Brokerage Firms Pay Billions in Bonuses in 2008 While Taking Taxpayer Money

On July 30, 2009, New York Attorney General Andrew Cuomo issued a report entitled “No Rhyme or Reason: The ‘Heads I Win, Tails You Lose’ Bank Bonus Culture.”

In the report, Mr. Cuomo discusses the compensation programs instituted by banks and brokerage firms while the economy was heading for, and in the midst of, crisis. The findings are truly astonishing are summed up well as “When the banks did well, their employees were paid well. When the banks did poorly, their employees were paid well. And when the banks did very poorly, they were bailed out by taxpayers and their employees were still paid well. Bonuses and overall compensation did not vary significantly as profits diminished.”

The report illustrates that while Citigroup and Merrill Lynch suffered losses of $54 billion in 2008, they “paid out nearly $9 billion in bonuses and then received TARP bailouts totaling $55 billion.” Furthermore, the bonuses paid in 2008 by Goldman Sachs, Morgan Stanley, and J.P. Morgan Chase exceeded their net income. Specifically, the report notes that “these three firms earned $9.6 billion, paid bonuses of nearly $18 billion, and received TARP taxpayer funds worth $45 billion.” The report also noted that State Street paid approximately $470 million in bonuses while receiving $2 billion in TARP funding.

Appendix A to the Report is a must read for anyone concerned about the problems in the financial system. A table contained in the Appendix shows that J.P. Morgan Chase & Co. paid each of more than 1,600 employees bonuses that were equal to or greater than $1 million (while the firm accepted $25 billion in TARP). Goldman Sachs and Citigroup paid similar bonuses to more than 950 and 730 employees, respectively (while accepting $10 billion and $45 billion, respectively from TARP). In 2008, Merrill Lynch suffered losses of more than $465,000 per employee. Nevertheless, the firm paid total bonuses that averaged more than $61,000 per employee.

Share

Considering Hiring a New Investment Adviser?

Earlier this week, The Wall Street Journal reported that while the four major Wall Street brokerage firms experienced an outflow of $8 billion of assets in 2008, Registered Investment Advisers brought in more than $108 billion in new assets during the same period. This activity likely reflects a shift in investor preference from transaction-based broker relationships to fiduciary relationships.

Investors generally choose to have their financial affairs handled by someone they feel they can trust. Given the financial meltdown that has taken place over the last 2+ years, it is easy to see why investors would prefer to have a fiduciary manage their investments rather than a brokerage firm that has unavoidable conflicts of interest with their clients.

If you are considering hiring an investment adviser, another Wall Street Journal article also set out some questions that investors should ask financial advisers. Every adviser-client relationship is based upon different goals, and, as a result, each investor should ask different questions when interviewing a financial adviser. However, if you are looking for a list of standard questions, this is a good place to start.

It is important to know as much as you can about your financial adviser, stockbroker, etc. You can also find information about stockbrokers by checking FINRA’s BrokerCheck website and research registered investment advisers through the SEC’s Investment Adviser Public Disclosure (IAPD) website.

The Kueser Law Firm represents investors in securities arbitration and litigation. If you are concerned that your investments have been mismanaged, please contact us to learn more about your rights.

Share

SEC Charges Morgan Keegan for Fraudulent Marketing and Sales of Auction Rate Securities

On July 21, 2009, the Securities and Exchange Commission (SEC) charged Morgan Keegan & Company. In its Complaint, the SEC seeks an injunction for violation of the federal securities laws, as well as equitable relief for Morgan Keegan investors. Included in this equitable relief is a request for a court order requiring Morgan Keegan to repurchase illiquid ARS from its customers. More about the SEC’s case, including a link to the Commission’s Litigation Release and Complaint can be found here.

