February 27th, 2015
in Op Ed
by Shah Gilani, Wall Street Insights & Indictments
If you didn't read yesterday's BrokeAndBroker blog by Wall Street lawyer Bill Singer, you should.
In in his earlier life, before he got a life, Singer was an attorney at the National Association of Securities Dealers (NASD) - now known as the Financial Industry Regulatory Authority (FINRA). And his latest blog is titled "A Tale of Two Streets and FINRA's Disparate Sanctions."
It's about a guy named Adam Jensen, who was registered with the FINRA - but isn't anymore.
Jensen's tale is interesting, but it's his example that I'm interested in today...
Our Crooked Two-Tiered System
FINRA is the self-regulatory outfit that operates underneath the U.S. Securities and Exchange Commission's blinking eye, and that polices peeps and perps on Da Street of Dreams and Schemes.
Jensen, it so happens, submits a Letter of Acceptance, Waiver and Consent (AWC) to FINRA, neither admitting nor denying that he violated FINRA rules. In other words, it's a "settlement." He violated rules, got caught - and flashed his get-out-of-jail card.
If you want to know what he did, you'll have to read the blog. Suffice it to say, Jensen came up with a clever scam to inflate his sales production numbers to get paid more... DUH.
His punishment? Jensen gets barred for life from associating with any FINRA-registered firm in any capacity. In other words, his Wall Street days are over, unless he wants to run a hot dog stand in one of the Street's alleys.
Then, Singer tells the tale of the "FINRA 19," as he calls them. All 19 are broker-dealers with names like UBS Securities, Merrill Lynch, JMP Securities - names you've heard of.
The 19 collectively paid a couple million dollars in fines and had to sign those good, old AWC letters, neither admitting nor denying that they pumped up some of their own numbers to attract more business to their trading desks, to, of course, make more money.
Again, you'll have to read the blog to get the details about their misdeeds.
Anyway, some of them do the exact same thing again a few years later.
So, they have to pay some more money and sign some more AWCs. That's it.
The point is, no one is barred, no one loses their jobs, no one is any worse off for violating rules, not once, but twice... that we know of.
That's Bill Singer's "Tale of Two Streets."
It made me realize something pretty frightening.
By coddling crooks at big shops and barring little crooks where they find them, Wall Street's regulators are engineering - make that breeding - super-crooks.
They're like those super-bacteria that antibiotics can't kill. They're the bugs in the hospital that make everyone afraid to end up there.
Only the hospital here happens to be our capital markets - our economy.
No wonder we're sick all the time.