A Bad Broker Found His Firm; You Should Avoid Them Both
(Jun 2016)
In June 2016, a FINRA panel in Albuquerque, NM ordered Centaurus Financial, Inc. to pay the Claimant, a recent widow when the subject conduct began, $150,000 plus all hearing fees after reasoned findings that "the investments Hashemian recommended while at Centaurus were not suitable", that Centaurus was responsible for Hashemian's actions which "constituted fraudulent and negligently made misrepresentation and omitted material information in the sale of investments" and that "Centaurus...
Smaller Brokerage Firms Are Even Worse!
(May 2016)
Last week we posted Have 1.3% or 7.3% of Stock Brokers Engaged in Misconduct? explaining that the competing estimates of broker misconduct differ because of differences in their definition of misconduct and the sample of brokers studied.
Firms with 400 to 999 Brokers Are Much Worse Than Larger Firms.
In last week's post, we listed the 100 highest risk brokerage firms with 400 or more registered brokers sorted by the percentage of their brokers associated with Investor Harm Events as of...
Investors Lose Over $7 Billion in SandRidge Energy Stock and Notes
(May 2016)
In recent months, investors have lost billions of dollars as a result of their investments in SandRidge Energy, Inc. stock, notes and bonds. Sandridge is involved in the exploration and production of oil and natural gas in the continental United States with some interests in the Gulf of Mexico.
SandRidge's stock price has lost 99% of its value since 2014, erasing more than $4 billion of market capitalization. In addition to near complete losses to SandRidge stockholders, investors have lost...
Have 1.3% or 7.3% of Stock Brokers Engaged in Misconduct?
(May 2016)
In our recent working paper How Widespread and Predictable is Stock Broker Misconduct? we reconcile estimates of misconduct, demonstrate that broker misconduct is predictable and explain that ostensibly publicly available BrokerCheck data could be used to help investors avoid bad brokers and bad brokerage firms if only it were made truly public instead of only speciously so.
Jason Zweig's recent column in the Wall Street Journal Is Your Broker Good or Bad? discussed our research problem. In...
Nicholas Schorsch Cheated Investors in Recent Nontraded REIT Mergers
(Dec 2015)
Roll-ups
Recently we posted More Non-traded REIT Perfidy: The Roll-up Grift.
To re-cap: Non-traded REITs are required by state securities regulators to include language in their bylaws which closely tracks the 2007 North American Securities Administrators Association's Statement of Policy Regarding Real Estate Investment Trusts.1
NASAA guidelines protect shareholders in REITs which have not been trading for at least 12 months before being rolled-up. The protections include the requirement...
More Impossible Trade Prices Caused by Auto-liquidators: Option Combinations
(Dec 2015)
In three previous blog posts, we documented how auto-liquidators execute option trades at distorted prices to their clients' detriment. The price distortions are caused by the price impact of large sell or buy orders on thinly traded securities. These distortions were reversed within minutes, but not before causing investors millions of dollars of unnecessary losses.
In "The Recent Market Turmoil Spells Trouble for Auto-liquidators like Interactive Brokers", we showed that thinly traded...
More Non-traded REIT Perfidy: The Roll-up Grift
(Nov 2015)
We have extensively researched non-traded REITs and concluded that these illiquid direct participation programs have cost investors $50 billion compared to more liquid investments in traded REITs. Our Fiduciary Duties and Non-traded REITs provides a good overview of the problems with non-traded REITs and a summary of our empirical results. An Empirical Analysis of Non-Traded REITs contains a more detailed explanation of our research. See our previous blog posts on individual non-traded...
Only a Faulty Auto-liquidator Pays More for An Option Than it Can Ever Be Worth
(Nov 2015)
In two previous blog posts we documented how auto-liquidators appear to have executed option trades at distorted prices to their clients' detriment on August 24, 2015. The price distortions were caused by massive sell or buy orders on thinly traded securities being dumped into the market by auto-liquidation programs. These distortions were reversed within minutes, but not before causing investors millions of dollars of unnecessary losses.
In "The Recent Market Turmoil Spells Trouble for...
UBS Puerto Rico Still Can't Shoot Straight
(Oct 2015)
We've written extensively about the investment carnage caused by UBS Puerto Rico's management and sales of closed end municipal bonds funds. A summary of our findings can be found here: UBS Puerto Rico's Bond Fund Debacle: What We Know So Far .
Others will have to decide whether UBS was just incompetent or also wolfishly indifferent to Puerto Rico investors but recent evidence demonstrates that UBS Asset Managers of Puerto Rico continues to be, at least, incompetent.
The fourteen closed end...
More Signs of Trouble for Auto Liquidators
(Oct 2015)
In "The Recent Market Turmoil Spells Trouble for Auto Liquidators Like Interactive Brokers" we wrote about how the market decline on August 24, 2015 revealed continuing problems at auto-liquidating brokerage firms that cater to active traders. These active traders' accounts typically are subject to "portfolio margin" requirements which we have written about at length. 1
We showed that thinly traded long-dated, deep out-of-the money SPX put options were bought on August 24, 2015 at...
