The Street

Finally, the Regulators Are Trying to Protect You. But It’s Nothing But Bad News for Investors

Finra, which is the outfit that Wall Street pays to regulate itself, is pushing hard on a proposal that it thinks will help nail bad guys on Wall Street.

It sounds great on the surface: Give arbitrators permission to refer a rogue to the director of enforcement even as an investor’s hearing is going on. You know, so we can catch people like Bernie Madoff, who was such a trusted name on Wall Street that he was chairman of the Nasdaq Stock Market.

As of now, arbitrators have to wait until a hearing is over before they can tell headquarters that a villain is on the loose. Finra wants to be able to get on the case ASAP.

Nice idea, if only it didn’t have the potential to wreak havoc on the arbitration hearing of the poor slob who’s in the middle of trying to get his or her case resolved. It’s yet another example of the nutty things that can happen when you bar investors from going to court, where you don’t have all the secrecy of arbitration and thus don’t have to jump through hoops to figure out ways to get the word out. Here’s my story published tonight on TheStreet.com.

Anworth Mortgage, Your Greed is Showing

“Do your homework” sounds like reasonable enough advice when you’re leafing through a personal finance magazine or listening to the babble of the talking heads on a financial show. But is it practical?

In my story today for TheStreet Foundation, I write about a publicly traded real-estate investment trust, Anworth Mortgage Asset Corp. Its shareholders will vote at the company’s annual meeting today to determine whether the current board will be ousted in favor of a group proposed by activist investor Arthur Lipson.

I’m not so interested in the pyrotechnics of the fight itself. I’m just wondering if there’s any way that a shareholder without a private investigator’s license could possibly understand the far-flung activities of Anworth management without quitting their day jobs. From my story:

A thorough vetting of the company’s officials would take an investor from Anworth’s standard filings with the Securities & Exchange Commission to a hodge-podge of regulatory documents that occasionally outline mishandling of investor money by stock brokers who worked for a brokerage firm controlled by the CEO.

We really ought to stop giving the public the impression that if they just took the time to read an annual report, or a prospectus, or whatever, that they can take control of their portfolio and stay on top of things.

It’s my first column as founding journalism fellow at TheStreet Foundation, and I’m looking forward to producing more. You can read the column here.

One in Five Senior Citizens Fall for Financial Scams

As many times as I’ve run across stories about financial ripoffs of the elderly, I still can’t help but be shocked at the cruelty it takes to fleece people who are so fragile. In my article yesterday for TheStreet.com, I wrote about how much worse the problem has become, and how it will only get worse from here.

While elder financial abuse is in some respects nothing new in the annals of fraud, the aging of the baby boom generation and Americans’ increasing longevity are coming together in a perfect storm that could cause the problem to skyrocket. A 2010 survey by the Metropolitan Life Foundation estimated that victims of elder financial abuse lost at least $2.9 billion in 2010, up 12% from 2008.

I begin with a story about 73-year-old Charles S. Bacino, who lay dying in a hospital bed in 2012 when the man he called his “financial affairs manager” came by to visit and persuaded him to invest $82,000 in a cocoa and banana plantation in Ecuador. Mr. Bacino, who was hooked up to a morphine drip to soothe the pain of his pancreatic cancer, gave his keys to the man so that he could fetch his checkbook. Less than a month later, Mr. Bacino was dead and the whereabouts of his money was a mystery.

You can read the full article here.

The Agency that Helps Consumers, Irritates Republicans

When a Federal agency reins in sleazy debt collectors and slipshod mortgage servicers, that’s more than enough to get politicians enraged — at the agency, not the bad guys.

The two-year-old Consumer Financial Protection Bureau has already collected $3 billion to return to aggrieved consumers, and has done such good follow-up when consumers call to complain that lenders and others who fall under its jurisdiction are actually helping customers right away rather than face the ire of the CFPB.

In my story for TheStreet.com today, I talk about the bizarre reaction to CFPB from Republicans in the House of Representatives.