The SEC’s Complaint alleges that Morgan Keegan misled thousands of investors about the liquidity risks related to auction rate securities (ARS). This is another example of the massive fraud related to Auction Rate Securities that was perpetrated by financial services firms across the country. To date, several firms, including UBS, Wachovia, TD Ameritrade, Fidelity, and Stifel Nicolaus have entered into settlements with federal and/or state securities regulators. Some of these settlements have broader relief for investors, while others have left many investors still holding onto these illiquid investments.

If you were sold Auction Rate Securities and your positions have not been redeemed or repurchased, you should contact an attorney to discuss your rights. The Kueser Law Firm represents investors in securities arbitration and litigation. Feel free to contact us if you have any questions or would like additional information.

Share

SEC permanently changes rules related to “naked” short selling

In a much anticipated move, the Securities and Exchange Commission (SEC) made permanent a rule that it hopes will curb abusive “naked” short selling practices in the securities markets.

Short selling is the practice of selling a security that a person does not own. In essence, the person (the “short seller”) “borrows” the security from their broker (or another third party) and sells it to a buyer. This strategy is implemented where the short seller anticipates that the value of the security will drop. As the value of the security goes down, the short seller makes money. Conversely, if the value of the security increases, the short seller loses money. At some point in the future, the short seller will purchase an amount of shares equal to the amount borrowed. This is referred to as “covering” the short position. Often the short seller has to pay a fee to borrow the securities and has to pay interest on the value of the securities until the short position is covered.

The new rule (Rule 204T) requires broker-dealers to promptly purchase or borrow securities to deliver on a short sale. In addition, the SEC is working with self-regulatory organizations to make public information related to short sale volume. Lastly, the SEC is planning to hold a public roundtable on September 30 to discuss securities lending, pre-borrowing, and possible additional short sale disclosures. According to the SEC’s press release, “the roundtable will consider, among other topics, the potential impact of a program requiring short sellers to pre-borrow their securities, possibly on a pilot basis, and adding a short sale indicator to the tapes to which transactions are reported for exchange-listed securities.”

Share

Maintained by The Kueser Law Firm

The Kueser Law Firm | Securities Arbitration Attorney | Securities Arbitration Lawyer | Missouri Securities Arbitration Lawyer | Kansas Securities Arbitration Attorney

Social Media – Follow The Kueser Law Firm

DISCLAIMER

The choice of an attorney is an important one and should not be based solely upon advertisements such as this website. Past results afford no guarantee of future results. Every case is different and must be judged on its own merits.

*Any information submitted via this website may not be secure and/or confidential. Merely contacting this firm does not establish an attorney-client relationship.

Contact The Kueser Law Firm

Mailing Address:
P.O. Box 612
Lee's Summit, Missouri 64063
Phone: 816.374.5865
E-mail: Click Here
CONTACT FORM
Your Name (required)

Your Email (required)

Phone Number (optional)

Subject

Your Message:

To eliminate spam, please type the following code in the line below and press the Send button:
captcha

