FINRA and BBB Launch Smart Investing Website to Educate Consumers on Financial Fraud
(Dec 2012)
The FINRA Investor Education Foundation in conjunction with the Better Business Bureau (BBB) announced the launch of their new website, BBB Smart Investing, last Friday. Smart Investing provides investors with "tools and information to help [them] better protect and manage" their money.
One useful feature that we've noted on the blog before is the FINRA BrokerCheck, a free search engine for disclosures, regulatory action and fines against brokers and brokerage firms. The search generates a...
CFTC Amendment to Rule 4.5 Survives Challenge
(Dec 2012)
Last Thursday, a Federal judge ruled on a challenge to the CFTC's February 2012 amendment to Rule 4.5 that will require mutual funds and ETFs that have sufficient non-hedging participation in derivative markets to register with the CFTC as commodity pool operators (CPOs). The CFTC defines a CPO as a "person engaged in a business similar to an investment trust or a syndicate and who solicits or accepts funds, securities, or property for the purpose of trading commodity futures contracts or...
Massachusetts Securities Regulators Getting Tough on Non-Traded REITs
(Dec 2012)
LPL Financial, the largest independent broker-dealer in the US, is being sued by Massachusetts securities regulators for "numerous regulatory violations in connection with the sale of non-traded REITs." We have covered non-traded REITs extensively on this blog, as well as in a detailed working paper, and it appears that many of the problems that have been identified with these products are finally attracting attention from regulators.
According to the complaint, the action is specifically...
FINRA Fines and Suspends David Lerner for Apple REIT Ten Misrepresentations
(Oct 2012)
Today, FINRA fined David Lerner Associates $14 million, including $12 million in restitution to investors, for charging excessive markups and misleading investors in a non-traded real estate investment trust (REIT) known as Apple REIT Ten. They also suspended David Lerner himself for one year from the securities industry and for two more years from acting as principal for a securities firm. From the news release:
As the sole distributor of the Apple REITs, DLA solicited thousands of...
New Suitability Rules Now in Effect
(Aug 2012)
FINRA was created in 2007 through a combination of the former NASD with the regulatory functions of the NYSE. Since then, FINRA has been attempting to consolidate each entity's old rules into a single manual. Although progress has been slow, recently new suitability rules took effect. This much-needed update (parts of the old rule date back to 1938) brings the suitability rule a little closer to the realities of business in a modern, full-service securities firm; but it is still a far cry...
Overreliance on Credit Ratings Results in Large Losses for Municipalities
(Aug 2012)
Earlier this week, the SEC charged Wells Fargo's brokerage firm with selling complex securities to institutional investors such as municipalities and non-profits. The Institutional Brokerage and Sales Division, between January 2007 and August 2007, made recommendations to institutional clients to purchase asset-backed commercial paper "issued by limited purpose companies called structured investment vehicles (SIVs) and SIV-Lites backed largely by mortgage-backed securities and CDOs." Already...
Direxion to Close Several Leveraged ETFs
(Aug 2012)
Direxion Shares ETF Trust announced last week that -- upon recommendation of the trust's advisor Rafferty Asset Management, LLC -- nine daily leveraged and inverse Exchange Traded Funds will be liquidated and shares will no longer be open for purchase as of early next month. From the announcement,
Due to the Funds' inability to attract sufficient investment assets, Rafferty believes they cannot continue to conduct their business and operations in an economically efficient manner. As a result,...
Consumer Financial Protection Bureau Report on Reverse Mortgages
(Jul 2012)
Most American investors are likely aware of the SEC, and may also be aware of FINRA as an important regulatory institution (certainly, readers of this blog should be). But they may be less aware of the relatively new Consumer Financial Protection Bureau (CFPB), which also has a mandate to protect consumers from financial malpractice. The CFPB was created out of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and President Obama appointed its first director in January...
Variable Annuity Regulation: Speech by Susan Nash
(Jul 2012)
Last Tuesday, Susan Nash, Associate Director of the Division of Investment Management at the SEC, gave an interesting speech at the URI 2012 Government, Legal & Regulatory Conference regarding variable annuities. Variable annuities continue to grow in sales -- according to Ms. Nash's comments, sales of variable annuities grew by approximately 12% in 2011 -- but have been the subject of numerous FINRA Investor Alerts and Regulatory Notices due to their high costs and complex risks.
Ms. Nash...
