Small Fish Fry On Wall Street

April 12, 2013

GRIMSBY, ENGLAND - JUNE 15:  A buyer smells a ...

What's that line about a fish stinking from the head down?

For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Robert David Smith submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted.In the Matter of Robert David Smith, Respondent (AWC 2011029740301, April 9, 2013).

Smith entered the securities industry in 2005, and during the times relevant to this matter, he was registered in 2008 to September 23, 2011, with Barclays Capital Inc. ("Barclays"). Subsequently, Smith registered with J.P. Morgan Securities LLC.

The AWC alleges that between September 2009 and September 2011, Smith submitted to Barclays, 19 false travel and expense reports for meals, drinks and transportation purportedly for client entertainment. In fact, none of the referenced clients attended the events; and, on numerous occasions, the only attendees were Barclays employees. By submitting the false expense reports, Smith induced Barclays to pay $12,600 in violation of the high standards of commercial honor and just and equitable principals of trade set forth in FINRA Rule 2010.

In accordance with the terms of the AWC, FINRA imposed upon Smith a Bar in all capacities from associating with any FINRA member firm.

Bill Singer's Comment

Exactly what constitutes high standards of commercial honor and just and equitable principles of trade on Wall Street are concepts that I find a tad elusive to grasp - and, at times, a thoroughly absurd and laughable assertion. The perplexing aspect of FINRA's case against Smith is that the securities industry's self-regulatory organization displays its high dudgeon and its ultimate weapon of career mass destruction: the dreaded Bar.

You could fact check me on this, but I seem to recall within the recent past that Barclay's Bank was hit with much-trumpeted record fines for manipulating the energy markets and rigging LIBOR. See, for example, "Barclays Bank PLC Admits Misconduct Related to Submissions for the London InterBank Offered Rate and the Euro InterBank Offered Rateand Agrees to Pay $160 Million Penalty" (, June 27, 2012).

As I wrote in " UPDATE: LIBOR The Antitrust Division's Trojan Horse" (Street Sweeper, July 3, 2012):

Barclay's LIBOR Settlement
On June 27, 2012, the Department of Justice issued this press release: "Barclays Bank PLC Admits Misconduct Related to Submissions for the London Interbank Offered Rate and the Euro Interbank Offered Rate and Agrees to Pay $160 Million Penalty." The press release explains that:

"Barclays Bank PLC, a financial institution headquartered in London, has entered into an agreement with the Department of Justice to pay a $160 million penalty to resolve violations arising from Barclays's submissions for the London InterBank Offered Rate (LIBOR) and the Euro Interbank Offered Rate (EURIBOR), which are benchmark interest rates used in financial markets around the world, announced Assistant Attorney General Lanny A. Breuer of the Justice Department's Criminal Division and Assistant Director in Charge James W. McJunkin of the FBI's Washington Field Office. . ."

Once again, we return to checkbook justice. The big boys always seem to get to write out checks - funds that often come out of the pockets of public shareholders rather than directly from the savings of those who engineered any alleged crimes or civil fraud. Among the more frustrating tips of the hat, is this aside in the Department of Justice's press release:

"As a result of Barclays's admission of its misconduct, its extraordinary cooperation, its remediation efforts and certain mitigating and other factors, the department agreed not to prosecute Barclays for providing false LIBOR and EURIBOR contributions, provided that Barclays satisfies its ongoing obligations under the agreement for a period of two years. The non-prosecution agreement applies only to Barclays and not to any employees or officers of Barclays or any other individuals. . ."

Ya gotta love that "extraordinary cooperation" and the whole remediation thing. Nice touch, no?

That $12,600 which Smith ripped off from Barclays - was that a second's worth of wrongful income the firm generated from the electricity markets or from bank rates? Of course, $12,600 in bogus T&E is enough to invoke FINRA's executioner's axe upon the neck of some Wall Street schmo who seems to think that his employer is his personal piggybank; on the other hand, exactly what, then, does it take for FINRA to expel one of its fancy-schmanzy member firms - apparently not a history of hundreds of millions of dollars and euros in fines for market manipulation. Also, consider "FINRA Fines Barclays Capital $3 Million for Misrepresentations Related to Subprime Securitizations" (, December 22, 2011).

And folks wonder why I proudly call myself a cynic when it comes to so-called Wall Street reform? As I often note, ya got yer small fry and ya got yer big fish. You also have two different systems of regulation and justice for both those fishies. And that's the problem. And that's always been the problem. And, sadly, looks like that's always gonna be the problem. In the meantime, we're all just so much plankton on which the whales feed.

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