February 18, 2017
Much has happened since May 2010 when Sharemaster's 2009 annual report was called out by FINRA's Department of Market Regulation. Not the least of the developments is that the Trump Administration is now in place. We are awaiting the installation of Jay Clayton as President Trump's nominee for SEC Chair. FINRA is now headed by new CEO Robert Cook. Much had been said during the recent Presidential campaign about deregulation and reducing dubious burdens of compliance. Much has been said in more recent times about a friendlier and more pro-business regulatory regime. Don't misunderstand: I'm not taking sides or advocating one way or the other. I'm just the messenger and simply reporting what's been said.
In light of this new Age of Deregulation, I'm sort of wondering why FINRA CEO Cook can't save everyone an ongoing headache by intervening and putting an end to this nonsense. I'm also wondering whether Acting SEC Chair Piwowar and incoming Chair Clayton might not want to do their part in putting an end to this idiocy. This cannot be the way Wall Street regulation works. You can't grind up the little guy for sport. Every once in a while, someone needs to say enough. As I am often known to quip: There is a difference between having the right to do something and doing the right thing. Will no one from FINRA or the SEC step in and end this insanity? READ Readers of the BrokeAndBroker.com Blog are regularly admonished by publisher Bill Singer to do their due diligence before investing. Ask for the paperwork that supports all the important claims by the issuer. If you are given the paperwork, don't just take it at face value. Make an effort to confirm what's on the pages. This Hugh Moreon guy, who is supposedly the CEO and graduated Harvard and is considered the world's leading authority on something that you don't even remotely understand -- have you spoken to him and verified he is who the filings say he is? Did you physically visit the factory where they make the next-generation, microbionic, xEiCHodescent, cytolysitic widget? Has the Central Asian Commercial Bank of Uppah Yuess confirmed the existence of the company's eight-figure balances? Unfortunately, even if you do your due diligence, you might not get all the answers and, more troubling, the answers you get might not be verifiable. As recent SEC cases demonstrate, there's more to due diligence than going through the motions. READ
In response to the Order Instituting Proceedings's assertion that Tirrell's alleged violations were "unprecedented," I must ask why the term "unprecedented" does not regularly find its way into OIPs naming large financial institutions who are charged with multi-million dollar frauds.
Show me the body of work where an unsettled OIP describes a violation as "unprecedented."
Tell me who at the SEC gets to decide when a given set of facts is deemed "unprecedented."
Direct my attention to the SEC Rule of Practice that defines when a violation rises to the status of "unprecedented."
Far too much regulation is asymmetric with unfair advantage attaching to regulators who decide when to file charges and frequently conduct their prosecutions before captive, in-house forums. The costs for defending the innocent are just as steep as those for the guilty. The professional damage caused merely by the presentation of allegations may destroy a career, even if the respondent/defendant prevails. As such, there should be no place in an SEC OIP for the language of press releases. An OIP is a sobering moment in the life of any Respondent. The Division should respect the seriousness of the consequences of its filing charges. An OIP is not permission for the Division to land a kidney punch or a low blow. As Sgt. Joe Friday so aptly lamented: "Just the facts ma'am." READ What happens when a stockbroker doesn't do something because he thought that he was doing exactly what he was told to do by his customer and, as such, the stockbroker wasn't doing what his customer didn't tell him to do; however, the customer's nieces, who became the executors of her estate, think that it should have been obvious to the stockbroker that he needed to do something that the customer seems to have told him she didn't want done; and, to make things even more complicated, even if the customer who should have said something to the stockbroker but didn't say anything had wanted to say something, it appears that she became disabled and would not have been able to say whatever it is she didn't or should have? Confused? Welcome to the club. Welcome to the FINRA arbitration! READ At its core, a recent Securities and Exchange Commission case alleges that the Respondent didn't do right by his clients but, in essence, picked through various trades and dumped the less successful trades on his unsuspecting clients. As the case makes its way to a contested hearing, the Respondent argues that he is being overwhelmed by the regulatory machinery and being forced to choose between defending himself or providing for his family. Frankly, it's not that rare a complaint. Although I am not suggesting any moral equivalency, the photo of that lone Tiananmen Square protester standing in the way of a tank captures the dimension of the challenge raised by many SEC Respondents. Depending upon the facts of a given SEC enforcement case, sometimes you root for the tank; sometimes you root for the guy in the white shirt. READ