Posts belonging to Category Derivatives

Regulators Expand Investigations into JP Morgan’s Derivatives Trading


The Commodities Futures Trading Commission (CFTC) is expanding its investigation into whether J.P. Morgan traders, who made the derivatives trades that resulted in losses of $3 billion and counting, engaged in fraud, among other things. The investigation is proceeding under new authority gained in the Dodd-Frank financial reform act. “U.S. Probe of J.P. Morgan Widens,” […]

Conflicts of Interest and Complex Products Highlight Concerns about Wall Street


Broker-dealers’ conflicts of interest and the proliferation of complex financial products being sold by financial advisers are the top areas of concern to the Financial Industry Regulatory Authority (FINRA), according InvestmentNews (“Ketchum: Finra’s focus on conflicts of interest compounding,” by Bruce Kelly).

Why Simply ‘Looking Into’ Wall Street’s Failure To Perform Adequate Due Diligence Isn’t Enough


The Securities and Exchange Commission has identified broker-dealer due diligence as an area of high risk. Before recommending any investment, a brokerage firm is required by law to have a reasonable basis for believing the investment is suitable for customers to whom the investment is recommended, and for understanding all the material facts (the pros […]

Wall Street’s ‘Gunslinger’ Mentality Must Be Regulated


By now many of us have learned of JPMorgan Chase’s $100 billion derivatives bet that has turned into a $3 billion and counting loss. Proving that Wall Street banks are still acting like gambling casinos, JPMorgan bet 15 percent of its balance sheet on risky credit default swap contracts tied to corporate bonds (“What JP […]

Regulators Eye the Role of Investment Wholesalers in Providing Misleading Disclosures to Investors


The Financial Industry Regulatory Authority (FINRA) is showing stepped-up interest in the role of broker-dealers and individuals that act as wholesalers in the sale of private (Reg D) offerings that clients and often brokers do not fully understand. (See InvestmentNews article by Bruce Kelly entitled “Finra eyes wholesalers’ role in vending.”

Chicago Professors Argue That Governmental Approval Should Be Required For Wall Street’s Exotic Financial Products


Wall Street is peddling snake oil ? new financial products that are the equivalent of bottles of medicine with labels like “Dr. Bartlett’s Beneficent Balm ? Boon to Mankind” ? and they should be regulated as such, according to University of Chicago professors Eric A. Posner and E. Glen Weyl. The FDA protects consumers from […]

Many Exotic CDs and Structured Notes Involve High Costs and Serious Risks


With interest rates stuck at record lows, and retirees or those on the brink of retirement looking are for higher yields, Wall Street has capitalized on this dilemma by selling an array of alternative products like “structured notes” that promise higher yields but come with higher (often undisclosed) risks, and by marketing dividend stocks as […]

Regulators Plan Legal Actions Over Improper Sales of ETFs and ETNs


The Financial Industry Regulatory Authority (FINRA) announced plans to file enforcement actions against certain brokerages in connection with unsuitable sales of leveraged and inverse leveraged exchange-traded funds (ETFs), as well as for failure to train their brokers who sell them (see Reuters article by Suzanne Barlyn and Jessica Toonkel entitled “FINRA to bring cases over […]

The SEC Identifies Inadequate Disclosures in Sales of Structured Notes


The U.S. Securities and Exchange Commission is “asking” banks that issue structured notes to improve the accuracy of disclosures to investors, including comparing the sale price to the true (lower) value of the notes at the time of sale. “We believe issuers should consider prominently disclosing the difference between the public offering price of the […]

Chasing Higher Yields Involves Taking Greater Risk


The prospect of several more years of extremely low interest rates is causing people who depend on interest income to accept Wall Street’s recommendations to purchase relatively illiquid and opaque alternative investments like structured products, non-traded REITs, hedge funds and variable annuities. (“Itchy Investors Ramp Up the Risk,” Wall Street Journal). Regulators worry that the […]