Image Courtesy of April 2014 Wall Street Journal

Courtesy of financial industry media outlet MarketsMedia’s all-star journalist Terry Flanagan most recent dissertation “Got Transparency?” it is one that deserves an accolade from altruists within the industry, if not a check under the hood or bottom of Terry’s car before he starts the engine.

“One aggravating factor is a lack of transparency. Many market participants do not know either the amount of the rebate or where it ends up.”

As Flanagan points out, “..In institutional equity trading, rebates have been a point of contention since the late 1990s, when Bill Clinton was U.S. President and the Dow Jones Industrial Average scaled 10,000 for the first time.

Supporters say exchanges paying rebates on order flow is a perfectly legitimate practice of rewarding customers and offering volume discounts. Helped by rebates, trading commissions have dropped substantially over the years; the biggest decline from 2005 to 2017 was 68% for the lowest-touch direct market access / algorithmic trades, according to Tabb Group research.

“Most buy-side firms operate with ‘all-in’ pricing models and aren’t provided granularity into fees by order, but the decisions on when and how to route to particular venues significantly impact execution performance…” according to Stino Milito, Co-Chief Operating Officer at Dash Financial Technologies.

On the other hand, critics say rebates create conflicts of interest, and shortchange end investors if brokers route in ways that disadvantages clients……Helped by rebates, trading commissions have dropped substantially over the years; the biggest decline from 2005 to 2017 was 68% for the lowest-touch direct market access / algorithmic trades, according to Tabb Group research.

 “There is absolutely crap disclosure about broker-dealer routing strategies,” according to Dave Weisberger of ViableMkts. “If you can’t get a high-level view of how brokers route and what the outcomes are, then how can you be talking about a transaction fee pilot, or making claims about what rebates do to destroy the market?

Are you a startup fintech or blocktech firm that is seeking to raise capital and finding yourself ‘short of’ a cogent business plan or the proper investor offering documents?

Schedule your call with the senior executives at Prospectus.com LLC today

To read the entirety of Terry Flanagan’s piece in the latest edition of MarketsMedia, click here

The Great Rebate Debate..Broker Disclosure IS Front-Burner Topic

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It would only seem logical that, after counting the thousands of instances (which are only partially revealed via Finra’s brokercheck database) in which retail investors have been ripped-off by licensed investment brokers who have sold an investment product without disclosing conflicts of interest courtesy of incentive fees or kickbacks those brokers are making from third parties when selling seemingly simple and/or complex investment products to the respective customers.  After all, the burden of establishing rules of the road and regulating the practice of selling investment instruments has long been the domain of the US Securities & Exchange Commission and secondarily on Finra, which is a self-regulated body that governs the broker-dealer space–which is comprised of the universe of brokers who sell investment products.  The SEC mandate–according to altruists–is to protect investors from abusive practices advanced by those selling investment products by establishing regulations that protect investors. Further, Finra’s mandate is to impose standards of compliance and to police broker-dealers to ensure they comport with SEC regulations.

Aside from the last comments being somewhat redundant, all of this would seem to make sense, were it not for the fact that Finra is the SEC’s biggest lobbyist. Finra member firms (who pay membership fees) are comprised of all of the brokerages that sell investment products to retail investors and by default, Finra is therefore conflicted when having the biggest lobbying influence on the SEC as to the rules and regulations that govern those member firms.

Sponsored by Prospectus.com. Our team of capital markets experts and securities lawyers specialize in preliminary offering prospectus, secondary offering prospectus and full menu of financial offering memorandum document preparation. More information via this link

Mr. Trump and Mr. Clayton (SEC Commissioner)

Yes, there are consumer advocacy groups that lobby the SEC to ensure proper protections are in place for unwitting investors. But, the fact is those advocacy groups do not have anywhere near the resources to effectively influence the handful of SEC Commissioners who are handpicked by the prevailing administration–meaning those sitting inside the White House. All one has to do is consider the circuitous path aggrieved investors must take when they’ve been wronged to realize the system is stacked against them, starting with investors having to bring their claims via an industry arbitration forum and foregoing their rights to sue the wrong-doers in an actual court of law. Once in arbitration, investors then face a forum that is typically overweighted with “expert” industry professionals–the folks who work for Finra member firms, whether as consultants or direct employees. More important, all one has to do is analyze the number of cases brought by investors against a member firm and their respective broker to recognize the cases resolved in favor of the investor are dwarfed by the number of instances in which a ‘no harm no foul’ determination is made in favor of the defendant.