A gaggle of chest-beating Republicans has been in attack mode against the CFPB since before it even opened its doors, trashing the agency’s architect, Massachusetts senator Elizabeth Warren, and passing bills to try to weaken its authority. The latest effort, up for a vote in the House of Representatives in coming weeks: the Consumer Financial Protection and Soundness Improvement Act of 2013, which would reduce the agency’s pay schedule and make it easier to overturn its rules, among other curtailments.

Jeb Hensarling, chairman of the House Financial Services Committee, actually makes a good point when he criticizes CFPB for collecting extensive consumer data that is a worry in these times of compromised personal information, but he’s so over-the-top in his condemnations that his constructive criticisms could get lost.

A favorite practice of Hensarling’s is to introduce CFPB Director Richard Cordray at official hearings with taunts about the agency being “accountable to no one,” which is always kind of funny since the CFPB chief is sitting across from his cantankerous questioners precisely because he is being held accountable. Hensarling managed to squeeze references to Cordray as “credit czar” and “national nanny” and “benevolent financial product dictator” in a single sentence at a hearing in September.

You can read my story here.

Best investment advice: Vet brokers yourself, because regulators aren’t doing it for you

Just because a stock broker has a license to do business doesn’t mean they’ve received a meaningful stamp of approval from regulators. Next time some financial person is pitching you for business, go back and read the stunning coverage of Mark C. Hotton, a guy who allegedly was fleecing investors for years as regulators sat back and ignored a stream of red flags.

Hotton is the fellow who fooled the Broadway producers of “Rebecca: The Musical” into thinking he’d raised millions of dollars in financing for them. The producers of Rebecca only lost $60,000 doing business with Hotton. Others haven’t been so lucky.

Hotton is in jail today, and it’s a joke when you consider that, after years of alleged stealing of millions from investors, he finally got caught because he fleeced a few big-shots from show-biz. It’s even more of a joke that U.S. prosecutors took a deep bow for their “lightning speed” sleuthing after catching Hotton 22 years after his first crime — which should have been a reason to keep him out of the brokerage business altogether.

I wrote about Hotton’s capers in a recent Bloomberg column. A week after that story, I wrote a second one, this time for TheStreet.com, about a fresh complaint against (the now-incarcerated) Hotton filed by Finra, which is the Wall-Street-funded regulator that is overseen by the Securities and Exchange Commission. There really ought to be a special judicial forum where the public can bring complaints against regulators who are utterly clueless.

Ban Robo-Trading? That’s so 1980s

You’re seen a lot of headlines about robo-trading in the financial markets, but don’t fool yourself that it’s some new problem for regulators.

The debate’s been going on for 25 years as to what we can do to rein in computer trading. We’re still bringing up the same questions, and we’re still living in a time where Wall Street is way ahead of its regulators on the high-speed trading issue.

I talk about it in my column this morning for TheStreet.com. Read article

So what’s an extra $7 billion anyway?

It could have been worse for JP Morgan and its CEO Jamie Dimon: The New York Times might have broken the story on some other day, like when readers weren’t on red alert for today’s Supreme Court ruling on health care. In any event, Jessica Silver-Greenberg and Susanne Craig broke the news this morning that the JPM loss that was supposed to be only $2 billion (aka, the “tempest in a teapot” loss) might wind up being $9 billion. You can read that article here.

I wrote about Dimon in my column “JPMorgan’s Dimon Goes From ‘Least-Hated’ to ‘Most-Embarrassed'” for TheStreet.com in May, calling Dimon “Wall Street’s most cooed-over magazine cover boy.” (I should note that I’ve never seen any cooing over Dimon by Craig, a refreshing exception among financial writers). I’ve seen a lot of top execs get fawned over by business writers over the years, but the adulation of Dimon has for a long time been over-the-top. You can read that story here.

I’m always happy to hear from readers, so feel free to email me at susan.antilla15@gmail.com, or send a message @antillaview.

By Publication

By Tag