Investor Lawyers Blog

Lehman Brothers Australia Found Liable in CDO Losses of 72 Councils, Charities, and Churches

Published on: September 25, 2012 | by Shepherd Smith Edwards & Kantas, LLP

Lehman Brothers subsidiary Lehman Brothers Australia has been found liable for collateralized debt obligation losses sustained by 72 councils, churches, and charities during the global economic crisis. The class action securities lawsuit was led by three Australian counsels—Wingecarribee, Parkes and Swan City. A fixed settlement amount, however, has not yet been reached. The parties will have to meet to figure out the damages, and their submissions will then be presented to the Federal Court later this year. (Because the defendant, previously known as Grange Securities, is in liquidation, it cannot make any payments right now). The three lead plaintiffs had sought up to $209M (US dollars), which is how much they say was lost from the CDOs.

The majority of the CDOs that caused the investors losses had been purchased from Grange Securities before Lehman Brothers Australia acquired the firm in 2007, which is the year when the bond world started to fall apart as the global economic crisis began to unfold. The plaintiffs are claiming alleged breach of fiduciary duty, misconduct, and negligence for how the defendant marketed the synthetic derivative investments.

Federal Court Justice Steven Rares, who issued the ruling, said the CDOs were presented as if they were liquid like cash and safe investments even though they were, in fact, a risky, “sophisticated bet.” He said the plaintiffs were told that they would get their money back if they held on to the CDO’s until maturity and that high credit ratings placed the securities in the same arena as the AAA-rated Australian government’s debts. They also presented the investments that it recommended or made for the plaintiffs as suitable for investors that had conservative goals.

The judge noted that although that each of the three councils that were the lead plaintiffs had different complaints, in relation to two councils, the defendant was negligent in the advice and recommendation it offered them. Also, as financial advisor to two of the councils, the financial firm breached its fiduciary duty and took part in deceptive and misleading behavior when it pushed the CDOs as suitable for them.

More Blog Posts:
Stockbroker Securities Roundup: Criminal Convictions Vacated Against Six Charged in Front Running Scam and Citigroup Broker Cleared in $1B CDO Deal SEC Case, Stockbroker Fraud Blog, August 11, 2012

Some of the SEC Charges Against Investment Adviser Over Alleged Involvement In J.P. Morgan Securities LLC Collateralized Debt Obligation Are Dismissed, Institutional Investor Securities Blog, September 24, 2011

Lehman Brothers’ “Structured Products” Investigated by Stockbroker Fraud Law Firm Shepherd Smith Edwards & Kantas LTD LLPn, Stockbroker Fraud Blog, September 30, 2008

Securities Roundup: FINRA Heightens Focus on Options Industry & Wants More Investors to Use BrokerCheck, Lawmaker Hopes SEC is Taking Closer Look at National Exchanges, and US Senator Calls For Reform of Money Market Mutual Fund Industry

Published on: September 24, 2012 | by Shepherd Smith Edwards & Kantas, LLP

At the Security Traders Association’s yearly market conference in DC, Richard Ketchum, Financial Industry Regulatory Authority’s chief executive officer and chairman, said that due to growing problems the SRO is heightening its surveillance and exam focus on the options industry. He noted that there has been an increase in complaints about the use of algorithmic activities to perform possible manipulations to “move underlying equity” and that this could cause a financial firm to “take advantage” of options positions that were pre-established.

Per BNA, Ketchum said that FINRA has set up surveillance alerts to catch too much messaging traffic from algorithms that update quotes at vicious rates when options are involved. It is also looking at firms to make sure they have adequate controls related to algorithms and it will keep checking for options orders that may have possibly inaccurate coding.

The week before, Ketchum reported that the FINRA Board of Governors had given the SRO’s staff the authority to propose to the SEC rule changes to promote greater investors use of BrokerCheck. This free tool allows investors to look up former and current firms and brokers that are registered with the SRO, and representatives and investment advisers, to decide whether the should work with them. (This information would also have to be available on websites that were maintained by/for an individual associated with these firms.) Per amendments that have been proposed to the FINRA Rule 2267, which covers the education and protection of investors, member firms would have to make sure that their company sites provide a direct link to BrokerCheck. Meantime, a change has also been proposed to FINRA Rule 8312 that would give the public permanent access to information available through BrokerCheck about foreign and state cases against associated persons who were let go after a settlement was reached. It would also per the board’s approval, make downloads of BrokerCheck information available.

