Did Goldman And Tourre Break FINRA Regulations By Not Reporting "Fab Fabrice's" Wells Notice Receipt?Submitted by Tyler Durden on 04/17/2010 11:09 -0500
Yesterday we praised two NYT reporters for having uncovered the mess of the Goldman CDO scandal first, and we concluded, erroneously now it seems, that the SEC merely piggybacked on their disclosure to file charges against Goldman. However, as Reuters' Matt Goldstein reports, Goldman had received a Wells Notice from the SEC as far back as "six months ago", which predates the Morgenson and Story December 24 story. And as the SEC case would likely have taken at least one year to build up, we are confident that the SEC began their investigation into Goldman and Paulson well prior, likely in 2008 if not earlier. For those unfamiliar, a Wells is basically an advance warning that the recipient will be a target of an SEC investigation. We do not anticipate that anyone aside from Tourre (who, being just 27 at the time of the alleged transactions, in no imaginable way acted alone) and Goldman's legal counsel was aware of this development, although with allegations that Goldman was dumping various security holdings in advance of the announcement one can never be certain. One key line of questioning has emerged as a result of this disclosure: why was there no official notice anywhere in the public record of this Wells Notice receipt? The precedent is murky when it comes to corporations responsibility to report Wells Notice receipts: certainly, Goldman had no mention of this even in its March 1 10-K. What is however without question, is that Fabrice Tourre, who as we reported yesterday, is a registered broker dealer, has a responsibilty to modify his/her U-4 within 30 days of the Wells Notice receipt, yet as of yesterday there was still "no disclosure of any event about this broker." Assuming Goldman received the Wells 31 days ago or more, it begs the question did the firm, by allowing Tourre not to report the Wells Notice, break Finra regulations, and just why it believes it has the facility to do this?
The wild west days of social networking as a platform for stock tips and under the radar information exchange may be coming to an end. Or at least FINRA is finally realizing that there is more to stock manipulation than meets the eye, and in a radical change in policy (which up to now had been non-existent on the matter), FINRA will start policing and pouring through tweets, after announcing that "securities firms must keep copies of all business-related communications on social networks, whether those communications are official or from associated persons." Yet indicating just how woefully behind the times the SEC's much-feebler cousin is, FINRA has admitted that "the technology to grab those messages might not exist." The reason why FINRA should be concerned, as Securities Industry News highlights is that "Every Wall Street company – except possibly the smallest ones – have employees using social networks, creating potential liability problems for their employers, for whom they might not be speaking. However, many firms are also actively using these new platforms themselves, to reach out to customers, the general public, and potential new recruits."
FINRA Initiates Probe Into Goldman's "Trading Huddle" And Comparable Practices By Other Wall Street FirmsSubmitted by Tyler Durden on 12/17/2009 18:53 -0500
Could it be that the regulators are finally set on doing the one thing they are paid to do, i.e. regulatoring? Perhaps, especially when they are presented with all the data on a silver platter, as the WSJ did some time ago. The same WSJ reports that FINRA has now started a probe into the practice known as "trading huddles" which is merely another phrase for providing the best, most actionable data to one's preferential clients, and also a very politically correct and polite way of allegedly endorsing front-running.
We know you are busy, we also know you are hell bent on intercepting IOI manipulation as per Mr. Jon Kroeper's recent media appearances. Which is why we kindly request that you get back to us at your earliest convenience with information on how many of the IOIs disclosed below are, in fact, "natural." We will make this a recurring topic on Zero Hedge until such time as you respond to our information request. You can contact us at firstname.lastname@example.org
We appreciate your prompt attention to the matter
Zero Hedge staff.
One of Zero Hedge's recurring concerns with market abuse has been the concept of manipulated natural Indications of Interest, or IOIs, a topic which readers can catch up on here and here. And yes, absent feedback from regulators this could have added to the ever increasing list of conspiracy theories broached by Zero Hedge. Yet ironically shortly after Zero Hedge first posted on this, FINRA came out with the following regulatory notice 09-28 from May 2009, in which the regulator "reminded firms of their obligation to provide accurate information in disseminating indications of interest."
JP Morgan Enjoying FINRA's Recently Amended Conflict-Enhancing Quiet Period In Upgrading MB FinancialSubmitted by Tyler Durden on 09/15/2009 11:24 -0500
There was a time when FINRA did some good things. It did mostly useless things, and was glaringly incompetent in even those, but on occasion it would do something proper, at least when moderating analyst conflicts of interest. Then the crash came, and all bets were off. Interestingly, in October 2008, a month after the bottom came off the market, and when the kitchen sink was being thrown at stocks in order to prevent further collapse, FINRA lost the last shred of interventionist integrity it had when it decided to abolish the so-called quiet period for research actions subsequent to a follow-on offering. Yesterday, JP Morgan was more than happy to take advantage of this last shred of regulatory decency collapsing by the wayside, as more and more synergies of the SEC-Wall Street merger become effectuated.
Everyone's favorite Indications Of Interest (IOIA function in BBerg) is about to come under some serious regulatory fire.