Post by jcline on Aug 13, 2006 12:51:15 GMT -4
STOCKGATE TODAY
An online newspaper reporting the issues of Securities Fraud
Utah backs down on threats from Wall Street Lobbyists – August 14, 2006
David Patch
So how far will Wall Street go to protect their territory on illegal stock trading? This past Friday we found out.
The Securities Industry Association (SIA), thought by many to be nothing more than a shill for Wall Street Institutions, lobbied the Governor of Utah to postpone a law passed by the state that was intended to protect the companies and investors of Utah and succeeded Friday to block the introduction. The postponement acts as nothing but a delay in the protection of the businesses and investors who were short changed in a stock sale transaction.
The law being contested was one where Wall Street, who act as an intermediary in a stock sale transaction, or where Wall Street was in fact the seller in a transaction where the delivery of the shares sold were immediately provided to the buyer of these shares, would be responsible for providing Utah regulators information pertaining to that transaction upon request. While the broker-dealer representing the buyer in the transaction walks away with the trade commission, as does the broker-dealer representing the sell side, the transaction is never actually concluded leaving a buyer short of their rightful ownership of shares. The state of Utah’s law forced these firms to provide the specific information on such trades in order to protect the buyer.
The SEC has records now showing that these fails in delivery can last for weeks or months as the seller of these shares not delivered awaits a profitable period in time to make good on delivery of these shares. This delay is a risk to the market but more importantly, a risk to the unprotected buyer of these securities.
What the Utah law proposed to do was seek out the identities of the seller in such transactions when the fails in heavily oversold securities persist for extended periods in time. The SIA opposed this law as being unnecessarily harsh on the brokerage community and has filed suit in federal court to block the law.
Unfortunately, Congress disagrees with the SIA as stated in the drafted language of the Securities Act of 1934. Congress mandated that all trades must settle promptly for the safety of the investing public. Thus, the state of Utah passed laws that authorized state regulators to seek out the identities of the selling parties in extended failed transactions to better understand why a trade did not settle promptly as required by law. The law identified fines and penalties to those Wall Street institutions that failed to make such disclosures upon request. It was as simple as that.
But here lies the problem.
According to a Salt Lake Tribune report SIA President Marc Lackritz, said the association [SIA] is eager to provide "robust investor protection and market speed, liquidity and uniformity, which are the linchpins of our financial markets.” The SIA “convinced” the state Governor that they were looking out for us.
Market speed? As in allowing millions of trade transactions, representing billions of investor dollars, to go unsettled for indefinite periods of time? Lackritz defends the industries position that settling certain trades, without the disclosure to the investor that such trades failed settlement, as being of no harm to that investor?
But that mindset disputes years of posturing by the SIA over the trade settlement process.
Pertaining to such settlement issues, the SIA, back in December 2000, presented their first white paper on the conversion from T+3 to a T+1 settlement cycle. This initiative was created as the Industry billed this as a critical step in reducing industry wide risks.
But after 4 years of lobbying, the SIA suddenly dropped this effort in June of 2004. Ironically, June 2004 is the same month that short selling reforms under Regulation SHO was being passed by the SEC Staff to address settlement issues in the market place. The SIA was backing off shortened settlement cycles citing the costs required to implement a T+1 settlement cycle relative to the payback for those expenditures.
Payback for what Wall Street revenues or the safety of the investing public?
In a June 2004 comment letter to the SEC on the shortened settlement cycle the SIA said T+1 "should not be considered at this time" and that simpler steps such as same-day trade matching prior to clearance "will mitigate risk in the clearance and settlement process."
Now does that sound like putting the interests of the investor up first? Costs required implementing a process to mitigate risks? What risks is it the SIA is identifying?
As time has passed, it is clear what cost risks the SIA was concerned with.
By June 2004 there was an identified $6 Billion in Mark-to-Market fails in the DTCC stock settlement system. These fails are the liability and responsibility of the industry and not that of the buyer or the seller of these securities.
In a stock transaction, the sell-side broker dealer is responsible for insuring the trade can settle prior to executing such a trade. If thereafter the trade fails, it is their liability and not that of the selling party for any expenses incurred in settling such trades. Therefore, the costs of T+1 is that the Industry would have to potentially take a loss on the settlement of a trade executed where a fail was created and the value of the stock rises.
A $6 Billion Mark-to-Market failure liability could cost the Industry tens of billions of dollars or more if forced to settle.
The SEC, in their proposal March 2004 proposal on the Settlement cycle defined the settlement problem by simply stating:
It is generally accepted that a substantial portion of the risks in a clearance and settlement system is directly related to the length of time it takes for trades to settle. In other words, "time equals risk." In the context of the Commission's proposal in 1993 to move to T+3, the Federal Reserve Board ("Board") noted that settlement systems for securities and other financial instruments were a potential source of systemic disturbance to financial markets and to the economy.
