JUST WHEN YOU THOUGHT IT WAS SAFE TO GO BACK IN THE WATER
(FELONIUS FUNK SHOWS UP)
America sports brokerage and financial planning companies of all shapes and sizes, from the mega bank-owned firm to the tiny independent, almost "mom and pop" boutique. The lion's share of these people are hard-working, properly licensed, and they make the right ethical decisions every day. Once in a while a properly licensed rogue will move into a city and set up shop. Ponzi schemes are developed in order to pay off old money with new money after "guranteeing" returns that seem just a little to good to be true. Sometimes "Promissory Notes" are offered to clients (loans to help keep the business going) with the promise of overly attractive interest rates attached to them. Eventually complaints to the regulators roll in, all of these businesses collapse, the owners get caught, they go to trial, they get convicted, and they do some jail time.
What do these predatory businesses have in common? When the FEDS in the securities industry build their cases, one of the primary charges is the alleged issuance of "Unregistered Securities". Any new securitiy issued by any member firm has to go through a series of regulatory processes before it can be "cleared" for issuance. The private issuance of debt and/or equity securities in this vast industry is forbidden. This country has seen a bunch of rogue investment business owners go to jail, over the last twenty years, for selling unregistered securities and participating in ponzi schemes.
I rarely watch anything in our media that helps glorify Hollywood. I have not watched the Grammys, Emmys, and Oscars for years. The point was brought to my attention recently that, during one of those awards ceremonies, someone did stand at the podium and remark that no one from Wall Street had gone to jail over the 2007-08 financial shenanigans. I applaud this public outcry for justice. Many of you still may be wondering who, if anyone, really did anything wrong three years ago.
Concluding, I will remind you that there are good derivatives and bad derivatives. Derivatives like zero coupon bonds, convertible bonds and/or convertible preferred stock, are examples of good derivatives that go through normal regulatory procedures before they can be cleared for issuance and then sold by a number of member firms. Now let's talk about the bad derivatives. They are created on paper out of thin air by employees of member firms, often exponentially leveraged, and then are sold to clients around the world without regulatory scrutiny of any kind. Many of them are off shore and not even shown on the balance sheets of the firms involved.
So.......our small white collar criminals go to jail for the same offenses that the big boys in the banking, investment banking, and insurance industry commit. The big boys, however, continue to get their "Get Out Of Jail Free" cards renewed and plunder the financial landscape with their own versions of toxic waste.
The bottom line: The big firms are just as guilty of selling unregistered securities as their smaller counterparts who have been busted and sent to jail. The leverage used, in fact, makes the big boys much more guilty.
FF
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