Merrill Lynch Told to Pay $3.6M to Brazilian Heiress for Brother’s Alleged $389M in Unauthorized Trading

Published on: September 22, 2012 | by Shepherd Smith Edwards & Kantas, LLP

A Financial Industry Regulatory Authority panel is ordering Merrill Lynch (MER), a Bank of America Corp. (BAC) unit, to pay $3.6 million to a Brazilian heiress who contends that she lost millions of dollars because of unauthorized trades that her brother made in her account. The securities arbitration case was submitted on behalf of Sophin Investments SA, which was established to manage Camelia Nasser de Kassin’s inheritance from a relative.

Sophin contended that Merrill allowed Camelia’s brother, Ezequiel Nasser, to make unauthorized trades worth $389 million using her accounts at two Merrill Lynch units. He allegedly invested in high risk securities, including naked puts in Lehman Brothers and Bear Stearns (BSC) that created a deficit of at least $8 million.

The plaintiff claimed inadequate supervision, civil fraud, unauthorized trading, and other alleged wrongdoings, and asked for compensatory damages of $21 million for the $9.5 million that had been placed in the accounts, $9.5 million as an investment return, and the rest for commissions that went to Merrill. The financial firm then submitted a counterclaim alleging that their contract together had been breached. It asked the FINRA panel for almost $2.5 million in damages for the deficit in Sophin’s retail account and close to $3 million for the swap account. Merrill also filed claims against Marc Bonnant, who is the lawyer who set up the accounts on Sophin’s behalf, as well as against Ezequiel.

The FINRA panel found both Sophin and Merrill liable. While it told Merrill to pay $6.1 million in compensatory damages to Sophin, the latter was told to pay the financial firm $2.5 million-hence the $3.6 million that Merrill was ultimately ordered to pay Sophin. Also, while the panel acknowledged that Bonnant paid less than adequate attention to his fiduciary duties to Sophin, it said that Merrill exhibited “lapses” in hits own supervising and record keeping.

The claims made against Ezequiel Nasser by Merrill were denied. The arbitration panel said Bonnant, who has been based in Europe, isn’t under its jurisdiction. (Merrill has accused him of authorizing the trades that it had made for Sophin and misrepresenting the client’s investment experience, financial state, and tolerance for risk.)

This case is just one aspect of the bigger dispute between Merrill Lynch and members of the Nasser banking family over alleged trading losses. For example, in 2008, the financial firm sued the Nassers for huge trading losses that result in a $99 million judgment. A New York appeals court upheld that ruling.

Unauthorized Trades
A broker or advisor has to get an investor’s permission to sell or buy securities for an investor. Otherwise, the trade is not authorized. When “trading authorization” is obtained to sell or buy in that client’s account, trades can be made without getting in touch with the client. However, this is a limited power of attorney.

Unfortunately, many investors suffer losses because of unauthorized trades.

Merrill Lynch must pay $3.6 million to Brazilian banking heiress, Merrill Lynch, Reuters, September 12, 2012

Merrill Lynch Ordered to Pay $3.6 Million to Brazilian Heiress, Wall Street Journal, September 12, 2012

Bonnant V. Merrill Lynch (PDF)

More Blog Posts:
Shepherd Smith Edwards and Kantas LLP Pursue Securities Fraud Cases Against Merrill Lynch, Pierce, Fenner, & Smith, Purshe Kaplan Sterling Investments, and First Allied Securities, Inc., Stockbroker Fraud Blog, May 10, 2012

Merrill Lynch Agrees to Pay $40M Proposed Deferred Compensation Class Action Settlement to Ex-Brokers, Stockbroker Fraud Blog, August 27, 2012

Shepherd Smith Edwards and Kantas LLP Pursue Securities Fraud Cases Against Merrill Lynch, Pierce, Fenner, & Smith, Purshe Kaplan Sterling Investments, and First Allied Securities, Inc., Stockbroker Fraud Blog, May 10, 2012 Continue Reading ›

Municipal Advisor Bill Passes Vote by US House of Representatives

Published on: September 21, 2012 | by Shepherd Smith Edwards & Kantas, LLP

The House of Representatives has passed a bill that narrows the definition of a municipal advisor. HR 2827 also exempts certain market participants from being subject to certain rules and says that under Dodd-Frank Section 975 already regulated entities are not municipal advisors. This bill comes after the SEC proposed its own definition of municipal advisor two years ago that some considered too inclusive and/or not in line with Congress’s intent.

