Monday, December 15, 2014

Efforts Continue to "BankofAmericanize" Merrill Brokers - No Compensation for "Small" Accounts

I am not quite sure when a $250,000 account became a small account, but Merrill Lynch told its brokers on Wednesday that it is eliminating pay for servicing clients with less than $250,000

Merrill Lynch & Co.Now, if you are a client at Merrill, with an account worth "only" $250,000, are you going to stay with Merrill? Of course not. 

And if you are a broker at Merrill, with any number of accounts in that range, are you going to stay with Merril?

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The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including SEC and FINRA investigations, insider trading cases, securities arbitrations and class actions, nationwide. For more information call 212-509-6544 or send an email.

Fallout from Landmark Insider Trading Decision Begins

A ruling that tossed out the insider trading convictions of two hedge fund managers may have opened the door for others charged with wrongful trading to get their cases or pleas dismissed.

US District Court Judge, Andrew L. Carter Jr.,  ordered the lawyers for the defendants in an unrelated insider trading case to come to court on Dec. 18 to discuss the implications of the ruling.

The day before, a panel of the United States Court of Appeals for the Second Circuit overturned the convictions of the hedge fund managers Anthony Chiasson and Todd Newman. Judge Carter said in his brief order that he wanted to discuss whether the appellate ruling affects a guilty plea by at least one of five defendants. In the case he is overseeing, five friends have been accused of receiving a secondhand tip about IBM’s plans to acquire SPSS for $1.2 billion in October 2009.

While the press is heralding the Second Circuit ruling as historic and ground breaking, it really isn't anything new. We have always taken the position that the accused insider trader has to know that the information he received was illegally obtained. Sometimes that is easy, but in many of these cases, particularly in the ones with lower level tippees, that is nearly impossible, since they typically do not know how the information was obtained.
"We conclude that, in order to sustain a conviction for insider trading, the government must prove beyond a reasonable doubt that the tippee knew that an insider disclosed confidential information and that he did so in exchange for a personal benefit" 
Hopefully this ruling will encourage the other circuit courts to return these cases to the law, and help stop innocent conduct from being turned into guilty conduct.

For more information, go to Some Accused of Insider Trading May Rethink Their Guilty Pleas  


Related:

Steve Cohen "ebullient" after learning of the Second Circuit decision

US appeals court vacates two insider trading convictions

Thursday, December 11, 2014

Fraudulent Apple Trades Cost Morgan Stanley $4 Million in Fines

Morgan Stanley will pay $4 million to settle charges that it failed to stop a rogue Rochdale Securities LLC trader from fraudulently buying $525 million in Apple stock in 2012.

For more information, go to Morgan Stanley Fined $4 Million for Role in Fraudulent Apple Trades - WSJ

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The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including SEC and FINRA investigations, insider trading cases, securities arbitrations and class actions, nationwide. For more information call 212-509-6544 or send an email.

Broker Tip: Affluent Pre-Retirees Concerned with Health Care Costs

"Concerned" doesn't do the concept justice. The article uses the word "terrified." More than 62 percent of pre-retirees now say they are “terrified” of what health care costs may do to their retirement plans, according to an annual Nationwide Retirement Institute survey released today. The survey reveals concern about out-of-control health care costs and the Affordable Care Act (ACA) increasing those costs.

It is amazing how many wealthy individuals in their 50s and 60s do not have a clue about investing, or planning for their future. These folks need help. This is a great marketing niche for HNW brokers and advisers.

See all of the results of the survey at Affluent Pre-Retirees Concerned With Health Care Costs | Nationwide.com

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Mark J. Astarita is a nationally known securities attorney who represents brokers, advisers and investors nationwide in their legal, compliance and business related matters. For information on how Mark can help you, contact him at 212-509-6544, or by email.

Tuesday, December 9, 2014

Time to Ban Mandatory Deferred Compensation - Morgan Stanley Admits It Uses Employee Funds For Its Own Benefit

Morgan Stanley is not the only one who does it - almost all of the larger brokerage firms require large producers and executives to take their compensation on a deferred basis - often up to 50% of regular compensation and 80% of bonuses.
English: Morgan Stanley - logo
Like most of these types of policies, the firms attempt to convince employees that the deferral is for the benefit of the employee - deferred taxes and all of that nonsense. However, employees are well aware that deferred comp is simply a way to keep employees from leaving - imagine a system where your boss holds a portion of your pay, and you can only get it if you stay at the firm for another three years.
Welcome to the world of deferred compensation.

But there is another side of the issue - by delaying payment of salary, commissions and bonuses, the firms save a significant amount of money in that fiscal year, and they do it to shore up their balance sheets, not because they are trying to help their employees.

Morgan Stanley said on Friday it will pay more of its bonuses to employees upfront and defer less, because the bank is on a better financial footing and can move its pay practices more in line with those of competitors.

The firm admitted that it will be paying out an additional 1.2 BILLION DOLLARS by decreasing the amount of required deferral. Flip that around. The firm was saving something on the magnitude of a billion dollars a year by forcing its employees into a deferred compensation arrangement.

The firms also take the position that you don't get your pay, which you earned, but has been deferred, if you leave, or get fired, before it vests.

That figure alone demonstrates the significance of deferred compensation, the reality is that it is a way for the firms to save money by withholding compensation, and why Congress should ban the practice of mandatory deferred compensation.

Original Article: Morgan Stanley to defer less of employees' future bonuses

--- The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including employment contracts, promissory notes and employment litigation, nationwide. For more information call 212-509-6544 or send an email.