The good news is that in recent years, enough outcry on the part of investors has led to among other things, the federal government establishing an independent watchdog in the form of the Consumer Financial Protection Bureau, whose role “is to make consumer financial markets work for consumers, responsible providers, and the economy as a whole. We protect consumers from unfair, deceptive, or abusive practices and take action against companies that break the law.”  Further, thanks to prior White House administration, the SEC adopted a new set of standards intended to better protect the investor from their investment brokers and imposing guidelines that called for greater transparency and more granular disclosure as to conflicts of interest on the part of investment brokers so that investors could fully understand exactly where their investment dollars were directed and the actual returns on investment they could anticipate receiving.

The bad news is that Finra has fought with tooth and nail to water down those regulations and much like the NRA, they’re experts at navigating the swamplands of Washington DC.  Further bad news-the Trump Administration’s doctrine to loosen regulations on banks and brokers with the goal of making it less onerous insofar as compliance overhead and regulatory oversight so banks can make big profits on transactions and enable them to be more leveraged has also taken aim at those pesky conflict of interest disclosure requirements imposed on investment brokers.

Before TrumpWorld (the political version of WestWorld), it was acknowledged that brokers should be disclosing fees they earn, including commission being charged to the customer and incentive fees the broker is getting paid from the manufacturer of the investment product.

But we know that Trumpeteers have long campaigned to turn the clock back and with the influence of the orange-haired guy sitting in the Oval Office, to bring the world back to the 1950′s so that business titans and US-styled oligarchs who play golf at Mar-A-Lago could become fatter cats than they already are.  And that mindset has included the investment broker space, as evidenced by Trump’s SEC latest proposal to water down existing rules and pending legislation that would favor investors as opposed to the brokers selling investment products–who after all-are either country club members or who vie to be. That’s what makes America great, right?

Something funny happened after the SEC’s latest proposal-investors and brokers have balked. Here’s the opening excerpt from the WSJ coverage..

SEC’s Proposed Curbs on Stockbroker Advice Under Attack

Plan from Trump-appointed officials at SEC runs into criticism from both brokers, investors

WASHINGTON—A government proposal to restrict incentives that can bias broker advice to clients is generating complaints both from Wall Street and investor advocates.

The plan by the Securities and Exchange Commission, developed by Trump-appointed officials, may replace some aspects of an Obama-era regulation by the Labor Department that Wall Street successfully challenged in court. A federal court invalidated the Labor rule, and the Trump administration declined to appeal the decision, killing it for good.

Now investor groups, brokerages and other business groups are taking shots at the SEC’s attempt to address brokers’ conflicts of interest, saying that it is too vague and won’t improve protections for investors. The commission must consider the comments before it can vote to implement the regulation, perhaps sometime in 2019.

To read the full coverage, click here

The post SEC Proposal To Address Brokers’ Conflicts of Interest Bashed appeared first on BrokerDealer Blog.

tZERO, the digital-themed broker-dealer created by Patrick Byrne and BOX Digital Markets LLC (BOX Digital)-a subsidiary of Boston Options Exchange, announced it has formed a joint venture to launch the industry’s first regulated security token exchange.

Lisa Fall, Box Digital

On May 18, 2018, the two companies entered into a letter of intent to form an exchange to list and publicly trade security tokens for companies that issue, or convert existing stock to, security tokens. The proposed joint venture would be equally owned by tZERO and BOX Digital, with each having equal representation on the Board of Directors, together with one mutually agreed upon independent director. Lisa Fall, who currently serves as CEO of BOX Digital and as president of BOX Options Exchange LLC, would be the CEO of the joint venture.

“tZERO has proven to be a pioneer in the development and practical use of blockchain technologies for capital markets for a number of years,” said Ms. Fall. “tZERO’s track record and accomplishments in this innovative area, coupled with BOX’s expertise in operating a highly efficient and transparent equity options marketplace, made partnering together an easy decision and we look forward to building a world-class platform for listing and trading security tokens.”

tZERO plans to contribute cash and license tZERO’s blockchain technology for operation of the security token market. BOX Digital will contribute expertise and personnel toward obtaining regulatory approval and operation of the security token market. Approval of the U.S. Securities and Exchange Commission will be sought following execution of definitive documentation. Creation of the joint venture is subject to definitive documentation and customary conditions.

