Our Capital Markets need More Regulation, not Less

Merrill Lynch engaged in deals with hedge funds that may have been designed to delay recognition of losses from mortgage securities. The SEC is likely to investigate. Merrill shares tumbled more than 9%.

What other skeletons are in their closet? Isn't this shameful?

We have heard so much about how our alleged dislosure law reform, made the U.S. Securities and Commodities markets "less competitive."

How Sarbanes-Oxley makes electronic startups less competitive
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Really?

Has a more transparent and accountable set of laws made the Subprime meltdown any less severe?

Has the Sarbanes-Oxley bill forced Merrill Lynch and other Financial Firms to violate regulations and to leverage themselves, and violate our trust, beyond tolerable risk levels?

Obviously, no. We need more regulation of our capital markets. Not less.

The National Futures Association alleged that Peregrine Financial Group failed to comply with their Compliance Rules.



NFA's BCC issued a Decision to Peregrine accepting Peregrine's settlement offer in which the firm neither admitted nor denied the allegations of the Complaint. The BCC ordered that Peregrine pay a $5,000 fine within thirty days of the date of the Decision. The BCC also ordered that Peregrine adopt, and submit to NFA within thirty days of the date of the Decision, procedures to ensure future compliance with NFA's Compliance Rules as they relate to the supervision of conditioned registrants. Finally, the BCC ordered that Peregrine adopt, and submit to NFA within thirty days of the Decision, procedures to ensure future compliance with all provisions of the Amended Final Order Granting Conditional Registration to Dominick Concilio.


Oh yeah, and have you head about the "Bubble Alert" that we are being warned about? Who is responsible for this mess?

So, yeah, this inflation thing is nothing to worry about. Which is why investors continue to plunk money down in hard assets and buy up dollar-denominated products like oil and gold, both of which surged again to finish another day with those “highest price since Columbus” headlines.
Both gold and oil have gained around 60% in the last two years.

A few years ago, $100-a-barrel crude oil and $1,000 gold would have seemed completely ridiculous. But the markets are on the cusp of grasping the former, and at this rate, the latter isn’t too far off. (Many will say, “c’mon, $1,000 gold is ridiculous,” but admit it - you hesitated before saying that this time.)

As the dollar continues to decline these assets get cheaper for foreigners to buy, but they’re not the only ones, considering the steady demand coming from the U.S. as well. With world economies still in reasonably solid shape, the commodity demand remains strong. “The dollar is falling and is making dollar-denominated assets cheaper so you get gold and crude going up and that’s probably going to keep going for a while,” says Patrick Kerr, president of Oilgasfutures.com, a commodity brokerage.


What he’s been hearing lately — and this might be a “bubble” alert — is that there are many fund managers discussing the idea that people are underallocated in these assets, with too much in equities and bonds. Buying in at $100 oil seems a bit foolhardy, but then again, people said that at $70 and $80 as well (which was a day or two ago, if we remember).

So, let's put this into some kind of perspective--the Financial Firms are complaining that we are not "competitive" because they are over-regulated; while at the same time they have over-leveraged themselves, violate the requisite regulatory guidelines, and expose us, average Americans, to an unprecendeted level of exposure to financial ruin, to no fault of our own.

Isn't it time to regulate the Merrill Lynch's, the Peregrine Financial Group's, the Citibank's, and the rest of the Financial Firms, with more scrutiny and regulations?

Are Financial Firms Undercapitalized?

Based on the latest financial news, including the fact that Merrill Lynch just had their worst write down ever in their history, even the SEC has questions about their alleged financial reporting:

SEC scrutinises disclosures made by Merrill Lynch

The essence of the investigation is really about the firm's disclosures about its financial position and whether they were honest and forthcoming about that, to its employees, customers, investors, and to the government.

Obviously, something is amiss with our current business climate, and the way our financial firms have betrayed our trust.

A further example of Financial Firms misleading the public includes Peregrine Financial Group, an alleged leading firm in the Futures and Commodities Industry. They were fined and found to be operating without sufficient capitalization funds and failing to notify the Commodity Futures Commission, aka the "CFTC!"

WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced today that it has issued an order instituting and simultaneously settling an administrative proceeding against Peregrine Financial Group, Inc. (Peregrine) of Chicago, Illinois. The action results from an audit by the CFTC's Division of Trading and Markets of Peregrine's financial statements as of March 26, 1999. In consenting to the order, Peregrine neither admitted nor denied the findings in the order.

Specifically, the CFTC order finds that Peregrine, a registered futures commission merchant, was under capitalized as of March 26, 1999, in violation of section 4f(b) of the Commodity Exchange Act (CEA) and CFTC regulation 1.17(a). The order also finds that Peregrine violated CFTC regulations by: 1) failing to file timely notice with the Commission that its adjusted net capital was less than the minimum required, on March 26, 1999; 2) failing to file notice that its adjusted net capital was below the early warning threshold; 3) failing to keep accurate books and records; and 4) filing with the Commission an inaccurate capital computation and statement of financial condition on its Form 1-FR-FCM as of March 26, 1999. These violations of the CEA and the CFTC's regulations occurred primarily because Peregrine improperly classified certain receivables as "current assets," according to the order.

How long will it take for us to realize that we are being taken advantage of by these large Wall Street and Chicago Financial firms? They have betrayed and continue to betray our collective trust.

On many levels.

Let's face it, they are in business for themselves; not for us. Recommending what or how much to allegedly "invest" in is inherently a conflict of interest.

They always make a commission or a fee; and we take all of the risk.

Isn't it time that the consumer take the power back from the big Financial Firms