Tuesday, August 30, 2011

Odd: Man Tries Surgery on Himself with a Butter Knife

A 63-year-old Southern California man, suffering from a painful hernia, apparently stuck a butter knife into his abdomen in an attempt to remove it. He then attempted to catherize the incision with a lit cigarette. No crime commited, but he is being held for observation.

LA Times: Hernia Surgery

Monday, August 29, 2011

Bank of America To Sell Merrill Lynch?

Interesting timing of this new rumor - BofA may have to sell or spin off Merrill Lynch. That would undoubtedly be good news for Merrill Lynch brokers and advisors.

BofA's woes making life difficult for Merrill advisers - InvestmentNews


Schwab Pitches its Clients' Clients

According to On Wall Street, Charles Schwab has long said that it doesn’t solicit the investor clients of the financial advisors who custody assets with the firm. It’s a stance it repeated just a month ago when discussing its upcoming franchise program.

Whoops. Last week, Schwab did exactly that, ending an email to its clients' clients pitching portfolio products to retirement plan sponsors who were clients of retail financial advisors and turnkey asset management programs that have custodial relations with Schwab.

The firm apologized, claimed it was an accident, that it never intented to solicit its advisors' clients, and admitted that doing so "that would be a breach of our partnership."

It certainly would be, and advisors who have been damaged by that pitch are surely looking for securities counsel.

Schwab Apologizes Over Sales Pitch to Advisor Clients

Bank of America Finally Jumps the Shark - Massive Layoffs on Tap

You knew this was going to happen. Since taken over by Bank of America, Merrill Lynch has got to be one of the most mis-managed brokerage firms in existence. The firm has been in complete mayhem since the takeover, principally because the Bank of America bankers do not have a clue as to how to run a brokerage firm. Now, with the stock in the trash (the stock is down FIFTY PERCENT this year alone), Bank of America has announced that they are going to lay off 10,000 employees. Ten Thousand.

And you know it is not the bank executives that are going to go; its going to be the brokerage side, and according to media reports, those layoffs include brokers. Evidence of the complete incompetence of Bank of America to run a broker firm abound.

Remember when Bank of America decided it would be a clever cost savings measure to cut the payouts of its branch brokers? It took their industry low 25% payout, and cut it to 12.5%. Half. Those bank brokers, who bust their butts trying to get bank customers to convert their CDs to mutual funds, had their pay cut in half. The result? Brokers left the bank in droves - they had no choice, their pay was cut in half at the same time the bank cut the referrals from the bankers to the brokers. A true mess. Even Sallie Krawcheck referred to Bank of America's pay policies as "stupid."

Or how about the other clever move when BofA took over Merrill - it cut Merrill brokers off from their own potential customers. Brokers who were in the process of transitioning from US Trust, or <gasp> Bank of America itself were prohibited from bringing their old customers over to Merrill Lynch. I wrote about that in my column "BofA In a Panic?"The arbitrations over that escapade are still going on.

Bank of America's poor decision making was evident from day one. It's retention bonuses to Merrill Lynch brokers were so poorly planned, and so low that there was a massive exodus of brokers from Merrill Lynch. Bank of America decided that a bonus of less than one times trailing 12 was going to keep brokers at the firm, when its competitors were offering 2 times trailing twelve for them to leave Merrill Lynch. Incredibly, Bank of America was surprised that brokers left.

That was October 2008. Then in August 2009 Bank of America decided that chasing million dollar producers away was not a good idea, and it announced that it was looking to hire brokers of all production levels. We discussed that disaster in "Is Merrill Schizophrenic?"

That apparently did not work out either, so in 2010 Merrill announced that it was going to hire rookie brokers, because it did not want to pay for talent. That apparently did not work out too well, since now it is those rookie brokers who are undoubtedly going to be on the firing line.

During all of this, Bank of America refused to join the Broker Recruiting Protocol, which raised the ire of many in the industry, including other firms. It suffered through that mini-fire storm, and then merged all of its brokers into Merrill, resulting in....wait for it....them joining the Broker Recruiting Protocol.

But we are not done. In 2011, Bank of America realized that they were having trouble recruiting new brokers and keeping existing ones . I know, it was no shock to those of us in the industry, but apparently Bank of America was baffled. A rational approach to the problem would be to step up recruiting, sweeten pay packages, and otherwise transform your firm into a business where brokers were proud to say they worked, and were clients were being properly taken care of.

But no, not a Bank of America. Rather than doing anything to make their operating units a better place for clients and employees, Bank of America changed its focus from trying to hire brokers, to attempting to stop the few that they had from leaving. In March of this year, BofA announced unilateral employment restrictions on US Trust advisors.  Bank of America gave those advisors an ultimatum - a demand that they sign a new agreement that would effectively sideline them for up to eight months if and when they decide to leave the firm or else risk losing not only their 2010 bonuses but their jobs as well. I discussed all of this back in March, in "BofA In A Panic? Unilaterally Imposes Garden Leave Provisions."

