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Reform the NASD!

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Sep 18, 2006 8:53 pm

Having a guy like Brennan or Frank Michelin (LH Ross) on the NASD's Board of Governors would be akin to having Ivan Boesky as Director of Enforcement at the SEC.

I want squeaky clean non chop house Governors on the NASD's BOD.

Sep 18, 2006 9:10 pm

[quote=ymh_ymh_ymh]

Having a guy like Brennan or Frank Michelin (LH Ross) on the NASD's Board of Governors would be akin to having Ivan Boesky as Director of Enforcement at the SEC.

I want squeaky clean non chop house Governors on the NASD's BOD.

[/quote]

Do you, in your heart of hearts, think that Bill Singer does too?

Sep 18, 2006 9:21 pm

Yes, because he has represented elderly women clients whose hubbies got fleeced by the chop house boys in Brighton Beach a few times and felt very sorry for them. Gavaroot pa Russki mob?

I guess their hubbies were afraid to sue for fear of swimming with the beluga.

Our definition of squeaky clean may be a little different, however. I like the Boy Scout type (no need to be Ivy League, but it helps). Take a look at Roel Campos' CV and you'll see why he's my favorite SEC Commissioner.

Bill, if you're reading this how about explaining your definition of squeaky clean. Who's your favorite SEC Commissioner? That says a lot about a person.

Sep 18, 2006 9:34 pm

The gangsters like to hire ex enforcement types becasue it is believed that the best way to get around the rules is to use a guy who knows them from the other side.

I would wager that every chop shop on the street as a lawyer on staff, or retainer, who used to be an NASD or SEC enforcement lawyer.

Anybody who champions the election of a guy from GunnAllen to the NASD district board is not a friend of the honest segment of the industry.

Sep 18, 2006 9:40 pm

I know the chop shops like to hire ex SEC guys. On Gunn-Allen, let's hope they're trying to clean up their act. David Jarvis (newbie GC) is too nice of a guy to soil his reputation if they're not.

The 2 Gunn-Allen cold call brokers (stock jockeys) who tried to strong arm that retiree friend of mine in Philly don't know jack about stocks, that's for sure. One would think if they want to snag some new biz, their first few tips should be in the money, don't you think?

On hiring ex SEC guys or NASD ones, there's a saying on the Street, "if you can't beat them, buy them."

Sep 18, 2006 9:50 pm

[quote=ymh_ymh_ymh]

I know the chop shops like to hire ex SEC guys. On Gunn-Allen, let's hope they're trying to clean up their act. David Jarvis (newbie GC) is too nice of a guy to soil his reputation if they're not.

[/quote]

I do not know David Jarvis, but I do know that a lot of guys will be more than happy to cast their lot with a questionable firm if the compensation package is nice enough that they can retire once the tour of duty is over.

If done right the high priced compliance officer will be able to build enough plausible deniablity into their role so they don't go to prison.

If they do go, it will generally be for a fairly short time in fairly benign quarters and when they get out they'll have a hell of a party favor in an off shore account.

That's the damn shame.  Hundreds, even thousands, of suckers lose millions of dollars buying an imaginary cure for cancer.  If the NASD/SEC is able to make a case, and if they are able to win the case, a few of the principals will be barred for life and perhaps sentenced to some time at Eglin or somewhere like that.

When they go home they're still rich while their victims are eating cat food, pretending it's yellow fin tuna.

Sep 20, 2006 1:28 pm

In the end the only real reform will be creating a regulatory system that isn't tied to firms regulating brokers but an independent system similar to the RIA structure and the 1940 act that includes commissions and fees. The idea you can "reform" while retaining the essential disfunction of the broader premise of the NASD is doomed and unexciting.

70% of current b/d staffing might be eliminated, that would help consumers and brokers alike. Compliance and support should all be portable and unbundled. It's the zero sum system that distributes all blunders and costs to every producer, consumer and firm and the underlying socialist culture that can't be reformed. It can only be eliminated completely. 

Sep 20, 2006 2:34 pm

The system is broke and does need major reform, that’s a given. I feel sorry for every single boiler room/bucket shop/chop house victim.

Sep 20, 2006 3:19 pm

[quote=ymh_ymh_ymh]

MER's infraction per rep ratio is much smaller than Gunn-Allen's but to be fair, perhaps Gunn-Allen is trying to clean itself up a little. Their new General Counsel, David Jarvis, is an ethical guy.

