Amerivet Securities Inc.

FINRA Wants Amerivet Securities Inc.’s Lawsuit Seeking to Inspect the SRO’s Records Dismissed

Published on: March 26, 2011 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority wants the District of Columbia Court of Appeals to reverse the D.C. Superior Court’s decision to not dismiss Amerivet Securities Inc.’s lawsuit against the SRO. The broker-dealer wants to inspect FINRA’s records and books.

Amerivet Securities filed its complaint in August 2009 under the Delaware General Corporation Law’s Section 220, which lets a shareholder examine a company’s records and books for “any proper purpose.” The broker-dealer says it needs to inspect FINRA’s books and documents in order to expose the corporate wrongdoing related to the SRO’s 2008 investment losses and and allegedly inflated executive pay practices.

When our securities fraud attorneys covered this case more than a year ago, we noted that Amerivet had accused FINRA of failing to supervise and regulate a number of its larger member firms, including Lehman Brothers, Merrill Lynch, Bernard L. Madoff Investment Securities Inc., Bear Stearns and Co, and Stanford Financial Group. The broker-dealer also claimed that FINRA recklessly pursued high-risk investment strategies that were not appropriate for preserving capital. (Read our previous Stockbroker Fraud Blog post to find out more.) Last month, Judge John Mott ruled in favor of Amerivet and noted that pursuant to Section 220, the broker-dealer had asserted a proper purpose for wanting to make its inspection.

FINRA to Assess Amerivet Securities Inc. Allegations that Certain SRO Executives Received Excessive Pay in 2008

Published on: February 9, 2010 | by Shepherd Smith Edwards & Kantas, LLP

At a closed-door meeting scheduled for February 10, the Financial Industry Regulatory Authority board of governors will preside over a closed-door meeting to assess allegations made by Amerivet Securities Inc. that certain FINRA executives, including chief executive Mary Schapiro, received excessive pay. The brokerage firm submitted a letter to the board last year demanding that action be taken to recover this compensation, as well as the SRO’s unprecedented portfolio losses” in 2008.

A release, filed by Amerivet’s securities litigation lawyers, alleged that in 2008, under Shapiro’s leadership, FINRA failed to warn investors about auction-rate securities risks, paid senior FINRA executives close to $30 million, failed to discover that R. Allen Stanford and Bernard Madoff were engaged in Ponzi scams, and sustained close to $700 million in losses.

FINRA Executives’ Pay

Schapiro was paid $3.3 million in bonuses and salaries in 2008. Per her accumulated retirement plan benefits, She also received approximately $7.2 million.

Another 12 current and ex-FINRA executives made over $1 million in 2008, including ex-chief administrative officer Michael D. Jones, who received $4.3 million in severance, compensation, and accumulated benefits after over 10 years at the SRO. Elisse Walters, now with the SEC, was paid $3.8 million ($2.4 million was supplemental retirement benefits), and Douglas Schulman, now with the IRS, was paid $2.7 million in salary, retirement benefits, and bonuses after over eight years of service.

FINRA has called Amerivet’s statements “part of an ongoing publicity campaign” involving a counsel and a party who have been in “litigation with FINRA.”

Related Web Resources:
Finra execs overpaid? The board wants to know, Investment News, February 20, 2010
FINRA

FINRA Board of Governors
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Brokerage Firm Amerivet Securities Inc. Sues FINRA for Alleged Misconduct

Published on: August 26, 2009 | by Shepherd Smith Edwards & Kantas, LLP

Amerivet Securities Inc. has filed a complaint suing the Financial Industry Regulatory Authority. The brokerage firm wants to figure out whether the self-regulatory organization’s failed to regulate large financial institutions and took part in “reckless” investment strategies. In the District of Columbia superior court, Amerivet Securities argued that it needed access to the SRO’s records and books to determine whether misconduct did occur, resulting in investment losses last year and certain executive compensation practices within FINRA. In a letter dated July 31, FINRA refused to turn over the documents.

Amerivet says that between 2005 and 2008 FINRA failed to supervise and regulate Lehman Bros. Inc., Bear Stearns & Co., Bernard L. Madoff Investment Securities Inc., Merrill Lynch & Co., Stanford Financial Group, Sky Capital Holdings LLC., and its other larger member firms. The brokerage firm is also accusing FINRA of recklessly pursuing investment strategies that were extremely risky and not appropriate for the “preservation of capital.” The SRO’s purchase of $862 million in auction-rate securities was one risky venture that the plaintiff cited as an example. In 2008, FINRA reported losses the equivalent of 26.5% of its investment portfolio-that’s $568 million.

Amerivet says it believes that FINRA invested with Bernard Madoff and either suffered losses or may have “clawback” claims related to their investments with him. The plaintiff says that if FINRA had been doing its job properly, the SRO would have exposed and stopped Madoff’s ponzi scam rather than becoming one of its victims.

Amerivet says that FINRA, like NASD, overpays its senior executives. For example, after NASD and NYSE Regulation Inc. merged to become FINRA in 2007, NASD chairperson Mary Schapiro’s income allegedly increased by 57%.

Amerivet made its claim per Section 220 of the Delaware General Corporation Law.

Amerivet Complaint Against FINRA Alleges Madoff Investment, NoQuarterUSA.net, August 25, 2009
Read the Complaint (PDF)
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