Bad Broker Blog

FINRA issued a release last week announcing it had settled charges with HSBC Securities and U.S. Bancorp related to the sales of toxic auction rate securities. These broker dealers are among the 14 firms that have faced federal regulatory action for marketing auction rate securities as being safe as cash-when they certainly were not.

Yesterday the Securities and Exchange Commission arrested the president and four employees of a Staten Island, New York investment advisory firm for allegedly profiting $17.5 million from phony stock tips.

There has been no shortage of investors, pundits, and observers who have directed their anger at Goldman, Sachs & Co. in recent years. In 2007 the firm would short-sell much of its assets in mortgage-related securities, which would contribute to the housing bubble bursting-in the recession that would soon follow, Goldman Sachs was one of the few firms to actually profit while investors nationwide were losing near-incalculable amounts of money.

Boosted by what experts believed were better-than-expected home sales from last month, the Dow Industrial Average rose Monday to over 11,000 Monday, an 18-month high. But don't be deceived by this. Hopefully, a surge in the Dow will improve the economy at large, but during a market up-swing too many investors ignore warning signs that they themselves are victims of broker fraud.

The Security and Exchange Commission, the Financial Industry Regulatory Authority and four states have filed administrative action against Morgan Keegan & Co. Thursday, accusing the firm of defrauding investors of more than $2 billion.

Last month's U.S. Supreme Court decision gives investors more power to sue mutual fund managers for charging unreasonably high fees. This also signals the government's intent to regulate fund fees itself, rather than leaving such powers to Wall Street.

Rhonda Breard, a well-known securities broker operating out of the Seattle area, is expected to plead guilty to charges stemming from an alleged $9.4 million Ponzi scheme. This comes on the heels of FINRA's decision last Wednesday to permanently bar Breard from the securities industry.

Beverly Hills stockbroker Bambi Holzer has fielded a mind-boggling 42 customer disputes in her 25-year career, according to her disciplinary record from the Financial Industry Regulatory Authority. And yet, despite receiving sanctions from federal regulators, and settlements with former clients totaling at least $11.4 million, Holzer is currently a registered representative for Wedbush Morgan Securities.

Massachusetts Secretary of State William Galvin believes sales of private placements in recent years are "going to become a very significant issue" for 2010.

It took Anton Valukas, a court-appointed examiner, over a year to complete his report on whether Lehman Brothers acted improperly leading to their 2008 bankruptcy-the largest in American history. The highly-anticipated report discusses accounting gimmicks, which were "eerily reminiscent of how Enron tried to prop up its balance sheet back in 2001 before it collapsed," said Peter Henning, a writer for the New York Times and editor emeritus of White Collar Crime Prof Blog.

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