Monday, December 8, 2014

SEC Press Releases

HSBC’s Swiss Private Banking Unit Charged With Providing Unregistered Services to U.S. Clients

HSBC’s Swiss-based private banking arm has been charged with violating federal securities laws by failing to register with the SEC before providing cross-border brokerage and investment advisory services to U.S. clients. HSBC Private Bank (Suisse) agreed to admit wrongdoing and pay $12.5 million to settle the SEC’s charges.

The owner of several now-defunct investment entities has been charged with fraudulently selling shares of stock that he claimed to own when he had actually purchased them for others a few years before.

Fraud charges have been announced against two former top executives at a Wisconsin-based assisted living provider accused of listing fake occupants at some senior residences in order to meet the requirements of a lease to operate the facilities.

A penny stock promoter in Montana has been charged with orchestrating a fraudulent pump-and-dump scheme involving the stock of a Northern Virginia-based company that claims to be in the airport security business. 



Strong Markets Encourage Scammers

The New York Post has a timely warning. Directed at senior citizens, it is a good read for broker and all investors.
The ubiquity of fraud solicitation, coupled with the inability of many people to recognize the red flags of fraud, place a large number of Americans at risk of losing money to scams — with older Americans at the greatest risk,” according to the FINRA Investor Education Foundation report. 
While the article claims that memories of Madoff are dimming, a Madoff Scheme is not the one that most investors should be worried about. Investing in hot tips, sure fire wins and profits that are beyond belief are what investors need to be concerned about.

For more information - Strong markets encourage scammers to prey on elderly | New York Post. if you are concerned about a scam, get in touch with us at 212-509-6544. We may be able to review your investment at no cost to you.

--- The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including the defense of enforcement actions and representation of investors, financial professionals and investment firms, nationwide. For more information call 212-509-6544 or send an email.

Friday, December 5, 2014

Time To Make SEC Press Releases Accurate and Fair

Russell Ryan comes out swinging again, and highlighting a problem that those of us who defend investors and financial professionals face nearly every day - the over-the-top SEC press release.
FINRA engages in the same sort of gamesmanship. Both regulators announce their allegations against a defendant, often using inflammatory language, and word their press releases as if the defendant had already been tried and convicted.

Some of these releases run afoul of guidelines send down by the courts, as referenced by Mr. Ryan, but many more are simply abusive, and appear to be designed to prejudice the public against the named defendants, before the defendant has even seen the complaint!

Further, the SEC and FINRA rarely, if ever, issues a press release when it loses a case, and leaves its original press release at the website, for every search engine to find, and to continue to return in response to a search for the exonerated defendant's name.

Mr.Ryan points out not only the biased and inflammatory nature of the press releases, but the fact that there is an inherent conflict in the press releases. The releases trumpet a filing, not a finding by a court or judge, written by the SEC Staff who is prosecuting the case, and authorized by the Commission itself, for a case that will be prosecuted by that same attorney, before an administrative law judge who was appointed by the Commission - and whose decision will be appealed to the Commission!

We have discussed the SEC's abuse of its administrative proceedings before, in Judge Rakoff Questions the SEC's Overuse of Administrative Proceedings, SEC's Use of Administrative Proceedings Under Fire, as have others, including Peter J. Henning, a professor at Wayne State University Law School in The S.E.C.’s Use of the ‘Rocket Docket’ Is Challenged, Professor Stephen Bainbridge in Should the SEC be Prosecutor, Judge, Jury, and Executioner? and  Gretchen Morganstern in her New York Times article titled At the S.E.C., a Question of Home-Court Edge, and it is getting out of control.

This is not simply an issue of securities defense attorneys crying foul, this is a serious constitutional issue, with important ramifications for everyone who invests. While some may believe that this does not affect them, the SEC does not limit its use of administrative proceedings to prosecute securities professionals - they use this kangaroo-like proceeding against investors as well.

The original article - Get the SEC Out of the PR Business - WSJ

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--- The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including the defense of enforcement actions and representation of investors, financial professionals and investment firms, nationwide. For more information call 212-509-6544 or send an email.

Wednesday, November 26, 2014

Advisors Have Leverage In Employment Agreements

Executive Recruiter Mindy Diamond finds that compliant advisors, with $100 million in assets under management, are in the driver's seat in the recruiting scene.

We represent advisors across the country, insuring that they are in fact compliant, and working on the best possible deal to get out of their current firm, and into the new firm.

Thinking of a move? Give us a call - 221-509-6544.

For more information - Why Advisors Have Leverage | Financial Planning

--- The attorneys at Sallah Astarita & Cox  have experience in all aspect of broker-dealer compliance, employment and litigation. Our clients include individual financial professionals, and firms of all sizes, nationwide. For more information call 212-509-6544 or send an email.

Tuesday, November 25, 2014

Citigroup Global Markets Fined for Equity Research Supervision Failures

FINRA fined Citigroup Global Markets, finding that from January 2005 to February 2014, Citigroup failed to meet its supervisory obligations regarding the potential selective dissemination of non-
public research to clients and sales and trading staff.

CitigroupAccording to the press release during this period, Citigroup issued approximately 100 internal warnings concerning communications by equity research analysts. However, when Citigroup detected violations involving selective dissemination and client communications, there were lengthy delays before the firm disciplined the research analysts and the disciplinary measures lacked the severity necessary to deter repeat violations of Citigroup policies

For more information - FINRA Fines Citigroup Global Markets Inc. $15 Million for Supervisory Failures Related to Equity Research and Involvement in IPO Roadshows | Business Wire


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