Broker Check-Who Are You Gonna Call?


(WSJ) by Jason Zweig-

Most people expect the food in a three-star restaurant to be tastier than one-star grub and a two-thumbs-up movie to be better than a flick that got a solitary upward-pointing thumb. Good luck, however, finding a handy way to rank stockbrokers.

That needs to change, because new research shows the most valuable information about brokers emerges only when you can compare them and their firms industry-wide.

The Financial Industry Regulatory Authority, which oversees how investments are sold, maintains BrokerCheck, a database and website that provides information on nearly 1.27 million current and former brokers. A study by Finra last fall found that BrokerCheck data could reliably predict which brokers are most likely to harm their clients.

And so you could, if you had open access to all the data Finra collects on BrokerCheck. But, contends a new report, the regulator keeps such a tight hold that the service doesn’t tell investors what they need to know.

The vast majority of brokers are hardworking, honest folks who have no customer complaints on their records.

But those who have been active since before 2000, and those whose colleagues have a history of misconduct, are much more likely to generate complaints from customers, according to the new analysis.

Those insights emerge only from analyzing oceans of data on brokers and their firms — an absurdly impractical task for ordinary investors looking up BrokerCheck records one at a time.

How much should you worry if a broker settled a complaint for $25,000? Are four arbitrations in 27 years a lot or a few? Have 13 out of 14 of the other employees in your broker’s office had complaints lodged against them? There’s no way outsiders with conventional computing power can tell. Nor can investors readily figure out which firms have the most employees with marks on their records.

And that matters — a lot — because taking advantage of clients seems to be contagious.

Brokers whose colleagues have spotty track records end up harming investors much more often, the new report says.

An unrelated recent study, which looked at some 150,000 brokers at nearly 1,000 firms, found that in the wake of a merger between firms, the average broker becomes over one-third more likely to incur customer complaints if his or her new brokerage colleagues have a history of misconduct.

Yet another analysis, released last month by economists at the University of Minnesota and the University of Chicago, found that brokers with a history of complaints were snapped up by other firms rather than being driven out of the industry.

So, before hiring a broker, you should know the disciplinary record of his or her colleagues. Even a report from Finra itself last fall drew a similar conclusion.

The latest study was conducted by Securities Litigation and Consulting Group, a research firm in Fairfax, Va. Part of its business is providing expert-witness testimony in arbitration proceedings against brokers and their firms. Still, “my incentives don’t change the arithmetic,” says SLCG founder Craig McCann, a former economist at the Securities and Exchange Commission.

The study bases its analysis on Finra’s own standards for judging whether investors were harmed; it replicates several of the regulator’s findings from last fall almost exactly. Finra’s chief economist, Jonathan Sokobin, says the SLCG report “essentially validated our results.”

Morgan Stanley Smacked by NY AG For Mortgages


Law360, New York (February 11, 2016, 10:11 AM ET) — 6-Pack Bank and Global BrokerDealer Morgan Stanley agreed today to pay $3.2 billion to resolve claims that it misled investors about mortgage-backed securities before the financial crisis, New York Attorney General Eric Schneiderman said.

The settlement is the latest among big banks related to the financial crisis, and ends government claims that Morgan Stanley misrepresented to investors the mortgages it packaged into securities. 

The settlement is the latest among big banks related to the financial crisis, bringing to a close government claims that Morgan Stanley told investors that the mortgages it packaged into securities were of higher quality than was actually the case. The firm’s misstatements cost investors billions of dollars and the problematic mortgages helped cause many homeowners to lose their homes or suffer significant financial losses, Schneiderman said.

“Today’s agreement is another victory in our efforts to help New Yorkers rebuild in the wake of the financial devastation caused by major banks,” Schneiderman said in a statement.

For the full story from Law360, please click here

Ex-BrokerDealer Earns 3 Yr Jail Sentence for Bribe Plot

brokerdealer jail

Law360, New York (December 15, 2015, 6:16 PM ET) — A former employee of New York broker-dealer Direct Access Partners LLC was sentenced in federal court on Tuesday to three years in prison for his role in a $60 million bribery scheme involving a Venezuelan state-owned bank.

U.S. District Judge Denise Cote sentenced Jose Alejandro Hurtado during a hearing in Manhattan court. Hurtado pled guilty in August 2013 to violating the Foreign Corrupt Practices Act, money laundering and obstruction of justice, among other criminal charges.

Prosecutors have said Hurtado and others at DAP funneled millions of dollars in bribe payments to a senior official at Banco de Desarrollo Economico y Social de Venezuela, or BANDES, in exchange for bond-trading business. Hurtado personally received about $11.9 million in profits from the scheme, according to prosecutors.

Hurtado, one of six people charged in the case, will receive credit for the nearly 17 months he spent in prison following his arrest. Direct Access Partners ceased operations in May of 2013 after the criminal charges and a related SEC suit. It was forced into bankruptcy by creditors on May 30.

“I’m here to apologize about this terrible situation and the pain I have caused everyone,” he said prior to the sentence, fighting back tears. “My behavior gave a terrible reputation to the financial industry and to future generations.”

The other DAP officers and employees who were charged in the case are Benito Chinea, Joseph Demeneses, Ernesto Lujan and Tomas Alberto Clarke Bethancourt.

