The Financial Industry Regulatory Authority’s chairman and chief executive, Richard G. Ketchum, says that despite failing to stop or even stem the financial crisis, the investment industry’s non-profit, self-regulatory agency is up to the challenge of being the country’s top securities enforcer. “We want to be in there stopping the activity, not just cleaning up the bodies. We’ve changed the organization to be able to respond more quickly. I think we’re more agile now than we were three years ago,” Ketchum told the New York Times.
The NASDAQ Stock Market is proposing a seasoning period for reverse-merger companies that want to be listed on its exchanges. The plan would require such companies to trade for at least six months on the Over-the-Counter Market or another lower exchange, and to maintain a share price of at least $4 for 30 of the first 60 days after applying for a listing on one of the major exchanges. NASDAQ is developing the plan in a bid to block what it sees an all too easy route for companies – particularly foreign ones – to circumvent scrutiny and raise capital from American investors by combining with publicly traded shells, according to TheStreet.com.
Some investors went after the Securities and Exchange Commission in a civil suit, claiming the agenyc failed to protect them by taking action against Bernie Madoff. It didn’t go their way, exactly. Ashby Jones at the Wall Street Journal says “a federal judge on Tuesday dismissed the suit, which alleged the SEC had acted with ‘gross negligence.’ U.S. District Judge Laura Swain ruled that the plaintiffs had failed to ‘identify any specific, mandatory duty that the SEC violated,’” but at the same time, she ripped the agency, “calling its behavior ‘sloppy,’ ‘uninformed,’ and ‘irresponsible.’”
Last year, the iSecurity and Exchange Commission’s nspector general faulted the agency for failing, over a period of eight years, to take action against alleged Ponzi schemer Allen Stanford. In a followup report today, things haven’t improved much. From the Washington Post: “Loosely translated, SEC officials responsible for examining financial firms may be so concerned about their batting averages that they refrain from recording their suspicions in an SEC database of tips, complaints and matters referred to colleagues in the SEC’s enforcement division for possible follow-up…”
Charlie Engle, encouraged by his broker, lied about his income on two mortgage applications for stated-income loans (also called ‘liar loans’ because no one was required to verify the numbers provided by applcants). An IRS agent started looking at Engle’s finances after he saw him in a documentary training to run marathons. The agent wondered how Engle could afford to train, and thus began an investigation that ended with Engle in prison, not for tax fraud, but for lying on his mortgage applications (it took a female undercover agent to wrestle a supposed confession out of Engle). “His punishment stands in stark contrast to that of the Countrywide chief executive Angelo Mozilo, who personally pulled in millions of dollars from his company’s embrace of low-documentation loans like Engle’s,” says the Huffington Post.
The eight plaintiffs, with a combined loss of nearly $18.7 million, say the agency’s negligence and misconduct caused their losses, and that they should’ve caught Stanford’s “massive” Ponzi scheme long before it collapsed. Last year, according to Bloomberg, the SEC’s inspector general faulted the agency and some specific employees for not taking action against Stanford sooner. They’d suspected Stanford was operating a Ponzi scheme for eight years before doing anything about it, the inspector general said.
Promising relief to investors already taken in by a bad investment (maybe through a pump-and-dump scheme), fraudsters swoop in and offer to help recover victims’ money by buying the bad shares, as long as the investors agree to pay “transfer fees” and other costs. It’s a double-hit; once they’ve got all the money they can, they’re gone and the bad investment is still bad. The so-called reload scams come and go in waves, says the Saskatchewan Financial Services Commission, and they’re seeing a lot of them rising up in the United States. They’ve got a warning, according to the Post-Leader: “Anything that’s asking you to send more money, good money to recoup the bad, you’ve got to really be careful.”
The AMEX has halted trading in the shares of NIVS IntelliMedia Technology Group Inc (AMEX: NIV) and China Intelligent Lighting & Electronics Inc. (AMEX: CIL).
NYSE Regulation Inc., which operates the exchange, said it was seeking additional information from both companies.
“NYSE Regulation is evaluationg both the need for certain public disclosure, as well as the overall suitability for the continued listing of the Company’s common stock. In this regard, NYSE Regulation is in the process of requesting additional information from the Company in connection with such assessment,” the organization said in each of the halt orders.
According to Securities and Exchange Commission filings, the chief executive of NIVS IntelliMedia, Tianfu Li, is the brother of the chief executive of China Intelligent Lighting, Xuemei Li.
The Securities and Exchange Board of India, or SEBI, says it’s noticed that brokers and their employees have been circulating unauthenticated news and rumors via blogs and other social media with the potential to damage the markets. It wants that to stop, and says that brokers should put a code of conduct in place, restrict their employees’ access to blogs and keep records of all employee social media activities. || Earlier: Before you ‘friend’ the SEC
Absaroka Capital Management LLC issued a follow up report on China Shen Zhou Mining & Resources Inc. (AMEX: SHZ), pointing out what it said were material misstatements or errors in the company’s Securities and Exchange Commission fiilings. The report, written as a letter to shareholders, also said that an analysis of the company’s financial statements using a forensic auditing tool raised additional concerns.
China Shen Zhou Mining issued a rebuttal March 10 to the original report. It disclosed in a subsequent SEC filing that its chief financial officer had resigned, making him the fourth CFO to leave that position in three years. Despite the negative reports, China Shen Zhou Mining’s shares have been rallying, along with shares of other Chinese minerals producers.