“Our partnership with BOX Digital Markets is a significant milestone that will create the first SEC-regulated exchange designed to efficiently trade crypto securities. Lisa Fall’s leadership, reputation and deep experience in the regulated securities exchange industry will be a major asset in achieving this objective,” said Saum Noursalehi, newly appointed CEO of tZERO. “Together, we will continue to work with the SEC as we develop a first-of-its-kind platform that will integrate blockchain capital markets into the current U.S. National Market System.”

“Now that pragmatic securities industry thought-leaders have figured out how to package crypto assets within the construct of a security so as to conform to the US regulatory regime, nobody can dispute the fact the genie is out of the bottle .  Securities Token Offerings (“STOs”) is a much more palatable approach, making way for a new mantra, “ICOs are dead, long live STOs”, until of course, another shoe drops.

For the full story from Traders Magazine, click here

Securities Token Exchanges Cranking Up in US: BOX +tZero

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For investment banks and broker-dealers, let’s face it-politics and business mix best with each other when done over cocktails or discrete ‘off-site’ meetings to discuss new capital market initiatives, deal issuance and/or asset management mandates. After all, most traditional broker-dealers eschew taking a political stand that opposes the federal government administration, simply out of fear that the long lips of the current WH CEO will whisper to administration-appointed SEC bureaucrats with a message akin to ‘the right industry regulator might want to make this [firm] go away..” Most, but not all is the catchphrase that compels a re-distribution of a capital markets desk commentary that focuses on fixed income markets and along with a smidgen of geopolitical observations and delivered to a captive group of leading Fortune 500 corporate treasurers, as well as a select group of sell-side syndicate desk ‘book-runners’.  Here’s the extract of the day’s piece, titled Risk On, Risk Off, US-NOKO Tensions Subside; Ugly Heads of Racism Take Top Headline…

Investment Grade Corporate Debt New Issue Re-Cap – A View About Charlottesville and the Aftermath

Risk was clearly back on in the financial markets today, as U.S./NOKO tensions fell to the wayside.  Unfortunately prejudice and racism reared their ugly heads in the Charlottesville, Virginia riot over the weekend.  On Monday, Fortune 500 thought leaders Ken Frazier, CEO of Merck & C0., Brian Krzanich, CEO of Intel, and Kevin Plank, CEO of Under Armour each took a stand by protesting the ‘equivocal’ comments made by President Trump in his first response to the domestic terrorism acts in Charlottesvile, which were advanced by self-proclaimed alt-right and white supremacist neo-Nazis.  Our firm  stands with every corporate executive who stays true to their own right-minded beliefs and their company’s dedication to doing right and doing good, many of whom also maintain proactive Diversity & Inclusion initiatives. For those corporate executives who spent all of their undergrad time in finance and accounting classes, and perhaps not as familiar with the history of the United States as they could be, racism and bigotry are diseases, and cancers that every generation of this country has been working to eradicate.

To the above point, one only need to re-read the Constitution and the Bill of Rights to appreciate that D&I is actually part of our country’s DNA. It is also part of the cultural foundation of many Fortune 500 corporations, including Intel, including Merck, including Under Armour and including many others! D&I means respect for and appreciation of differences in ethnicity, gender, age, national origin, disability, sexual orientation, education, and religion. But it’s more than this. We all bring with us diverse perspectives, work experiences, life styles and cultures and we presumably all share a disdain for anyone and any group that attempts to dismantle, disrupt and or destroy. Kudos to Mssrs. Frazier, Krzanich and Plank for putting themselves in harm’s way and risk of “injury by Twitter” for being true leaders and staying true to their convictions and their constituents. Kudos also to the many Fortune executives who have raised their own voices and to those who, like Jamie Dimon, have opted to protest by remaining that much more proactive in the WH-appointed roles in which they serve as volunteers.