In an effort to get wide bipartisan support, Rep. Robert Dold (R-Ill) and Rep. Gwen Moore (D-Wis.) modified the legislation and put back in the federal fiduciary standard for municipal advisers that ha been taken out. Democrats had expressed worry that getting rid of the uniform federal standard might reduce the strength of oversight on the industry. The bill also no longer has “blanket exemptions” to its definition of a municipal advisor, including the categorical language stating that broker-dealers, banks, and municipal securities dealers are not municipal advisors. However, per the House Financial Services Committee, which unanimously approved the bill earlier this month, if such entities were to only take part in certain activities, they would still not be included in the definition.

The bill passed the committee with an amendment by Rep. Barney Frank (D-Mass.) that would take out the language that defines a municipal advisor as someone “engaged … in writing” to give a municipality advice. He believed the wording might have set up a possible loophole from municipal advisor regulation by letting parties not have a written contract. The municipal adviser definition, however, would still include those that “engaged … for compensation.” Also moving forward to the House with the bill was an amendment by Dold letting persons “associated” with a municipal advisory firm to not have to individually register with the SEC. Dold said that the Commission had requested this.

SEC Charges Advanced Equities with Securities Fraud Related to Private Equity Offerings

Published on: September 20, 2012 | by Shepherd Smith Edwards & Kantas, LLP

The Securities and Exchange Commission is charging investment advisory firm and broker dealer Advanced Equities Inc. and its cofounders Keith G. Daubenspeck and Dwight O. Badger with securities fraud related to two private equity offerings that were made for a California alternative energy company. Badger, who spearheaded the sales initiatives for the offering and allegedly made misstatements about the company’s finances, is charged with misleading investors. Daubenspeck is accused of not correcting these misstatements, therefore allegedly inadequately supervising Badger. Daubenspeck is the Advanced Equities’ parent company’s ex-chief executive and board chairman. All three parties have agreed to a cease-and-desist order entry but they are not denying or admitting to the charges.

Per the SEC, for the Silicon Valley company’s 2009 offering, Badger led close at least 49 outside investor presentations and a minimum of five in-house sales calls with Advanced Equities brokers related to this between January and March 2009 alone. He claimed that the energy company had over $2 billion in order backlogs when actually this never went above $42 million. He also said that a national grocery chain had placed a $1 billion order even though that was only worth $2 million, and although a letter of intent for making future buys was signed, it was a non-binding one. Badger also is accused of making a misstatement when he said that a US Department of Energy loan of over $250 million had been granted to the company after it had sought a $96.8 million loan. (He also allegedly again made a misstatement about the loan application in 2010 during the follow-up offering.) His misstatements were then repeated to investors during phone calls and in e-mails by brokers, Advanced Equities’ investment banking team, and the broker-in-charge at the firm’s branch in New York. (The SEC believes that these individuals should have known that the statements that Badger made were untrue.)

Meantime, Daubenspeck allegedly did not say anything after he heard Badger issue the misstatements about the grocery store order, order backlog, and loan application even though he took part in at least two of the internal sales calls attended by Advanced Equities brokers during the 2009 offering. The SEC contends that although these misstatements should have been warning signs that there was the danger that the wrong information would get to investors, Daubenspeck allegedly did not take reasonable steps to fix these misstatements and did not properly supervise Badger.

Proposal Getting Rid of Ban Against General Solicitation and Advertising For Certain Private Placements Ended up with Narrower Scope Because of Short Deadline, Said SEC Deputy Director

Published on: September 20, 2012 | by Shepherd Smith Edwards & Kantas, LLP

According to the SEC’s Division of Corporate Finance deputy director Lona Nallengara, a short deadline for rulemaking resulted in its proposal to eliminate the ban on general solicitation and advertising for private placements only tackling the elements ordered by the Jumpstart Our Business Startups Act’s Title II provisions. Nallengara said that the proposal looks at the issues that the Commission considers important to deal with now, and that other issues, such as whether the definition of “accredited investor” needs to be revised and there should be a wider examination of Regulation D offerings and related provisions are likely to be addressed later.

Per the JOBS Act’s Title II, the regulator has put out a proposal that lets issuers generally solicit investors or advertise offerings under Rule 144A and Reg D Rule 506 of the 1933 Securities Act for offerings that are only sold to qualified institutional buyers or accredited investors. However, contrary to what some expected, the Commission didn’t propose a series of steps or a method that Rule 506 issuers can use to verify that purchasers are accredited buyers. Rather, the proposal mandates that issuers take steps that are objectively reasonable to make sure accreditation status is based only on the particular circumstances and facts of the transaction.