RSS News – Securities Fraud

  • GE sued by shareholders
    ... Electric Co. on Friday, claiming the conglomerate has covered mounting insurance liabilities and a US Securities and Exchange Commission probe, ... the first proposed shareholder class action accusing GE of securities fraud since the company surprised investors with two negative announcements ...
  • Barrow back campaigning, this time for secretary of state
    Barrow proposes to expand Georgia's program to combat securities fraud. Securities are stocks, bonds and other investment instruments, and he says that much of the fraud takes place outside of federal jurisdiction but within the jurisdiction of the state, where it is a secretary of state's office responsibility.
  • Texas Republicans concentrating fire on each other as primaries near
    The ad makes no mention of the fact that Ken Paxton is presently under indictment and accused of securities fraud, a charge he stoutly denies. But voters could easily connect those dots. And, it wouldn't take much for the only Democrat in the attorney general's race, Austin lawyer Justin Nelson, to tweak ...
  • Jury Convicts Kansas City Man of Investment Fraud Scheme
    Luscombe's stated investment strategy was to trade securities in the stock market based on the identification of trends in the upward or downward direction of the stock price. Luscombe told investors the risk was very low and minimal because he constantly monitored the stock price. Luscombe told ...
  • Blame for fraud must be shared across the system
    Financial scams have an uncanny knack of revisiting the country every decade. First, the Harshad Mehta-led securities scam shook the nation in the '90s. This was followed by the pay-order fraud perpetrated by Ketan Parekh in the first decade of this century. Nirav Modi is now in the eye of a new scam.
  • $1.8 bn PNB fraud, macro-data hit equities' movement
    But upper moves in the domestic markets have been limited because of local factors,” Deepak Jasani, Head, Retail Research, HDFC Securities, told IANS. ... PNB shares started to decline after the bank detected a multi-crore fraud case and authorities blamed billionaire diamond trader Nirav Modi for the ...
  • Montclair Tax Revaluation: Learn How Your Property Taxes are Assessed, Mar. 5
    ... by a federal jury today for defrauding two investors of $4 million, U.S. Attorney Craig Carpenito announced. Nicholas Lattanzio, 61, of Montclair, New Jersey, was convicted on all counts of an indictment charging him with two counts of wire fraud and two counts of securities fraud following a three-week ...
  • GE faces shareholder lawsuit over insurance shortfall, SEC probe
    ... by a shareholder who accused the conglomerate of concealing mounting insurance liabilities and a U.S. Securities and Exchange Commission probe, ... the first proposed shareholder class action accusing GE of securities fraud since the company surprised investors with two negative announcements ...
  • SGYP INVESTOR ALERT: The Law Offices of Vincent Wong Reminds Investors of an Investigation ...
    SGYP INVESTOR ALERT: The Law Offices of Vincent Wong Reminds Investors of an Investigation Involving Possible Securities Fraud Violations by the Board of Directors of Synergy Pharmaceuticals Inc. The Law Offices of Vincent Wong notifies investors of an investigation concerning whether Synergy ...

RSS SEC – Press Releases

  • SEC Obtains Bars and Suspensions Against Individuals and Accounting Firm in Shell Factory Scheme
    The Securities and Exchange Commission today announced charges against three Israeli residents, a Washington, D.C. attorney, and an Israeli auditor and his Maryland-based accounting firm for their roles in a fraudulent scheme in the creation of numerous public shell companies.  Under the terms of their settlements with the SEC, the three Israeli residents will be […]
  • SEC Suspends Trading in Three Issuers Claiming Involvement in Cryptocurrency and Blockchain Technology
    The Securities and Exchange Commission today suspended trading in three companies amid questions surrounding similar statements they made about the acquisition of cryptocurrency and blockchain technology-related assets. The SEC’s trading suspension orders state that recent press releases issued by Cherubim Interests Inc. (CHIT), PDX Partners Inc. (PDXP), and Victura Construction Group Inc. (VICT) claimed that […]
  • Kyle Moffatt Named Chief Accountant in Division of Corporation Finance
    The Securities and Exchange Commission today announced that Kyle Moffatt has been named Chief Accountant in the Division of Corporation Finance. Mr. Moffatt has served as Acting Chief Accountant in the Division since January 2018.  In that role, Mr. Moffatt has overseen the Division’s work to assist companies with the implementation of revenue recognition and […]
  • Karen Garnett, Associate Director of Division of Corporation Finance, to Leave Agency After 23 Years of Service
    The Securities and Exchange Commission today announced that Karen Garnett, an Associate Director in the Division of Corporation Finance, will leave the agency in February. As an Associate Director overseeing the Division’s disclosure review program, Ms. Garnett led the Division’s selective review of transactional and periodic filings by issuers in a range of industries, including […]
  • SEC to Hold National Compliance Outreach Seminar for Investment Companies and Investment Advisers
    The Securities and Exchange Commission today announced the opening of registration for its compliance outreach program’s national seminar for investment companies and investment advisers.  The event is intended to help Chief Compliance Officers (CCOs) and other senior personnel at investment companies and investment advisory firms to enhance their compliance programs for the protection of investors. […]