Investor Lawyers Blog

NASD and NYSE Group Inc. Move Toward SRO Merger

Published on: December 14, 2006 | by Shepherd Smith Edwards & Kantas, LLP

The NASD (National Association of Securities Dealers) and the New York Stock Exchange (NYSE) Group Inc. took a major step forward toward developing a consolidated, single, not-for-profit self-regulatory organization (SRO). They recently signed a historic letter of intent for the merger. Before the SRO can be created however, both parties’ memberships and the SEC have to approve the bylaw amendments. The SRO is expected to be up and running after the first quarter of 2007.

With a newly consolidated group working toward more efficient regulation, costs would be cut for broker-dealers because there no longer would be any duplicate oversight. There would also be one enforcement staff, one set of rules, and one set of examiners. Mary L. Shapiro, NASD chairman and chief executive officer, will be CEO of the organization. CEO of NYSE Regulation Richard G. Ketchum would remain in his position while also becoming the new SRO’s chairman of the board of governors.

An SRO is a nongovernmental organization that has been entrusted to regulate its own members. The purpose of the New SRO is to enhance regulatory efficiency and consistency, and millions of dollars are expected to be saved once the new operation is fully running.

For Investors, REIT’s Go Global

Published on: December 12, 2006 | by Shepherd Smith Edwards & Kantas, LLP

REIT Investors around the world can now take advantage of a global property boom in commercial real estate. Whereas several years ago, only six other nations, including the United States, allowed investors to invest in real estate investment trusts, there are now nearly 24 countries that either have established REITs or are structuring them.

REIT’s allow investors to become exposed to real estate without having to involve themselves in private investment outfits or direct ownership. Typically, real estate investment trusts own offices, apartments, and other kinds of commercial real estate, including warehouses, shopping malls, and hotels. Shareholders receive dividends based on 90% of all taxable income.

Examples of two countries that are developing REIT laws for investors:

SEC Files Emergency Action Against BMG Advisory Services Inc. And Ethan Thomas Company To Stop Alleged $2 Million Senior Citizen Investor Fraud Case

Published on: December 7, 2006 | by Shepherd Smith Edwards & Kantas, LLP

On November 30, The Securities and Exchange Commission made moves to stop what it is calling an “ongoing $2 million fraud” against the elderly by filing an emergency action in the U.S. District Court for the Eastern District of New York. The SEC says that Peter Dawson and his two companies, Ethan Thomas Co., Inc. and BMG Advisory Services Inc., misappropriated investor funds and fraudulent solicitations from elderly investors, including an 85-year old woman, an Episcopal priest, and a retired, legally blind NY City firefighter.

The commission says that Dawson acquired over $2 million from no less than seven investors, and that he told his elderly clients that they should mortgage their home, surrender their variable annuity policies, and transfer the proceeds to Ethan Thomas, where Dawson could manage these assets through BMG. The SEC is accusing Dawson of making misleading and false statements to these clients regarding their funds and of promising each of them a 12-15% return on every investment.

The SEC says that Dawson authorized-to himself and his wife-payments of up to $17,378.08 from a BMG account between March and April 2006. Later that year, he authorized an additional $53,326 to himself and an additional $68,015 to his wife. He neglected to pay his clients’ mortgages, and when some of his clients found out, they called him to find out why. Dawson closed down his BMG office and unsuccessfully tried to commit suicide.

Oppenheimer CEO Charged by NASD with Knowingly Producing Inaccurate Data

Published on: January 9, 2006 | by Shepherd Smith Edwards & Kantas, LLP

The NASD is charging Albert Lowenthal, Oppenheimer & Co.’s CEO, with knowingly turning in data that was not complete or accurate when it responded to the self-regulatory agency’s request that the brokerage firm assess its own practices pertaining to mutual fund breakpoint discounts. This latest complaint stems from a report issued in 2003 by NASD and other regulators that demonstrated how almost one in three mutual fund transactions in front-end load mutual funds did not get a breakpoint discount even though they looked to be eligible for one.

Because of this, NASD told about 2,000 brokerage firms that sold front-end load mutual funds during the two years previous to perform their own assessment of self-compliance regarding related requirements and report their findings. Oppenheimer (OPY) was one of the broker-dealers that got this request.

The breakpoint sweep led to investors getting over $130 million back. These are breakpoint discounts they should have received previously.