Today’s VIX closed 3 bps tighter versus Friday’s close. Also a reminder that tomorrow is August 15^th – “mid-August” – that’s when North Korea’s illustrious “bad boy” proclaimed that he’d have his master plan ready to bomb Guam developed by.  One week from today on Monday, August 21^st begin joint U.S-South Korean military exercises referred to as Ulchi-Freedom Guardian. The exercise began in our Bicentennial year of 1976. North Korea has annually perceived the joint exercise as “preparation for war.” It is the world’s largest computerized command control implementation. Up to 80,000 American and South Korean troops have participated in this exercise in the recent past.  The game will go on for two weeks before concluding on Thursday August 31^st.  Enjoy the show Mr. Jong-Un. You’ll have front row seats though I recommend binoculars. Here’s lookin’ at you kid!

If you ask me this is the perfect time for corporations to issue bonds. Not a bad thing will really happen, risk is back on and summer vacations are quickly approaching. My prediction – expect Amazon to the hit the tapes first thing tomorrow morning.  Free market enterprise at work. Ya gotta love it!

Today’s IG Corporate dollar DCM finished with 5 issuers that priced 7 tranches between them totaling $4.10b

to continue reading the entire commentary from the head of fixed income syndicate for Mischler Financial Group, nation’s oldest minority broker-dealer owned and operated by Service-Disabled Veterans, story, click here

The post As Fortune CEOs Take Unequivocable Stand -This BD Bids On appeared first on BrokerDealer Blog.

Whether due to improving economic conditions in the US as well as various other parts of the world, or due to technology advancements that serve as the catalyst to innovative products and services that solve legacy business challenges, the global private placement marketplace is surging. With this new era of entrepreneurship, the need for investor offering memorandum experts is likewise cascading. In Wall Street parlance, the demand for such experts is nearly “over-subscribed,” meaning the supply of capable professionals who specialize in preparing fully-compliant investor offering documents is being stretched thin. But, at least one firm within the professional services sector is addressing the investor documentation needs of forward-thinking business enterprises and they are situated neatly within the “curl of the wave”-all you need to find them is a search engine and the right key words/phrases.

Operating under the web banner OfferingMemorandum.com, the firm behind this portal is NY-based Broker Dealer LLC and with footprints in various cities across the global financial services ecosystem, they are leading the pack by making it simple and easy for broker-dealers*, captive business advisors and corporate lawyers for companies of any size and located in nearly every geographic location of the world to engage local securities law professionals and investor offering document experts who specialize in preparing preliminary offering memorandums, red herrings and final offering prospectus documents that conform to financial industry best practices and comply with local regulatory guidelines that govern investor solicitations. (*For various reasons, registered broker-dealers do not prepare the investor offering memorandum or an offering prospectus, and it is therefore incumbent on the Issuer to provide the investor offering documents.)

Ryan Gorman, Prospectus.com

According to Ryan Gorman, a PR-IR-Corporate Communications expert who works with many startup companies, “While some capital markets  professionals will attribute the continued spike in private placement issuance to the ‘Trump Bump”,others will credit the evolution of the JOBS Act [the US legislation spearheaded by former President Obama intended to make the regulatory steps more simple for small companies in the US to raise capital], global macro gurus point to the rising economic tides in various regions of the globe. That said, nobody disputes the number of new companies and latter-stage funding initiatives for small, medium and large companies remains in an unobstructed uptrend.

Private Placement offerings are surging and direct IPOs are gathering steam. But, for those seeking to raise capital for a start-up or to fuel expansion for a fast-growing business, any entrepreneur worth his salt knows their first step is preparing a cogent business plan, then consolidating that blueprint into a short-form ‘pitch deck’ and once prospective investors have expressed interest in the investment opportunity, the enterprise seeking capital (aka “Issuer”) provides the investor with an offering memorandum or an offering prospectus. Simple as this process might sound, offering memorandum preparation is non-trivial and is typically performed by securities attorneys who specialize in investor offering documents. Also known as an “OM”, the offering memorandum is perhaps the most critical document, as it frames the terms and conditions of the investment, and when prepared within the context of best practices, the offering memorandum is the document that both Issuer and Investor can hang their hats on. Somewhere in the mix, the enterprise that seeks funding (also known as the Issuer) might engage a registered broker-dealer to serve as a placement-agent aka underwriter for the financing round, or the Issuer may already have identified investors and has determined there is no need to engage a broker-dealer

*Registered broker-dealers generally serve as a placement agent or underwriter for a capital raise, but typically defer to the Issuer to provide them with the investor offering documents, as such it is the obligation of the Issuer or their corporate counsel to create an offering memorandum or a prospectus. In most instances the Issuer will engage their law firm to prepare these documents, and increasingly, law firms that do not have a securities law practice will outsource or sub-contract to firms that dedicated to this type of work. As the number of private placement offerings and direct IPOs via Regulation A+ continues to grow, portals such as OfferingMemorandum.com and Prospectus.com provide a unique solution.