On another note, I guess getting on Chris Cox' butt once in a while does work. Looks like he's coming around a little:

http://www.sec.gov/news/speech/2006091406cc.htm

I think one of the other Commissioners may have shown him this month's issue of RR which features bucket shops on the cover. He (Chris) actually said, "bucket shop" which is a term he probably was not familiar with a year ago.

If any of you guys are football fans, I would appreciate you pulling for the Trojans against those Cornhuskers tonight (even if Reggie Bush might have gotten us in trouble)!

[/quote]

I live in the heart of Husker Nation and I absolutely loved the result.  I only wish USC would have put up another 28.  The saddest part about that was that we actually had a tornado touch down in Omaha and got anywhere from 2-5 inches of rain, 1/2"-2" diameter hail and 80 mph winds.  Instead of breaking to the weather to update us, they simply split the screen so all of the Husker-loving tools would be happy and showed the radar - couldn't hear anything the meteorologists were saying.  Completely incredible.

Sep 20, 2006 3:42 pm

[quote=ymh_ymh_ymh]The system is broke and does need major reform,
that’s a given. I feel sorry for every single boiler room/bucket
shop/chop house victim.[/quote]



I agree completely, but I also feel that some of the blame has to fall
on those who are fleeced.  The old adage that greed overcomes fear
is true.



I think that it will only get worse as the boomers become more and more desperate to increase their retirement lifestyle.



What is also troubling is the appearance that the NASD and SEC seem to
view penny stock fraud as a victimless crime–or a crime not worthy of
their full attention.



The idea that the SEC allows issues of up to $5 million to fly below
the radar is in great part responsible for this.  Lots of the
penny stock frauds are offerings in the 4.5 million area–claiming an
exemption under one of those regulations like Regulation A or B or D or
whatever it is.



On the other hand, what about the legitimate offerings that are
small.  Should some small manufacturing firm have to go through a
full registration just in order to raise $4 million?  That
certainly seems onerous and unnecessary.



As Yul Brenner would say, “It’s a puzzlement.”

Sep 20, 2006 4:12 pm

[/quote]

I agree completely, but I also feel that some of the blame has to fall on those who are fleeced. 
[/quote]

Blame the victim? Yeah, there's a defense strategy.

Sep 20, 2006 4:27 pm

The problem in penny stock land and the boiler rooms et al is lack of funding at the SEC as well as rookies who don't understand how the game is played. I had to explain "wash trade" to a senior SEC lawyer not so long ago.

The key to stopping most of this is investor education. Yes, "some" of the victims are greedy and know better. They don't complain until they get hosed. Many are just naive and very desperate.

If the NASD was granted more comprehensive policing power, the SEC would have less "work" to do. I have found, overall, that NASD enforcement lawyers are much more savvy as to how the penny stock p&d game is played and who plays it than the SEC lawyers are. Also, there's no honor and glory at the SEC for those who pursue this type of security fraud. If you're not going to get a promotion or "atta boy" for it, why bother?

Sep 20, 2006 4:33 pm

[quote=tjc45]

[quote= ]

I agree completely, but I also feel that some of the blame has to fall on those who are fleeced. 
[/quote]

Blame the victim? Yeah, there's a defense strategy.

[/quote]

It's called "Personal Responsibility."  If you get conned some of the responsibility falls on your shoulders.
Sep 20, 2006 5:14 pm

[quote=Knows Wall St.] [quote=tjc45]

[quote= ]

I agree completely, but I also feel that some of the blame has to fall on those who are fleeced. 
[/quote]

Blame the victim? Yeah, there's a defense strategy.

[/quote]

It's called "Personal Responsibility."  If you get conned some of the responsibility falls on your shoulders.
[/quote]

 I see what you mean.

There is a growing number of cases appearing where people bought new or near new 06 cars only to later find out that their car had been damaged by Hurricane Katrina. Before the Feds could stop it, car haulers pulled thousands of new cars out of the muck and transported them all over the country. Inspectors stopped one load of new Nissans at the California border. But dozens more had already made it through the auction there. One dealer shipped his flood damaged inventory to a clean title state, washed the titles and then shipped the cars back to Mississippi. And then those cars and cars around the country were sold to the public. Today, many of these flood cars sit unsold as the title washing process continues. It's not enough to run the vin of the car being purchased through the fed registry. Many of these cars escaped before the feds could get to them. Anyone who doesn't get on their back and scrape under the dashboard looking for mud deserves what they get. That about cover it?

