June 24, 2017
As a former regulatory lawyer with two different Wall Street self-regulatory organizations, BrokeAndBroker.com Blog publisher Bill Singer is a been-there-done-that industry guy with a keen sense of the politics of regulation. Given Bill's skeptical nature, it is a somewhat remarkable moment when he has positive things to say about one of Wall Street's cops. Today's BrokeAndBroker.com Blog is one of those remarkable moments -- and it's an even more rarefied event because this is the second time that Bill writes favorably about Scott W. Bauguess, Acting Director of the Securities and Exchange Commission's ("SEC's") Division of Economic and Risk Analysis ("DERA").
The SEC recently posted on its website the transcript of a speech Dr. Bauguess delivered on June 20, 2017, "Market Fragility and Interconnectedness in the Asset Management Industry." That speech takes us on a trip through a number of provocative ideas pertaining to the mechanics of our markets, with a particular emphasis on how they tend to react during times of stress. Dr. Bauguess presents a scary thought-piece about the expectations and preparations for market risk and how some traditional assumptions may collapse under the weight of spreading investor fear and compromised liquidity. We are asked to compare the unfolding of a bank run by depositors with a similar event involving fund investors. As the speaker walks us through the two models, we quickly realize that fast-moving market events have Tsunami-like impacts characterized by uncontrollable speed and savage damage. We quickly lose whatever comfort we had placed in such catch phrases as diversification and risk pools. What Dr. Bauguess asks us to contemplate are unforeseen stress fractures and the havoc such undermining could cause to market stability. READ http://www.brokeandbroker.com/3508/sec-bauguess-fragility/
The "South Park" Mountain Gnomes have a plan to steal underpants and make millions of dollars in profits. It is a brilliant plan and carried out with great stealth. All of which reminds BrokeAndBroker.com Blog
publisher Bill Singer, Esq. (not a gnome even if he sort of looks like one, but, at least a Brad Pitt look-alike gnome) of a recent FINRA Arbitration Decision
. Unfortunately, that Decision
involves allegations of elder abuse, which is no laughing matter. Frankly, it's sort of pathetic that a FINRA arbitration decision would remind Bill of a cartoon but it does . . . and he's guessing that once you read today's blog that you will grudgingly agree. READ http://www.brokeandbroker.com/3507/finra-arbitration-underpants/
The Financial Industry Regulatory Authority ("FINRA") and Scottsdale Capital Advisors Corporation have been engaged in what seems like a battle to the death for the past few years -- which is not to make light of the self-regulator's serious allegations or of the tenacious defense by Scottsdale and other named respondents. The Respondents embarked upon a multi-year effort to stay, derail, and otherwise block FINRA's regulatory case.
In the end, the FINRA's Department of Enforcement pressed its charges and the case went forward. On June 20, 2017, FINRA issued FINRA Department of Enforcement, Complainant, v. Scottsdale Capital Advisors Corporation, John J. Hurry, Timothy B. DiBlasi, and D. Michael Cruz, Respondents
(Office of Hearing Officers Amended Extended Hearing Panel Decision
, #2014041724601 / June 20, 2017). Although I am certain of few things in life, I would bet that this Decision
from the Office of Hearing Officers is merely the beginning of a protracted appeal. READ http://www.brokeandbroker.com/3506/finra-oho-scottsdale/
You better sit down before you read today's BrokeAndBroker.com Blog
. Publisher Bill Singer has something complimentary to say about both an AWC and FINRA! Yeah, shocking. Equally odd is the fact pattern involving a stockbroker's misunderstanding of the mechanics of the VXX. Of course, Bill still felt the need to take a couple of shots at FINRA near the end of his comment but, you know, old habits die hard. READ http://www.brokeandbroker.com/3505/finra-vxx-suitability/
You may have been reading recently about the ongoing FINRA push to burnish its image and attack the problem of recidivist stockbrokers and overly accommodating brokerage firms. In truth, the data does show that a disturbing select few FINRA member firms have a dubious concentration of registered representatives with multiple offenses. Moreover, regulatory disclosures indicate that some reps have a history of customer complaints that takes on the appearance of a rap sheet. After a lot of negative publicity about the revolving door at the self-regulatory organization through which repeat offenders come and go, management is in the midst of a speaking tour and media blitz. Ya never know. Maybe the new management team at FINRA is serious. Maybe these new folks will really clean up the biz and restore investor confidence. On the other hand, while FINRA is point fingers at others, perhaps it should also point a finger at itself. Let's consider a recent regulatory settlement in which FINRA seems as much of the problem as the solution. READ http://www.brokeandbroker.com/3504/finra-awc-annuity/
Benjamin Wey has been embroiled in criminal, civil, and regulatory proceedings for the past few years. Wey and his legal team have responded with all the tools at their disposal and battled on -- and when I say "battle," you should think along the lines of mutual assured destruction and not thumbing one's nose. That aggressive defense strategy achieved the reversal of a NASDAQ delisting in the landmark Securities and Exchange Commission's Cleantech Innovations decision. Following lurid allegations of sexual harassment and other claims against Wey by former employee Hanna Bouveng a federal jury awarded her $18 million (of which $16 million was in punitive damages), which was reduced to $5.6 million by a federal judge. A few days ago, Wey's defense team achieved what many see as a epic victory in the form of a suppression order that may have seriously hindered if not effectively destroyed the Department of Justice's criminal case against Wey. Frankly, in some 32 years of practicing law, I have rarely read a more stunning Fourth Amendment ruling.
I urge all industry professionals to take the time to familiarize yourself with the issues noted in Wey's suppression motion and subsequent Southern District of New York Opinion and Order.. Given the 92-page length of the Opinion and Order, it is not possible to fully digest its findings and rationale within the confines of the BrokeAndBroker.com Blog and I pointedly make no boast of doing so. In relatively superficial fashion, I will try to present to you some of the key issues. READ http://www.brokeandbroker.com/3503/sdny-suppression-wey/