The Paulson Plan has finally been revealed, but it may just be much ado about nothing. No one expects anything to happen in a presidential election year, and Secretary Paulson acknowledges that fact. He also pointed out that this overhaul plan is not a reaction to current market conditions or financial problems, but is something that has been in the works for months.
There is a lot to digest in the Plan, which consumes 218 pages, but the key points for the securities industry are the merger of the SEC and the CFTC, the vesting of regulatory oversight in the fed, and the inclusion of hedge funds and private equity funds in the regulatory umbrella; although in a very limited fashion.
The Treasury Department has created a fact sheet regarding the plan at its web site.
Monday, March 31, 2008
Sunday, March 30, 2008
J.P. Morgan Offers Retention Deal To Bear Reps
JP Morgan would certainly like to hold on to the Bear Stearns reps - or at least their assets...or does it?
First, reps who gross less than $250,000 a year can apparently take a hike. No retention bonus for them, or at least not one that has been announced.
For reps in the $250,000 to $500,000 range, the offer is 25% up front in cash, 25% in stock. For those over $500,000, the offer is 75% cash, 25% stock, up front, plus and additional 50% stock, 50% cash in three years, of the average production over those three years.
Good deal? Not so much. First, that "bonus" is not entirely a bonus, it is structured as the usual forgiveable promissory note, at least on the cash side. There is some confusion (which may just be me) as to whether it is a 7 year note or a 9 year note. Seven years is a long time, and committing to 7 years, or losing the bonus, at this shaky moment in history is not a comforting thought.
However, given the fact that no one is giving signing bonuses without a 7 or 9 year note (I remember when these notes were for 100% over 3 years!), the note portion of the bonus may not matter. The problem is in the size of the bonus - million dollar producers are getting offers of closer to 200%, not 100%, at other firms.
Sure, sure, there is the "no ACAT" part of the equation that has got to count for something, but how can you sign on for 9 years at a firm that is in such upheaval? You like your manager? Sure, but he might be gone next year. You like your location? Sure, until Morgan closes your branch and consolidates it with the one 30 miles away. There are hundreds of reasons to leave a firm, that are completely out of your control.
And then there is that "bank" thing. Bankers just don't "get" the retail securities business. Although there probably isn't any way to avoid that these days.
Then again, I don't see anyone offering attorneys 100% of their trailing 12 as a bonus to jump ship, so maybe "free" money is a good thing. But play it smart -get an attorney to review all of the documentation so that you know what you are getting into. If you are a million dollar producer, do some negotiating on the terms of your employment while you are having those discussions - and get the promises in writing. Then take the money, put it in a CD and draw it down every year. You may be looking for a new home next year.
And remember to pay the taxes on that bonus - whoops, there goes another 40%.
Special Note to Bear Stearns Reps - before you jump on those ERISA Class Action lawsuits, give me a call.
First, reps who gross less than $250,000 a year can apparently take a hike. No retention bonus for them, or at least not one that has been announced.
For reps in the $250,000 to $500,000 range, the offer is 25% up front in cash, 25% in stock. For those over $500,000, the offer is 75% cash, 25% stock, up front, plus and additional 50% stock, 50% cash in three years, of the average production over those three years.
Good deal? Not so much. First, that "bonus" is not entirely a bonus, it is structured as the usual forgiveable promissory note, at least on the cash side. There is some confusion (which may just be me) as to whether it is a 7 year note or a 9 year note. Seven years is a long time, and committing to 7 years, or losing the bonus, at this shaky moment in history is not a comforting thought.
However, given the fact that no one is giving signing bonuses without a 7 or 9 year note (I remember when these notes were for 100% over 3 years!), the note portion of the bonus may not matter. The problem is in the size of the bonus - million dollar producers are getting offers of closer to 200%, not 100%, at other firms.
Sure, sure, there is the "no ACAT" part of the equation that has got to count for something, but how can you sign on for 9 years at a firm that is in such upheaval? You like your manager? Sure, but he might be gone next year. You like your location? Sure, until Morgan closes your branch and consolidates it with the one 30 miles away. There are hundreds of reasons to leave a firm, that are completely out of your control.
And then there is that "bank" thing. Bankers just don't "get" the retail securities business. Although there probably isn't any way to avoid that these days.