Nallengara, who spoke on a CorporateCounsel.net JOBS ACT panel, acknowledged that there are differences of opinion on how strict the verification method for making share that buyers are accredited should be. Issuers don’t want the requirements to be too much of a burden while investors and state regulators want tough safeguards to make sure that only sophisticated investors are buying. He said the SEC is open to comments on the proposed rule’s verification portion. However, he wouldn’t give more concrete details about when the Commission plans to adopt a final rule per Title II (but the comment period, which is 30-days long, places the rulemaking for the proposal on a “faster track.”)

Rodman & Renshaw Exits Brokerage Business

Published on: September 19, 2012 | by Shepherd Smith Edwards & Kantas, LLP

Rodman & Renshaw LLC is getting out of the brokerage business. It turned in its Form BDW – the Uniform Request for Withdrawal of Broker Dealer- to the Financial Industry Regulatory Authority on Friday. Just two days before, on September 12, the brokerage firm, which is a Direct Markets Holdings Subsidiary, told the SRO that it isn’t in compliance anymore with the Securities and Exchange Commission’s Net Capital Rule 15c3-1. Because of this, besides liquidating transactions, the once leading investment bank will no longer be involved in the securities business. Rodman & Renshaw may also sell its assets.

Just last month, FINRA fined Rodman & Renshaw $315,000 for alleged supervisory and information barrier violations involving interactions that took place between its investment banking and research functions. FINRA maintains that because of supervisory deficiencies, at least two incidents occurred involving a research analyst taking part in attempts to solicit investment banking business and an incident involving another research analyst trying to organize a payment from a public company happened. Both individuals have been sanctioned and will serve out suspensions.

According to Investment News, failing to meet regulatory-net-capital levels is often a sign that the end is near for a financial firm-unless it manages to recoup and stay in operation. Since the 2008 economic crisis, a number of brokers-dealers have struggled to keep their reserves up. Unfortunately, hundreds of brokerage firms have been unable to do so, and many of them have had to close down. FINRA says that in the last five year, there has been a 13% drop in the number of broker-dealers. Compare the 4,370 brokerage firms in operation last month to the 5,005 that were in business in 2007.

Texas Securities Fraud: Ex-Stanford Chief Investment Officer Gets 3-Year Prison Term for Her Part in $7 Billion Ponzi Scam

Published on: September 18, 2012 | by Shepherd Smith Edwards & Kantas, LLP

Three months after pleading guilty to obstruction of an SEC proceeding related to its probe of the Stanford Ponzi scam, ex-Stanford Financial Group chief investment officer Laura Pendergest-Holt, 38, has been sentenced to three years behind bars. Texas financier R. Allen Stanford defrauded investors of over $7 billion. Pendergest-Holt was the first person indicted in the case involving him.

According to prosecutors, a number of former Stanford executives worked to conceal the true financial health of the bank and gave the SEC misleading information during its investigation into the Ponzi scheme in 2009. Pendergest-Holt had been scheduled to go to trial on 21 criminal counts before she decided to plead guilty to the single count of obstruction.

She owned up to lying to the firm’s financial advisers and investors, including telling them that the international money managers that she oversaw had placed most of the bank’s assets in investments that were liquid and conservative. She also claimed to supervise the bank’s whole investment portfolio, when she was actually only familiar with about two portions of it comprising just 12% of total assets. It wasn’t until 2009 that she found out that the portfolio’s third and biggest tier was made up of real estate that was overvalued, high-risk private equity investments, and a $1.6 billion personal loan issued to Stanford himself. Pendergest-Holt admitted that when she met with the SEC after making that discovery she purposely tried to stall the Commission’s investigation. She said that she had wanted to give the company-not Mr. Stanford-an opportunity to amend the disclosures so they “could fall into line.”

According to Assistant U.S. Attorney Jason Varnado, Pendergest-Holt was allowed to plead guilty to just one criminal count because she didn’t know that Stanford was running a Ponzi scam until it was almost over. However, although her legal team tried to get her confinement moved from prison to her home or a halfway house, Varnado opposed the change of venue. He pointed out that because of federal sentencing guidelines, this could have left her with a much shorter sentence. Her efforts to have another month at home with her family, including her 16-month old daughter, were also rejected. (Pendergest-Holt’s friends and family have promoted the image of her as just another Stanford Ponzi scam victim who also lost a great deal financially, Varnado, however, said that he didn’t think Pendergest-Holt, who also gave her own statement in court, was taking responsibility for her actions, which included misleading investors. He said that not only was she not a victim, but “she is a federal felon.”)

