Tag: Wall Street (Page 1 of 3)

SEC Approves New Plan to Root Out Conflicts of Interest on Wall Street

Market News Daily - SEC Approves New Plan to Root Out Conflicts of Interest on Wall Street.
Market News Daily – SEC Approves New Plan to Root Out Conflicts of Interest on Wall Street.

The SEC has approved a new plan to root out conflicts of interest on Wall Street related to financial firms and the adoption of technology.

Retail investors have argued for years now that technology on Wall Street, such as high frequency trading, or HFT, plays a big role in manipulating the markets as it becomes a gateway for spoofing orders.

Spoofing is a market abuse behavior where a trader moves the price of a security up or down by placing a large buy or sell order with no intention of executing it which creates the impression of market interest in that security.

The US Securities and Exchange Commission approved a plan on Wednesday to root out what Chair Gary Gensler has said are conflicts of interest that can arise when financial firms adopt the technologies, per Bloomberg.

The agency also adopted final rules requiring companies to disclose serious cybersecurity incidents within four business days after they’re deemed significant.

While the SEC is not primarily focused on the controversial practice of high frequency trading and its technology, it is looking at AI as another possible threat to the average investor.

Companies would need to assess whether their use of predictive data analytics or AI poses conflicts of interest, and then eliminate those conflicts, according to an SEC release. 

“These rules would help protect investors from conflicts of interest and require that regardless of the technology used, firms meet their obligations” to put clients first, Gensler said during the meeting.

“This is more than just disclosure. It’s about whether there’s built into these predictive data analytics something that’s optimizing in our interest or something that’s optimizing” to benefit financial firms, he said.

About the SEC’s New AI Conflicts of Interest Plan

Market News Daily - SEC Approves New Plan to Root Out Conflicts of Interest on Wall Street.
Market News Daily – SEC Approves New Plan to Root Out Conflicts of Interest on Wall Street.

The plan will be open for public comments, which the agency will review before bringing a final version to a vote, likely some time in 2024, says Bloomberg.

The rule would require a majority of the five-member commission’s approval to be finalized.

Banks and brokerages have been using AI for fraud detection and market surveillance for years.

More recently, the focus has shifted to trading recommendations, asset management and lending.

The SEC states that it wants to make sure that companies don’t put their interests before those of clients when recommending trades or products.

The AI proposal is the latest plan from Washington regulators concerned about the technologies’ power to influence everything from credit decisions to financial stability.

Companies would need to assess whether their use of predictive data analytics or AI poses conflicts of interest, and then eliminate those conflicts, according to the SEC release.

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Also Read: The SEC Has Now Finalized New Transparency Regulations

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Market News Today - SEC Approves New Plan to Root Out Conflicts of Interest on Wall Street.
Market News Today – SEC Approves New Plan to Root Out Conflicts of Interest on Wall Street.

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35,000 Retail Investors Sign SEC Letter for New Rules

Market News Daily - 35,000 Retail Investors Sign SEC Letter for New Rules.
Market News Daily – 35,000 Retail Investors Sign SEC Letter for New Rules.

Nearly 35,000 retail investors have signed a letter to the SEC published by We The Investors requesting improvements to market rules and new disclosures.

The letter is introducing new disclosure in lending transparency, margin transparency, netting transparency, FTD transparency, as well as disclosure of registration, and many other rules that will help level the playing field for retail investors.

We The Investors has given retail investors an organized, professional, and formal stance in the finance world.

For once, Wall Street vs Main Street are going head-to-head like never seen before.

Retail investors have become highly knowledgeable about the stock market and how regulation is primarily tailored to better suit institutional investors over the average investor.

This decade is going to bring forth some of the biggest changes in the stock market.

Here are the latest news and updates.

We The Investors SEC Letter

Market News Daily - 35,000 Retail Investors Sign SEC Letter for New Rules.
Market News Daily – 35,000 Retail Investors Sign SEC Letter for New Rules.

“Dear Chairman Gensler,

Since the launch of We The Investors in March, 2022, we have had over 100,000 retail investors sign up to support our various efforts to advocate for five basic principles in market reform: transparency, simplicity and fairness, choice and control, best execution and better settlement and clearing.

Our grassroots advocacy campaign has a simple goal – to empower retail investors to represent themselves while advocating for market structure reforms.

Today we write to you to continue this campaign and urge you to address one of the most opaque areas of market structure – the settlement and clearing systems that have problematic disclosures around stock lending, failures to deliver (“FTDs”), margin and netting, and the practices that enable business models predicated on FTDs.

When you discussed naked shorting and FTDs on the Jon Stewart podcast, you agreed that “we need more transparency and better transparency about a really core part of the market [] when somebody sells securities they don’t own.”

The Commission has focused with its recent proposals (10c-1 and 13f-2) on disclosure of stock borrowing and short selling by investment managers, and we applaud and support those efforts. 

However, we do not believe that these efforts go far enough, and we would like the SEC to re-examine the disclosures and mechanisms in place in this “core part of the market.”

As such, we write to you requesting the following improvements to market rules and disclosures – a roadmap for change.

Retail Investors Propose New Disclosures from SEC

Market News Daily - 35,000 Retail Investors Sign SEC Letter for New Rules.
Market News Daily – 35,000 Retail Investors Sign SEC Letter for New Rules.

