February 25th, 2010
Tim Geithner, America’s treasury secretary, promises a complex regulatory overhaul by mid-June and Europe is not wasting any time either.
The European Commission announced the formation of two institutions, the European Systemic Risk Council (ESRC) and the European System of Financial Supervisors (ESFS). These organizations, it is hoped, will rectify the trans-national banking problem that occurs only in Europe. The problem is that European banks are allowed to operate across any border, but the home country is saddled with the responsibility of supervising the banks in whatever country the bank operates. Thus, it takes only one country to disrupt the economic equilibrium in the European Union, as this financial crisis has revealed.
Some think that the ESRC and ESFS may not be as effective as hoped. There are those who argue that fundamental issues such as funding and governance was not adequately addressed in the establishment of these organizations. The argument goes further to hold that the European Commission is being too hasty in the formation of these noble organizations. They may be correct because it is hard for any organization to make much of a contribution if it is not funded and/or goverened. And funding and governance are always areas ripe for debilitating debates and arguments among the countries comprising the EU.
In America, the big banks will grudgingly accept further regulation if greater stability is provided. However, in the nation’s capital, regulators and Congress leaders squabble over ideology. Sheila Bair of the FDIC and John Dugan of the Comptroller of Currency are at odds at what the FDIC should be allowed to do. Bair favors the FDIC’s role as a liquidator of non-banks as well as banks, an idea which Dugan strongly opposes. There is no clear plan for what would be a systemic regulator in the U.S economy either. The existing regulators, involved with government agencies in desperate need of modernization, are understandably very concerned and very vigilante about any immediate changes to their status quo. In short, the perfect storm of partisan politics and the lobbyists of the existing regulators, will most likely make 2009 a year that sees fewer regulatory changes.
So, while there seems to be a demand for regulation on a grander scale for the banks/financial companies the regulators are already tearing apart that idea. I think that some form of consolidated regulation on a (hopefully) temporary basis could be just what the world needs. Whether the world gets it is another question altogether.
To view more info/ipinion on this issue, click here.
Posted in Consumer Protection, International, Securities Related Issues | No Comments »
February 25th, 2010
It is always a good idea to keep an eye on your money, especially these days and there are many simple ways to guard your money, including these tips from the Wall Street Journal.
1. “Do your homework when picking a financial adviser.”
2. “Ask tough questions to identify potential conflicts of interest.”
3. “Ask tough questions about risk factors.”
4. “Check whether the fund manager’s interests are aligned with yours.”
5. “Check whether the fund firm ’s interests are aligned with yours.”
These steps seems fairly intuitive, but they do definitely merit Post-it or checklist worthy status for any investor.
For more on the details and rationale behind each step, click here.
Tags: ponzi scheme, protect investments, recession, securities fraud, stock fraud, stock loss
Posted in Consumer Protection | No Comments »
February 25th, 2010
Bank Medici AG lost it’s banking license this past Thursday. The financial banking authority of Austria, the Financial Market Authority, took action because the bank’s starting capital mark dropped below the 5 million Euro requirement. Bank Medici claimed that it suffered huge losses due to Madoff’s massive Ponzi scheme. The bank noted on its website that it will still fight in the interest of its clients and make its decisions accordingly.
Read the full story here.
Tags: madoff, ponzi scheme, protect investments, recession, securities fraud, stock fraud, stock loss, sue broker
Posted in Business Disputes, Consumer Protection, International, Scams and Schemes, Securities Related Issues | No Comments »
February 25th, 2010
Another shocker: Nigel Hamilton-Smith, the Antiguan liquidator of the Stanford Group’s offshore bank testified that Stanford used client funds to fuel his conspicuous consumption.
The Texas financier has been accused by U.S. regulators of a $8.5 billion fraud.
For more on the ongoing case, click here and/or see my earlier post.
Tags: madoff, ponzi scheme, protect investments, recession, securities fraud, stock fraud, stock loss
Posted in Business Disputes, Consumer Protection, Scams and Schemes, Securities Related Issues | No Comments »
February 25th, 2010
The twist is not soo much that he got caught with his hand in the proverbial cookie jar.
Mark Bloom, the former manager of the North Hills Management hedge fund based out of New York, was able to start and operate North Hills separately while he was working for another money manager (which, by the way, is also involved in a $500+ million fraud complaint). Bloom claims that he will be using a public defender to defend the stock fraud charges against him. After one of the biggest investors in North Hills Management demanded redemptions and Bloom evaded those request, the investor, a charity, sued because the charity believed that Bloom was using hedge fund money for personal conspicuous consumption.
For more on the story, click here.
Tags: madoff, ponzi scheme, protect investments, recession, securities fraud, stock fraud, stock loss, sue broker
Posted in Business Disputes, Consumer Protection, International, Scams and Schemes, Securities Related Issues | No Comments »
February 25th, 2010
His own lawyer calls him a “deeply flawed individual” and I nominate that for the understatement of the recession.
