SEC Sends Former CT BrokerDealer to the Slammer For Cherry-Picking

Posted on January 15, 2015 by admin

BrokerDealer.com blog update courtesy of SEC news release issued Jan 14

The Securities and Exchange Commission announced today that Noah L. Myers of Lyme, Connecticut and the former owner of MiddleCove Capital, LLC, an investment adviser formerly registered with the SEC, was sentenced to 40 months in prison followed by three years of supervised release following his conviction on one count of securities fraud. On October, 20, 2014, Myers waived his right to indictment and pleaded guilty to one count of security fraud.

On January 16, 2013, the SEC accepted offers of settlement from Myers and MiddleCove and instituted a cease-and-desist order against them. The SEC order found that from approximately October 2008 to February 2011, Myers engaged in fraudulent trade allocation – “cherry-picking” – at MiddleCove. Myers executed his cherry-picking scheme by unfairly allocating trades that had appreciated in value during the course of the day to his personal and business accounts and allocating trades that had depreciated in value during the day to the accounts of his advisory clients. Myers did this by purchasing securities in an omnibus account and delaying allocation of the purchases until later in the day (and sometimes the next day), after he saw whether the securities appreciated in value. When a security appreciated in value on the day of purchase, Myers would often sell the security and disproportionately allocate the purchase and the realized day-trading profit to his own accounts or to accounts benefiting himself or his family members. In contrast, for securities that did not appreciate on the day of purchase, Myers would disproportionately allocate these purchases to his clients’ accounts and his clients would hold the position for more than one day. Myers carried out his cherry-picking scheme with regard to several securities, but was most active with an inverse and leveraged exchange traded fund (ETF). Myers finally ceased these practices in February 2011 when one of his employees threatened to contact the Commission.

The SEC’s January 16, 2014 order found that Myers and MiddleCove willfully violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and Sections 206(1), 206(2) and 207 of the Investment Advisers Act of 1940. The SEC order revoked the registration of MiddleCove as an investment adviser, barred Myers from the securities industry, and ordered Myers and Middlecove to pay disgorgement of $462,022, prejudgment interest of $26,096, and a civil money penalty of $300,000.

BrokerDealer Bonus Season a Bust?

Posted on January 14, 2015January 14, 2015 by admin

Brokerdealer.com blog update courtesy of Kevin Dugan’s article from 9 January in the New York Post.

With record fines this year, brokerdealers are preparing to receive lower than average bonuses from their bosses.

Wall Street might have to settle for the second-best caviar this year.

After a year of record fines, sluggish trading and low interest rates, bankers hoping for richer payouts should prepare to be disappointed when bonus season gets underway next week.

By most estimates, the pool of money set aside for Wall Street workers is expected to be flat with the previous year, when the industry took home $16.7 billion, or an average of $164,530 per person.

Last year, big banks were slammed by billions in fines and penalties — Bank of America paid the largest fine ever for a single company, $16.7 billion — for offenses ranging from toxic mortgage securities to money laundering to tax evasion.

“The fines have come to roost,” said Michael Karp, CEO and co-founder of headhunting firm Options Group. “The bonus pool and compensation are the most vulnerable for banks to make up the shortfall.”

While the overall bonus pool is expected to be flat, there will be gains in some better-performing business areas. Investment bankers, private wealth managers and securitized product traders could see bonuses rise by more than 10 percent, according to a research report from Johnson Associates.

That will be offset by declines for credit and stock traders, the report said.

Layoffs across Wall Street should keep individual bonuses from sliding too much for those who still have a job, even for those working in areas with smaller bonus pools, Karp said.

Wall Street had shed 2,600 jobs through October of last year, according to New York State Comptroller Thomas DiNapoli.

Morgan Stanley is set to be the first bank to announce bonuses, on Jan. 15, sources said. The bank is expected to have some of the biggest payouts because of its focus on wealth management, which has exploded as wealthier clients give banks more money to manage.

Citigroup and Goldman Sachs are expected to announce bonuses the following day. Citi’s traders will see their bonuses slashed by 5 percent to 10 percent after a weak year, said a person familiar with the company’s plans. That’s worse than earlier estimates that had the bonus pool level with the previous year.

Goldman’s investment bankers could see some of the fattest payouts this year, as the firm pulled in the most business during the busiest M&A year since the financial crisis, according to Bloomberg data.

JPMorgan Chase is expected to announce bonuses during the last week of January, while European-based banks typically tell their employees in February and March.

Morgan Stanley, Citi, and JPMorgan declined to comment. Goldman didn’t return a call seeking comment.

Broker Firm Takes Former Employee to Court Over Client Information

Posted on January 13, 2015 by admin

Brokerdealer.com blog update courtesy of InvestmentNews.

Former employee, Tom Chandler

It’s a classic dispute over what client information brokers can take with them when they move among brokerages, but this time a registered investment adviser is the one picking a fight with a big firm.

Hanson McClain Inc., a registered investment adviser with about $1.6 billion in assets under management, has sued a former adviser, Thomas Chandler, and Ameriprise Financial Services Inc. The Sacramento, Calif.-based RIA claims they took confidential client information and solicited Hanson McClain customers in violation of their contracts and California law.

“Defendant’s egregious and despicable conduct is the 21st-century version of highway robbery,” Hanson McClain said in the complaint. “Defendants seek to profit by free-riding on [Hanson McClain's] valuable information that they stole.”

