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Made a few $ shorting with Option Puts... fwiw
FINRA and Nasdaq Fine Wedbush Securities Inc. $675,000 For Supervisory Violations Relating to Chronic Fails to Deliver by a Client in Multiple Exchange-Traded Funds
https://www.finra.org/newsroom/2016/finra-and-nasdaq-fine-wedbush-securities-inc-675000-supervisory-violations-relating
Overstock's Patrick Byrne down to 'brass tacks' with SEC over public crypto-securities
https://uk.news.yahoo.com/overstocks-patrick-byrne-down-brass-101218489.html#4fH0eZo
FINRA Fines Deutsche Bank Securities Inc. $1.4 Million for Violating Regulation SHO and Short Interest Reporting Rules
Business Wire Financial Industry Regulatory Authority (FINRA)
WASHINGTON--(BUSINESS WIRE)--
The Financial Industry Regulatory Authority (FINRA) announced today that it has fined Deutsche Bank Securities Inc. $1.4 million for violating Regulation SHO, FINRA’s short interest reporting rule and for related supervisory failures.
Reg SHO generally allows firms to track their positions in a security from certain trading operations or trading desks separately from other positions maintained at the firm through the use of an "aggregation unit." Reg SHO requires, among other things, that in determining the net positions of aggregation units, firms cannot include the securities positions of a non-U.S.-broker-dealer affiliate. FINRA found that for over 10 years, Deutsche Bank has been improperly including securities positions of a non-U.S.-broker-dealer affiliate in numerous aggregation units when determining each unit's net position.
In addition, FINRA requires firms, with certain exceptions, to regularly report their total "short" positions in all customer and proprietary firm accounts in equity securities. These short positions must be reported on a gross, rather than a net basis. FINRA found that from April 2004 to September 2012, Deutsche Bank reported the netted positions in its financial aggregation account as the firm’s short interest positions for that particular day.
Thomas Gira, FINRA Executive Vice President and Head of Market Regulation, said, “The foundation for Regulation SHO compliance and the benefits it provides to investors and market integrity is that firms properly track their short positions in accordance with the rule. Similarly, in order to preserve the value and integrity of short interest information reported to and disseminated by FINRA, it is incumbent on firms to accurately calculate this information.”
FINRA also found that Deutsche Bank’s supervisory system with respect to its aggregation unit structure and short interest reporting was not reasonably designed to detect and prevent such rule violations during the relevant time periods.
In concluding this settlement, Deutsche Bank neither admitted nor denied the charges, but consented to the entry of FINRA's findings.
Investors can obtain more information about, and the disciplinary record of, any FINRA-registered broker or brokerage firm by using FINRA's BrokerCheck. FINRA makes BrokerCheck available at no charge. In 2014, members of the public used this service to conduct 18.9 million reviews of broker or firm records. Investors can access BrokerCheck at www.finra.org/brokercheck or by calling (800) 289-9999. Investors may find copies of this disciplinary action as well as other disciplinary documents in FINRA's Disciplinary Actions Online database. Investors can also call FINRA’s Securities Helpline for Seniors at (844) 57-HELPS for assistance or to raise concerns about issues they have with their brokerage accounts and investments.
FINRA, the Financial Industry Regulatory Authority, is the largest independent regulator for all securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business – from registering and educating all industry participants to examining securities firms, writing rules, enforcing those rules and the federal securities laws, and informing and educating the investing public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers the largest dispute resolution forum for investors and firms. For more information, please visit www.finra.org.
View source version on businesswire.com: http://www.businesswire.com/news/home/20151119005935/en/
Contact:
Financial Industry Regulatory Authority (FINRA)
Michelle Ong, 202-728-8464
Nancy Condon, 202-728-8379
http://finance.yahoo.com/news/finra-fines-deutsche-bank-securities-150500248.html;_ylt=AwrC1C1vo05WAFUAwImTmYlQ;_ylu=X3oDMTEzc2p0NzZlBGNvbG8DYmYxBHBvcwMyBHZ0aWQDVklEUFJEXzEEc2VjA3Nj
SEC Files Fraud Charges on False Tweets
More Corrupt Brokers Identified in SEC Stock Manipulation Case
By Chris Lange
November 5, 2015 1:25 PM
The U.S. Securities and Exchange Commission (SEC) announced that it has identified three additional individuals to charge in a penny stock manipulation case that was filed last year against alleged corrupt brokers and others.
The agency filed a request in a Brooklyn federal court to lift the stay in its civil action with the intent of filing an amended complaint alleging that two additional brokers, Michael Morris and Ronald Heineman, facilitated this scheme through their brokerage firm while a third man, attorney Darren Ofsink, profited illegally by selling unregistered shares for which no registration exemption applied.
The SEC’s amended complaint charges Morris with violations of the antifraud provisions and securities registration provisions of the federal securities laws. Heineman is charged with violations of the antifraud provisions and Ofsink is charged with violating the securities registration provisions.
The amended complaint seeks a final judgment ordering them to disgorge ill-gotten gains plus prejudgment interest, imposing financial penalties and permanently enjoining them from future violations of the federal securities laws.
Joseph G. Sansone, co-chief of the SEC Enforcement Division’s Market Abuse Unit, said:
Brokers serve important gatekeeping functions in our markets and deterring market manipulation is among their critical responsibilities. We allege that Morris and Heineman didn’t just fail to deter the stock fraud being perpetrated at their brokerage firm, they actively participated in it.
In a parallel action, the U.S. Attorney’s Office for the Eastern District of New York Thursday announced criminal charges against Morris and Ofsink.
http://finance.yahoo.com/news/more-corrupt-brokers-identified-sec-182546329.html;_ylt=AwrC0ww4hj1WzGkANYyTmYlQ;_ylu=X3oDMTEzY2Voam5wBGNvbG8DYmYxBHBvcwM4BHZ0aWQDVklEUFJEXzEEc2VjA3Nj
Illegal Naked Short Selling Appears to Lie at the Heart of an Extensive Stock Manipulation Scheme
http://smithonstocks.com/illegal-naked-short-selling-appears-to-lie-at-the-heart-of-an-extensive-stock-manipulation-scheme/
SEC is dealt fresh blow as NY judge halts enforcement case
Reuters
August 12, 2015 11:29 AM
By Jonathan Stempel
NEW YORK, Aug 12 (Reuters) - A federal judge in Manhattan has handed the U.S. Securities and Exchange Commission a big defeat over its use of in-house judges, halting its case against a former Standard & Poor's executive because the way SEC judges who handle such cases are appointed is likely unconstitutional.
U.S. District Judge Richard Berman issued a preliminary injunction on Wednesday stopping the regulator's civil administrative proceeding against Barbara Duka, the former S&P executive, over her role in an alleged fraud involving mortgage debt ratings.
Berman is at least the second federal judge to halt in-house SEC cases because of concern that the regulator's practice of letting staff rather than commissioners appoint its five administrative law judges may be unconstitutional.
His decision is significant because many SEC cases arise from activities in the financial services industry in Manhattan, and sets a precedent for judges in his court.
Other defendants suing to stop similar cases include financier Lynn Tilton, whose lawsuit is overseen by Berman's fellow Manhattan judge, Ronnie Abrams.
Berman's decision is "gratifying," Duka's lawyer Guy Petrillo said. "Regardless of the courtroom in which we ultimately land, we look forward to vindicating our client, who did nothing wrong."
SEC spokeswoman Judith Burns declined to comment.
U.S. District Judge Leigh Martin May in Atlanta has halted two SEC administrative proceedings.
The SEC has been pursuing more enforcement cases in-house, using authority it gained through the 2010 Dodd-Frank law.
Critics say this deprives defendants of protections they enjoy in federal court, and makes it easier for the SEC to win.
Berman said the appointment of SEC judges by staff likely violated Article II of the U.S. Constitution, making it unfair to let its case against Duka proceed.
"The plaintiff has demonstrated irreparable harm along with a substantial likelihood of success on the merits of her claim," Berman wrote.
Duka said the process gives SEC judges job protections that could make it impossible even for the president to remove them.
On Aug. 3, Berman gave the SEC seven days to fix the problem, suggesting it could be "easily cured" if commissioners were to appoint the judges. No action was taken.
Duka, a former head of S&P's commercial mortgage-backed securities group, was accused of concealing how S&P had eased its criteria for calculating some ratings in 2011.
S&P, a unit of McGraw Hill Financial Inc, agreed in January to pay $77 million to settle related charges by the SEC and the New York and Massachusetts attorneys general.
The case is Duka v SEC, U.S. District Court, Southern District of New York, No. 15-00357.
(Reporting by Jonathan Stempel in New York; Editing by Paul Simao; and Peter Galloway)
http://finance.yahoo.com/news/sec-dealt-fresh-defeat-ny-133250590.html;_ylt=AwrC1jHW18xVGlcAXCGTmYlQ;_ylu=X3oDMTByMDgyYjJiBGNvbG8DYmYxBHBvcwMyBHZ0aWQDBHNlYwNzYw--
Some future historian working to recreate the evolution of Wall Street criminality in the decade leading up to the Crash of ’08 could find no better place to start than working through these tens of thousands of pages of print-outs, which are available for the asking: come to think of it, maybe it is time I just cause it all to be posted online myself, probably on some Dutch server that is immune from subpoenas and lawsuits.) :)
Anthony Elgindy, R.I.P.
Posted on 26 July 2015 by Patrick Byrne
As astute readers of DeepCapture have gathered by now, over the years I have developed quite a soft spot in my heart for the assorted brigands, cutpurses, swindlers, and crooks who inhabit these pages. One must keep in mind that they have looted the savings of millions, of course, and some of them are terrorists who wish to do harm to our country, but even when I was an altar boy I learned that when rage-stomping bullies and miscreants I would invariably feel a twinge of sympathy. So call it the legacy of a misspent youth, but when I learned last night that Anthony Elgindy (AKA “Amir Elgindy” AKA “Tony Pacific”) killed himself Thursday, I confess my chuckle had a certain sad edge to it. Call me sentimental.
Amir Elgindy was an Egyptian with ties to the Muslim Brotherhood who immigrated to America and, like others from that neck of the woods, gave himself an Italian name as soon as he arrived. Here he engaged in various forms of stock market miscreancy, including (in the late 1990’s) setting up a cleverly-designed password protected website on which various criminals (about 60-70 in all), shielded from public scrutiny, coordinated illegal short-and-distort market manipulation schemes. I say, “cleverly designed” because it was rigged as a message board on which one could not scroll backwards. Day and night various criminals would openly discuss which firms to target next, what brokerages were giving loose locates to enable illegal naked short selling, and which toadie journalists had been fed stories they had agreed to publish, and when.
