SEC Press Release: Fraud in Forex Trading
(Oct 2010)
SEC Charges Massachusetts-Based Forex Traders and Their Firm With Fraud
The U.S. Securities and Exchange Commission (SEC) issued a press release today announcing that it had
"charged two foreign currency traders and their Boston-based company with operating a fraudulent scheme in which they sent investors misleading account statements while stealing their funds and incurring major trading losses."
The SEC alleges that Karlis and Akyil raised approximately $40 million from...
FINRA Press Release: Reverse Convertibles
(Oct 2010)
FINRA Orders Ferris, Baker Watts to Pay Nearly $700,000 for Inappropriate Sales of Reverse Convertible Notes
The Financial Industry Regulatory Authority (FINRA) issued a press release today announcing that
it has fined the former Ferris, Baker Watts LLC, acquired by RBC Wealth Management, $500,000 for inadequate supervision of sales of reverse convertible notes to retail customers as well as unsuitable sales of reverse convertibles to 57 accounts held by elderly customers who were at...
FINRA Regulatory Notice: Commodity Futures-Linked Securities
(Oct 2010)
Sales Practice Obligations for Commodity Futures-Linked Securities
The Financial Industry Regulatory Authority (FINRA) published Regulatory Notice 10-51 reminding firms to make fair and balanced statements in its communication with the public on commodity futures-linked securities. They are reminded that the returns on such securities can often deviate from the returns on the underlying commodities to which they track.
In an effort to further educate public investors, SLCG has written...
In the News: Structured Notes
(Oct 2010)
Bloomberg issued a news release today reporting that the amount of sales and issuances of structured products had reached a record in 2010. The demand for higher yields and caution in investing in stock were factors which contributed to the growth in structured products. According to Bloomberg, a popular structured product was the step-up callable note, which is a callable note that increases ('steps up') its fixed rate over time.
This calls for active analysis of the merits of...
SLCG Research: Leveraged Municipal Bond Arbitrage
(Oct 2010)
SLCG released today 'Leveraged Municipal Bond Arbitrage: What Went Wrong?'. Leveraged municipal bond arbitrage is a strategy employed by fixed income hedge funds. This strategy buys long term municipal bonds and sells or shorts long term Treasury bonds while hedging with interest rate swaps. The strategy would seek to profit from the difference in the rates it receives from the municipal bonds and the rates it pays on the Treasury bonds and interest rate swaps.
Brokers marketed hedge...
SLCG Research: Auction Rate Securities
(Oct 2010)
SLCG released today 'Auction Rate Securities'.
Auction rate securities were first issued in the mid-1980s by corporations. Over the next two decades ARS were issued widely by institutions ranging from closed-end mutual funds, municipalities to student loan trusts. ARS were long-term floating rate securities whose coupon payments were determined at auctions that were typically held every 7 to 35 days. ARS were long-term securities with short-term floating rates.
Broker dealers marketed...
In the News: SEC Reviewing Sales of Structured Products
(Sep 2010)
Bloomberg issued a news release today announcing that sales practices of banks and broker-dealers for structured products are being investigated by the Securities and Exchange Commission (SEC) for product overcharging and disclosure of conflicts of interest.
This is not a surprising new release: it is consistent with our findings in our paper on reverse convertibles, 'What TiVo and JP Morgan teach us about Reverse Convertibles.' In this paper, we find that brokerage firms consistently...
FINRA Regulatory Notice: Municipal Securities
(Sep 2010)
FINRA Reminds Firms of Their Sales Practice and Due Diligence Obligations When Selling Municipal Securities in the Secondary Market
The Financial Industry Regulatory Authority (FINRA) published Regulatory Notice 10-41 reminding broker dealers including municipal securities dealers to
fully understand the municipal securities they sell in order to meet their disclosure, suitability and pricing obligations under the rules of the Municipal Securities Rulemaking Board (MSRB) and federal...
FINRA Press Release: Illicit Equities Trading Strategy
(Sep 2010)
FINRA Sanctions Trillium Brokerage Services, LLC, Director of Trading, Chief Compliance Officer, and Nine Traders $2.26 Million for Illicit Equities Trading Strategy
The Financial Industry Regulatory Authority (FINRA) issued a press release this week announcing that
it has censured and fined New York-based Trillium Brokerage Services, LLC, $1 million for using an illicit high frequency trading strategy and related supervisory failures. Trillium, through nine proprietary traders,...
FINRA Investor Alert: Equity-Indexed Annuities
(Sep 2010)
Equity-Indexed Annuities - A Complex Choice
The Financial Industry Regulatory Authority (FINRA) published an Investor Alert on the rewards and risks of equity-indexed annuities. An annuity makes periodic payments to the holder of the annuity. There are fixed annuities that make fixed payments and variable annuities that make variable payments. Equity-indexed annuities (EIA) are similar to both fixed and variable annuities. They pay an interest rate linked to an equity index and guarantee...