Conn men always have a way to justify what they do. Interesting that you agree with their POV.

Oct 6, 2006 8:28 pm

Don't look now....But i just got a letter from The NASD...those' dissidents' apparently got the vote out:

Dear Executive Representative and Voting NASD Member/Owner:

My name is David Alsup and I am running for election as your NASD National Adjudicatory Council (NAC) Representative from the Western Region (Districts 1, 2. 3).  I would like your vote. 

I can guarantee you that you have never seen a letter like this before. Why? Well, the NASD pretty much likes to hand-pick the folks to serve on its committees and the NAC.  Frankly, I just don't think the NASD has any confidence in us as industry members to act responsibly. The NASD is wrong.

As one of the founders of the Financial Industry Association (FIA), I just launched an historic petition drive to win the nomination as your NAC Western Region District Representative, and I have been certified as an official candidate running on the FIA slate.  You now have a choice! 

I support a fair and balanced approach to regulation – one that is based upon a presumption of innocence.  Moreover, I do not believe that each and every violation requires a "death penalty" sanction and I am in favor of utilizing education and letters of caution for inadvertent, non-fraudulent violations where public customers are not harmed and there is no evidence of willfulness. 

FIA has recently launched a campaign to bring fairness and reasonableness back to all aspects of the NASD. I support that initiative.

Your ballots should now be or soon will be sitting in your mailbox.  I have enclosed a sample ballot (see below) that will explain FIA's position and how to best vote for the candidates that will represent your interests on the District Committee. 

I also support Samuel Lek who is campaigning in the New York NAC, and all of FIA's 32 candidates. I encourage you to vote for them as well to help assure your views will be properly represented.

As you may know, I am part of a slate a 34 candidates who were endorsed by the Financial Industry Association (FIA), which obtained petitions from over 730 NASD Member Firms. Twenty-eight of the FIA's candidates are by petition and six are cross-endorsed by an NASD nominating committee. The era of unopposed, hand-picked NASD candidates is over!  Now, you have a choice.  Now, we all have a chance to make things better.

As one of FIA's 34 candidates, I can assure you that we  have heard your complaints and read your comments, and we all support a change to the following:

The immediate removal of a regulatory approach that too often imposes harsh sanctions upon inadvertent, non-fraudulent violations. Increased and balanced membership participation in elected positions. Expediting and improving the fairness of the disciplinary process. Require membership vote and approval before any new rule is enacted or 
changed. Revision to the NASD Sanction Guidelines to provide for more fair and reasonable
sanctions. Reaffirmation of the "reasonableness" standard in all supervisory systems and
procedures. Expediting the new and existing Membership Agreement requests approval processes to not exceed 60 days. The formation of a Bill of Rights and Office of the Industry's Advocate to better
define the rights of all member firms and associated persons during investigations and examinations and to zealously represent your interests.

I am pleased to join with FIA in this historic effort to democratize the NASD and return the self-regulatory organization to a partnership between the regulator and the regulated.  Now you must do your part!  Vote for the FIA slate.  Get your fellow Executive Representatives in the NASD community to vote the FIA slate for a change to fairness and reasonableness!!

The Financial Industry Association (FIA) is pleased to announce that over 730 NASD Member Firms signed FIA's petitions for NASD elective office. As a result of this historic campaign, FIA's slate of candidates includes 28 nominees by "petition," and 6 nominees cross-endorsed by the District Nominating Committees.

FIA has launched this historic effort to democratize the NASD and return the self-regulatory organization to a partnership between the regulator and the regulated.  Now you must do your part!  Vote for the FIA slate.  Also, please get your fellow Executive Representatives in the NASD community to vote the FIA slate for a change to fairness and reasonableness!!

You may receive multiple ballots for this election process since there are 13 different contested NASD positions. You may VOTE in EVERY district where you have a registered branch office.  For every ballot you receive, please VOTE and return in the original envelope provided by the NASD.  For more information  see: www.FinancialIndustryAssociation.org.

I am available to discuss any issues you may have concerning this election and I can be reached at 800 252-3017, or you can email me at [email protected]