Unfortunately for Anthony Elgindy, one of his closest friends was not, in fact, loyal to him. This friend hired assistants to sit at computer screens around the clock, 24/7/365, hitting “Print Screen” every couple minutes and making physical record of all that was said in this chat room for nearly three years. Many years ago I obtained an attic full of bankers boxers filled with these print outs (which, incidentally, I caused to be scanned and stored with a law firm for posterity. Thus, unscrambling the various relationships among the miscreants I pursued on Wall Street was far easier than it may have appeared to outsiders. There they were, in black and white: One hedge fund manager rejoices in the compliance of pseudo-journalist Herb Greenberg (of Jim Cramer’s thestreet.com), opining, “maybe when thestreet.com folds we can hire Herb to work exclusively for us” (NB: they did, and that describes Herb’s subsequent career at CNBC and ever after, until he faded into obscurity). Dave Kansas, also of Jim Cramer’s TheStreet.com (Dave Kansas went on to edit the C Section of the Wall Street Journal, where I first crossed paths with him in 2002 when he degraded a story on Bill Hambrecht’s Dutch Auction IPO as a favor to the Wall Street firms he has spent his career dutifully servicing with all the imagination of a lifer in a Tijuana hump-hump bar). Carol Remond of DowJones. Bloomberg’s Dale Evans, it is written,”gave us SPBR for free-been very profitable.” Dan Loeb, now a well-known New York hedge fund manager, who got his start on Elgindy’s board using the pseudonym “Mr. Pink”, wrote at one point of Dale’s willingness to be spoon fed stories to regurgitate on cue in Bloomberg (stories that could be front run by thse criminals): for his services “Dale Evans is a made man,” wrote now-respectable hedge fund manager Dan Loeb. (Some future historian working to recreate the evolution of Wall Street criminality in the decade leading up to the Crash of ’08 could find no better place to start than working through these tens of thousands of pages of print-outs, which are available for the asking: come to think of it, maybe it is time I just cause it all to be posted online myself, probably on some Dutch server that is immune from subpoenas and lawsuits.)
Elgindy furthered such stock picking “prowess” by bribing two FBI agents to feed him advance knowledge of federal investigations against companies, information he and his lads could front run. He would likely have gotten away with it forever, I think, but on September 10, 2001, he called his Smith Barney broker and told him to liquidate his (Elgindy’s) stocks, saying that “tomorrow the Dow is going to 3,000? (it was 9,600 at the time). The next day planes hit buildings, and said Smith Barney broker called the feds, who rolled up Elgindy and his stock discussion board. At trial the federal prosecutors decided to leave aside mention of their belief that Elgindy clearly had prior knowledge of 9/11 as being too inflammatory: knowing he was losing the case, however, Elgindy’s lawyer started bringing up such allegations, which opened things up for the feds to discuss them in court. That part of the trial transcript was later sealed by the judge, by in 2007 an enterprising Bloomberg journalist named Gary Matsumoto managed to obtain them from a Brooklyn court storage facility, and it is clear that the feds absolutely believed that Elgindy knew about 9/11 the day before it occurred.
Elgindy was convicted on the charges of bribing FBI agents. Between his conviction and his sentencing he was under house arrest in his home near San Diego. When he showed up to the court for sentencing, he came with only 9 fingers, the other having been lost “in a beach barbecuing accident,” he told the judge. When the prosecutor pointed out that Elgindy had been under house arrest and unable to access a beach, Elgindy changed to another improbable story. A person central to the case later told me that certain elements of Organized Crime had shown up at Elgindy’s house while he was awaiting sentencing, told him that if he talked while he was in prison they would skin Elgindy’s wife alive, took Elgindy to his basement, and at gunpoint forced him to saw his own finger off with a hacksaw, the better to remember the tutorial.
Elgindy was sentenced to 11 years in prison. While in prison he followed my activities closely, even obsessively. As a result, I made arrangements for an associate of mine to befriend Elgindy (under pretense) through email, and actually received permission to visit Elgindy in prison in 2006: three days before my associate’s visit, the Federal Bureau of Prisons revoked my associate’s permission, moved Elgindy to isolation, and refused him further ability to communicate with my colleague. How odd.
Elgindy was released from prison recently, having served nine years in total. Evidently the strain of it all was too much for the poor fellow, however, and he killed himself three days ago. Details of his demise and whether or not it was another “beach barbecuing accident” have not yet been made public.
Secret Owner of Offshore Brokerage Firm Arrested for Alleged Leadership Role in a $300 Million Securities Fraud and Money Laundering Scheme
Defendant Charged with Participating in Numerous Market Manipulation Schemes, Including the Manipulation of Cynk Technology Corp (CYNK)
U.S. Attorney’s Office
June 23, 2015 Eastern District of New York (718) 254-7000
https://www.fbi.gov/newyork/press-releases/2015/secret-owner-of-offshore-brokerage-firm-arrested-for-alleged-leadership-role-in-a-300-million-securities-fraud-and-money-laundering-scheme
Gregg R. Mulholland, a dual U.S. and Canadian citizen, was arrested at Phoenix International Airport earlier today during a layover of his flight from Canada to Mexico on charges of securities fraud conspiracy and money laundering conspiracy for fraudulently manipulating the stocks of numerous U.S. publicly-traded companies and then laundering approximately $300 million in profits through at least five offshore law firms. Mulholland was the secret owner of Legacy Global Markets S.A. (Legacy), an offshore broker-dealer and investment management company based in Panama City, Panama and Belize City, Belize, which was indicted in September 2014 (United States v. Bandfield, et al., 14-CR-476 (ILG)). The defendant’s initial appearance for removal proceedings to the Eastern District of New York is scheduled for tomorrow before United States Magistrate Judge Eileen Willett at the Sandra Day O’Connor United States Courthouse in Phoenix, Arizona.
The charges were announced by Kelly T. Currie, Acting United States Attorney for the Eastern District of New York, and Diego Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI); Shantelle P. Kitchen, Special Agent-in-Charge, United States Internal Revenue Service, Criminal Investigation, New York (IRS-CI); and Raymond R. Parmer Jr., Special Agent-in-Charge, Department of Homeland Security, Homeland Security Investigations, New York (HSI).
“As charged in the criminal complaint, Mulholland used an elaborate offshore corporate structure built on lies and deceit to defraud U.S. investors in publicly-traded companies and profited to the tune of $300 million. He concealed his leadership role in this fraudulent network, which included stock promoters, lawyers, and broker-dealers, by using aliases and sham companies, and fled the United States when his secretly-owned brokerage firm was indicted last summer,” stated Acting United States Attorney Currie. “We are committed to closing fraudulent offshore safe havens and prosecuting those who seek to abuse the financial markets to enrich themselves.” Mr. Currie thanked the Securities and Exchange Commission and the Justice Department’s Office of International Affairs for their cooperation and assistance in the investigation.
“Mulholland’s alleged sophisticated scheme for ill-gotten gains included everything from lies, fraud, and offshore firms. It all caught up with him today when he was arrested and charged with securities fraud conspiracy and money laundering conspiracy. The FBI will continue to work with our partners to police our markets and ensure they are legal, fair, and equitable,” stated FBI Assistant Director-in-Charge Rodriguez.
“The use of overseas accounts and other offshore mechanisms to conceal income and assets is obviously of great interest to the Internal Revenue Service,” stated IRS-CI Special Agent-in-Charge Kitchen. “Investment fraud schemes that incorporate these means to hide proceeds ultimately make the Internal Revenue Service an unwitting, additional victim. In response, IRS-Criminal Investigation, working with our law enforcement partners, will follow the global financial trail to unravel such crimes.”
“Mulholland’s arrest puts an end to an alleged money laundering and security fraud scheme that was motivated by greed,” said HSI New Special Agent in Charge Parmer. “HSI will work with our law enforcement partners and use every tool at our disposal to combat financial crimes that cost tax payers millions of dollars.”
According to the complaint unsealed this morning in Brooklyn federal court, between 2010 and 2014, Mulholland controlled a group of individuals (the Mulholland Group) who together devised three interrelated schemes to: (a) induce U.S. investors to purchase stock in various thinly-traded U.S. public companies through fraudulent promotion of the stock, concealment of their ownership interests in the companies, and fraudulent manipulation of artificial price movements and trading volume in the stocks of those companies; (b) circumvent the IRS’s reporting requirements under the Foreign Account Tax Compliance Act (FATCA); and (c) launder the fraudulent proceeds from the stock manipulation schemes to and from the United States through five offshore law firms. Through this scheme, the Mulholland Group laundered approximately $300 million in fraudulent proceeds.
To facilitate these interrelated schemes, the complaint charges that the Mulholland Group used shell companies in Belize and Nevis, West Indies, which had nominees at the helm. This structure was designed to conceal the Mulholland Group’s ownership interest in the stock of U.S. public companies, in violation of U.S. securities laws, and enabled the Mulholland Group to engage in numerous “pump and dump” schemes. This structure enabled the Mulholland Group to manipulate the stock of Cynk Technology Corp, which traded on the U.S. OTC markets under the ticker symbol CYNK. Using aliases such as “Stamps” and “Charlie Wolf,” Mulholland was intercepted on a court-authorized wiretap in May 15, 2014, admitting to his ownership of “all the free trading” or unrestricted shares of CYNK. Prior to this May 15, 2014 conversation between Mulholland and his trader at Legacy, there had been no trading in CYNK stock for 24 trading days. Over the next two months, the stock of CYNK rose from $0.06 per share to $13.90 per share, a more than $4 billion stock market valuation for a company that had no revenue and no assets.
Mulholland used the services of a U.S.-based lawyer to launder the $300 million generated through his stock manipulation of CYNK and other U.S. companies—directing the fraud proceeds to five law firm accounts and transmitting them back to members of the Mulholland Group and its co-conspirators. These concealment schemes enabled Mulholland to evade reporting requirements to the IRS.
The charges in the complaint are merely allegations, and the defendant is presumed innocent unless and until proven guilty. If convicted, Mulholland faces a maximum sentence of 20 years’ imprisonment.
The government’s case is being prosecuted by the Office’s Business and Securities Fraud Section. Assistant United States Attorneys Jacquelyn Kasulis and Winston Paes are in charge of the prosecution. Assistant United States Attorney Brian Morris of the Office’s Civil Division will be responsible for the forfeiture of assets.
The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions, and other organizations. Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants.
For more information on the task force, please visit www.StopFraud.gov.
The Defendant:
GREGG R. MULHOLLAND
Age: 45
San Juan Capistrano, California
Vancouver, Canada
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https://www.fbi.gov/newyork/press-releases/2015/secret-owner-of-offshore-brokerage-firm-arrested-for-alleged-leadership-role-in-a-300-million-securities-fraud-and-money-laundering-scheme
Greek regulator fines hedge funds over short selling issue
Reuters
37 minutes ago
ATHENS/LONDON (Reuters) - Greece's capital markets regulator has fined more than a dozen hedge funds in the past few months for potentially breaching European rules on short selling stocks without borrowing them first, an official from the regulator said on Friday.
The hedge funds include Tosca Master Fund, Hadron Alpha Select Fund, and Verrazzano European Long Short, according to a statement on the website of Greece's Hellenic Capital Market Commission.
Tosca, Hadron and Verrazzano declined to comment.
The fines range between 10,000 euros (7,115 pounds) and 40,000 euros and are related to trades in Greek banks such as Eurobank Ergasias (EURBr.AT), Alpha Bank (ACBr.AT) and National Bank of Greece (NBGr.AT), the regulator's statement said.
Short selling is used by hedge funds to profit from falling share prices. It usually involves selling borrowed shares and buying them back at a lower price and pocketing the difference.
But sometimes shares are sold short without being borrowed first, known as naked short selling.
European rules were introduced in 2012 imposing certain restrictions on short selling and requiring certain disclosures from hedge funds on short positions.
Some hedge funds have not received notifications of the fines directly from the regulator and have sought clarification form the Greek authorities.
The Alternative Investment Management Association has also been approached by several hedge funds to look into potential inconsistency in interpretation of the European short-selling regulation by the Greek regulator, a spokesman said for the Association said, adding that the hedge fund trade body was not going to be involved in individual cases.