Hanson McClain initially filed a complaint Sept. 3, less than a week after Mr. Chandler left the firm. It filed an amended complaint Dec. 17. The firm seeks a permanent injunction blocking Mr. Chandler from soliciting clients, the return of client information and compensatory damages.

Hanson McClain, founded in 1993 by Scott Hanson and Pat McClain, has about 35 advisers. It said Mr. Chandler downloaded client information from the firm’s server, then transferred the data to a personal email account before departing Labor Day weekend. The information, which allegedly included names, account numbers, net worth, birthdays and phone numbers, involved clients with total net worth of about $540 million, according to the complaint.

Hanson McClain founders, Pat McClain, left, and Scott Hanson

Hanson McClain also accused Mr. Chandler of requesting a list of emails for “platinum” list clients, with whom he worked for about a month before he left, then connecting with them on LinkedIn so he could access information through the social media network once had exited.

The complaint said Ameriprise and a branch manager, Kable Doria, had “conspired” with Mr. Chandler to remove the data in order to compete unfairly with Hanson McClain.

Advisers frequently take some client contact information when they switch firms, under the Broker Protocol. It allows them to take client names, home and email addresses, phone numbers and account titles without threat of litigation or accusations they violated their firms’ nonsolicitation agreements.

Hanson McClain is not a signee of the protocol, however, but Ameriprise is.

Still, Mr. Chandler has opposed the request for the injunction. He says he had a right to notify clients of his new employment and that the information he took did not qualify as a “trade secret” under California law.

“Mr. Chandler used this basic client information for the permissible purpose of making this announcement when he began working at Ameriprise,” states a motion on his behalf opposing the injunction. “Mr. Chandler did not solicit the business of these clients or ask them to transfer their accounts.”

For the complete article from InvestmentNews, click here.

Egypt’s BrokerDealers Rejoice: ETF Trading is Finally Allowed

Posted on January 12, 2015 by admin

Brokerdealer.com update courtesy of Reuters and profiled on MarketMuse.

Brokerdealer.com provides members with the ability to have access to international databases, one the international options is Egypt. Until this week, the Egypt Stock Exchange has not permitted for ETFs to be traded on the exchange. This will on change on Wednesday, January 14, when for the first time, ETFs will be traded. The exchange hopes that this will lead to more foreign investors and boost the economy.

Egypt’s stock exchange will allow trading in Exchange Traded Funds (ETFs) for the first time on Wednesday, as part of efforts to encourage foreign investment and boost liquidity.

ETFs are typically funds that track equity indexes, though they can also track commodities and other assets, with component stocks usually represented in proportion to the size of their market capitalization.

ETFs are traded like a stock and can allow investors to diversify their risks and reduce transaction costs.

The introduction of ETFs in Egypt comes amid a flurry of takeovers and share issues on Egypt’s stock exchange, signalling resurgent interest from international investors in a market looking to restore confidence after the turmoil unleashed by a 2011 uprising which ousted leader Hosni Mubarak.

The main stock index rose about 30 percent in 2014 and trading volumes have rebounded above levels seen in 2010.

“We are working on offering new investment vehicles to investors and in the long run, these funds will help to create liquidity in the market,” Mohamed Omran, chairman of the Egyptian Exchange, told Reuters.

“The funds will help investors reduce risk by investing in the market as a whole.”

The introduction of ETFs will also allow for the emergence of market-makers in Egypt for the first time, potentially boosting liquidity.

Egypt’s Beltone Financial Holding, which specialises in brokerage, investment banking and private equity, won Egypt’s first licence to operate an ETF on the Egyptian Exchange in April.

Its ETF is being launched with an initial value of 10 million Egyptian pounds ($1.4 million), according to Alia Jumaa, head of investment for the new fund.

For the original article from Reuters, click here

FINRA Bans Penny-Stock Broker Anastasios Belesis

Posted on January 12, 2015 by admin

Brokerdealer.com update courtesy of Bloomberg’s Zeke Faux.

Financial Industry Regulatory Authority (FINRA) has been banned from the brokerage industry forever on Friday.

Anastasios Belesis

, the former head of John Thomas Financial Inc., was barred from the brokerage industry for life by the Financial Industry Regulatory Authority for trading ahead of clients’ orders.

Belesis dumped the New York-based firm’s position in a penny stock that was surging while 14 customers tried and failed to sell their shares, Finra said today in a statement. The industry-funded regulator ordered Belesis to pay about $1 million plus interest to customers and fined him $100,000.

Belesis has appeared on business television and had a minor role in the movie “Wall Street: Money Never Sleeps” before his boiler room across from the New York Stock Exchange closed in 2013. Trainees at the brokerage were forced to stand and bark memorized sales scripts for as long as 14 hours a day, Bloomberg News reported at the time, citing interviews with 20 former employees.

Finra said in the statement today that John Thomas didn’t hold the customer orders intentionally. Ron Cantalupo, a John Thomas broker who was accused of intimidating a colleague, was cleared by the regulator, which also dismissed charges against Michele Misiti and John Ward.

Finra’s fraud charges against Belesis were dismissed as well. He agreed to pay $500,000 in 2013 to settle accusations by the Securities and Exchange Commission that he pressured a hedge-fund manager to steer fees to John Thomas.

“He was never ever charged with running a boiler room,” Ira Sorkin, Belesis’s lawyer at Lowenstein Sandler LLP, said in a telephone interview. “To the extent there were charges brought against him for fraud, they were dismissed.”

For the original article from Bloomberg’s Zeke Faux, click here