The post Private Placement Offering Memorandum Experts: Over-Subscribed! appeared first on BrokerDealer Blog.

(Reuters) Jan 3 – A former Jefferies Group Inc bond trader is going back on trial in federal court in Connecticut over whether he lied to customers about mortgage bond prices to boost profit. (Photo/Douglas Healey for Bloomberg)

The retrial of Jesse Litvak, with jury selection set for Wednesday and opening arguments for Thursday, comes 13 months after a federal appeals court voided his original conviction and two-year prison sentence.

But it gives U.S. prosecutors a fresh chance to crack down on alleged deceptive Wall Street sales tactics in the bond market, and could bolster cases against several other traders.

“The retrial will clear the air over whether bond traders can increase margins by falsely representing prices, which can distort trading and capital formation,” said James Cox, a Duke University law professor. “Whether someone relied on the information is irrelevant to prosecutions; it’s all about whether the underlying conduct is condemnable.”

C.J. Mahoney, a lawyer for Litvak, declined to comment, as did a spokesman for U.S. Attorney Deirdre Daly in Connecticut.

Litvak, who worked for Jefferies in Stamford, Connecticut, was charged in January 2013 with misleading customers about bond prices from 2009 to 2011.

This allegedly boosted the Leucadia National Corp unit’s profit by about $2.25 million, and his own pay.

Litvak has said his customers were sophisticated investors who were “inherently skeptical” of what counterparties tell them, and would have known if he were cheating them.

Convicted in March 2014, Litvak won a reprieve from the 2nd U.S. Circuit Court of Appeals in December 2015.

That court threw out fraud accusations related to the federal bailout known as the Troubled Asset Relief Program, and said Chief Judge Janet Hall, who oversaw the trial, wrongly excluded expert testimony for the defense.

BrokerDealer.com thanks Reuters and WSJ for providing source material-to continue reading the Reuters coverage, click here

Retrial Starts for Jefferies’ Former Bond Trader

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The indictment says that there was an agreement among ex PM Kang, and Sterne Agee executives Deborah Kelley and Gregg Schonhorn to pay Kang bribes in the form of “entertainment, travel, lavish meals, prostitutes, nightclub bottle service, narcotics, luxury gifts, and cash payments” among other things, in exchange for fixed-income business.

us_v._kang_and_kelley_indictment.pdf by Chris Bragg

The value of the alleged bribe was more than $1 million, Bharara’s office said, including such gifts as trips to New Orleans and Montreal, a ski trip to Park City, Utah, a $17,400 luxury wrist watch, tickets to Broadway shows and the U.S. Open, cocaine and crack cocaine, as well as thousands of dollars for strippers and prostitutes.

Prospectus.com team of capital markets experts and securities lawyers specialize in preliminary offering prospectus, secondary offering prospectus and full menu of financial offering memorandum document preparation. More information via this link -

Kang steered more than $2 billion in fixed-income business to the brokers, the indictment says, which resulted in millions in commissions.

(Reuters)-Dec 21 U.S. prosecutors on Wednesday accused a former portfolio manager at New York state’s retirement fund of steering $2 billion in trades in exchange for bribes from brokerage employees, in the latest pay-to-play case to rock the fund.

Navnoor Kang

Navnoor Kang, the ex-director of fixed income at the New York State Common Retirement Fund, was charged in an indictment filed in Manhattan federal court along with Deborah Kelley, a former Sterne Agee Group Inc managing director. Gregg Schonhorn, another broker-dealer whom prosecutors said paid bribes, was charged in related court filings (Reporting by Nate Raymond and David Ingram)

More Securities law news courtesy of Law360.com ….