Now, after three years of disasters (we haven't even touched on the employee arbitrations Merrill Lynch has lost, the customer arbitrations that it has lost, and the millions of dollars of fines that have been imposed) Bank of America has undoubtedly jumped the shark - it has reached the point where it is beyond recovery.

Bank of America announced that it will be laying off 10,000 employees, on top of the 2,500 layoffs that it instituted earlier this year.

A damn shame. When I started working with financial professionals in the 1980s, Merrill Lynch was THE brokerage firm. Brokers were proud to work there, clients were well treated, and the firm was well respected.

That is certainly old news, at least from by broker-centric view.

Bank of America and layoffs

Monday, August 15, 2011

SEC Whistleblower Information and FAQ

We just posted an introduction to the SEC Whistleblower Program at our new site, for those of you who are interested.

SEC Whistleblower Program


Don't Google "Insider Trading" or "10b-5" Before Trading on Inside Information

More insider trading cases from the commission. This time the SEC charges that the defendant used information that he gleaned or stole from his girlfriend who was working for Disney on it acquisition of Marvel Entertainment in 2009.

A slightly different twist on the classic insider trading case. According to the SEC he used his brother's account to make the trades. Did he think that was going to fool investigators? But just before many of his purchases he searched the Internet for terms  such as “insider trading,” “material, non-public information,” and “Rule 10b-5.”So much for a defense of lack of intent or knowledge of the acquisition.

According to the SEC’s complaint the defendant's girlfriend worked on the Marvel acquisition as an extern in Disney’s corporate strategy department, and she possessed confidential details about the pricing and timing of the deal, and the SEC is alleging that the defendant illegally traded on this non-public information in breach of his duty of trust and confidence to his girlfriend.

The misappropriation theory has certainly taken us a long way from the wording of the statute - that the fraud must be in connection with the purchase or sale of a security. 

The SEC Complaint is at the Commission's site.

SEC Charges Former Investment Fund Employee with Insider Trading in Marvel Stock Prior to Disney Deal; 2011-166; August 11, 2011


Friday, August 12, 2011

SEC Investigating S&P On Insider Trading Issues

According to a short piece from Reuters his morning, the SEC has asked rating agency Standard & Poor's (S&P) to disclose which employees knew of its decision to downgrade U.S. debt before it was announced last week, the Financial Times said, citing people familiar with the matter. The article also states that the Commission is not aware of a leak, nor is it aware of aberrational trading.


Thursday, August 11, 2011

SEC Charges Former Baseball Player and Others with Insider Trading;

Lawyers, doctors, even scientists and now baseball players - it seems that no one can escape the allure of trading on inside information. It is truly an amazing phenomenon, since presumably all of these people know it is illegal. Given the draconian penalties, you would think they would not take the risk.

The SEC has charged former professional baseball player Doug DeCinces and three others with insider trading ahead of a company buyout. The SEC alleges that DeCinces and his associates made more than $1.7 million in illegal profits when Abbott Park, Ill.-based Abbott Laboratories Inc. announced its plan to purchase Advanced Medical Optics Inc. through a tender offer.

The SEC alleges that DeCinces, who lives in Laguna Beach, Calif., received confidential information about the acquisition from a source at Santa Ana, Calif.-based Advanced Medical Optics. DeCinces immediately began to purchase shares of Advanced Medical Optics in several brokerage accounts, buying more throughout the course of the impending transaction as he received updated information from his source. During this time, DeCinces also illegally tipped three associates who traded on the confidential information – physical therapist Joseph J. Donohue, real estate lawyer Fred Scott Jackson, and businessman Roger A. Wittenbach.

DeCinces agreed to pay $2.5 million to settle the SEC’s charges, and the three others also agreed to settlements.

“Time and again, we see reputable people engaging in insider trading and risking their good names in order to enrich themselves and those around them ...People need to understand that we are watching for suspicious trading activity, and they will pay a heavy price when we catch them insider trading.” Daniel M. Hawke, Chief of the SEC Division of Enforcement’s Market Abuse Unit and Director of the Philadelphia Regional Office.

The SEC Complaint is online, as is the Commission's press release

Saturday, August 6, 2011

S&P Downgrades US Credit For First Time

Citing "political brinkmanship” which has made the government's ability to manage its finances “less stable, less effective and less predictable” S&P dropped the credit rating for the United States government.

Our politicians have completely and utterly screwed us, once again. When are we going to learn? They have no interest in serving the people, their interest is in winning a political battle, while losing the entire war.

S&P downgrades U.S. credit rating for first time - The Washington Post