Today the SEC and SIA have banded together to ignore all of their previous comments to insure that if Wall Street wants to create liquidity by selling what does not exist, and can profit from such liquidity, than the risks to the public can be ignored. What it means to the investing public is very minor in the overall objective of insuring our capital markets (Wall Street’s personal playground) remains fruitful for the children at play.
Something to consider (My own personal thoughts):
Recently I identified to several associates the parallel the SIA and Wall Street are to organized crime. They chucked at this parallel but the more you think about it the more realistic it becomes.
Back in the glory days of Organized crime, store owners were required to pay protection money to crime families to insure their businesses would not be burn down by families themselves. The families had cops and thugs do the collecting as the extortion money was considered just part of the process of being a business owner in one family’s territory. If you didn’t play nice, your business was destroyed.
Today we have Wall Street being afforded special privilege that insures their profitability despite the impact it has on us as individual investors or the business operations trading in the markets. WE as investors and business leaders are playing in wall streets territory.
The payouts are being made daily and those payouts are being collected by the SEC as fees and by the SIA. The carefully crafted laws have become part of those payments as the SIA spends millions of dollars annually to lobby on behalf of the white collar criminals, the god fathers, of Wall Street.
This past Friday the SIA just burned down their latest non-compliant business owner and that was the state of Utah. They did so publicly as a sign to all others who attempted to fight the Wall Street family. The Utah government was not playing nice with Wall Street and the SIA threatened the safe operation of the state. All that was left was for the state to back down under the threats or suffer the consequences.
A modern day organized crime family has evolved and like all others, the power of money controls their actions. This organized crime family does not use guns and fire to destroy the families across this nation. No this family of thieves uses the power of financial terrorism to destroy and has parts of the federal government in their pockets.
So how far will Wall Street go to protect their territory? On Friday they forced the State of Utah to back down on a law intended to protect the people and the businesses of that state. No small task but accomplished right before your eyes and no one even blinked.
Tomorrow the SIA will be back at the door steps of Congress and the SEC insuring that the latest proposed changes to Regulation SHO, where loopholes for fraud are intended to be closed, do not pass through into law. Such changes, while good for the investing public, are not in the best interests of an industry that generated enough ill-gotten profit to pay out $27 Billion in bonuses last year alone. Wall Street’s fines amassed into the billions for their actions against the investing public. These fines were also the equivalent to a parking ticket for robbing the bank.
For more on this issue please visit the Host site at www.investigatethesec.com .
Copyright 2006
An online newspaper reporting the issues of Securities Fraud
Utah backs down on threats from Wall Street Lobbyists – August 14, 2006
David Patch
So how far will Wall Street go to protect their territory on illegal stock trading? This past Friday we found out.
The Securities Industry Association (SIA), thought by many to be nothing more than a shill for Wall Street Institutions, lobbied the Governor of Utah to postpone a law passed by the state that was intended to protect the companies and investors of Utah and succeeded Friday to block the introduction. The postponement acts as nothing but a delay in the protection of the businesses and investors who were short changed in a stock sale transaction.
The law being contested was one where Wall Street, who act as an intermediary in a stock sale transaction, or where Wall Street was in fact the seller in a transaction where the delivery of the shares sold were immediately provided to the buyer of these shares, would be responsible for providing Utah regulators information pertaining to that transaction upon request. While the broker-dealer representing the buyer in the transaction walks away with the trade commission, as does the broker-dealer representing the sell side, the transaction is never actually concluded leaving a buyer short of their rightful ownership of shares. The state of Utah’s law forced these firms to provide the specific information on such trades in order to protect the buyer.
The SEC has records now showing that these fails in delivery can last for weeks or months as the seller of these shares not delivered awaits a profitable period in time to make good on delivery of these shares. This delay is a risk to the market but more importantly, a risk to the unprotected buyer of these securities.
What the Utah law proposed to do was seek out the identities of the seller in such transactions when the fails in heavily oversold securities persist for extended periods in time. The SIA opposed this law as being unnecessarily harsh on the brokerage community and has filed suit in federal court to block the law.
Unfortunately, Congress disagrees with the SIA as stated in the drafted language of the Securities Act of 1934. Congress mandated that all trades must settle promptly for the safety of the investing public. Thus, the state of Utah passed laws that authorized state regulators to seek out the identities of the selling parties in extended failed transactions to better understand why a trade did not settle promptly as required by law. The law identified fines and penalties to those Wall Street institutions that failed to make such disclosures upon request. It was as simple as that.
But here lies the problem.
According to a Salt Lake Tribune report SIA President Marc Lackritz, said the association [SIA] is eager to provide "robust investor protection and market speed, liquidity and uniformity, which are the linchpins of our financial markets.” The SIA “convinced” the state Governor that they were looking out for us.
