop almost below the lowest of ethical windows….read this. FINRA had to implement a rule (Rule 3160) to stop tellers from diverting depositors to bank owned stock brokers haunting lobbies at bankers’ desks. Even I was surprised at this one! The rule goes somewhat (not far) to curb the abuse of tellers directing depositors into risky stock market investing to increase their yield. Bank depositors are risk avoiders and often unsophisticated. Preying on them in the inner sanctum of a conservative bank is bottom fishing raised to a new low. The rule only requires boilerplate risk disclosures. We need to return to the days when bankers banked and brokers broked instead of bankers diverting window depositors into inappropriate risk investments.