Some hedge funds have also approached the European Securities and Markets Authority (ESMA).
"They have raised an issue with us but we have not received any former complaint," a spokesman for ESMA said. The ESMA spokesman said the sanctioning of market participants for any breaches of EU rules was not in ESMA's remit.
The Financial Times initially reported the dispute over the fines.
(Reporting by Nishant Kumar in LONDON and Deepa Babington in ATHENS. Editing by Jane Merriman)
Illegal Naked Short Selling Appears to Lie at the Heart of an Extensive Stock Manipulation Scheme
Posted by Larry Smith on Jun 16, 2015
Hedge Fund Managers, Brokers, Market Makers, Investor Advocates (LOL), and those who enable them same MO... all becoming known.
Of course just my opinion. ;)
The group claims the managers wrongly used government agencies to privately benefit their funds by urging regulators to investigate companies whose stock they are short.
HLF - A George Soros-backed group is going after Bill Ackman for using the government to short Herbalife
Business Insider
By Portia Crowe 1 hour ago
(Ralph Orlowski/Reuters)George Soros.A Washington-based advocacy group is accusing hedge fund managers of using "government processes" to benefit their firms' investments, Yahoo! Finance's Michael Santoli reported.
The group Citizens for Responsibility and Ethics in Washington is after Steve Eisman, who's campaigned to short some for-profit education companies, and Bill Ackman, who has publicly staked $1 billion shorting Herbalife.
The group claims the managers wrongly used government agencies to privately benefit their funds by urging regulators to investigate companies whose stock they are short.
Here's where it gets juicy: one of CREW's funders is a non-profit founded by hedge fund manager George Soros – who happens to own a major stake in the Herbalife (3.8 percent, according to a recent Bloomberg report).
If Soros has any involvement in the claims, it would not be the first time he and Ackman have gone head to head over Herbalife.
Soros took a stake in Herbalife, which sells nutritional supplements and weight loss products, after Ackman accused the company of running a pyramid scheme. The Pershing Square CEO has also accused Soros of stock manipulation and reportedly brought that complaint to the SEC.
Now CREW, which Santoli reports has received at least $800,000 from Soros' Open Society non-profit, is pushing back on Ackman's tactics.
But this is not the first time a hedge fund manager has alerted authorities to possible misbehavior and – benefitted from the result. As Business Insider's Julia La Roche pointed out, the recent Lumber Liquidators scandal is an example of how that can be a force for good.
And as Yahoo! Finance's Santoli notes, the battle to protect multi-level marketing companies and for-profit schools seems like an unlikely one for a usually liberal group like CREW.
http://finance.yahoo.com/news/george-soros-backed-group-going-131730287.html
Modus Operandi frequent on the OTC...
http://www.citizensforethics.org/page/-/PDFs/Policy/3_18_15%20Herbalife%20Exhibits.pdf?nocdn=1
just my opinion... of course :)
HLF - Watchdog Group Asks Congress To Investigate Bill Ackman For “Gov’t Manipulation”
CREW ratchets up pressure on Bill Ackman for government manipulation in Herbalife case
Posted By: Clayton Browne
Posted date: March 18, 2015 03:16:42
Nonprofit lobbying organization Citizens for Responsibility and Ethics in Washington (CREW) sent a letter to the House and Senate Commerce Committees on Wednesday requesting they investigate the problem of large short sellers attempting to manipulate the federal government for personal profits. The letter singled out hedge fund titans Steve Eisman and Bill Ackman as potential violators.
Statement from CREW Executive Director
CREW Interim Executive Director Anne Weismann noted, “First it was Steve Eisman working over the Department of Education (Education) while he shorted the stocks of for-profit colleges and now it’s Bill Ackman ginning up a federal investigation into Herbalife Ltd. (NYSE:HLF) to make good on a billion dollar bet against the company.”
Weismann went on to say: “While it appears DOJ and the SEC may be investigating Mr. Ackman’s conduct, Congress needs to look at this issue. Many Americans already believe Wall Street is a rigged game. Watching billionaire hedge fund managers get richer by instigating government action can only lead to further decreased confidence in the country’s financial markets and government leaders.”
Documents show Bill Ackman’s team regularly contacted FTC officials
As reported by the The New York Times Company (NYSE:NYT) and other media sources, Bill Ackman and his hedge fund have made great efforts to urge federal regulatory action against Herbalife, a company in which Ackman held a large short position. Ackman even admitted he just needed to get any one of “the SEC, the FTC, the 50 attorney generals around the country, (or) the equivalent regulators in 87 countries,” to start an investigation in order to drive the price down.
The Department of Justice has reportedly initiated an investigation into Ackman’s activities as an attempt to manipulate Herbalife’s stock.
CREW claims that it received documents through a Freedom of Information Act request showing that Bill Ackman’s lawyer contacted Lois Greisman, the Associate Director of the Division of Marketing Practices at the FTC, on a regular basis with articles and blog posts critical of Herbalife, some of which were written or paid for by Ackman or his associates.
Fran McGill, a spokesman for New York-based Pershing Square at Rubenstein Associates Inc., declined to comment. An Herbalife spokeswoman declined to comment on the matter
See the full letter here – http://www.citizensforethics.org/page/-/PDFs/Legal/Letters/3-18-15_Commerce_Short_Seller_Letter.pdf?nocdn=1 and here http://www.citizensforethics.org/page/-/PDFs/Policy/3_18_15%20Herbalife%20Exhibits.pdf?nocdn=1
http://www.valuewalk.com/2015/03/bill-ackman-crew/
Interesting...
http://www.brokeandbroker.com/2671/finra-hurry/
SEC commissioners blast Oppenheimer waiver
WASHINGTON (MarketWatch)— Two members of the Securities and Exchange Commission have criticized the agency’s decision to grant a regulatory waiver to let a sanctioned brokerage keeping selling securities.
Kara Stein and Luis Aguilar, Democratic commissioners on the Securities and Exchange Commission, criticized the SEC’s giving Oppenheimer a waiver allowing them to continue conducting private securities offerings that are exempt from registering with the SEC.
The waiver came after the SEC alleged Oppenheimer helped execute sales of penny stocks for a brokerage firm in the Bahamas that was not registered to business in the United States and violated anti money laundering laws. Oppenheimer paid $20 million to settle charges by the SEC and the Treasury Department’s Financial Crimes Enforcement Network.
Stein and Aguilar’s dissent also said Oppenheimer had committed similar violations in 2005 and 2013.
“These violations are just the most recent chapter in a long and unfortunate history of regulatory failures,” Stein and Aguilar’s dissent said.
Oppenheimer was granted a waiver based on it saying it would hire a law firm to review its policies for compliance with the regulations in question, but Stein and Aguilar said the order did not require the law firm to independent or qualified.
“The fact that these past efforts have failed to alter an entrenched culture of non-compliance makes the decision to grant a full waiver in this matter even more disconcerting,” the dissent said.
In the past, Stein has said the commission needs to be careful and nuanced about granting waivers and that investors and companies should be allowed to know when a firm or individual receives one.
http://www.marketwatch.com/story/sec-commissioners-blast-commission-on-oppenheimer-waiver-2015-02-04?siteid=rss
In the Matter of
INTERNATIONAL CAPITAL
GROUP, LLC,
http://www.sec.gov/litigation/admin/2015/33-9717.pdf
9. The loans were nonrecourse: in the event of default, which could be triggered,
inter alia, by a 60 percent decline in the price of the collateral stock, the debtor had the option to
tender additional collateral or to forfeit the securities with no contingent liability.
14. On average, ICG began selling shares associated with each loan three days prior
to loan closing and funding, and completed the sale of all remaining collateral within two weeks
of receiving the stock from the customer. In many instances, ICG did not wire funds to the
customer from its bank account until it had sold sufficient collateral shares in its brokerage
account to generate an equivalent amount of proceeds. ICG’s principals personally oversaw and
authorized sales of stock by ICG.
16. Unlike a traditional lender, ICG generated relatively little of its cash flow from
the customers’ payment of interest, fees, or repayment of principal. In addition, because ICG
expected many of its loans to default, it generally did not maintain cash reserves to return
collateral shares at maturity
SEC Charges Oppenheimer With Securities Law Violations Related to Improper Penny Stock Sales
FOR IMMEDIATE RELEASE
2015-14
Washington D.C., Jan. 27, 2015 — The Securities and Exchange Commission today charged Oppenheimer & Co. with violating federal securities laws while improperly selling penny stocks in unregistered offerings on behalf of customers.
Oppenheimer agreed to admit wrongdoing and pay $10 million to settle the SEC’s charges. Oppenheimer will pay an additional $10 million to settle a parallel action by the Treasury Department’s Financial Crimes Enforcement Network (FinCEN).
According to the SEC’s order instituting a settled administrative proceeding, Oppenheimer engaged in two courses of misconduct. The first involved aiding and abetting illegal activity by a customer and ignoring red flags that business was being conducted without an applicable exemption from the broker-dealer registration requirements of the federal securities laws. The customer was Gibraltar Global Securities, a brokerage firm in the Bahamas that is not registered to do business in the U.S. Oppenheimer executed sales of billions of shares of penny stocks for a supposed proprietary account in Gibraltar’s name while knowing or being reckless in not knowing that Gibraltar was actually executing transactions and providing brokerage services for its underlying customers, including many in the U.S. The SEC separately charged Gibraltar in 2013 for its alleged misconduct.
The SEC’s order finds that Oppenheimer failed to file Suspicious Activity Reports (SARs) as required under the Bank Secrecy Act to report potential misconduct by Gibraltar and its customers, and the firm failed to properly report, withhold, and remit more than $3 million in backup withholding taxes from sales proceeds in Gibraltar’s account. Oppenheimer also failed to recognize the resulting liabilities and expenses in violation of the books-and-records requirements, and improperly recorded transactions for Gibraltar’s customers in Oppenheimer’s books and records.
According to the SEC’s order, the second course of misconduct involved Oppenheimer again engaging on behalf of another customer in unregistered sales of billions of shares of penny stocks. The SEC’s investigation, which is continuing, found that the sales generated approximately $12 million in profits of which Oppenheimer was paid $588,400 in commissions. The firm’s liability stems from its failure to respond to red flags and conduct a searching inquiry into whether the sales were exempt from registration requirements of the federal securities laws, and its failure reasonably to supervise with a view toward detecting and preventing violations of the registration provisions.
“Despite red flags suggesting that Oppenheimer’s customer’s stock sales were not exempt from registration, Oppenheimer nonetheless allowed unregistered sales to occur through its account, failing in its gatekeeper role,” said Andrew J. Ceresney, Director of the SEC’s Division of Enforcement. “These actions against Oppenheimer demonstrate that the SEC is fully committed to addressing lax AML compliance programs at broker-dealers through enforcement action. The sanctions imposed on Oppenheimer, which include admissions of wrongdoing and $20 million in monetary remedies, reflect the magnitude of Oppenheimer’s regulatory failures.”
The SEC’s order requires Oppenheimer to cease and desist from committing or causing any violations and any future violations of Section 15(a) and 17(a) of the Securities Exchange Act of 1934 and Rules 17a-3 and 17a-8, and of Section 5 of the Securities Act of 1933. In addition to the monetary remedies, Oppenheimer agreed to be censured and undertake such remedial measures as retaining an independent consultant to review its policies and procedures over a five-year period.
