Bank of America Fined $33 Million In Fines For Merrill Disclosure

Bank of America agreed to pay $33 million on Monday to settle federal charges that it hid from investors plans to pay billions of dollars in bonuses to employees of Merrill Lynch.The SEC accused the firm of misleading shareholders when the bank asked them to approve the deal, which was ultimately concluded under intense federal pressure as Merrill Lynch teetered on the verge of collapse. The SEC's press release announcing the charges is available at SEC Charges Bank of America for Failing to Disclose Merrill Lynch Bonus Payments, and a copy of the underlying complaint is available at SECLaw.com. More>>>

New Plan to Register Investment Advisers

The Obama Administration is proposing legislation that will remove the exemptions from registration enjoyed by managers of private investment partnerships and hedge funds. The legislation will require the registration of virtually all investment advisors who operate from the United States, or who provide services to United States citizens, and who manage over $25 million in assets. More details and commentary are at SECLaw.com - New Plan to Register Investment Advisers.

Investor's Guide to Securities Industry Disputes

The Pace Law School Investor Rights Clinic, has just published the Investor’s Guide to Securities Industry Disputes: How to Prevent and Resolve Disputes with Your Broker.  The Guide, authored by Professor Jill Gross, the Director of the school's Investor Rights Clinic, and Clinic Staff Attorney Alice Oshins, is designed to help individual investors with modest investment accounts. The Guide is designed to prevent disputes, to help investors learn their obligations as investors, to assert their rights as investors, and pursue a securities arbitration or mediation claim if needed to resolve any disputes that do arise.  

While designed for investors, a quick read wouldn't hurt the retail broker either.

Rise in Broker Employment Disputes Noted

As FINRA announces the significant increase in arbitration filings this year over last, many have assumed that the increase is caused by customers filing complaints against their brokers. That may not be the case.

Our law firm is seeing a marked increase in complaints by brokers over the termination of their employment at some of the major investment banks. We have confirmed with FINRA that the arbitration filing numbers include claims between brokers and firms. We have also confirmed that while FINRA breaks down its statistics for types of customer claims, in its total statistics it does not distinguish between customer cases and broker vs. firm cases.

The rise in cases filed in 2009 (which has now passed 4,000) may not be an indication of a significant increase in brokers accused of wrongful conduct, but rather an rise in disputes between brokers and firms as pressure mounts on firms to increase productivity and decrease costs.

Given the fact that we have witnessed a marked increase in inquiries from brokers at most of the major wirehouses over employment issues, the rise in arbitration claims may very well be in the broker-firm category of cases.

Court Dismisses SEC vs Mark Cuban Suit

On Friday, the federal district court judge in Texas granted Mark Cuban's motion to dismiss the insider trading charges against him. I have been blogging about the case since it's inception (the posts and analysis are available here).

I am still digesting the opinion, which actually rejects a number of Mr. Cuban's legal arguments, but in the end, agrees with him. I will post a more detailed analysis as soon as my own trial schedule allows, but the short version is that the Court, assuming the SEC's allegations to be true, found that those allegations were not enough. While there may have been an agreement to keep the information confidential, there was no agreement not to trade on the information.

Contrary to the posts of many on the Internet, it is not a total win. The SEC's complaint was dismissed for failing to state a claim. It has 30 days to file a new complaint, and has not said what it will do.

In my experience, the SEC has already taken its best shot. As I discussed in the earlier posts, they stretched their facts about as far as they can be stretched, and I doubt that they will be filing a new complaint. An appeal maybe, but not a new complaint.

Marc Dreier Sentenced To 20 Years in Prison

In case you forgot about him,Marc Dreier has been sentenced to 20 years fordefrauding clients and investors of over $400 million. Law Blog - WSJ

The SEC's "Feel Good" Committee

The SEC's new "investor Advisory Committee" is getting ready to become a functioning entity. The committee was created to advise the SEC on matters of concern to investors, and to provide the Commission with investor perspective on regulatory issues. My view on the Committee is in this month's On Wall Street Magazine, in an article titled "The SEC's 'Feel Good' Committee".