Madoff’s fraud is an almost unbelievable scam, spanning a reported $170 billion dollars through his company, decades of time, abuse of untold friendships, and destruction of tens, hundreds, maybe thousands of peoples’ lives. This is not a scam limited to the primary vicitims, no, this scam has destroyed many families for generations to come because soo many invested everything they had.
But Madoff says he’s “sorry.” Due to the type of damages these cases do to families, retirees, and anyone touched by the scam, I am not sure “sorry” does it. I think spending the rest of his life confined in a spartan cell with plenty of time to think about all the horror he inflicted and to feel all the anguish and loss of his victims, but maybe that gives him too much credit because I don’t think he has any ability to respond as a human. How coudl he? He launched this scam decades ago and instead of unwinding it if not giving himself up, he only pushed harder to scam greater and greater amounts of money from more and more people.
Did he have no thoughts for what he was doing and no understanding that it would all wind up a massive train wreck?
Did he even try to invest the money? It sounds like the answer to that is “no.” Instead used the loot, because that’s what it was, to benefit himself and his family. He didn’t even try to invest the money – everything was a scam from his published returns (shame on the SEC, too) to his monthly account statements where he did not even take the time to make sure that his statements were even remotely accurate.
Madoff is less than human most would agree. But is it only that he is perfectly human?
Can a human be soo epically flawed and still function in society as he did for decades? I suppose so.
Maybe money is the root of all evil after all.
Tags: madoff, ponzi scheme, securities fraud, sentencing, stock fraud, stock loss
Posted in International, Scams and Schemes, Securities Related Issues | No Comments »
February 25th, 2010
A New York broker-dealer and four other individuals were charged with securities fraud by the SEC. It was alleged that they collectively raised billions of dollars illegally from investors to feed Bernie Madoff’s Ponzi scheme.
The legal complaint filed in a Southern District of New York U.S District Court lists the Cohmad Securities Corporation of being at fault. Chairman Maurice J. Cohn, COO Marcia B. Cohn, and representative Robert M. Jaffe were charged of marketing investment with Madoff without regarding the illegality of his Ponzi scheme. The same court filed a complaint against Stanley Chais, an investment adviser who handled three funds valued nearly at 1 billion dollars that were totally invested with Madoff.
Robert Khuzami, Director of the SEC’s Division of Enforcement, noted that:
“Madoff cultivated an air of exclusivity by pretending that he was too successful to trouble himself with marketing to new investors..In fact, he needed a constant in-flow of funds to sustain his fraud, and used his secret control of Cohmad to obtain them.”
The Cohmad defendants were indicted for fraud due to their peculiar apathy towards Madoff’s suspicious activities. For example the Cohns filed Forms BD and FOCUS reports that were falsified to hide Cohmad’s business of attracting investors to Bernard L. Madoff Investment Securities LLC (BMIS). The referral business was 90 percent of Cohmad’s revenue bringing in over 800 accounts and billions of dollars for BMIS. BMIS paid 100 million for Cohmad’s referral services. The compensation arraignment between the two entities created fraudulent conduct as well, with clients unable to withdraw money from accounts with false account statements.
Jaffe, the registered representative at Cohmad, brought in more than 1 billion into BMIS. Jaffe though he was getting overcompensated by Madoff when really BMIS employees were taking money out of Jaffe’s BMIS account.
Chais’s charges centered around his false role in managing the funds and for distributing false account statements. Chais built himself up as a qualified investor managing hundreds of millions of dollars worth of money with three partnerships. But Chais only sent them money out of one of his partnerships to BMIS and then proceeded to charge that partnership for his “service.” Chais apparently also ignored blatant inconsistencies with Madoff’s reported returns, and even encouraged them.
The article is linked here.
Tags: madoff, ponzi scheme, protect investments, securities fraud, stock fraud, stock loss
Posted in Uncategorized | No Comments »
February 25th, 2010
More key, specific advantages of Mediation from FINRA:
- Control—Mediation belongs to the parties. The disputing parties control the process, scheduling, costs, and outcome of the dispute.
- Less Adversarial—The mediation process is informal. It is less confrontational than arbitration or litigation.
- Preserves Options—Parties can enter into mediation without jeopardizing their option to arbitrate or litigate.
- Swift Settlement—Most mediations are successfully concluded in a single day. Since mediation can be scheduled soon after a dispute arises, parties reach settlement much earlier than in arbitration or litigation. Many mediations conclude before a formal arbitration claim is filed.
- Lower Cost —Mediation usually entails lower legal and preparatory costs, there is minimal interruption of business or personal life, lost productivity is kept to a minimum, and the fees and expenses of mediation are modest.”