The SEC’s investigation is being conducted by Robert Giallombardo, Margaret W. Smith, Robert Nesbitt, Gary Peters, and Jesse Grunberg with assistance from Christian Schultz. The case is being supervised by Doug McAllister and Nina Finston. The SEC appreciates the assistance of FinCEN and the Financial Industry Regulatory Authority.
http://www.sec.gov/news/pressrelease/2015-14.html
SEC Charges Stock-Based Lender With Selling Billions of Penny Stock Shares as Unregistered Broker-Dealer
FOR IMMEDIATE RELEASE
2015-18
Washington D.C., Jan. 29, 2015 — The Securities and Exchange Commission today charged a Chicago-area company that provides stock loans using equities as collateral, its two co-founders, and its former chief operating officer with selling more than nine billion shares of penny stocks through purported stock-based loans, block trades, and other transactions without registering with the SEC as a broker-dealer as required under the federal securities laws.
International Capital Group (ICG) and the executives agreed to collectively pay more than $4.3 million to settle the SEC’s charges.
“By selling billions of shares of penny stock without registering with the SEC, ICG and its principals subverted core protections provided to investors by the broker-dealer registration provisions,” said David Glockner, Director of the SEC’s Chicago Regional Office.
According to the SEC’s order instituting a settled administrative proceeding against ICG, its co-founders Brian R. Nord and Larry Russell Jr., and its former COO Todd J. Bergeron, ICG presented itself as a stock-based lender. ICG systematically sold stock obtained as collateral for at least 149 stock-based loans, but failed to register with the SEC as a broker-dealer. On average, ICG began selling the collateral shares it received through each loan three days before closing and funding the loan, and completed the sale of all remaining shares within two weeks of receiving the stock. In many instances, ICG did not provide money to the customer until the stock had been sold in an amount sufficient to fund the loan. On several occasions, ICG also violated the securities registration provisions by distributing unregistered stock that it acquired from issuers or their affiliates. Nord, Russell, and Bergeron directed, authorized, or participated in these transactions.
The SEC’s order finds that ICG violated Section 5 of the Securities Act of 1933 and Section 15(a) of the Securities Exchange Act of 1934. The order finds that Nord, Russell, and Bergeron violated Section 5 of the Securities Act and aided and abetted and caused ICG’s violations of Section 5 of the Securities Act and Section 15(a) of the Exchange Act. Without admitting or denying the findings, they agreed to cease and desist from committing or causing violations of these provisions. ICG, Nord, and Russell must pay $1,670,054 in disgorgement and prejudgment interest as well as penalties of $1.5 million, $300,000, and $250,000 respectively. They are barred from the securities industry and penny stock offerings for five years. Bergeron must pay $417,514 in disgorgement and prejudgment interest and a penalty of $150,000, and he is barred from the securities industry and penny stock offerings for three years.
The SEC’s investigation was conducted by Paul M. G. Helms and Jonathan I. Katz and supervised by Kathryn A. Pyszka in the Chicago Regional Office.
http://www.sec.gov/news/pressrelease/2015-18.html
U.S. SEC adopts rules establishing regime for swap data warehouses
Reuters
22 hours ago
(Updates to reflect SEC's action, adds details about the rules and disagreements among commissioners)
By Sarah N. Lynch
WASHINGTON, Jan 14 (Reuters) - U.S. securities regulators took another step toward shedding more light on the over-the-counter derivatives market Wednesday, adopting a raft of measures to give them a direct window into the opaque market.
The Securities and Exchange Commission's rules lay out a regulatory framework for "swap data repositories" like those operated by the Depository Trust & Clearing Corp, a specialized warehouse that collects trillions of dollars worth of swaps trades, shares it with regulators, and disseminates aggregated data to the public.
The SEC's rules come more than four years after they were first required by the 2010 Dodd-Frank Wall Street reform law. That law requires direct oversight of the $692 trillion swaps market and calls for a variety of new rules to improve price transparency, reduce risks of defaults and hold banks accountable for misconduct.
"Regulators will rely on (swap data warehouses) for timely, accurate information to monitor concentrations of risk exposures and address potential market abuses," SEC Chair Mary Jo White said.
The Dodd-Frank law split up the responsibility for policing the swaps market between the SEC and the Commodity Futures Trading Commission, with the CFTC winning the lion's share.
The CFTC long ago adopted its own rules for swap data warehouses under its turf.
SEC officials said the new rules are similar to the CFTC's.
They will require data warehouses to register, establish governance standards and designate a chief compliance officer.
The package of rules would also require the reporting of data, including the public dissemination of aggregated volume and pricing figures.
But the SEC measures provoked sharp disagreements along party lines. Republicans lamented a provision that holds employees of swap data warehouses liable for lying to the chief compliance officer.
The new rule "creates heightened liability and uncertainty," said Republican SEC Commissioner Michael Piwowar.
Democrats, meanwhile, said the rules fell short because they lack elements such as "real-time" reporting and a definition of a "block trade," a large trade typically reported with a lag time so it does not tip off other traders.
For now, the SEC's rules require all swaps to be reported within 24 hours, until more study is done to refine the timing.
The SEC said it was still working to complete rules mandating the format that warehouses should use when reporting data so that it will be useful for regulators.
"We have a lot of work to do," said SEC Democratic Commissioner Kara Stein.
(Reporting by Sarah N. Lynch; Editing by Lisa Von Ahn)
http://finance.yahoo.com/news/u-sec-adopts-rules-establishing-172025813.html;_ylt=AwrBEiKL57dUGQMA8GOTmYlQ
Hagens Berman’s SEC Whistleblower Client Haim Bodek’s Complaint Against High-Frequency Trading and Financial Exchange Abuse Results in Largest-Ever Penalty Against a Financial Exchange
SEATTLE--(BUSINESS WIRE)--
Hagens Berman applauds today’s announcement from the U.S. Securities and Exchange Commission that two exchanges formerly owned by Direct Edge Holdings (and since acquired by Bats Global Markets, the second-largest financial exchange in the country) have agreed to pay a record-breaking $14 million penalty to settle charges that the exchanges failed to accurately and completely disclose how order types functioned on its exchanges, and for selectively providing such information only to certain high-frequency trading firms.
The case was prompted by an SEC whistleblower complaint filed in 2011 by Hagens Berman whistleblower client and market expert Haim Bodek. Mr. Bodek, former head of Trading Machines LLC (following stints with Goldman Sachs, UBS and others), has blown the whistle on deceptive practices by certain high-frequency trading firms and financial exchanges catering to them. He has been featured in front page Wall Street Journal profiles and elsewhere for his whistleblowing.
“This SEC action is the product of several years and hundreds of hours of careful analysis by our client, and an enormous job done by the SEC’s Market Abuse Unit under Daniel Hawke,” said Shayne Stevenson, partner and head of the whistleblower practice at Hagens Berman. “Haim Bodek performed an incredible public service at great risk to himself. He is exactly the kind of person the SEC whistleblower program was established to attract.”
The SEC Order finds that Direct Edge, an exchange that merged with Bats in late January 2014, failed to accurately describe order types used on the exchange. It also found that such information was selectively disclosed to certain high-frequency trading members and not to the SEC or the investing public.
This conduct violated sections 19(b) and 19(g) of the Securities Exchange Act of 1934.
The investigation centered on the controversial “price sliding” process for handling buy and sell orders. It revealed that the Exchange actually offered three variations of “price sliding” order types but did not disclose these features in its required disclosures to the SEC or to the investing public.
“This case and its outcome should serve as inspiration to other whistleblowers to report market manipulation and other fraudulent activities,” Shayne Stevenson said. “After all he has been through and grief from self-serving detractors, this is Haim Bodek’s well-deserved vindication.”
Prior to this penalty, the largest fine ever levied against a stock exchange was $10 million against Nasdaq OMX Group in May 2013 to settle civil charges stemming from mistakes made during Facebook’s initial public offering in 2012.
Haim Bodek’s attorney, Hagens Berman partner and head of whistleblower practice Shayne Stevenson, is available to speak regarding the implications of the case and other trends in whistleblower litigation. To schedule an interview, please contact the firm’s media contact, Ashley Klann at 206-268-9363.
About Hagens Berman
Hagens Berman Sobol Shapiro LLP is a national law firm representing whistleblowers, with offices in nine cities. The firm has been named to the National Law Journal’s Plaintiffs’ Hot List seven times for its landmark class-action, consumer-rights wins for plaintiffs. More about the law firm and its whistleblower practice can be found at www.hb-whistleblower.com. Follow the firm for updates and whistleblower news at @HagensBerman.
Contact:
Hagens Berman Sobol Shapiro LLP
Ashley Klann, 206-268-9363
ashleyk@hbsslaw.com
http://finance.yahoo.com/news/hagens-berman-sec-whistleblower-client-191100272.html;_ylt=AwrBEiIEAbZUGD4AQPWTmYlQ
SEC eyes transfer agents in new front against U.S. stock fraudsters
Reuters
January 12, 2015 4:20 PM
By Sarah N. Lynch
WASHINGTON, Jan 12 (Reuters) - In their battle to root out microcap stock fraudsters, U.S. securities regulators are turning their attention to the obscure world of transfer agents, who are sometimes in a position to prevent scams, or help to enable them.
Transfer agents are back-office businesses hired by companies to keep track of shareholder records and changes in ownership. To date, the industry has been lightly regulated, despite its critical role in keeping track of stocks as they change hands, and the issuance of shares.
The U.S. Securities and Exchange Commission is in the early stages of drafting new rules for transfer agents.
Some officials want to get the agents to scrutinize more closely attempts by corporate insiders or large shareholders to remove private stock ownership restrictions so that shares may be sold in public markets, and deny requests that may seem suspicious.
Those planning on committing a stock fraud can lie to or mislead transfer agents so they can get restrictions on shares removed. They may, for example, allow unregistered shares to be traded. Unregistered shares are not supposed to be sold to the public under federal law, unless they meet certain exemptions.
Once the stock is freely tradable, the fraudsters pump up the price with promotional material, including phony claims about the company's prospects, to dupe unsuspecting investors. The stock that was cleared by the transfer agent for trading is then sold, or "dumped," by the scam artists, often leaving them with big percentage gains before the price collapses.
It is unclear exactly when the SEC may consider new rules or how they will look, though SEC Chair Mary Jo White said in a statement to Reuters that the agency plans to kick it off by publishing a high-level policy document that will be used to solicit public feedback and help formulate the rules.
"We must review our rules carefully and enhance our protections for investors and the markets," she said.
SEC Democratic Commissioner Luis Aguilar said in an interview there is no doubt that transfer agents are gatekeepers who hold a "unique position" to identify and prevent unregistered, restricted shares from being sold illegally.
"The commission should adopt rules providing additional safeguards to protect against the unlawful distribution of unregistered securities," Aguilar said.
He expressed frustration by the snail's pace in getting the reform through especially as a 2012 law, the Jumpstart Our Business Startups (JOBS) Act, makes it easier for companies to raise larger sums of money without registering their securities.
There is some bipartisan support for rolling out new regulations for transfer agents. SEC Republican Commissioner Daniel Gallagher said in an interview that the current rules speak to a time when stock certificates were in paper, adding that new ones are woefully overdue.
