market selloff headline

market selloff headline

Sunday, March 30, 2014

Law School Clinics' Well-Deserved Recognition for Well-Reasoned SCOTUS Advocacy

Among my morning reading was this gem:

The Pittsburgh Post-Gazette reported in today's edition about the efforts of law students from the Univ. of Pittsburgh Law School and Pace Law School as amici advocates in the pending matter of Stone v. Bear Stearns, et al., Case No. 13-959, involving a "public" arbitrator in FINRA arbitration with numerous undisclosed conflicts of interest.  Pitt 2L Sydney Normil from Jamesburg, NJ, said, "It's the best practical experience I've had in law school."

Pace Law School Investor Rights Clinic Director, Prof. Jill I. Gross said, "It's an issue we think is in dire need of addressing.  [Mr. Stone] was supposed to get a neutral panel of arbitrators.  He did not get a neutral panel of arbitrators and he lost."

Pitt Law students and Professor Stewart pose with a brief they authored for the U.S. Supreme Court. From back to front, Kieran O'Leary, Jeremy Papp, Stuart Carney, Fangxing (James) Li, Kelly Horejs, Joseph Fladung, Sydney Normil, Joseph O'Neill, and Professor Alice Stewart. Andrew Karas not pictured.  Connor Mulvaney/Post-Gazette
Read the full Post-Gazette article here.

Tuesday, March 25, 2014

Fifteen Years and Roughly 40+ Arbitrations Before FINRA Removed Arbitrator Posing as a Lawyer

Not the former fake lawyer / arbitrator.

A Santa Barbara man removed from FINRA arbitrator roster claimed to be licensed in California, Florida, and New York, which was news to California, Florida, and New York.

Full InvestmentNews article here.

Friday, March 21, 2014

Florida Supremes: Consumer Arb Clause Must Be In Language Customer Speaks

Not the actual car dealer.
The Florida Supreme Court ruled yesterday in Basulto v. Hialeah Auto., LLC that use of an English-only pre-dispute arbitration clause with customers who do not speak English (N.B. all of the contract documents were English-only) does not create a contractual "meeting of the minds," the offending clause is unenforceable, and the auto dealer's attempts to compel arbitration were denied.

The detailed opinion in Basulto v. Hialeah Auto., LLC, Case No. SC09-2358 (March 20, 2014), can be accessed aqui.

Ameriprise Broker Used Customer Cash to Pay Plastic... But Wait, There's More!

Bill Singer of Broke and Broker expertly dissects the case of In the Matter of Jeffrey Scott Davis, Respondent (Letter of Acceptance, Waiver & Consent ("AWC") 2013037743101).

Jeffrey Scott Davis was formerly associated with Ameriprise, you know, Tommy Lee Jones' friends who are always there to help you with retirement, and last week he submitted his AWC, which FINRA accepted, and with that, Mr. Davis was banned for life from the business.

Mr. Davis did this voluntarily, instead of having the regulatory process against him continue. Once you read Bill Singer's analysis that decision begins to make perfect sense. It involved allegations that he went on a spree using customers' money to make electronic ACH payments of his credit card accounts.

According to FINRA, Mr. Davis had no prior regulatory events in his sixteen-year history in the securities industry.  According to Mr. Singer, what went missing from the AWC is far more troubling than what appeared.

Read the whole story at BrokeandBroker.

Thursday, March 20, 2014

The Bling is Always Real; the Promises are Almost Always Lies.

Canadian Scammer Petar Vucicevich seen before sentencing.
Photographer: Nick Brancaccio / Source: The Windsor Star
“Become a Millionaire.” Sounds great, right?  Who doesn’t want a secure financial future.  There was even a hugely popular game show hosted by the venerable, amiable and seemingly trustworthy Regis Philbin.  But when someone makes a pitch of this nature regarding investments, it should give you pause.  And when that seemingly dubious, too-good-to-be-true pitch is featured prominently right at the top of the pitchman’s website, in my estimation it is probably time to run in the other direction.  Consider a Netflix rental of "Boiler Room" this weekend as your primer for this shadowy world where the promises are usually fake, but the losses and related misery are very, very real.

When such a pitchman makes defensive and boastful statements like, “You haters out there will hate me even more in the coming years as I create more millionaires with my teachings, get excited,” [sic] it smacks of empty infomercial rhetoric that one cannot ever reasonably perceive as a credible source for advice regarding your nest egg.  If they are legitimate, why are they defensive?  At a minimum, it begs the question, if you’re so good at this, why are you trying to sell your “system” to me instead of simply becoming the next Warren Buffet, or perhaps the lesser-known Benjamin Graham who authored the investing classic, The Intelligent Investor?  Incidentally, one can buy that bit of 65-year-old time-tested wisdom for about six bucks on

Famed stock fraudster Jesse Livermore preyed on the short memory of investors and relied on markets moving as a herd and in cycles.  Livermore said famously, “I learned early that there is nothing new in Wall Street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again.”