Then again, I don't see anyone offering attorneys 100% of their trailing 12 as a bonus to jump ship, so maybe "free" money is a good thing. But play it smart -get an attorney to review all of the documentation so that you know what you are getting into. If you are a million dollar producer, do some negotiating on the terms of your employment while you are having those discussions - and get the promises in writing. Then take the money, put it in a CD and draw it down every year. You may be looking for a new home next year.
And remember to pay the taxes on that bonus - whoops, there goes another 40%.
Special Note to Bear Stearns Reps - before you jump on those ERISA Class Action lawsuits, give me a call.
Regulators Start Auction Rate Investigations
Auction rate securities are quickly becoming the next big retail investor problem. I am now getting calls almost daily from investors who say that they were sold the securities as an alternative to money market funds, and paid higher interest, and who now cannot sell their investments, which have become completely illiquid.
It will be interesting to see how these cases shake out - exactly what were investors told about these securities. One thing is certain - they were not told that they might be completely illiquid.
But that is where we are. Those investments that were the equivalent of money market funds cannot be sold. To add to the problem, UBS announced that it is going to mark down auction rate securities in its retail customer accounts on Monday - to reflect the lack of liquidity. The markdowns are reported to be up to 20% of the value of the security.
And now entering the fray is the State of Massachusetts, who is asking firms for information relating to the marketing of auction rate securities.
Hmmm, has the SEC and FINRA heard about this? Who reviewed those materials before they were distributed to investors?
Stay tuned, this is going to be big.
It will be interesting to see how these cases shake out - exactly what were investors told about these securities. One thing is certain - they were not told that they might be completely illiquid.
But that is where we are. Those investments that were the equivalent of money market funds cannot be sold. To add to the problem, UBS announced that it is going to mark down auction rate securities in its retail customer accounts on Monday - to reflect the lack of liquidity. The markdowns are reported to be up to 20% of the value of the security.
And now entering the fray is the State of Massachusetts, who is asking firms for information relating to the marketing of auction rate securities.
Hmmm, has the SEC and FINRA heard about this? Who reviewed those materials before they were distributed to investors?
Stay tuned, this is going to be big.
Lehman hit by $355 Million Fraud
As if Lehman, and the markets in general, this morning a report was released declaring that Lehman was fleeced out of more than $355 million in a fraud the investment bank believes was perpetrated by two employees at Japanese trading house Marubeni Corp. According to Reuters, the fraud may have hit other financial institutions as well.
If true, the scamsters perpetrated one of the more sophisticated corporate con jobs since Enron set up a fake trading floor to impress analysts. Lehman believes the scam included forged documents and an imposter.
The Reuters story says that Lehamn is allegin that two former Marubeni employees convinced Lehman to help finance what it understood were Marubeni's equipment leases and supply contracts with hospitals. Lehman gave the partnership money in advance to fund initial leases and contracts.
When Lehman sought payment under its deal on Feb 29, 2008, Marubeni said the seals on the contracts had been forged, and refused payment, according to the person briefed on the matter.
Marubeni declined comment on Lehman's statements, and said it could not give information on people no longer with the trading house or comment on ongoing investigations.
If true, the scamsters perpetrated one of the more sophisticated corporate con jobs since Enron set up a fake trading floor to impress analysts. Lehman believes the scam included forged documents and an imposter.
The Reuters story says that Lehamn is allegin that two former Marubeni employees convinced Lehman to help finance what it understood were Marubeni's equipment leases and supply contracts with hospitals. Lehman gave the partnership money in advance to fund initial leases and contracts.
When Lehman sought payment under its deal on Feb 29, 2008, Marubeni said the seals on the contracts had been forged, and refused payment, according to the person briefed on the matter.
Marubeni declined comment on Lehman's statements, and said it could not give information on people no longer with the trading house or comment on ongoing investigations.
Saturday, March 29, 2008
UBS, You Are Pissed At Us
That's a line from a recent auction rate securities article at Registered Rep Magazine. It seems that UBS is marking down the value of auction-rate securities held by individuals in their brokerage accounts. The markdowns are expected to be between 2 percent and 20 percent of the value of the securities.
More Trouble In Auction-Rate Securities Land
More Trouble In Auction-Rate Securities Land
Thursday, March 27, 2008
Cayne Sells $61 Million of Bear Stearns Stock
It looks like the end of the Bear Stearns story. The press is reporting that James Cayne, Chairman of Bear Stearns, sold $61.3 million of his shares of the company, as reported in a corporate filing. It is highly unlikely that any buy out price will be higher than the $10 that is currenly on the table.