There are currently about 450 transfer agents registered with the SEC, and the overall industry maintains roughly 276 million shareholder accounts for about 1.5 million issuers.
While they are required to register with the SEC, experts say it can take less than 90 minutes to fill out the form, which is not followed up by a rigorous review due to limited resources at the agency. Shops can be open for business 30 days after filing.
On average, the SEC conducts compliance exams at only between about 40 to 45 a year, prioritizing transfer agents considered higher risk.
Even some of the most basic industry best practices, such as requiring an attorney's legal opinion prior to removing restrictions on shares, is not required by the SEC's own rules.
"My joke is that it is harder to become a licensed hair dresser in New York than it is a transfer agent," said R. Cromwell Coulson, the head of OTC Markets Group Inc, the marketplace for unlisted over-the-counter stocks. This opens the door to "some very small capitalized businesses without the proper controls," he said.
The transfer agent industry is torn over just how much due diligence should be required, though there are many in the business, including its trade association, who say the lack of up-to-date regulations is absurd.
MOM-AND-POP SHOPS
Some smaller firms say they want the SEC to give them more guidance so they don't unwittingly enable a fraud and find themselves caught up in an SEC probe.
"The problem is, the SEC has not defined what red flags are," said Kara Kennedy, the executive director for ClearTrust, a small transfer agent in Florida. "Let's get in front of the SEC and lets ask for guidance. And if they won't give it to us, let's come up with a standard ourselves," she said.
The transfer agent industry is split between operations housed in some of the nation's largest financial firms and hundreds of mom-and-pop shops.
The blue-chip companies generally rely on some big transfer agent services operated by firms such as Computershare, American Stock Transfer & Trust Company, and Wells Fargo .
Many of the mom-and-pop firms operate out of tiny offices, or in some cases, out of people's homes and cater to smaller companies, including the microcap companies. Microcap companies typically disclose less financial information than major companies and trade on a "Wild West" over-the-counter stock market where investors face the most risk.
Transfer agents make their money by charging companies who hire them a variety of fees, either through fixed pricing or on a transaction by transaction basis.
CHARGES BROUGHT
In 2014, the agency brought a handful of enforcement cases against transfer agents. Although some of these cases focused on disclosure violations, others uncovered more serious violations such as issuing fake stock certificates and stealing client money to pay business expenses.
But for cases where transfer agents themselves cannot be directly blamed for a fraudulent scheme, the SEC has sought to get more creative to hold them accountable as gatekeepers.
In September, the SEC charged New Jersey-based Registrar and Transfer and its former chief executive with ignoring red flags that helped pave the way for unregistered company shares to be sold and used for an alleged pump-and-dump scheme.
In the complaint, the SEC said the transfer agent, Registrar and Transfer Company, "rubber stamped" requests from a company executive to remove restrictions on unregistered shares so they could be issued to other people, including himself. The SEC said the transfer agent "disregarded" these red flags and issued the shares.
Registrar and Transfer, which has since been acquired by Computershare, and its former CEO Thomas Montrone, both settled the charges, with the firm agreeing to pay more than $127,000 in fines, disgorgement and interest. Computershare declined to comment.
Mark Harmon, an attorney with Hodgson Russ LLP who represented Montrone, declined to comment on the case. In general, though, he said he has noticed the SEC stepping up its scrutiny in this area.
"I have been representing transfer agents for the better part of 20 years, and I would say the frequency of SEC inquiries on these issues, and the depth at which they are doing it has increased in the last few years," Harmon said.
(Reporting by Sarah N. Lynch; Editing by Karey Van Hall and Martin Howell)
http://finance.yahoo.com/news/sec-eyes-transfer-agents-front-212018523.html;_ylt=AwrBEiIEAbZUGD4AN_WTmYlQ
JPMorgan settles currency price rigging lawsuit in U.S.
By Jonathan Stempel
NEW YORK (Reuters) - JPMorgan Chase & Co has become the first bank to settle a U.S. antitrust lawsuit in which investors accused 12 major banks of rigging prices in the $5 trillion-a-day foreign exchange market.
The settlement was disclosed in a letter filed on Monday with the U.S. District Court in Manhattan from lawyers for JPMorgan, the largest U.S. bank, and investors. Terms were not revealed. Settlement papers are to be filed with the court this month.
The accord requires court approval, and was reached after mediation with Kenneth Feinberg, who also oversees a General Motors Co program to compensate drivers whose vehicles had faulty ignition switches.
The 2013 lawsuit is separate from criminal and civil probes worldwide into whether banks rigged currency rates to boost profit at the expense of customers and investors. JPMorgan was among six banks that in November reached $4.3 billion of settlements with U.S. and European regulators.
In their complaint, investors including the city of Philadelphia, hedge funds and public pension funds accused the 12 banks of having conspired since January 2003 in chat rooms, instant messages and emails to manipulate the WM/Reuters Closing Spot Rates.
They said traders would use such names as The Cartel, The Bandits' Club and The Mafia to swap confidential orders, and set prices through manipulative tactics such as "front running," "banging the close" and "painting the screen."
Other defendants include Bank of America Corp, Barclays Plc, BNP Paribas SA, Citigroup Inc, Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs Group Inc, HSBC Holdings Plc, Morgan Stanley, Royal Bank of Scotland Group Plc and UBS AG.
According to the lawsuit, the 12 banks held an 84 percent global market share in currency trading, and were counterparties in 98 percent of U.S. spot volume.
"The settlement is a responsible step by Chase in addressing its involvement," Michael Hausfeld, a lawyer for the investors, said in a phone interview. "It is a beginning with respect to the accountability of other banks engaged in the same trading."
JPMorgan spokesman Brian Marchiony confirmed the settlement but declined further comment.
Representatives for the other 11 banks declined to comment or did not immediately respond to requests for comment. Bank of America, Citigroup, HSBC, RBS and UBS also settled with regulators in November.
JP Morgan Chase & Co sign outside headquarters in New York" alt="© Reuters. JP Morgan Chase & Co sign outside headquarters in New York" rel="external-image">
The case is In re: Foreign Exchange Benchmark Rates Antitrust Litigation, U.S. District Court, Southern District of New York, No. 13-07789.
(Reporting by Jonathan Stempel in New York; Editing by Meredith Mazzilli and Grant McCool)
Oppenheimer Holdings beset by regulatory investigations
http://www.investmentnews.com/article/20140805/FREE/140809974/oppenheimer-holdings-beset-by-regulatory-investigations
Regulatory expenses cut into the bottom line at Oppenheimer Holdings Inc. as the firm said it had set aside more than $12 million in the second quarter in light of investigations by the SEC, Finra and the Treasury Department.
The firm's private client group, which has around 1,370 financial advisers, continues to face scrutiny over sales of penny stocks by several financial advisers from 2008 to 2010. Meanwhile, regulators have opened additional inquiries into sales of leveraged and inverse exchange-traded funds and potential lapses in supervision related to a former financial adviser, according to its most recent quarterly report.
As a result, Oppenheimer reported on Friday that its pretax profit had fallen to $7.6 million in the second quarter, a 51% decline compared with the same quarter of last year.
An outside spokesman for the firm, Stefan Prelog, said the firm declined to comment.
The $12 million charge stems primarily from the continued fallout from the sale of penny stocks by seven brokers in five branches from 2008 to 2010, the firm reported.
The brokers fraudulently traded over one billion shares of low- priced securities, according to an order issued by the Financial Industry Regulatory Authority Inc.
Last August, Oppenheimer paid $1.4 million to Finra to settle those allegations, but said that at least two SEC investigations from 2010 and 2011 had yet to be resolved.
The firm said it is expecting one or more enforcement actions to result in “significant charges against earnings” in the first quarter, in addition to the $12 million set aside last quarter.
In February, the Treasury Department Financial Crimes Enforcement Network, FinCEN, also sent a notice that it was investigating violations of the Bank Secrecy Act, which outlines anti-money-laundering requirements for financial firms.
With the additional $12 million set aside, Oppenheimer said it would be “fully reserved against potential liability arising out of the SEC and FinCEN matters.”
Separately, in May, Finra sent a separate Wells Notice to Oppenheimer asking the firm to explain why it should not be charged with failing to supervise a former financial adviser in addition to late Finra U4 and U5 filings and record retention.
The filing did not provide details about the broker.
In March, however, the SEC brought action for insider trading against a former Oppenheimer broker, Vladimir Eydelman, who had worked at the firm from 2011 to 2012 before joining Morgan Stanley. Although the firm was not named, the SEC said that Eydelman was able to make at least 11 insider trades after Oppenheimer's compliance department said it had begun looking into the matter.
Oppenheimer said at the time that it was continuing to cooperate with investigators and conduct its own probe into any lapses in supervision.
In a third matter, Oppenheimer said that for several quarters, Finra had been sending information requests regarding the sale of leveraged and inverse ETFs.
“Several Oppenheimer employees have provided on-the-record testimony in connection with the investigation,” the firm wrote in its earnings report. “Oppenheimer is continuing to cooperate with the investigating entities.”
The firm did not report setting aside funds specifically for either the rogue broker or ETF investigations.
Oppenheimer has faced similar inquiries prior to the $1.4 million Finra fine. In 2005, the firm paid fines totaling nearly $4.15 million to the New York Stock Exchange and FinCEN for alleged failures in the firm's anti-money-laundering program. The firm has made all settlements without admitting or denying the findings.
Worth a repost in my opinion!!!
Monk Saturday, 11/08/08 09:09:31 PM
Re: None
Post # of 319093
Stock market Manipulation and Fraud:
Well, this isn't really a FAQ page, but it is close to it.
Here are a series of bullet points that highlight everything you need to know about the current crisis, in "elevator pitch" format:
• Wall Street has a colorful history of institutionally-condoned stock manipulation and fraud.
• Stock manipulation was not illegal until the introduction of the SEC in 1934.
• Joe Kennedy, the first SEC Chairman (and father of JFK) made his fortune running stock manipulation "pools" on Wall Street.
• The head of the NYSE, who argued successfully against any meaningful regulation and oversight of Wall Street participants (brokers) by the SEC (due to their integrity and high moral fiber), and introduced the notion of self-regulation on the "honor" system (still in place today), was subsequently sentenced to 10 years in Sing-Sing for embezzling client accounts - including a fund in his care set up for orphans.
• The SEC originally was envisioned to have prosecution power.
• The final bill giving birth to the SEC was so anemic and watered-down that it was chastised as nonsense when it was passed, and it severely constrained the new Commission, and limited the SEC's power to filing civil suits. Virtually all the rules with Congressional teeth were stripped out of the bill, at Wall Street's behest. That state of affairs continues to this day.
• The SEC was never intended to police Wall Street and ensure a level and fair playing field – Roosevelt created it to, "Restore investor confidence in the market" after the 1929 and 1932 crashes – not to ensure there was any good reason to have confidence.
• The SEC's track record of action against Wall Street players is worse than abysmal.
• Broker/dealers have transitioned from owing their clients a fiduciary obligation of safekeeping, to a "customer" relationship, that is essentially adversarial – caveat emptor being the rule for customers.
• As commissions have dwindled to nothing (due to the advent of discount brokers, following deregulation) Wall Street is now beholden to the large money movers for their income, and stock lending is one of their biggest profit centers.
• Stock lending is exclusively an activity used by short sellers, who must borrow stock before selling it.
• Short selling is a bet on stock price declines. The short seller borrows stock, and then sells that borrowed stock, hoping to buy it back at a lower price later, when he returns it to the lender.