Market speed? As in allowing millions of trade transactions, representing billions of investor dollars, to go unsettled for indefinite periods of time? Lackritz defends the industries position that settling certain trades, without the disclosure to the investor that such trades failed settlement, as being of no harm to that investor?
But that mindset disputes years of posturing by the SIA over the trade settlement process.
Pertaining to such settlement issues, the SIA, back in December 2000, presented their first white paper on the conversion from T+3 to a T+1 settlement cycle. This initiative was created as the Industry billed this as a critical step in reducing industry wide risks.
But after 4 years of lobbying, the SIA suddenly dropped this effort in June of 2004. Ironically, June 2004 is the same month that short selling reforms under Regulation SHO was being passed by the SEC Staff to address settlement issues in the market place. The SIA was backing off shortened settlement cycles citing the costs required to implement a T+1 settlement cycle relative to the payback for those expenditures.
Payback for what Wall Street revenues or the safety of the investing public?
In a June 2004 comment letter to the SEC on the shortened settlement cycle the SIA said T+1 "should not be considered at this time" and that simpler steps such as same-day trade matching prior to clearance "will mitigate risk in the clearance and settlement process."
Now does that sound like putting the interests of the investor up first? Costs required implementing a process to mitigate risks? What risks is it the SIA is identifying?
As time has passed, it is clear what cost risks the SIA was concerned with.
By June 2004 there was an identified $6 Billion in Mark-to-Market fails in the DTCC stock settlement system. These fails are the liability and responsibility of the industry and not that of the buyer or the seller of these securities.
In a stock transaction, the sell-side broker dealer is responsible for insuring the trade can settle prior to executing such a trade. If thereafter the trade fails, it is their liability and not that of the selling party for any expenses incurred in settling such trades. Therefore, the costs of T+1 is that the Industry would have to potentially take a loss on the settlement of a trade executed where a fail was created and the value of the stock rises.
A $6 Billion Mark-to-Market failure liability could cost the Industry tens of billions of dollars or more if forced to settle.
The SEC, in their proposal March 2004 proposal on the Settlement cycle defined the settlement problem by simply stating:
It is generally accepted that a substantial portion of the risks in a clearance and settlement system is directly related to the length of time it takes for trades to settle. In other words, "time equals risk." In the context of the Commission's proposal in 1993 to move to T+3, the Federal Reserve Board ("Board") noted that settlement systems for securities and other financial instruments were a potential source of systemic disturbance to financial markets and to the economy.
Today the SEC and SIA have banded together to ignore all of their previous comments to insure that if Wall Street wants to create liquidity by selling what does not exist, and can profit from such liquidity, than the risks to the public can be ignored. What it means to the investing public is very minor in the overall objective of insuring our capital markets (Wall Street’s personal playground) remains fruitful for the children at play.
Something to consider (My own personal thoughts):
Recently I identified to several associates the parallel the SIA and Wall Street are to organized crime. They chucked at this parallel but the more you think about it the more realistic it becomes.
Back in the glory days of Organized crime, store owners were required to pay protection money to crime families to insure their businesses would not be burn down by families themselves. The families had cops and thugs do the collecting as the extortion money was considered just part of the process of being a business owner in one family’s territory. If you didn’t play nice, your business was destroyed.
Today we have Wall Street being afforded special privilege that insures their profitability despite the impact it has on us as individual investors or the business operations trading in the markets. WE as investors and business leaders are playing in wall streets territory.
The payouts are being made daily and those payouts are being collected by the SEC as fees and by the SIA. The carefully crafted laws have become part of those payments as the SIA spends millions of dollars annually to lobby on behalf of the white collar criminals, the god fathers, of Wall Street.
This past Friday the SIA just burned down their latest non-compliant business owner and that was the state of Utah. They did so publicly as a sign to all others who attempted to fight the Wall Street family. The Utah government was not playing nice with Wall Street and the SIA threatened the safe operation of the state. All that was left was for the state to back down under the threats or suffer the consequences.
A modern day organized crime family has evolved and like all others, the power of money controls their actions. This organized crime family does not use guns and fire to destroy the families across this nation. No this family of thieves uses the power of financial terrorism to destroy and has parts of the federal government in their pockets.
So how far will Wall Street go to protect their territory? On Friday they forced the State of Utah to back down on a law intended to protect the people and the businesses of that state. No small task but accomplished right before your eyes and no one even blinked.
Tomorrow the SIA will be back at the door steps of Congress and the SEC insuring that the latest proposed changes to Regulation SHO, where loopholes for fraud are intended to be closed, do not pass through into law. Such changes, while good for the investing public, are not in the best interests of an industry that generated enough ill-gotten profit to pay out $27 Billion in bonuses last year alone. Wall Street’s fines amassed into the billions for their actions against the investing public. These fines were also the equivalent to a parking ticket for robbing the bank.
For more on this issue please visit the Host site at www.investigatethesec.com .
Copyright 2006