The Blog Of The Securities Industry Professional Association

FINRA firing expensive bullets into Zombies



Time for a FINRA reevaluation of importance 

Each month I can’t wait to study the monthly disciplinary actions on FINRA’s web site for two reasons: First, what sort of idiotic thing did somebody try to pull and Secondly and more importantly, who do I know on the list?  After 20 plus years in the industry, it’s safe to say I am never surprised reading some of the scams that were pulled out there on investors.  It’s also safe to say that in the last ten years I have known at least one person or Broker Dealer in each and every monthly disbursement.   One of the things that always strike me as odd is the way FINRA will release action after action against what amounts to a  zombie corpse.  In fairness to relationships I have made over the years I will not use names but isn’t it a waste of members money to go after some of these zombie characters who have already left the industry?  In other words, if a person hasn’t been registered in say four years and already has several outstanding arbitrations and or actions against them, I’m pretty sure there is a good chance his series seven license isn’t coming up anytime soon, yet I see some of these same names month after month and year after year.  This begs the question as to why? As we noted last month in our story “ Who is the real criminal”? , one would think finding out how 32 million shares of stock could be sold in a naked short without following basic regulations would be more important than shooting a dead zombie body three more times.

Another reevaluation in the name of investor protection that must take place is the “Ordered restitution” we see time and again. I give these same ‘Orders’ to my teenage daughter day after day about cleaning up her room and I get the feeling FINRA’s ‘Order” carries almost the same significance as mine.   In December a firm was once again ordered to pay 13 million in customer restitution based on monies raised for a once hopeful on line trading firm.   We are going to play devil’s advocate and as much as it irks me, I’m willing to give the benefit of the doubt and concede that FINRA was 100% correct in each and every finding of fact.  So for the sake of argument, the person was pure evil, and investors were misled and it’s not debatable and here is what we are left with:

  • Investors put 13 million into the online company
  • The company has not paid back the investors
  • The company does have over 7,000 on line accounts and proprietary software

So what has changed in the last 4 years?  Well here is a basic recap of what has changed:

  • Investors put 13 million into the online company
  • The company has not paid back the investors as the company no longer exists

To date none of the ‘ordered restitution” has been paid back and since the owner has been shot 15 times, I’m guessing it never will be.  As an investor, I would be furious that the only asset I had to cling onto was summarily shut down and dispersed for free to other entities.  We believe the time is now for reevaluation at FINRA.  Perhaps the Board and Industry leaders should discuss setting up either a SEC appointed Trustee or Board appointed Trustee who will continue to run the entity and attempt to extract as much out of the company as possible.  Imagine a scenario whereby a certain percentage of profits each month is put into an investor trust account and is disbursed each quarter until investors are made whole?  Better yet, by appointing some sort of trustee, the firm can continue operations, grow and possibly be sold by some guy at Broker Dealer Exchange( who looks a lot like me)  for several million dollars thus ensuring even more investor funds be returned.  While we understand FINRA wants to protect investors and get the bad actors out as fast as possible, they need to do a better job of protecting the actual existing assets that are available for restitution.  What do you think?






Post Metadata

January 13th, 2016



Comments are closed.