• Illegal "naked short selling" involves placing a sales transaction, but not borrowing the stock, and simply failing to deliver it on delivery day. It is also called "failing to deliver" or FTD – or delivery failure.
• Delivery failure is a significant problem nowadays, as it can be used to run stock prices down in a manipulative manner. Delivery failure in any other industry is called fraud. Hedge funds are the biggest culprits in this illegal trading strategy, with broker/dealers right behind them in the culpability queue.
• Hedge funds are now the largest players in the US equities markets, representing the majority of trading, with almost $2 trillion under management.
• Hedge funds are large, virtually unregulated pools of anonymous money, used to invest in any way the operator sees fit.
• Prime brokers allow their hedge fund customers leverage on their assets, meaning that for every dollar of asset, they could easily hold $10 of short positions.
• This over-leverage presents a systemic risk should positions in several larger funds go the wrong way, as there isn't enough collateral to cover the domino effect of multiple positions being forced to cover.
• This over-leverage creates an environment where the brokers are now pregnant with their hedge fund customers' liabilities, and have a vested interest in seeing depressed stock prices remain depressed – if the stocks go up, the hedge funds could easily fail, and the brokers are on the hook to buy-in and deliver the stock owed by the funds – resulting in brokerage failures.
• The DTCC is ultimately at risk for this domino effect, as brokerages fail.
• The DTCC is owned by the brokers, thus is the brokers.
• The DTCC processes over $1.2 quadrillion (million trillion) every year, and owns most of the stock American investors hold in their accounts - but most of the country has never heard of the company. The total GNP of the planet is about $20 trillion per year.
• 1% of all trades in dollar volume fail to settle (be delivered) every day, per the SEC.
• $130 billion to $150 billion of equities trade every day.
• $2 trillion of total trades are processed by the DTCC every day, including bonds.
• The SEC does not qualify whether they refer to total trades, or total equities, when referring to 1% failing to settle.
• The SEC keeps the total dollar value of trades that have failed to be delivered secret.
• The Securities Industry Association publishes a spreadsheet that tallies the financial position of all NYSE member firms, and that spreadsheet shows $63 billion plus delivery and receipt failures as of the final day of Q2, 2006, just for those firms. Lines 69 and 103.
• The DTCC claims delivery and receipt failures are a rolling $6 billion per day.
• The disconnect in the numbers is CNS netting, wherein all fails are netted against all shares held long by the brokers, effectively concealing 90+% of the problem once netting is through.
• The $63 billion number doesn't include any of the massive international clearing firms. And that number is after pre-CNS netting, where the day's buys are used to offset the day's sells (even naked sells) at the broker and clearing house level, before reporting to the SIA, and before going into the CNS netting system.
• Of the $130 to $160 billion per day that trades in stock, per the DTCC, 96% is handled by CNS netting. This is consistent with the disconnect in the $6 billion and the $63+ billion numbers. 96% is handled by netting, which means 4% isn't. 4% of $130 billion is $5.2 billion not handled by CNS netting. Of that $5.2 billion, $2.1 billion fails. $1.1 billion of the fails are accommodated by the stock borrow program. $1 billion isn't, and goes onto the $6 billion post netting failure pile.
• $5.2 billion per day aren't handled by CNS netting. $2.1 billion fail. That is 40% of the trades, fail. $130 billion to $160 billion stock trades daily. $63 billion fails just in NYSE firms. That is around 40%.
• The SEC insists that the failure issue isn't a big problem. So does the DTCC. So does Wall Street. None of these entities have commented on the SIA spreadsheet, nor has the NY financial press. Not one comment. None.
• $63 billion is a big problem. That is a mark-to-market number, where yesterday's $20 stock is today $1, thus yesterday's $20 billion problem is now valued as a $1 billion problem. That means the actual true value of the problem is likely 10-20 times larger.
• $630 billion to $1.2 trillion is a very big problem. Even by NY standards.
• The SEC "grandfathered" all failed to deliver trades prior to January, 2005, effectively pardoning all those trades (for which money was paid but no stock ever delivered), from ever being required to deliver. This amounts to allowing those that violated delivery rules to keep the money from their illegal conduct.
• The SEC keeps the number of shares grandfathered, as well as the dollar amount, secret, for fear of creating market disrupting "volatility".
• The above numbers do not take into account the large number of undelivered trades that are handled "Ex-Clearing" – a way of handling delivery outside the system. Nor do they take into account pre-CNS netting, nor international clearing house fails.
• Many securities scholars believe the "Ex-Clearing" failure problem is 10 times larger than the in-system problem the above numbers represent.
• Many investors that think they have "shares" in their brokerage accounts, don't. They have "markers" that have no underlying share to validate them. Some call these "counterfeit shares", with good reason. The technical term is "Securities Entitlement."
• UCC8 mandates that all Securities Entitlements have a genuine share on deposit at the DTC, or in the broker's possession, for each Securities Entitlement. That rule is ignored by the SEC and Wall Street.
• The DTCC, via Cede & Co., is the registered owner of all shares held in "Street Name," which are all shares in margin accounts.
• Margin accounts represent the bulk of independent investor account types.
• Registered owners are free to use their "property" as collateral for loans or debt.
• It is unknown what, if any, loans or debts are collateralized by the stock "owned" by the DTCC.
• The DTCC's "Stock Borrow Program" lends shares to be delivered to buyers, if sellers fail to deliver.
• The Stock Borrow Program is operated on the honor system, and is anonymous.
• It allows one genuine share to be lent multiple times, leaving a string of markers/IOUs in the share's wake.
• This creates a systemic risk for the stock market, as more markers are in investor accounts, falsely represented as shares, than shares actually authorized by the companies.
• These markers are freely traded and treated by the system as real, resulting in a large secondary market of counterfeit shares – resulting in depressed stock prices.
• With paper certificates being eliminated – by the DTCC – there is no way to confirm that a share is genuine, versus a bogus marker.
• There is nothing to stop your broker from taking your money, and merely representing to you that you bought shares, without ever actually buying them. You have no way of knowing the difference, barring demanding paper certificates for your property.
• Only a handful of people on the planet understand all this.
• In the end, it is simple – Wall Street is printing shares electronically, investors are paying real money for those bogus shares, and the whole thing is predicated on the idea that few will ever understand what is being done, or bother to check.
• This represents a hidden tax on investors and the economy.
• It is, for the most part, illegal.
• It is being kept secret by the DTCC and the SEC, who are terrified of systemic collapse, and a complete loss of investor confidence, should all the facts become known.
• All the facts are becoming known.
LMAO...
The U.S. and the European Union then tightened their regulations to make it harder to engage in naked shorting. The U.S. now requires investors to have a reasonable belief they can borrow shares to cover a short sale within three days; the EU requires investors to have already borrowed the stock, or arranged to do so, on or before the day of the short sale.
York Said to Be Probed by Spain Over Bankia Naked Short
The London office of James Dinan’s York Capital Management LP may face civil charges from Spanish regulators for allegedly using a banned trading technique before last year’s bailout of mortgage giant Bankia SA. (BKIA)
The Comision Nacional del Mercado de Valores, or CNMV, notified Dinan’s firm in March it was scrutinizing a May 2013 short sale by the York European Focus Fund, according to a regulatory filing. The stock involved was Bankia, according to a person familiar with the matter, who asked not to be identified because the details are private. In December, the Spanish regulator started a probe into bets made against Bankia shares before May 23, 2013, when the stock plunged 51 percent after terms of a government bailout were disclosed.
The civil charges against York would be one of the first cases filed under a new regulatory code adopted by the European Union in 2012 to restrict short selling, blamed by many local officials for exacerbating the global financial crisis. Spain and Italy, two of the countries hit hardest by the European debt crisis, have both used emergency powers under the new code to temporarily ban any bets against local stocks.
“I have not seen a single case of even threatened enforcement” under the EU’s new short sale rule, said Christopher Leonard, an attorney in the London office of law firm Bingham McCutchen LLP, who has advised hedge-fund managers on complying with the restrictions. “It was inevitable that at some point someone would contravene the regulation, accidentally or on purpose, and that a regulator would seek to take action.”
Short Selling
Richard Swanson, York’s general counsel, declined to comment. In a regulatory filing, York said the trade was reviewed by its compliance department and other parties, and that there were circumstances outside its control that prevented a timely delivery of shares to execute the trade. The CNMV as a policy does not comment on its supervision process, according to a spokeswoman for the regulator.
Short selling is the practice of betting against stocks and other securities. In a short sale, a trader makes use of borrowed assets to bet on a decline in prices, hoping to buy them back later and pocket the price difference. The process of borrowing the stock from a third party and delivering it to the buyer is known as “covering” a short. A “naked short” is a banned practice in which investors sell a stock short without locating shares to borrow to complete the transaction.
The Spanish regulator is considering filing civil administrative charges against York Capital Management Europe (UK) Advisors LP for failing to cover a short position “in a timely manner,” according to documents that New York-based York filed with the U.S. Securities and Exchange Commission.
Timely Delivery
York, a New York-based manager that oversees about $19 billion, primarily in event-driven strategies, said in the filing that the firm’s compliance department, outside counsel and prime broker all reviewed the short sale prior to execution to ensure timely delivery of the shares needed to cover the transaction.
“It is the firm’s position that the failure of timely delivery was on account of circumstances completely outside of its control,” York said in the filing.
The potential enforcement proceeding was outlined in a “pliego de cargos,” meaning a list of civil charges, that York received on March 27, according to the filing. The SEC filing didn’t identify the stock involved.
During the global financial crisis, European and U.S. regulators temporarily prohibited short selling of stocks, claiming that the trading strategy was fueling market turmoil.
Naked Shorting
The U.S. and the European Union then tightened their regulations to make it harder to engage in naked shorting. The U.S. now requires investors to have a reasonable belief they can borrow shares to cover a short sale within three days; the EU requires investors to have already borrowed the stock, or arranged to do so, on or before the day of the short sale.
York’s European focus fund had previously invested in Bankia convertible debt and carried out the short sale to help offset any decline in the value of this investment, according to the person familiar with the matter. The firm executed the short sale just before the issuance of stock through the May 2013 recapitalization, and as a result, had a naked short position for a brief period of time, the person said.
York, founded by Dinan in 1991 with about $3.6 million in capital, joined a number of other hedge funds that sought to profit from the European debt crisis. Its European Focus fund, had almost $1 billion in assets, according to the latest figures available.
Bankia Bailout
The unraveling of Bankia, once the third-largest lender in Spain with $330 billion in assets at the end of 2010, was a decisive factor in forcing the Spanish government to turn to the European Union for a bailout of the country’s financial sector. After Spain formed Bankia by merging seven regional savings banks, the lender raised more than 3 billion euros through a July 2011 initial public offering, with many of the shares being sold to the bank’s own depositors.
These common shares were almost wiped out in a recapitalization of the bank that took place in May 2013 under the terms of a 18 billion euro bailout agreement with the European Union. Holders of the convertible debt were forced to exchange the securities for common stock that equaled less than half of face value.
At the time, the CNMV said it would investigate the May 23 stock plunge, just before Bankia issued 11.5 billion new shares under the terms of the recapitalization.
In December, the Spanish regulator issued a statement saying it had started six investigations to determine whether sales of Bankia stock that took place prior to the recapitalization complied with short-selling regulations. The CNMV said it had been in touch with market supervisors in seven countries where sellers of the shares lived and had made 99 requests for information.