• BREAKING: Ex-Blackrock Exec Jailed In UK For Insider Trading

  A former Blackrock investment manager was sentenced to 12 months in prison by a London court on Wednesday for insider dealing stemming from trades in energy companies in 2011, in another win for the Financial Conduct Authority.

• December 20, 2016
  

  Texas Man Charged With Bilking Investors In Ponzi Scheme

  A Texas financial adviser was arrested Monday on charges he cheated investors out of $6 million by selling unregistered securities in a purported digital advertising company that was really a Ponzi scheme, the Texas State Securities Board said.

• December 20, 2016
  

  Chancery Mulls Largest Incentive Award Ever In Occam Case

  The Delaware Chancery Court opened a rare trial Tuesday for a so-called incentive award for the lead plaintiff in the class action that challenged Occam Networks Inc. merger with Calix Inc., which proposed at roughly $3 million is believed to be largest of its kind in the court’s history.

• December 20, 2016
  

  RPM International Can’t Move SEC Suit Over $61M Deal

  A Washington, D.C., federal judge refused to move the U.S. Securities and Exchange Commission’s suit accusing government contractor RPM International Inc. of failing to account for a nearly $61 million settlement, saying Tuesday the Ohio company hadn’t proven it would be more conveniently heard elsewhere.

• December 20, 2016
  

  SEC, MSRB Fight GOP’s Challenge To New Pay-To-Play Rule

  The U.S. Securities and Exchange Commission and the Municipal Securities Rulemaking Board told the Sixth Circuit on Monday that it doesn’t have jurisdictional standing to consider the Republican Party’s challenge to new rules that increase pay-to-play restrictions on municipal advisers, saying the rules were created “by congressional will” and not by a final SEC order that can be appealed.

• December 20, 2016
  

  Neustar Settles SEC Investigation Over Severance Clause

  Technology company NeuStar Inc. has agreed to pay $180,000 to end allegations that it violated a whistleblower protection rule by restricting what former employees were allowed to say about the company, the Securities and Exchange Commission announced Monday.

• December 20, 2016
  

  Energy Co. To Pay SEC $1.4M Over Whistleblower Firing

  The U.S. Securities and Exchange Commission reached its first settlement over internal-whistleblower retaliation Tuesday, with an Oklahoma energy company agreeing to pay $1.4 million, subject to a bankruptcy plan, to resolve claims it fired a worker for whistleblowing and used restrictive separation agreements.

• December 20, 2016
  

  SIFMA, ABA Air Worries Over CFTC Cross-Border Swaps Rule

  The Securities Industry and Financial Markets Association, the American Bankers Association and other swap market interest groups urged the U.S. Commodity Futures Trading Commission on Monday to hit the brakes on proposed definitions for U.S. and foreign entities under cross-border swap rules, underscoring potential harm to the U.S economy and potential regulatory overreach.

• December 20, 2016
  

  Schulte Roth Withdraws As Patriarch’s Counsel In Zohar Suit

  Schulte Roth & Zabel LLP told a New York federal judge Tuesday that it will no longer represent Lynn Tilton’s Patriarch Partners in a breach of contract case against investment funds previously managed by Patriarch, citing “irreconcilable differences.”

• December 20, 2016
  

  Chancery Won’t Revive Suit Over OM Group’s $1B Apollo Sale

  Delaware’s Chancery Court has said it will not allow OM Group Inc. shareholders to reargue their recently dismissed suit targeting the company’s board members over its $1 billion buyout by Apollo Global Management, finding that the court adequately considered the evidence at hand.

• December 20, 2016
  

  Tokai Hopes To Move $97M Suit Over IPO To Mass. Fed. Court

  Tokai Pharmaceuticals Inc. Monday sought to move a putative class action by investors claiming it withheld important drug testing information prior to its $97 million initial public offering to a Massachusetts federal court Monday.

• December 20, 2016
  

  4th Circ. Says FINRA Challenge Must Go To SEC First

  The Fourth Circuit on Tuesday found microcap broker-dealer Scottsdale Capital Advisors Corp. can’t challenge the Financial Industry Regulatory Authority’s power in federal court, because Congress gave exclusive review of FINRA rules and decisions to the U.S. Securities and Exchange Commission.

