by Bill Singer WEEK IN REVIEW

June 20, 2015

Fun and games on Wall Street. That's sort of the topic for today's Blog. Except, well, you know, this article isn't really about fun and games but about fraud and thievery but . . . then again . . . a lot of disgruntled investors sort of think that the industry is about fraud and thievery, so, howsabout we just say that today's blog considers the case of an enterprising sales assistant and how she obtained money from her firm that wasn't hers to get. Word of warning for the clueless among you: This is NOT a how-to article and not intended as a DIY. READ

After four years of service, Republican Securities and Exchange Commission ("SEC") Commissioner Daniel M. Gallagher announced in May 2015 that he will be leaving the SEC once a replacement is appointed. Commissioner Gallagher is not going quietly into that good night but, to the contrary, rages against his dying tenure light.  

In a recent published statement concerning his votes against two regulatory settlements by investment advisers Blackrock Advisors, LLC and SFX Financial Advisory Management Enterprises, Inc., Gallagher explains his concern about what he sees as dubious regulation through enforcement actions. His rationale for declining to support the settlements is largely premised upon his concerns for the consequences of holding Chief Compliance Officers accountable pursuant to what he considers an often inappropriate "strict liability" standard. READ

Many industry participants think that they understand the regulatory nuances of an All-Or-None offering. Yeah, right. In the end, some AONs wind up a hopeless mess of a busted deal and follow-on regulatory sanctions. All of which recalls the lyrics of Pearl Jam's "All Or None":

It's a hopeless... situation
And I'm starting to believe
That this hopeless... situation
Is what I'm trying to achieve

Consider a recent FINRA regulatory settlement involving All-Or-None offerings. Maybe we can get Eddie Vedder to sing about it? READ

On May 23, 2012, Ernesto Espinoza, a JPMorgan Chase shareholder, sent a letter to the Board demanding an investigation of the "London Whale" debacle and pointedly asked for an investigation of the:
  • failure of JPMorgan's risk‐management policies,
  • dissemination of false or misleading information about the scandal, and 
  • extent to which JPMorgan had repurchased stock at inflated prices due to the failure to disclose the losses.
Following the requested investigation, Espinoza further demanded that the company sue the responsible individuals and claw back previously-awarded salary and bonuses. Finally, he sought to have JPMorgan improve corporate governance and implement better risk controls. READ

According to the Securities and Exchange Commission ("SEC"), since 1995 it has issued only 20 Stop Orders against registration statements (See list), which works out to about one per year over the past two decades. As such, when the SEC recently announced it had issued its 21st Stop Order, it was a somewhat rare event. Given the dramatic impact of such a step and the opportunity it affords to industry practitioners to learn from such miscues, the Blog offers this analysis. READ

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In the high-profile lawsuit of Starr International Company, Inc, Plaintiff, v. The United States, Defendant  (Opinion and Order, United States Court of Federal Claims, No. 11-779C, June 15, 2015), we are presented with a dispute as to whether the Federal Reserve Bank of New York legally acquired equity in AIG or whether the Fed's actions constituted an illegal taking under the Fifth Amendment. READ

As previously noted in "SEC Derails Scam Train On Trading Platform"( Blog, April 13, 2015), for many years I have warned about so-called Standby Letters of Credit, Bank Guarantees, and Trading Platform scams. These frauds are nothing than more than unadulterated bull-shit. Nonetheless, there are flocks of pigeons eagerly following the breadcrumbs into the arms of scam artists. Sadly, many victims of these frauds refuse to do their due diligence and abandon all logic and commonsense. With the recent settlement by two of the remaining respondents, a Securities and Exchange Commission case involving yet another trading platform comes to a close. READ