To contact the reporter on this story: Miles Weiss in Washington at mweiss@bloomberg.net
To contact the editors responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net Sree Vidya Bhaktavatsalam, Josh Friedman
Nah better ROI with the cover!
Ya know Ou8tlaw, if things are really this rigged, then the right course of action is to find out what the evil shorts are doing and make a few dollars piggy-backing on their scheme.
U.S. Enlists Big Data to Fight Securities Fraud
http://www.datanami.com/2014/08/19/u-s-enlists-big-data-fight-securities-fraud/
One in the US, that HAS allowed it...
just sayin
could be more?
imo retail may or may not be the problem, we'll see...
what broker allows retail shorting of sub-penny otc companies???? I understand only foreign brokers are allowing customers to do this, but which ones???
No need to wonder, pretty blatant in my opinion.
Just waiting on some entity to step up and stop, the corruption, and fraud, brought on by some of the Brokers, and MM's, etc.
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=98505105
What I find amazing is that if the general public can figure this out - hmmmmm Does that mean that the SEC and FINRA, DTCC etc are dumber than a 5th grader or part of the problem. Things that make you go hmmmmm.
“CELLAR BOXING”
There’s a form of the securities fraud known as naked short selling that is becoming very popular and lucrative to the market makers that practice it. It is known as “Cellar boxing” and it has to do with the fact that the NASD and the SEC had to arbitrarily set a minimum level at which a stock can trade. This level was set at $.0001 or one-one hundredth of a penny. This level is appropriately referred to as “the cellar”. This $.0001 level can be used as a "backstop" for all kinds of market maker and naked short selling manipulations.
“Cellar boxing” has been one of the security frauds du jour since 1999 when the market went to a “decimalization” basis. In the pre-decimalization days the minimum market spread for most stocks was set at 1/8th of a dollar and the market makers were guaranteed a healthy “spread”. Since decimalization came into effect, those one-eighth of a dollar spreads now are often only a penny as you can see in Microsoft’s quote throughout the day. Where did the unscrupulous MMs go to make up for all of this lost income? They headed "south" to the OTCBB and Pink Sheets where the protective effects from naked short selling like Rule 10-a, and NASD Rules 3350, 3360, and 3370 are nonexistent.
The unique aspect of needing an arbitrary “cellar” level is that the lowest possible incremental gain above this cellar level represents a 100% spread available to MMs making a market in these securities. When compared to the typical spread in Microsoft of perhaps four-tenths of 1%, this is pretty tempting territory. In fact, when the market is no bid to $.0001 offer there is theoretically an infinite spread.
In order to participate in “cellar boxing”, the MMs first need to pummel the price per share down to these levels. The lower they can force the share price, the larger are the percentage spreads to feed off of. This is easily done via garden variety naked short selling. In fact if the MM is large enough and has enough visibility of buy and sell orders as well as order flow, he can simultaneously be acting as the conduit for the sale of nonexistent shares through Canadian co-conspiring broker/dealers and their associates with his right hand at the same time that his left hand is naked short selling into every buy order that appears through its own proprietary accounts. The key here is to be a dominant enough of a MM to have visibility of these buy orders. This is referred to as "broker/dealer internalization" or naked short selling via "desking" which refers to the market makers trading desk. While the right hand is busy flooding the victim company's market with "counterfeit" shares that can be sold at any instant in time the left hand is nullifying any upward pressure in share price by neutralizing the demand for the securities. The net effect becomes no demonstrable demand for shares and a huge oversupply of shares which induces a downward spiral in share price.
In fact, until the "beefed up" version of Rule 3370 (Affirmative determination in writing of "borrowability" by settlement date) becomes effective, U.S. MMs have been "legally" processing naked short sale orders out of Canada and other offshore locations even though they and the clearing firms involved knew by history that these shares were in no way going to be delivered. The question that then begs to be asked is how "the system" can allow these obviously bogus sell orders to clear and settle. To find the answer to this one need look no further than to Addendum "C" to the Rules and Regulations of the NSCC subdivision of the DTCC. This gaping loophole allows the DTCC, which is basically the 11,000 b/ds and banks that we refer to as "Wall Street”, to borrow shares from those investors naive enough to hold these shares in "street name" at their brokerage firm. This amounts to about 95% of us. Theoretically, this “borrow” was designed to allow trades to clear and settle that involved LEGITIMATE 1 OR 2 DAY delays in delivery. This "borrow" is done unbeknownst to the investor that purchased the shares in question and amounts to probably the largest "conflict of interest" known to mankind. The question becomes would these investors knowingly loan, without compensation, their shares to those whose intent is to bankrupt their investment if they knew that the loan process was the key mechanism needed for the naked short sellers to effect their goal? Another question that arises is should the investor's b/d who just earned a commission and therefore owes its client a fiduciary duty of care, be acting as the intermediary in this loan process keeping in mind that this b/d is being paid the cash value of the shares being loaned as a means of collateralizing the loan, all unbeknownst to his client the purchaser.
An interesting phenomenon occurs at these "cellar" levels. Since NASD Rule 3370 allows MMs to legally naked short sell into markets characterized by a plethora of buy orders at a time when few sell orders are in existence, a MM can theoretically "legally" sit at the $.0001 level and sell nonexistent shares all day long because at no bid and $.0001 ask there is obviously a huge disparity between buy orders and sell orders. What tends to happen is that every time the share price tries to get off of the cellar floor and onto the first step of the stairway at $.0001 there is somebody there to step on the hands of the victim corporation's market.
Once a given micro cap corporation is “boxed in the cellar” it doesn’t have a whole lot of options to climb its way out of the cellar. One obvious option would be for it to reverse split its way out of the cellar but history has shown that these are counter-productive as the market capitalization typically gets hammered and the post split share price level starts heading back to its original pre-split level.
Another option would be to organize a sustained buying effort and muscle your way out of the cellar but typically there will, as if by magic, be a naked short sell order there to meet each and every buy order. Sometimes the shareholder base can muster up enough buying pressure to put the market at $.0001 bid and $.0002 offer for a limited amount of time. Later the market makers will typically pound the $.0001 bids with a blitzkrieg of selling to wipe out all of the bids and the market goes back to no bid and $.0001 offer. When the weak-kneed shareholders see this a few times they usually make up their mind to sell their shares the next time that a $.0001 bid appears and to get the heck out of Dodge. This phenomenon is referred to as “shaking the tree” for weak-kneed investors and it is very effective.
At times the market will go to $.0001 bid and $.0003 offer. This sets up a juicy 200% spread for the MMs and tends to dissuade any buyers from reaching up to the "lofty" level of $.0003. If a $.0002 bid should appear from a MM not "playing ball" with the unscrupulous MMs, it will be hit so quickly that Level 2 will never reveal the existence of the bid. The $.0001 bid at $.0003 offer market sets up a "stalemate" wherein market makers can leisurely enjoy the huge spreads while the victim company slowly dilutes itself to death by paying the monthly bills with "real" shares sold at incredibly low levels. Since all of these development-stage corporations have to pay their monthly bills, time becomes on the side of the naked short sellers.
At times it almost seems that the unscrupulous market makers are not actively trying to kill the victim corporation but instead want to milk the situation for as long of a period of time as possible and let the corporation die a slow death by dilution. The reality is that it is extremely easy to strip away 99% of a victim company’s share price or market cap and to keep the victim corporation “boxed“ in the cellar, but it really is difficult to kill a corporation especially after management and the shareholder base have figured out the game that is being played at their expense.
As the weeks and months go by the market makers make a fortune with these huge percentage spreads but the net aggregate naked short positions become astronomical from all of this activity. This leads to some apprehension amongst the co-conspiring MMs. The predicament they find themselves in is that they can’t even stop naked short selling into every buy order that appears because if they do the share price will gap and this will put tremendous pressures on net capital reserves for the MMs and margin maintenance requirements for the co-conspiring hedge funds and others operating out of the more than 13,000 naked short selling margin accounts set up in Canada. And of course covering the naked short position is out of the question since they can’t even stop the day-to-day naked short selling in the first place and you can't be covering at the same time you continue to naked short sell.
What typically happens in these situations is that the victim company has to massively dilute its share structure from the constant paying of the monthly burn rate with money received from the selling of “real” shares at artificially low levels. Then the goal of the naked short sellers is to point out to the investors, usually via paid “Internet bashers”, that with the, let’s say, 50 billion shares currently issued and outstanding, that this lousy company is not worth the $5 million market cap it is trading at, especially if it is just a shell company whose primary business plan was wiped out by the naked short sellers’ tortuous interference earlier on.
The truth of the matter is that the single biggest asset of these victim companies often becomes the astronomically large aggregate naked short position that has accumulated throughout the initial “bear raid” and also during the “cellar boxing” phase. The goal of the victim company now becomes to avoid the 3 main goals of the naked short sellers, namely: bankruptcy, a reverse split, or the forced signing of a death spiral convertible debenture out of desperation. As long as the victim company can continue to pay the monthly burn rate, then the game plan becomes to make some of the strategic moves that hundreds of victim companies have been forced into doing which includes name changes, CUSIP # changes, cancel/reissue procedures, dividend distributions, amending of by-laws and Articles of Corporation, etc. Nevada domiciled companies usually cancel all of their shares in the system, both real and fake, and force shareholders and their b/ds to PROVE the ownership of the old “real” shares before they get a new “real” share. Many also file their civil suits at this time also. This indirect forcing of hundreds of U.S. micro cap corporations to go through all of these extraneous hoops and hurdles as a means to survive, whether it be due to regulatory apathy or lack of resources, is probably one of the biggest black eyes the U.S. financial systems have ever sustained. In a perfect world it would be the regulators that periodically audit the “C” and “D” sub-accounts at the DTCC, the proprietary accounts of the MMs, clearing firms, and Canadian b/ds, and force the buy-in of counterfeit shares, many of which are hiding behind altered CUSIP #s, that are detected above the Rule 11830 guidelines for allowable “failed deliveries” of one half of 1% of the shares issued. U.S. micro cap corporations should not have to periodically “purge” their share structure of counterfeit electronic book entries but if the regulators will not do it then management has a fiduciary duty to do it.
A lot of management teams become overwhelmed with grief and guilt in regards to the huge increase in the number of shares issued and outstanding that have accumulated during their “watch”. The truth however is that as long as management made the proper corporate governance moves throughout this ordeal then a huge number of resultant shares issued and outstanding is unavoidable and often indicative of an astronomically high naked short position and is nothing to be ashamed of. These massive naked short positions need to be looked upon as huge assets that need to be developed. Hopefully the regulators will come to grips with the reality of naked short selling and tactics like "Cellar boxing" and quickly address this fraud that has decimated thousands of U.S. micro cap corporations and the tens of millions of U.S. investors therein."
Interesting
AlanC Member Level Grandfathered Member Wednesday, 02/05/14 04:14:13 PM
Re: AlanC post# 15248
Post # of 15250
1-Brown Brothers to pay $8 mln fine for money laundering violations
Wed Feb 5, 2014 12:38pm EST
http://www.reuters.com/article/2014/02/05/finra-brownbrothers-idUSL2N0LA0YX20140205
(Adds comments by company and compliance officer, context )
By Suzanne Barlyn
Feb 5 (Reuters) - Brown Brothers Harriman has agreed to pay a record $8 million civil fine for "substantial" violations involving its program to detect and prevent money laundering, Wall Street's industry- funded watchdog said on Wednesday.