All of the defendants have pled guilty. Chinea and Demeneses were each sentenced to four years in prison, Lujan and Bethancourt were each sentenced to two years in prison, and Gonzalez is scheduled to be sentenced Jan. 15.

For the full story from 360Law, please click here

Did JPMorgan Commit Fraud To Silence Whistle-Blower?

jpmorgan whistleblower

Behemoth brokerdealer and six pack bank JPMorgan has had its share of blow backs consequent to pushing envelopes, but recent story via NY Times profiling former broker Johnny Burris comes straight out of the “Tell-Me-This-Really-Isn’t-True Dept”–and causing at least several former federal prosecutors to ponder whether JPMorgan could be charged with various counts of wire fraud, aside from libel charges, in an obvious attempt by mid-level bank executives to silence a whistle-blower.

Here’s the simple summary-according to NYT reporting, JPMorgan knowingly submitted phony customer complaints to industry regulator Finra in an effort to malign the integrity and reputation of broker Johnny Burris in an effort to discredit his whistle-blowing charges that JPMorgan pressured brokers to sell house products that were either not suited for certain clients, or were products that were considerably more expensive than those clients could have purchased from other providers.

Courtesy of extract from 4 December front page business section of NYT and reporting by Nathaniel Popper….

Johnny Burris, a former broker at JPMorgan Chase, might have known he was walking into a minefield when he decided to go public with his concerns about his former employer.

Mr. Burris complained in 2013 that JPMorgan was pressuring brokers like him to sell the bank’s own mutual funds even when the offerings from competitors were more suitable. A few weeks after an article in The New York Times about Mr. Burris’s concerns appeared, complaints from some of his former clients in Arizona began showing up on his disciplinary records that are maintained by a regulatory agency and publicly available.

The client complaints made it hard for Mr. Burris to get another job and helped scuttle his case against JPMorgan for wrongful termination. But when Mr. Burris recently reached two of the clients whose names had been on the complaints, they told him they had not, in fact, written the complaints — a JPMorgan employee had.

Carolyn Scott, the ostensible author of one of the letters complaining about Mr. Burris, said in a recent interview with The Times that she had not written the document, but had signed it without knowing the contents after a JPMorgan employee had told her it was something that could help her “get some money back.”

“I was stupid enough I didn’t read it myself,” Ms. Scott said. “I had no problems with Johnny. No problems whatsoever.”

Another man who supposedly wrote a letter of complaint was, it turned out, essentially unable to read or write, and said in an interview that he had never had an issue with Mr. Burris. investigators located Mr. Burris’s record of phony complaints via Finra BrokerCheck

“I would never have known how to draft a complaint letter, nor could I have drafted the letter in question,” the man said in a declaration that he recently signed in front of a notary public to support Mr. Burris — after the declaration was read back to him aloud.

For Mr. Burris, the explanation behind these complaints was clear: This was retaliation for his criticism of JPMorgan, though retaliation carried out poorly.

“How do you believe I feel knowing that the bank solicited, drafted false, erroneous complaints about me?” he wrote to JPMorgan in late October, after speaking with his old clients.

During the arbitration in 2014, Mr. Burris’s lawyer asked his former supervisors if anyone at JPMorgan had helped draft the complaints and was told: “Absolutely not.”

This week, though, a spokeswoman for JPMorgan, Patricia Wexler, said that one of Mr. Burris’s former colleagues, Laya Gavin, had, in fact, assisted the clients as a courtesy “by typing up what they told her verbally, reading it back to them for accuracy, and submitting them for review.”

Both clients involved disputed that description of the events and said that the complaints Ms. Gavin wrote up did not reflect their sentiments and added that Ms. Gavin had not read the complaints to them before having them sign the documents.

A spokeswoman for the Financial Industry Regulatory Authority, Michelle Ong, said that her organization was “aware of these allegations” about the complaints and was looking into them. Finra is the agency that maintains broker disciplinary records.

Keep reading the NYT story by Nate Popper via this link

TD Ameritrade is Moving-From NYSE to NASDAQ

td ameritrade

(Bloomberg) – TD Ameritrade Holding Corp. will move its share listing to the Nasdaq Stock Market from the New York Stock Exchange.

The online brokerdealer expects to begin trading on Nasdaq Inc.’s stock exchange on Dec. 14 under its ticker symbol, AMTD, the company said in a release Tuesday.

“We regularly review our many business relationships, and moving our shares to Nasdaq is the right thing for our business at this point in time,” Fred Tomczyk, outgoing chief executive officer of TD Ameritrade, said in a statement. Kim Hillyer, a spokeswoman for TD Ameritrade, declined to elaborate on what led to the decision to move the shares from Intercontinental Exchange Inc.-owned NYSE to Nasdaq. maintains the global financial industry’s most comprehensive database of broker-dealers operating in more than 30 countries worldwide

The listing change comes as Tomczyk announced he will retire on Sept. 30. He will be succeeded by Tim Hockey, head of Canadian banking and wealth management at Toronto-Dominion Bank, which owns about 40 percent of TD Ameritrade, according to data compiled by Bloomberg. Before taking over Tomczyk’s role, Hockey will become President of TD Ameritrade on Jan. 2, the company said.