Thursday, March 13, 2014

Fabulist Fine

SDNY Judge Katherine Forrest imposed an $825K penalty yesterday on the “fabulous Fab” as a sanction for his role in pushing the built-to-fail Abacus MBS fund, which hedge fund Paulson (no affiliation with the Dartmouth man who brought us all TARP) shorted through strategic CDS and participated in the selection of the subprime securities that would inevitably implode.

Some say bitcoin is a “Ponzi,” FINRA issues an alert, but CTFC chief hints it may regulate the newest “currency”

The regulator that completely missed the MF Global implosion (which I commented on for CNN, ABC News, Law 360, and Progressive Farmer News, among other places) is now mulling a new bitcoin regulatory regime.  Acting Commodity Futures Trading Commission chairman, Mark Wetjen, informed reporters this week, "We are looking into that." 

Wednesday, March 12, 2014

Credit Suisse executive: “Our [mortgage] diligence process [wa]s such a joke.”

New York Times investigative journalist, Gretchen Morganson, published a report recently revealing sweeping failures within the mortgage underwriting division at Credit Suisse which parallel many of the horror stories reported about banking misconduct, cited by many as the main cause of the 2008 economic collapse.

Sunday, March 9, 2014

False Claims Act Whistleblower to Receive $64M of JPM Fraud Settlement

Former J.P. Morgan employee Keith Edwards alleged the mega-bank falsely certified FHA and Veterans Affairs-backed mortgages dating back to at least 2002, resulting in "substantial losses" for the federal agencies.  Edwards worked for J.P. Morgan (and/or predecessors) from 2003-08 and sued the bank under the False Claims Act in January 2013 for the suspected malfeasance; the U.S. government later joined him in the litigation.  The U.S. Dept. of Justice obtained roughly $3.8B in False Claims Act settlements and judgments in 2013 alone.

Friday, March 7, 2014

Investment Adviser Assoc Exec Says FINRA Playing "Long Game" to Gain Adviser SRO InvestmentOversight

Source: InvestmentNews
Neil Simon (no, not that Neil Simon), vice president of government relations for the Investment Adviser Association, told the audience at yesterday's IAA Compliance Conference in the Washington D.C. area, FINRA is "playing the long game, [by] laying the groundwork for a future lobbying effort. It views advisers as a regulatory and revenue opportunity.”

Read full InvestmentNews report here.

Thursday, March 6, 2014

New Consumer Advocate Lawyers' Study Challenges BrokerCheck System

The Public Investors Arbitration Bar Association (PIABA), is hosting a media call at 1:00 p.m. today to provide details regarding a recent study conducted by PIABA that compares the FINRA BrokerCheck database with the Central Registration Depository (CRD). The study will be released publicly today.

According to Reuters, FINRA a substantial amount of CRD data to populate the BrokerCheck system, but does not include as much detail.  For example, BrokerCheck discloses information about a broker's licenses as well as customer arbitration complaints, but excludes information about licensing exam scores, or if a broker satisfied a tax lien.  Other advocates have criticized the BrokerCheck system for lacking the features of a “relational” database, to search, for example, all brokers who ever worked with “The Wolf of Wall Street,” Jordan Belfort, or Bernie Madoff.

Read the full Reuters report here and here.

Read the PIABA press release here.

UPDATE: Wall Street Journal report regarding new PIABA BrokerCheck study available here.

InvestmentNews published detailed coverage here.

BrokerCheck Under the Microscope by WSJ; 1600+ Brokers Have Undisclosed Criminal Records, Bankruptcies

The Wall Street Journal analyzed data from just 21 states and cross-referenced criminal and bankruptcy-court filings. The study revealed over 1600 currently-licensed brokers had undisclosed criminal charges, convictions and bankruptcy filings. Brokers are required to disclose bankruptcy petitions filed within the last decade.

An unidentified FINRA spokesperson told the Journal, "We are deeply concerned by these reporting failures, which are inconsistent with the regulatory responsibility of both firms and their registered persons," adding, "This situation is unacceptable."  According to the regulatory spokesperson, FINRA will be "bringing swift disciplinary actions where appropriate."

Read the full WSJ article here.