The New York-based investment firm did not have an adequate program in place to look for and detect suspicious penny stock transactions, the Financial Industry Regulatory Authority (FINRA) said in a statement. The firm also did not sufficiently investigate potentially suspicious activity involving penny stocks after becoming aware of a possible problem, nor did it file mandatory reports to alert regulators, FINRA said.
The fine is the highest levied by FINRA for violations of the securities industry's anti-money laundering compliance rules, the regulator said. FINRA also levied a $25,000 fine against the firm's global anti-money laundering compliance officer, Harold Crawford, and suspended him for 30 days.
The transactions in question generated at least $850 million in proceeds for Brown Brothers customers, according to FINRA.
Brown Brothers Harriman and Crawford neither admitted nor denied FINRA's charges, according to FINRA. Brown Brothers has changed its handling and monitoring of low-priced securities to prevent a possible recurrence of problems, the firm said in a statement. The activity involved a "small part" of the firm's investor services business and not its investment management or private banking business, it said.
"I believed that we had established an appropriate system to identify and deal with global AML risks," said Crawford, the firm's anti-money laundering compliance officer, in a statement. FINRA, Crawford said, did not consider certain measures he took, including severing ties with "certain problematic" clients, so he settled, he added.
Low-priced securities, such as penny stocks, are often subject to efforts by fraudsters to falsely inflate trading volume and share prices, a securities law violation that is a precursor to money-laundering, according to anti-money laundering compliance professionals. Penny stocks typically trade at less than one dollar per share and are highly speculative.
The problems at Brown Brothers happened between early 2009 and mid-2013, according to FINRA. The firm executed transactions or delivered securities involving at least six billion shares of penny stocks, many on behalf of foreign bank customers in known bank secrecy havens such as Switzerland and Guernsey, according to its settlement with FINRA. Fraudsters who do business through bank secrecy havens can more easily shield their identity, say compliance professionals.
Brown Brothers also did not know other basic details about the transactions, such as the identity the stock's true owner. The absence of those details should trigger a review of the transactions by a firm's anti-money laundering team, said Aaron Kahler, director of anti-money laundering compliance services for a U.S.-based unit of Capgemini, a Paris-based global consulting firm.
Firms that do not have that information may not be fully aware of the potential for fraud or fail to properly analyze transactions, said Kahler, who was not involved in the case. (Reporting by Suzanne Barlyn; Editing by Phil Berlowitz and Dan Grebler)
http://www.reuters.com/article/2014/02/05/finra-brownbrothers-idUSL2N0LA0YX20140205
The Order reiterates that Knight made a colossal screwup, one that drained the value of the company. However, no conspiracy or market manipulation found.
News pertaining to the rigged game we call the Stock Market!
Monk Saturday, November 08, 2008 9:09:31 PM
Re: None Post # of 319093
Stock market Manipulation and Fraud:
Well, this isn't really a FAQ page, but it is close to it.
Here are a series of bullet points that highlight everything you need to know about the current crisis, in "elevator pitch" format:
• Wall Street has a colorful history of institutionally-condoned stock manipulation and fraud.
• Stock manipulation was not illegal until the introduction of the SEC in 1934.
• Joe Kennedy, the first SEC Chairman (and father of JFK) made his fortune running stock manipulation "pools" on Wall Street.
• The head of the NYSE, who argued successfully against any meaningful regulation and oversight of Wall Street participants (brokers) by the SEC (due to their integrity and high moral fiber), and introduced the notion of self-regulation on the "honor" system (still in place today), was subsequently sentenced to 10 years in Sing-Sing for embezzling client accounts - including a fund in his care set up for orphans.
• The SEC originally was envisioned to have prosecution power.
• The final bill giving birth to the SEC was so anemic and watered-down that it was chastised as nonsense when it was passed, and it severely constrained the new Commission, and limited the SEC's power to filing civil suits. Virtually all the rules with Congressional teeth were stripped out of the bill, at Wall Street's behest. That state of affairs continues to this day.
• The SEC was never intended to police Wall Street and ensure a level and fair playing field – Roosevelt created it to, "Restore investor confidence in the market" after the 1929 and 1932 crashes – not to ensure there was any good reason to have confidence.
• The SEC's track record of action against Wall Street players is worse than abysmal.
• Broker/dealers have transitioned from owing their clients a fiduciary obligation of safekeeping, to a "customer" relationship, that is essentially adversarial – caveat emptor being the rule for customers.
• As commissions have dwindled to nothing (due to the advent of discount brokers, following deregulation) Wall Street is now beholden to the large money movers for their income, and stock lending is one of their biggest profit centers.
• Stock lending is exclusively an activity used by short sellers, who must borrow stock before selling it.
• Short selling is a bet on stock price declines. The short seller borrows stock, and then sells that borrowed stock, hoping to buy it back at a lower price later, when he returns it to the lender.
• Illegal "naked short selling" involves placing a sales transaction, but not borrowing the stock, and simply failing to deliver it on delivery day. It is also called "failing to deliver" or FTD – or delivery failure.
• Delivery failure is a significant problem nowadays, as it can be used to run stock prices down in a manipulative manner. Delivery failure in any other industry is called fraud. Hedge funds are the biggest culprits in this illegal trading strategy, with broker/dealers right behind them in the culpability queue.
• Hedge funds are now the largest players in the US equities markets, representing the majority of trading, with almost $2 trillion under management.
• Hedge funds are large, virtually unregulated pools of anonymous money, used to invest in any way the operator sees fit.
• Prime brokers allow their hedge fund customers leverage on their assets, meaning that for every dollar of asset, they could easily hold $10 of short positions.
• This over-leverage presents a systemic risk should positions in several larger funds go the wrong way, as there isn't enough collateral to cover the domino effect of multiple positions being forced to cover.
• This over-leverage creates an environment where the brokers are now pregnant with their hedge fund customers' liabilities, and have a vested interest in seeing depressed stock prices remain depressed – if the stocks go up, the hedge funds could easily fail, and the brokers are on the hook to buy-in and deliver the stock owed by the funds – resulting in brokerage failures.
• The DTCC is ultimately at risk for this domino effect, as brokerages fail.
• The DTCC is owned by the brokers, thus is the brokers.
• The DTCC processes over $1.2 quadrillion (million trillion) every year, and owns most of the stock American investors hold in their accounts - but most of the country has never heard of the company. The total GNP of the planet is about $20 trillion per year.
• 1% of all trades in dollar volume fail to settle (be delivered) every day, per the SEC.
• $130 billion to $150 billion of equities trade every day.
• $2 trillion of total trades are processed by the DTCC every day, including bonds.
• The SEC does not qualify whether they refer to total trades, or total equities, when referring to 1% failing to settle.
• The SEC keeps the total dollar value of trades that have failed to be delivered secret.
• The Securities Industry Association publishes a spreadsheet that tallies the financial position of all NYSE member firms, and that spreadsheet shows $63 billion plus delivery and receipt failures as of the final day of Q2, 2006, just for those firms. Lines 69 and 103.
• The DTCC claims delivery and receipt failures are a rolling $6 billion per day.
• The disconnect in the numbers is CNS netting, wherein all fails are netted against all shares held long by the brokers, effectively concealing 90+% of the problem once netting is through.
• The $63 billion number doesn't include any of the massive international clearing firms. And that number is after pre-CNS netting, where the day's buys are used to offset the day's sells (even naked sells) at the broker and clearing house level, before reporting to the SIA, and before going into the CNS netting system.
• Of the $130 to $160 billion per day that trades in stock, per the DTCC, 96% is handled by CNS netting. This is consistent with the disconnect in the $6 billion and the $63+ billion numbers. 96% is handled by netting, which means 4% isn't. 4% of $130 billion is $5.2 billion not handled by CNS netting. Of that $5.2 billion, $2.1 billion fails. $1.1 billion of the fails are accommodated by the stock borrow program. $1 billion isn't, and goes onto the $6 billion post netting failure pile.
• $5.2 billion per day aren't handled by CNS netting. $2.1 billion fail. That is 40% of the trades, fail. $130 billion to $160 billion stock trades daily. $63 billion fails just in NYSE firms. That is around 40%.
• The SEC insists that the failure issue isn't a big problem. So does the DTCC. So does Wall Street. None of these entities have commented on the SIA spreadsheet, nor has the NY financial press. Not one comment. None.
• $63 billion is a big problem. That is a mark-to-market number, where yesterday's $20 stock is today $1, thus yesterday's $20 billion problem is now valued as a $1 billion problem. That means the actual true value of the problem is likely 10-20 times larger.
• $630 billion to $1.2 trillion is a very big problem. Even by NY standards.
• The SEC "grandfathered" all failed to deliver trades prior to January, 2005, effectively pardoning all those trades (for which money was paid but no stock ever delivered), from ever being required to deliver. This amounts to allowing those that violated delivery rules to keep the money from their illegal conduct.
• The SEC keeps the number of shares grandfathered, as well as the dollar amount, secret, for fear of creating market disrupting "volatility".
• The above numbers do not take into account the large number of undelivered trades that are handled "Ex-Clearing" – a way of handling delivery outside the system. Nor do they take into account pre-CNS netting, nor international clearing house fails.
• Many securities scholars believe the "Ex-Clearing" failure problem is 10 times larger than the in-system problem the above numbers represent.
• Many investors that think they have "shares" in their brokerage accounts, don't. They have "markers" that have no underlying share to validate them. Some call these "counterfeit shares", with good reason. The technical term is "Securities Entitlement."
• UCC8 mandates that all Securities Entitlements have a genuine share on deposit at the DTC, or in the broker's possession, for each Securities Entitlement. That rule is ignored by the SEC and Wall Street.
• The DTCC, via Cede & Co., is the registered owner of all shares held in "Street Name," which are all shares in margin accounts.
• Margin accounts represent the bulk of independent investor account types.
• Registered owners are free to use their "property" as collateral for loans or debt.
• It is unknown what, if any, loans or debts are collateralized by the stock "owned" by the DTCC.
• The DTCC's "Stock Borrow Program" lends shares to be delivered to buyers, if sellers fail to deliver.
• The Stock Borrow Program is operated on the honor system, and is anonymous.
• It allows one genuine share to be lent multiple times, leaving a string of markers/IOUs in the share's wake.
• This creates a systemic risk for the stock market, as more markers are in investor accounts, falsely represented as shares, than shares actually authorized by the companies.
• These markers are freely traded and treated by the system as real, resulting in a large secondary market of counterfeit shares – resulting in depressed stock prices.
• With paper certificates being eliminated – by the DTCC – there is no way to confirm that a share is genuine, versus a bogus marker.
• There is nothing to stop your broker from taking your money, and merely representing to you that you bought shares, without ever actually buying them. You have no way of knowing the difference, barring demanding paper certificates for your property.
• Only a handful of people on the planet understand all this.
• In the end, it is simple – Wall Street is printing shares electronically, investors are paying real money for those bogus shares, and the whole thing is predicated on the idea that few will ever understand what is being done, or bother to check.
• This represents a hidden tax on investors and the economy.
• It is, for the most part, illegal.
• It is being kept secret by the DTCC and the SEC, who are terrified of systemic collapse, and a complete loss of investor confidence, should all the facts become known.
• All the facts are becoming known.
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