Last year, Cayne's same holdings were worth a billion dollars.
Bear Stearns Chairman sells $61.3 million of stock - Yahoo! News
Last year, Cayne's same holdings were worth a billion dollars.
Bear Stearns Chairman sells $61.3 million of stock - Yahoo! News
Senate Inquiry into Bear Stearns Deal
BusinessWeek is reporting that Congress is investigating the bailout of Bear Stearns and the Fed's 29 billion dollar guarantee.
While that might be warranted, the usual calls for more regulation, and thus a bigger bureacuracy and more taxpayer dollars, are becoming tiresome.
While that might be warranted, the usual calls for more regulation, and thus a bigger bureacuracy and more taxpayer dollars, are becoming tiresome.
Wednesday, March 26, 2008
Protesters Enter Bear Stearns Headquarters -
Well, this is a new one. Twenty-five years on Wall Street, and I don't ever remember a sit-in at a brokerage firm.
According to the article, 60 protesters demonstrated in the lobby of Bear Stearns' building to protest the lack of a federal bailout for homeowners.
I am a bit puzzled by the connection between the Fed's guarantee of Bear Stearns assets and a bailout of homeowners who thought they were being clever in taking interest-only mortgages, or adjustables that they could not afford. But I guess their slogan "Help Main Street Not Wall Street" was a catchy phrase.
The whole thing apparently lasted a half hour.
Protesters enter Bear Stearns headquarters - Yahoo! News
According to the article, 60 protesters demonstrated in the lobby of Bear Stearns' building to protest the lack of a federal bailout for homeowners.
I am a bit puzzled by the connection between the Fed's guarantee of Bear Stearns assets and a bailout of homeowners who thought they were being clever in taking interest-only mortgages, or adjustables that they could not afford. But I guess their slogan "Help Main Street Not Wall Street" was a catchy phrase.
The whole thing apparently lasted a half hour.
Protesters enter Bear Stearns headquarters - Yahoo! News
Tuesday, March 18, 2008
Recession? - Visa raises $17.9 billion in record IPO
There are recessions, and then there are recessions. While prices are soaring in grocery and clothing stores, San Francisco-based Visa sold 406 million class A common shares for $44 per share, for a total of 17.9 billion.
According to Reuters, the underwriters, led by JPMorgan (there is that name again) and Goldman Sachs have the option to purchase an additional 40.6 million shares to cover overallotments, which would make the offering closer to 20 billion dollars if the entire overallotment is used.
Visa raises $17.9 billion in record IPO: Financial News - Yahoo! Finance
According to Reuters, the underwriters, led by JPMorgan (there is that name again) and Goldman Sachs have the option to purchase an additional 40.6 million shares to cover overallotments, which would make the offering closer to 20 billion dollars if the entire overallotment is used.
Visa raises $17.9 billion in record IPO: Financial News - Yahoo! Finance
Monday, March 17, 2008
JPMorgan to buy Bear
We all knew this was coming. JPMorgan is going to buy Bear Stearns. The real shock is the price - JPMorgan is paying just $2 a share for Bear, or a total of $236 million.
That per-share payout is just one-fifteenth of Bear's stock price on Friday and miles off its record share price of $172.61 last year. According to the Reuters, that means Bear's shareholders, including British billionaire Joseph Lewis and Bear Stearns' Chairman Jimmy Cayne, will have their holdings wiped out by the deal.
Reuters quotes Emanuel Weintraub, managing director of Integre Advisors, a New York-based money management firm, with an important observation - "It's scary for what it says about the value of financial assets, if a company is worth only a small percentage of book value."
According to the Wall Street Journal, the hardest hit are going to be Bear's employees, who hold as much as 30% of their pensions in Bear stock, according to press reports.
That per-share payout is just one-fifteenth of Bear's stock price on Friday and miles off its record share price of $172.61 last year. According to the Reuters, that means Bear's shareholders, including British billionaire Joseph Lewis and Bear Stearns' Chairman Jimmy Cayne, will have their holdings wiped out by the deal.
Reuters quotes Emanuel Weintraub, managing director of Integre Advisors, a New York-based money management firm, with an important observation - "It's scary for what it says about the value of financial assets, if a company is worth only a small percentage of book value."
According to the Wall Street Journal, the hardest hit are going to be Bear's employees, who hold as much as 30% of their pensions in Bear stock, according to press reports.