• December 20, 2016
  

  Citibank Renews Bid To Dodge $2.3B RMBS Class Action

  Citibank NA on Tuesday again asked a New York judge to toss a proposed class action accusing the bank of ignoring pervasive problems with residential mortgage-backed securities, saying precedent from a recent state appellate ruling supports its contention that the suit is inadequately pled.

• December 20, 2016
  

  Bondholders Dismissed From Bank Libor Conspiracy MDL

  A New York federal judge Tuesday dismissed a class of bondholders from multidistrict litigation accusing big banks of rigging the London Interbank Offered Rate, saying their alleged antitrust injuries were not caused by the banks.

• December 20, 2016
  

  Bankrupt Oil Co. Gives Preferred-Share Action The Slip

  A Manhattan federal judge dismissed a class action lawsuit against New Source Energy Partners LP and underwriters over the company’s $40 million 2015 preferred-share offering Monday, finding that the bankrupt oil and gas portfolio’s risk-disclosures were “precise” and “exhaustive” and did not run afoul of the securities laws.

• December 20, 2016
  

  Morgan Stanley Pays $7.5M For Customer Protection Offenses

  Morgan Stanley & Co. LLC agreed to pay $7.5 million Tuesday to settle allegations it violated the U.S. Securities and Exchange Commission’s Customer Protection Rule when using customer cash as collateral on loans used to finance hedging swap trades.

• December 20, 2016
  

  Del. Supreme Court Upholds Chancery On TC Pipeline Case

  Bare claims of unfairness cannot overcome a partnership’s valid “special approval” shields for company decisions, Delaware’s Supreme Court said Monday in a ruling that rejected a master limited partnership member’s appeal of a losing challenge to a $446 million TransCanada Pipelines deal.

• December 20, 2016
  

  $2.5M CFTC Spoofing Settlement Gets Green Light

  An Illinois federal judge on Tuesday signed off on a deal that settles a yearlong legal dispute between the U.S. Commodity Futures Trading Commission and a Chicago-based trader accused of placing spoof bids on futures markets and who has now agreed to pay $2.5 million to resolve the suit before a trial.

The post Three Charged in NYS Retirement Fund Pay-to-Play Scheme appeared first on BrokerDealer Blog.

FINRA, aka Financial Industry Regulatory Authority, the SRO that serves as overseer of the securities brokerage industry and broker-dealers at large has completed the election campaign and voting process for electing individuals to its Board and the election winners include a former Bear Stearns partner as well as a current senior exec of hedge fund complex Bridgewater Associates.

Per WSJ-The chief executive officer of a San Francisco investment bank prevailed in a hard-fought election to join the board of Finra, the front-line regulator of stockbrokers, knocking off an incumbent and a well-known challenger who campaigned on the message that rigid oversight is choking small firms.

Bob Muh, the CEO of Sutter Securities Inc. and a former Bear Stearns partner, narrowly defeated three other candidates to win a seat on the board of the Financial Industry Regulatory Authority. He beat the second-place candidate, Stephen Kohn of Lakewood, Colo., by just three votes, according to people familiar with the matter. Robert Keenan, a sitting board member who also upset an incumbent when he won his last election in 2013, placed third. Mark Howells, a broker based in Scottsdale, Ariz., also competed in the race.

Finra, one of the country’s most powerful financial regulators, allows the industry it oversees to elect some of its officers. While Finra isn’t a government agency and ultimately answers to the Securities and Exchange Commission, Congress has sanctioned its role as a standard-setter and rule-enforcer for the brokerage industry.

Finra’s bylaws require that a majority of its 24-member governing board have no industry ties. But Finra reserves three board seats to represent its 3,550 small-firm members. That board structure has fostered the unusual dynamic of candidates campaigning for office at the overseer by vowing to lighten its oversight.

Turnout in the election was about 43%, meaning about 1,500 of Finra’s small-firm members voted, people familiar with the matter said. (For the full WSJ article, click here)

A more colorful take on the above is courtesy of DealBreaker’s Jon Shazar:

t may surprise you (but probably shouldn’t) to learn that there are some people who think FINRA’s doing too good and too thorough a job regulating broker-dealers. That it’s really nobody’s business if a broker levies an unspoken lap dance fee. That its website is actually too up-to-date and too easy for clients to use to find out about the levying of unspoken lap dance fees. That the problem isn’t FINRA’s habit of whitewashing what broker records are available, but that there are just too many disciplinary actions being taken that require whitewashing. These people are called FINRA members, specifically its 3,550 small-firm members. And because self-regulation is a hilarious carnival of ineptitude and bad optics, these small firms get to elect a representative to FINRA’s board, to represent their interest in going unregulated to the greatest extent possible.