Meantime, Stanford is serving his 110 years behind bars in Florida. His Stanford International Bank in Antigua sold fake CDs to investors and he took their money to fund a number of businesses that failed, support his lavish lifestyle, and bribe regulators. All the while, investors from over 100 countries were wrongly led to believe that their money was being invested in bonds, stocks, and other securities.

Ex-Stanford Exec Gets 3 Years for $7B Swindle, ABC News/AP, September 13, 2012

Stanford Ex-Investment Chief Pendergest Holt Gets 3 Years, Bloomberg News, September 13, 2012

United States v. Laura Pendergest-Holt, Gilberto Lopez and Mark Kuhrt, Court Docket Number: H-09-342, US Department of Justice

More Blog Posts:
Ex-Stanford Group Compliance Officer, Now MGL Consulting CEO, Says SEC’s Delay Over Whether to Charge Him in Ponzi Scam is Denying Him Right to Due Process, Stockbroker Fraud Blog, July 24, 2012

Stanford Ponzi Scam Investors File Class Action Lawsuit Suing The Securities and Exchange Commission, Stockbroker Fraud Blog, July 25, 2012

Texas Financier Allen Stanford’s Ponzi Scam: SIPC Asks District Court to Toss Out SEC Lawsuit Seeking to Reimburse Fraud Victims, Stockbroker Fraud Blog, March 5, 2012 Continue Reading ›

SEC Enforcement Roundup: Commission to Make Closer Examination of Revenue-Sharing Between Brokers and Investment Advisers, NYSE to Pay $5M For Alleged Compliance Issues, and Enforcement Director Khuzami Praises His Division’s Performance

Published on: September 18, 2012 | by Shepherd Smith Edwards & Kantas, LLP

The Securities and Exchange Commission is ramping up its examination of revenue-sharing arrangements between brokers and investment advisers. It made this announcement in a related administrative order involving advisory firms Focus Point Solutions Inc. and H Group Inc. and their owner Christopher Keil Hicks, who have consented to pay $1.1 million to settle charges that they did not disclose to their clients certain revenue-sharing payments that posed possible conflicts of interests.

Hicks and Focus Point Solutions are accused of not telling clients that in return for specific services, they were getting a portion of the revenues from a brokerage firm that managed mutual funds, which were being recommended to investors. Hicks’ other firm, H Group Inc., allegedly improperly voted on its clients’ behalf to make Focus Point a sub-adviser to one mutual fund (most of that fund’s shareholders were clients of H Group.)

Meantime the New York Stock Exchange has consented to pay $5 million to settle compliance failure charges that allegedly gave some customers an advantage over certain trading information. The Securities and Exchange Commission announced the charges, which are the first of its kind, on September 14. This is also the first financial penalty for an exchange.

According to the Commission, under Regulation NMS, market data cannot be sent to proprietary customers before the same information has been sent out in consolidated feeds, which give quote and trade information to the public. Yet, starting in 2008, the NYSE allegedly violated this regulation over a certain time period when it sent the data through its proprietary feeds first. NYSE also allegedly failed to ensure proper compliance when it did not correctly monitor the proprietary feeds’ speed compared to the speed of the consolidated feeds. According to SEC Enforcement Director Robert Khuzami, even just “milliseconds” of a head start in terms of access to market data “disproportionately disadvantages retail and long-term investors.”

Although the NYSE is settling, it is not denying or admitting to wrongdoing. It and parent NYSE Euronext Inc. (NYX), however, have consented to having an independent party examine their market data delivery systems. On its website NYSE said that the SEC did not accuse it of taking part in any intentional misbehavior or that the data delays had hurt any investors.

Khuzami also recently spoke about the SEC’s other enforcement efforts. At a Practicing Law Institute conference, he said that the Division of Enforcement is doing well. He partially credits its performance to an organizational restructuring that took place in 2010, the agency’s whistleblower program, and stronger investigative work. Khuzami noted that the restructuring generated five specialized units, which has let SEC staff become experts in certain enforcement areas, and, with the help of data-driven analytics, allowed the Commission to look into violations.

Khuzami said that contrary to the idea that his division has not been investigating purported violations that allegedly took place during the 2008 economic crisis, these investigations have been taking place and that 75% of them have gone to litigation. Also, he noted that the SEC has begun a number of initiatives to try to identify additional violations, such as private fund analysis for zombie-funds and looking at whether hedge fund performances are aberrational compared to a certain strategy’s benchmark.