Saturday, March 15, 2008
Blogging Lawyer Sued for Defamation
There is an interesting lesson here for bloggers and those who post on blogs. Be careful what you write, since a defamation claim can be brought against you for your postings.
The links will take you to the law.com article, and this particular case has a few twists since the blogging lawyer was anonymous when he made the postings, and just so happened to be blogging about a case in which he was involved as a party's in-house counsel.
But the facts of the case apply to blogging in general. The attorney said in his blog that plaintiff's counsel conspired with the federal district court clerk to change the date of a filing by a day, in order to give subject matter jurisdiction. It may sound petty, but that is a serious allegation against the attorneys involved and the clerk.
The attorneys sued, and they sued the blogger, and his party-employer, Cisco.
Obviously we don't know what happened, but the point isn't so much as whether there was a conspiracy, but the impact of making potentially defamatory statements on the Internet. There is a thought out there that you can't be sued for what you say in a blog or in a comment, and that posting anonymously will protect the speaker. Neither is true. The law applies to the Internet, just like everywhere else. And while this anonymous blogger outed himself, any attorney worth his salt, armed with a few subpoenas, can track a web posting back to its author - or at least the computer that the posting was made from.
Forewarned is forearmed.
Law.com - Patent Attorneys Sue Cisco and Blogging In-House Lawyer for Defamation
The links will take you to the law.com article, and this particular case has a few twists since the blogging lawyer was anonymous when he made the postings, and just so happened to be blogging about a case in which he was involved as a party's in-house counsel.
But the facts of the case apply to blogging in general. The attorney said in his blog that plaintiff's counsel conspired with the federal district court clerk to change the date of a filing by a day, in order to give subject matter jurisdiction. It may sound petty, but that is a serious allegation against the attorneys involved and the clerk.
The attorneys sued, and they sued the blogger, and his party-employer, Cisco.
Obviously we don't know what happened, but the point isn't so much as whether there was a conspiracy, but the impact of making potentially defamatory statements on the Internet. There is a thought out there that you can't be sued for what you say in a blog or in a comment, and that posting anonymously will protect the speaker. Neither is true. The law applies to the Internet, just like everywhere else. And while this anonymous blogger outed himself, any attorney worth his salt, armed with a few subpoenas, can track a web posting back to its author - or at least the computer that the posting was made from.
Forewarned is forearmed.
Law.com - Patent Attorneys Sue Cisco and Blogging In-House Lawyer for Defamation
Friday, March 14, 2008
Bear Stearns Bail Out
This may be the end of the line for Bear Stearns. The hugely independent, and well respected broker-dealer may not be able to survive its subprime problems, according to the New York Times. JPMorgan has stepped in with short term financing to solve the immediate problem, but immediate means 28 days. Hardly a long term solution.
Bear is fighting rumors pretty hard, and it appears that this might simply be a run on the bank, without true substance. But with the stock down 50% today alone, it is certainly looking bleak.
We wish Bear Stearns well, it has contributed greatly to our country's financial markets over the decades, and hope that they do in fact survive.
Bear is fighting rumors pretty hard, and it appears that this might simply be a run on the bank, without true substance. But with the stock down 50% today alone, it is certainly looking bleak.
We wish Bear Stearns well, it has contributed greatly to our country's financial markets over the decades, and hope that they do in fact survive.
Monday, March 10, 2008
Spitzer Is Linked to Prostitution Ring - New York Times
The New York Times is reporting that New York Governor Elliot Spitzer has been caught on a wire tap confirming plans to have a prostitute meet him in Washington where he had reserved a hotel room. This reportedly occurred on February 13 of this year.
I was never impressed with Mr. Spitzer when he was the Attorney General of New York, as he always appeared to be more impressed with his press than his results. He was a self-righteous, arrogant and overly impressed with himself prosecutor, and I thought the people of the great state of New York made a huge mistake when they elected him governor.
He barged into areas that he should not have been, he tossed a potential monkey wrench into the securities regulatory scheme and in reality, did nothing to help the industry or potential investors. Even his record research settlement with Wall Street did nothing to help investors - a pittance went to investors, if it ever got distributed at all. A big piece when to the various attorneys general around the country.
I am certainly less impressed now. If this story is true, Mr. Do-gooder, Mr. White Knight, Mr. Over-the-Top, is nothing but a common John - well, not so common, since he allegedly got a prostitute to travel to Washington to meet him.