These triennial contests have all the hallmarks of a real political campaign: websites, mudslinging, throw-the-bums-out mentalities. Unsurprisingly, they also look an awful lot like a local Tea Party meeting, with candidate trying to one-up the other in making deregulatory promises they’ll never be able to keep in the face of the 23 other FINRA board members who don’t think it’s a great idea to provocatively antagonize customers, the press and the Securities and Exchange Commission at every turn.

This year, the bum getting thrown out was Robert Keenan, elected three years ago on the platform that the previous bum wasn’t doing enough to get these regulatory pencil pushers off their goddamned backs, and who was felled by the same sword. But the winner—who will get to serve alongside fellow new FINRA director and Bridgewater exec Eileen Murray—wasn’t the most fire-breathing of the candidate. Instead, by a margin of all of three votes out of 1,500 cast, the small folks of FINRA picked a 78-year-old former Bear Stearns, Bob Muh, partner to carry the doomed torch.

Mr. Muh, 78 years old, was seen as a moderate and experienced voice in a campaign in which Mr. Kohn accused Mr. Keenan of playing fast and loose with campaign rules and not pushing back hard enough against regulations that brokers oppose….

“I certainly can’t call it a landslide or a mandate, but I’m delighted I’ll have the chance to convince the independent directors on the board of some the changes that are need for the small firms,” Mr. Muh said in an interview Monday after Finra announced the results.

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Online retailer Overstock.com expects trading to begin on its blockchain-based alternative trading system before the end of the year, according to company officials.

The ATS will be operated by Overstock.com subsidiary TO as part of the company’s Medici Project, and it will only handle trades in the company stock, at least at first. So while it’s not an immediate competitive threat to the existing field of 13 U.S. stock exchanges plus several dozen ATSs, the initiative will be closely watched as a gauge of the potential of distributed-ledger technology in capital markets.

The ATS will write completed trades to its blockchain instead of routing them to the National Securities Clearing Corp., a subsidiary of Depository Trust & Clearing Corp., for clearing.

Overstock.com plans to prime the liquidity on the ATS through a new issue of corporate shares to existing shareholders the day before trading commences on the new trading venue.

T0 officials plan to formally announce its partnership with a broker-dealer on Sept. 12. “For those who want to trade on the ATS, they will have to create an account with the broker-dealer,” said Overstock’s man-in-charge Judd Bagley, who declined to name the brokerage firm.

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For those not following the travails of Germany’s biggest investment bank and broker-dealer Deutsche Bank, suffice to say this bank has had its full share of comeuppance throughout the past many months. If nothing stings more than getting hit with a big fat fine from Finra, the sting is more palpable when its a $12.5 million smack for hooting and hollering confidential information over a company-wide ‘squawk box.’ Below courtesy of Business Insider columnist Portia Crowe:

(Business Insider) Aug 8-Deutsche Bank allowed potentially confidential research and trading information to be broadcast over internal speakers, according to the Financial Industry Regulatory Authority, or Finra.

That body fined Deutsche Bank $12.5 million after finding that the German bank was aware that broadcasts, known as “hoots” or “squawks,” contained potentially confidential or price-sensitive information but “repeatedly ignored red flags” suggesting it wasn’t adequately supervising the loud systems.

Traders regularly communicate across desks over internal speaker systems known as “squawk boxes.”

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At least one registered representative of the firm communicated potentially confidential and/or material nonpublic information to customers as a result of the supervisory deficiencies, according to a filing from Finra.

That provided the recipients with a potential informational advantage over other customers.

“Deutsche Bank’s disregard of years of red flags including internal audit findings, risk assessments, and compliance recommendations was particularly egregious given the risk that material nonpublic information could be communicated over squawk boxes,” Finra’s chief of enforcement, Brad Bennett, said in a statement.

Deutsche Bank neither admitted to nor denied the charges. The full story via this link to Business Insider

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