- Preservation of Business Relationships—By reaching an early resolution with minimal financial or other strain on either party, the chances for preserving business relationships are greatly enhanced.
- Protects Privacy—Mediation offers greater confidentiality than arbitration.
- Creative Solutions—Mediators help the parties craft creative solutions.
- Low Risk—Settlement potential is high. The case proceeds quickly. The cost is modest and there are benefits even if a settlement is not reached.
Meditation is the choice of many parties when choosing to settle a business dispute. One particular reason why mediation has been so popular is that the parties have full control of the variables (process, costs, outcome). Even if there is not a full settlement made, the progress made in mediation proves to be invaluable because it leaves less difficulties to be resolved through any other forms of dispute resolution (arbitration/litigation). Mediation seems to resolve the key, collateral issues the best, which saves a considerable amount of resources for both parties that are involved. Mediation thus streamlines the situation for the next step of alternative dispute resolution (depending on the complexity of the issue) or it resolves the issue altogether. On the local level, with situations arising between investors and individual clients, mediation is often the best option.
For more information on Mediation, click here.
Tags: Alternative Dispute Resolution, Mediation
Posted in Alternative Dispute Resolution | No Comments »
February 25th, 2010
R. Allen Stanford was taken into custody on his Ponzi scheme allegations related to his international banking empire. Because the judge agreed that Stanford poses a flight risk the judge ordered him to remain in custody.
The government’s indictment charged Stanford and other executives at his firm with scamming 30,000 investors invested $1.2 billion in assets and in about 7 years grew it to about $8.5 billion.
Investigators say that even as Stanford claimed healthy returns for those investors, he was secretly diverting more than $1.6 billion in personal loans to himself.
Tags: madoff, ponzi scheme, stock fraud, stock loss
Posted in International, Scams and Schemes, Securities Related Issues | No Comments »
February 25th, 2010
The Financial Industry Regulatory Authority (FINRA) provides a helpful overview of the main attributes of each of these dispute resolution processes. Keep in mind that these non-legal processes are described in the context of securities disputes whether between a client and a broker-dealer or between a broker-dealer and one of its ex-brokers. Ideally, there should be a good relationship between brokers and investors, but inevitably there are disagreements. Arbitration and Mediation are examples of alternative dispute resolution processes that bypass the inconveniences an expense associated with a lawsuit filed in civil court.
Mediation and Arbitration are non-judicial processes for resolving disputes between parties. In mediation, an impartial third party, known as the mediator, tries to help the parties to the dispute reach a resolution by focusing both parties on the critical issues. Mediation is a voluntary process where the parties agree to ‘give it a try’ but the mediator cannot make any decisions or force any party to do anything. In contrast, once the parties have agreed to submit their dispute to arbitration, the (hopefully) impartial arbitrator makes a decision that is binding on both sides. The arbitrator listens to each party’s concerns and makes a decision based on each party’s presentation of their story.
The Financial Industry Regulatory Authority (FINRA) states that:
Meditation…
- “Is voluntary. The parties also decide who the mediator will be, when the mediation will take place, and how the dispute will be settled.”
- “Is informal. In mediation, an impartial person—the mediator—promotes negotiations between the disputing parties.”
- “Is inexpensive. The mediation process is less expensive than arbitration or litigation.”
- “Is non-binding. Unlike other forms of dispute resolution, such as arbitration and litigation, the mediator does not impose a solution or decide your case. Instead, the mediator guides or helps the parties to reach or create their own solution. Parties may still arbitrate their dispute if they are unable to agree on a settlement.”
- “Is a “win-win” solution. The mediator’s role is to help the parties find a mutually acceptable solution to their controversy. Since the inception of the program in 1995, more than 6,000 cases have been filed in mediation. Parties who mediate at this forum resolve four out of every five disputes, an 80% settlement rate!!”
Arbitration…
- “Is impartial. Based on the size of your claim, your dispute will be heard by one or more impartial arbitrators. Arbitrators are selected by the parties through an automated system that produces arbitrator lists. Parties may remove any listed arbitrator for any reason. They are encouraged to rank the remaining arbitrators, according to preference.”
- “Is fair. During the hearing, parties make brief opening statements explaining what they intend to prove and what relief (e.g., money damages) is sought. Parties have the opportunity to present documents and witnesses in support of their positions, to object to documents and to question witnesses presented by other parties, and to make closing remarks to summarize their positions.”
- “Is final and binding. Arbitrators evaluate the evidence and arguments presented and reach a final and binding decision (the “award”). Awards are only subject to court review on very limited grounds.”
- “Is expedient. Arbitrators endeavor to render the award within 30 business days after the close of the proceeding.”
For more on these articles by FINRA, click here and here.
Posted in Alternative Dispute Resolution | No Comments »