Khuzami also spoke about the SEC whistleblower program that was created under the Dodd-Frank Wall Street Reform and Consumer Protection Act, saying that it has already been “successful.” In just one year, August 2011 – 2012, the program has received about 2,870 tips—about 8 a day—with financial fraud, disclosure, market manipulation, and offering fraud among the most common alleged violations named. Khuzami said most tips in the US have from Texas, Florida, New York, and California. Whistleblower fraud tips have also come from abroad.

In re Focus Point Solutions Inc., SEC, Admin. Proc. File No. 3-15011 (PDF)

NYSE fined after some clients got early look at data, Reuters/Yahoo News, September 14, 2012

Division of Enforcement, SEC

More Blog Posts:
SEC Commissioners Paredes and Gallagher ‘Dismayed’ Over Chairman Schapiro’s Announcement Regarding Failed Money Market Mutual Fund Industry Overhaul Proposal, Institutional Investor Securities Blog, September 7, 2012

Institutional Investor Securities Roundup: FHFA Can Start Discovery in MBS Litigation Against Banks, SEC Sues Puerto Rico Man Over Alleged $7M Scam, and Assets of Two Colorado Men are Temporarily Frozen Over Alleged Promissory Note Ponzi Scheme, Institutional Investor Securities Blog, August 31, 2012

SEC Study Reports that Many Retail Investors Are Financially Illiterate, Stockbroker Fraud Blog, September 5, 2012

Technology and Market Developments Warrant Review of IPO Quiet Period, Says SEC Chairman Schapiro

Published on: September 15, 2012 | by Shepherd Smith Edwards & Kantas, LLP

Replying to House Oversight Committee Chairman Darrell Issa’s (R-Calif.)’s worries about the IPO process, Securities and Exchange Commission Chairman Mary Schapiro wrote him a letter that, while standing by the existing structure, acknowledged that the Commission does need to take a look at the rules involving the “quiet period.” Per the rules, companies are not allowed to talk about their stock price to an offering during this time. Issa had recently told her that the SEC and Congress needed to take a more in-depth examination of both the way IPO’s are being priced and current communication restrictions.

Citing Facebook’s (PB) recent IPO in May, Issa pointed out that its underwriters gave negative forecasts about the company to certain institutional investors, which was a communication that current IPO rules allow. Retail investors, however, were not privy to this same information, so that when FB’s share price dropped significantly soon after trading started, it was the retail investors who were the ones that sustained most of the losses. Issa believes that quiet period rules discourage effective price discovery, which gives underwriters too much discretion in being able to establish IPO prices.

Although Schapiro did not talk about the Facebook IPO in her 32-page response, she argued that communication rules let the underwriter and company employ different means of figuring out the right securities price while simultaneously making sure that all prospective investors are given access to information that is consistent. She also spoke about how the quiet period is for making sure that all investors look at the offering documents of an issuer to get information about the IPO. Shapiro acknowledged that the SEC should look at current restrictions and she was adamant that making sure there is a proper regulatory structure for IPOs is integral to the “Commission’s mission to protect investors, facilitate capital formation, and maintain fair and orderly markets.”

Commenting on the exchange between Issa and Schapiro, Securities Lawyer William Shepherd had this to say: “The securities markets now operate at warp speed, but technological advances can work in two directions. Better technology can benefit all participants. Yet, better technology can also disadvantage all but the highest tech financial firms. The SEC should remember its role to protect investors from such disparities. If greater information is available to any investor, it should be easily available to all.”

Specifically addressing the “quiet period”, Shepherd, who is the founder of a stockbroker fraud law firm that represents clients throughout the US, said, “The required ‘quiet period,’ when a new issue is eminent, should not be violated to benefit a few, as was the situation during the Facebook initial public offering. Rather than working on plans to change the ‘quite period’ rules for the future, the SEC should first file charges against those who broke the current rule.”

Read Schapiro’s Letter to Issa (PDF)

More Blog Posts:
REIT Retail Properties of America’s $8 Public Offering Results in Major Losses for Fund Investors, Institutional Investor Securities Blog, April 17, 2012

Should Retail Investors Be Given Greater Access to IPO Information?, Stockbroker Fraud Blog, June 29, 2012

Will the JOBS ACT Will Expand Private Offerings But Hurt Public Markets?, Institutional Investor Securities Blog, July 6, 2012 Continue Reading ›