What a piece of work. And when caught, he holds a press conference and calls his conduct "an obligation to his family." I always thought that paying a prostitute was a crime, putting aside of course, your obligation to your wife to be faithful, and your obligation to your constitutants to obey the law.
Nothing but another piece of garbage politician. Nothing more.
UPDATE - His political foes are having a field day, calling for his resignation
I was never impressed with Mr. Spitzer when he was the Attorney General of New York, as he always appeared to be more impressed with his press than his results. He was a self-righteous, arrogant and overly impressed with himself prosecutor, and I thought the people of the great state of New York made a huge mistake when they elected him governor.
He barged into areas that he should not have been, he tossed a potential monkey wrench into the securities regulatory scheme and in reality, did nothing to help the industry or potential investors. Even his record research settlement with Wall Street did nothing to help investors - a pittance went to investors, if it ever got distributed at all. A big piece when to the various attorneys general around the country.
I am certainly less impressed now. If this story is true, Mr. Do-gooder, Mr. White Knight, Mr. Over-the-Top, is nothing but a common John - well, not so common, since he allegedly got a prostitute to travel to Washington to meet him.
What a piece of work. And when caught, he holds a press conference and calls his conduct "an obligation to his family." I always thought that paying a prostitute was a crime, putting aside of course, your obligation to your wife to be faithful, and your obligation to your constitutants to obey the law.
Nothing but another piece of garbage politician. Nothing more.
UPDATE - His political foes are having a field day, calling for his resignation
Saturday, March 8, 2008
Another Back-Dating Scandal on the Horizon?
I just stumbled upon this article today. (I literally stumbled upon it, and if you haven't tried stumbleupon, you are missing out on great web sites, and one of the best time-wasters invented by modern man).
The article at portfolio.com discusses a study that found that CEOs of public companies apparently have an uncanny ability to time their stock donations so as to increase the value of that donation. And, they are making the donation to their family charitable foundation.
That is all well and good, and while we can debate the concept of giving billionaires yet another way of avoiding paying taxes, there is nothing illegal about making this donation. However, it is a problem if they making the donation shortly before a significant price decline, in possession of material inside information. Now the article maintains that using inside information to time a charitable donation is not illegal. I am not so sure that this is true (think of the now-quaint requirement of 10b-5 - "in connection with the purchase or sale of a security) - but there is an argument that a donation is not a purchase or a sale, and therefore the anti-fraud provisions of the Act does not apply.
Assuming this is actually the case, there is a huge loophole here. CEO knows his stock is going to tank because of bad earnings, CEO donates a million dollars in stock to his own family's charitable foundation, and gets a million dollar tax deduction, on for donating stock that, a week later, after the news, is worth significantly less.
That hardly seems to be just or equitable. But then we get to the next part of the article...it appears that these CEOs are backdating their donation dates! Well, that is just perfect. Take an inequitable tax loophole, and then backdate your donation date to avoid the loss on your stock!
Now THAT sounds illegal, and if the article is correct, we have a yet another scandal brewing.
The article at portfolio.com discusses a study that found that CEOs of public companies apparently have an uncanny ability to time their stock donations so as to increase the value of that donation. And, they are making the donation to their family charitable foundation.
That is all well and good, and while we can debate the concept of giving billionaires yet another way of avoiding paying taxes, there is nothing illegal about making this donation. However, it is a problem if they making the donation shortly before a significant price decline, in possession of material inside information. Now the article maintains that using inside information to time a charitable donation is not illegal. I am not so sure that this is true (think of the now-quaint requirement of 10b-5 - "in connection with the purchase or sale of a security) - but there is an argument that a donation is not a purchase or a sale, and therefore the anti-fraud provisions of the Act does not apply.
Assuming this is actually the case, there is a huge loophole here. CEO knows his stock is going to tank because of bad earnings, CEO donates a million dollars in stock to his own family's charitable foundation, and gets a million dollar tax deduction, on for donating stock that, a week later, after the news, is worth significantly less.
That hardly seems to be just or equitable. But then we get to the next part of the article...it appears that these CEOs are backdating their donation dates! Well, that is just perfect. Take an inequitable tax loophole, and then backdate your donation date to avoid the loss on your stock!
Now THAT sounds illegal, and if the article is correct, we have a yet another scandal brewing.
Friday, March 7, 2008
Unregistered BD Defrauds Day Traders
I am often asked by prospective clients for ways to avoid registration as a broker-dealer. But here is one response that I did not consider - just ignore the registration rules and statutes!
