Earnings Management, Fintech-Driven Incentives and Sustainable Growth by Michael I. C. Nwogugu;

Author:Michael I. C. Nwogugu; [Неизв.]
Language: eng
Format: epub
Publisher: Taylor & Francis (CAM)
Published: 2019-10-24T20:00:00+00:00

5.4.1 FINRA’s ARS portfolio, and FINRA’s failure to warn investors about the risks of investing in ARS

Ms. Mary Schapiro was formerly the Chairman of FINRA (a securities industry regulatory organization in the USA) immediately before she was appointed as the Chairperson of the US Securities & Exchange Commission (US SEC) in 2009. A 2008 article54 noted that during 2008 (Ms. Schapiro’s last year as FINRA’s Chair-person):

i)  FINRA failed to investigate or sanction Bernard Madoff and Robert Allen Stanford, who perpetrated two of the largest Ponzi schemes in US history (even though their investment companies were regulated by FINRA).

ii)  FINRA failed to act against large FINRA members (Lehman Brothers, Bear Stearns and Merrill Lynch) in connection with their roles in the subprime mortgage securities scandals.

iii) FINRA failed to warn investors about Auction Rate Securities (ARS) problems after FINRA had liquidated its own ARS portfolio holdings during mid-2007, but before the ARS market “froze” (and there were numerous publicly available articles about the risks inherent in such “investments”).

iv)  FINRA suffered about US$700 million of losses in its ARS portfolio during Ms. Schapiro’s tenure as Chairperson of FINRA.

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