By: Kirill Kan The House of Representatives approved the Stop Trading on Congressional Knowledge (“STOCK”) Act on February 9, 2012, by a vote of 417 to 2. The bill stands to (1) prohibit Members and Employees of Congress from using “nonpublic information derived from the individual’s position as a Member or Employee of Congress . . . for personal benefit” and (2) require Members of Congress to publicly file and disclose financial transactions of securities within 30 days. The bill, marks a stripped down version of legislation approved in the Senate last week as the House version does not include a…
Author: Online Managing Editor
By: Alexander J. Miachika On Wednesday, Jan. 30th, U.S. markets were greeted by the report of a surprise drop in GDP to end the 4th quarter of 2012. One might have expected this to be a harbinger of doom–the start of a dive back into the depths of recession we thought we had just escaped–considering that unemployment continues to hover at 7.8%. Instead, economist Paul Ashworth quickly pointed out that, despite a “one-off” drop in government spending, this was “the best-looking contraction in U.S. GDP you’ll ever see.” The unexpected drop was largely caused by the biggest defense spending cuts…
By: Michael Lavi The Fordham Corporate Law Center, in conjunction with KStone Partners, hosted a public forum on whether financial reporting by the federal government comports with Constitutional requirements. In what was perhaps the first public conference on this topic, distinguished panelists discussed the federal government’s actual expenditures, its current financial reporting, its historic choices about financial reporting, questions surrounding the Statement and Account clause of the U.S. Constitution, and proposed reforms. Moderator: Sean J. Griffith Panelists: The Honorable David M. Walker David Mosso Joseph H. Marren Brian T. Fitzpatrick http://vimeo.com/35574753 Click here for pre-conference presentation Click here for slides used by Mr. Marren…
By: Kirill Kan On May 6, 2010, the Dow plunged nearly 9.8% in 10 minutes, its biggest intraday point drop ever, according to the Wall Street Journal. After the midafternoon collapse, the Dow recovered to close only 3.2% below the prior day. Many individual equity securities and exchange traded funds (“ETFs”) suffered similar declines and reversals within a short period of time, falling 5% to 15% before recovering most, if not all, of their losses. According to an SEC report, published several months later, this “flash crash” was brought on by high-frequency trades executed by a single unnamed firm “against…
By: Sean Disken In these days, following some of the most comprehensive financial instability in the history of the United States, we have seen large groups of people flocking to Occupy movements across the nation. The Occupy protests are largely an expression of a portion of society’s indictment of the financial industry and its major players. But where, in light of this public outcry, is the government? While the Occupiers cry for blood, assured of the guilt of America’s business people, in 2011, the number of financial fraud prosecutions has fallen to half of those a decade ago. As this…
By: Andrei Girenkov Bernie Madoff’s $17 billion dollar Ponzi scheme may go down as the largest of its kind in history. The man himself will spend the rest of his life in federal prison. SEC has doled out punishments to eight employees who should have uncovered the fraud earlier. But none of that will compensate the victims for their loss. The man appointed by the SEC to carry that responsibility is trustee Irving Picard. Picard so far has recovered over $7.6 billion for the victims of the fraud. The vast majority of this money came from a ‘clawback’ settlement with…
By: Vishal M. Mahadkar Securitization of residential mortgage loans increases credit availability and liquidity as capital market funders from around the world are linked with consumer borrowers. The distance created between consumer borrower and ultimate bondholder, however, results in an originate-to-distribute model of lending that misaligns incentives and encourages shady—and even predatory—lending practices. As we all know, underwriting standards deteriorated, subprime mortgages defaulted, and investors all over the world doubted the underwriting quality of all securities products, which inhibited banks from financing their short-term borrowing needs, leading to outright insolvency for some and a life-line of bail-out funds for others.…
By: George M. Papasimakis Is Dodd-Frank destined to fail in preventing the next financial crisis? Is the Street headed for another financial meltdown? A quick look at the European debt crisis unfortunately answers the question, and investors are already reacting. Just last week in the U.S., stocks declined, the Dow Jones Industrial Average tumbled 134.86 points, or 1.1%, to 11770.73, down 2.7% in two days and three of the last four sessions. Stocks and bonds of U.S. banks were pounded, in particular Jefferies Group Inc. and Morgan Stanley. Gold tumbled 3% and silver dropped 6.9%, a sign that investors may…
By: Chaim Bergman With the financial sector meltdown in 2008, the resulting recession, and the recent “Occupy” movements springing up across the country, many have begun to closely scrutinize the practices and procedures of the financial organizations involved in the financial fiasco. Reports of near 10% unemployment contrasted with those of financial institutions paying hefty salaries and accruing large profits have further fueled public and congressional outrage at what appears to be a “broken” financial system. A recent Delaware court decision, however, seems to fly in the face of this perceived public outrage. In a suit filed in January, 2010,…
By: Kirill Kan The Financial Industry Regulatory Authority (FINRA) is the largest independent regulator for securities firms doing business in the United States. As a Self-Regulatory Organization (SRO), FINRA is tasked with market regulation through contract with major U.S. stock markets, including the New York Stock Exchange, NYSE Arca, NYSE Amex, the NASDAQ Stock Market and the International Securities Exchange. Under the supervision of the SEC, FINRA (1) writes, (2) interprets, and (3) enforces the rules that govern the brokerage industry. A fact that has come under attack more frequently in recent years is that FINRA accomplishes these goals through…