The SEC has announced that it obtained an emergency court order against an unregistered securities day-trading firm in La Jolla, Calif.
Not only was the firm operating as an unregistered broker-dealer, it was defrauding the day traders who traded their own equity through the firm. Offering leverage rations of up to 20:1, the firm was diverting the traders' equity to pay losses by other traders,
According to the SEC, the defendants enticed traders with services unavailable at a registered broker-dealer. As alleged in the complaint, they allowed traders to day-trade without meeting the $25,000 minimum equity requirement under FINRA regulations for such trading. The SEC's complaint also alleges that Tuco received transaction-based compensation for its members' trading, and Tuco's traders conducted substantial day-trading through Tuco's brokerage accounts both in dollar amounts and number of trades. As a result, the firm and its owner earned substantial commissions on the trading as the registered representative for the Tuco principal accounts at the registered broker-dealer.
I guess the thought is that if you are going to violate the federal securities fraud statutes, you might as well go all the way and violate the registration statutes also.
No word on potential liability for the BDs who opened the accounts and permitted the trading.
The SEC has announced that it obtained an emergency court order against an unregistered securities day-trading firm in La Jolla, Calif.
Not only was the firm operating as an unregistered broker-dealer, it was defrauding the day traders who traded their own equity through the firm. Offering leverage rations of up to 20:1, the firm was diverting the traders' equity to pay losses by other traders,
According to the SEC, the defendants enticed traders with services unavailable at a registered broker-dealer. As alleged in the complaint, they allowed traders to day-trade without meeting the $25,000 minimum equity requirement under FINRA regulations for such trading. The SEC's complaint also alleges that Tuco received transaction-based compensation for its members' trading, and Tuco's traders conducted substantial day-trading through Tuco's brokerage accounts both in dollar amounts and number of trades. As a result, the firm and its owner earned substantial commissions on the trading as the registered representative for the Tuco principal accounts at the registered broker-dealer.
I guess the thought is that if you are going to violate the federal securities fraud statutes, you might as well go all the way and violate the registration statutes also.
No word on potential liability for the BDs who opened the accounts and permitted the trading.
Thursday, March 6, 2008
Test Taking Scandal at State Farm
Really. Are the continuing ed requirements so onerous that insurance salesman have to get someone to take the tests for them? FINRA fined and suspended 16 current and former registered representatives of State Farm VP Management Corp. of Bloomington, IL, for misconduct involving FINRA's Continuing Education requirements for registered representatives.
According to the press release, nine of the sanctioned representatives were supervisors who directed or allowed subordinates to take State Farm's "Firm Element" proficiency test for them. One was a supervisor who directed a subordinate to take the test for other registered representatives. Six of the sanctioned representatives completed the Firm Element test for their superiors.
To State Farm's credit, the press release makes it a point to state that the representatives engaged in this misconduct without any authorization from State Farm. State Farm reported the misconduct to FINRA after uncovering test-taking irregularities in one of its regions and conducting a preliminary investigation. State Farm then expanded its internal investigation nationwide and provided FINRA with its findings.
Of course, if it was a small BD involved, the president of the BD would have been suspended, the firm fined and sanctioned for inadequate supervisory procedures. Guaranteed.
The individual representatives received fines ranging from $5,000 to $10,000 and suspensions ranging from 30 days to six months. One representative also was barred as a principal. State Farm VP Management Corp. is engaged in the business of selling mutual funds and variable products.
According to the press release, nine of the sanctioned representatives were supervisors who directed or allowed subordinates to take State Farm's "Firm Element" proficiency test for them. One was a supervisor who directed a subordinate to take the test for other registered representatives. Six of the sanctioned representatives completed the Firm Element test for their superiors.
To State Farm's credit, the press release makes it a point to state that the representatives engaged in this misconduct without any authorization from State Farm. State Farm reported the misconduct to FINRA after uncovering test-taking irregularities in one of its regions and conducting a preliminary investigation. State Farm then expanded its internal investigation nationwide and provided FINRA with its findings.
Of course, if it was a small BD involved, the president of the BD would have been suspended, the firm fined and sanctioned for inadequate supervisory procedures. Guaranteed.
The individual representatives received fines ranging from $5,000 to $10,000 and suspensions ranging from 30 days to six months. One representative also was barred as a principal. State Farm VP Management Corp. is engaged in the business of selling mutual funds and variable products.
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