Nearly 35,000 retail investors have signed an SEC letter proposing new disclosures and rules for market transparency.

Outlined below are the disclosures and rules detailed in the letter.

“First, we believe that there is a comprehensive set of new disclosures that could shed light into this opaque portion of the market:

  • Lending Transparency: Retail investors have the right to know whether their securities have been lent out, and how much revenue the broker has received.
  • Margin Transparency: Investors need visibility into the estimated margin per security for Clearing Brokers.
  • Netting Transparency: Investors need disclosure of gross versus net notional or share count per security to help understand trading dynamics and discern the level of real investment versus intraday trading activity.
  • FTD Transparency: Failure To Deliver disclosures need to be updated more often, and include more information, including how and when FTDs are remediated, what type of counterparty is responsible for the failure (bucketed into clearing broker, exempt market maker or custodian), and how long the FTDs remained open.
  • Disclosure of Registration: Public companies should be required to disclose directly registered shareholder numbers on all 10-Q and 10-K reports.

Next, we believe that retail brokers must be obligated to give their investors more control over the lending of their securities and how those securities are registered:

  • NOBO/OBO designations: Brokers should explain to investors the choices they may make as it relates to transparency of share ownership, where shares are recorded in a brokerage account in beneficial format. The default options should always be NOBO (non-objecting beneficial owner). Shielding holdings from investee companies through the use of OBO (objecting beneficial owner) designations should be a right that an investor should opt in to. Brokers should provide the investor’s email address as part of any disclosure of NOBO holdings.
  • Control of Stock Lending: Investors have the right to decide whether their securities can be lent out to short sellers. Disclosures around account types and the implications therein need to be made simpler, easier to understand, and more explicit in the account creation process.
  • Control of Registration: Investors should be able to choose whether their shares are to be held in a brokerage account or in direct registration form in the investor’s own name on the company’s share register. Brokers should be required to support the direct registration of shares in an investor’s name.
  • Investor Communications and Proxy Voting: Investors should be able to receive their communication directly from the company they invest in and not have their shareholding pooled with other clients of the broker, whose interests may not be aligned. Investors should be able to vote directly with the company, and have their voice heard at general or extraordinary shareholder meetings. Their votes should be directly confirmed by the company or its agent.

Retail Investors Demand Change in the Market

“Finally, we urge you to reform the settlement and clearing system to end problematic practices that can distort price discovery and supply/demand dynamics:

  • End the “Market Maker” Exemption to Reg SHO: As SEC enforcement has shown, so-called “market makers” have abused this exemption to Reg SHO that allows them to sell shares short without a locate. Markets would better reflect actual supply and demand dynamics if all trading firms had to locate shares before selling short. The SEC should further set a goal of a more robust, transparent, electronic locate workflow and standard.
  • End “Fails as a Business Model”: Too many firms rely on failing to deliver on their short sales to prop up or sustain their business models. This practice must be ended, either by enforcing mandatory buy-ins or through interest charges on failures. This would entail a more comprehensive overhaul of the US settlement system, and one potentially modeled on the European Settlement Discipline Regime.

We urge you to take these actions to improve transparency in markets, shine a light on the most opaque part of our market’s plumbing, to ensure that prices in the market reflect actual supply and demand, and to guarantee that brokers give investors the appropriate level of control and disclosure so they can make the decisions appropriate to their unique, individual circumstances.

We would be happy to meet with you and discuss any of these proposals in more detail.”

You can sign the official letter from We The Investors on their official website.

If you would like to receive more updates and news for the retail community like this, join the newsletter below.

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Market News Today - 35,000 Retail Investors Sign SEC Letter for New Rules.
Market News Today – 35,000 Retail Investors Sign SEC Letter for New Rules.

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Elon Musk’s New Litigation Team is Taking on Wall Street

Market News Daily - Elon Musk's New Litigation Team is Taking on Wall Street.
Market News Daily – Elon Musk’s New Litigation Team is Taking on Wall Street.

Tesla Inc. (NASDAQ:TSLA) and SpaceX CEO Elon Musk says his new litigation team will go after Wall Street short sellers and other corrupt regulators.

Brandon Ehrhart, General Counsel and Corporate Secretary at Tesla posted on LinkedIn more details.

“Are you an experienced partner at a top law firm?

Do you enjoy handling sophisticated litigation and trials but are frustrated by internal issues like conflicts and passing on work for clients you love?

Tesla Legal is building something unique: a full-scale internal litigation and trial team that can handle all aspects of litigation and trial work, including briefings, hearings, discovery, depositions and trials, completely in-house.

Apply online and see if you qualify for a team that handles cutting-edge and sophisticated legal work itself with NO conflicts.

Because we are one team with one mission: to accelerate the world’s transition to sustainable energy.”

Source: LinkedIn Post.

Elon Musk on Wall Street Short-Sellers

Elon Musk responded to the publication on Twitter sharing Brandon Ehrhart’s LinkedIn post with the following statement:

“Tesla will continue to use outside litigators, but it’s important to build a powerful litigation team internally, so that we’re not always on the defensive.

We’ll also go after the Wall St short-sellers, certain law firms & (sometimes) corrupt regulators who are the true evil.”

Elon Musk has been outspoken about short sellers in the past and has even had quarrels with the Securities and Exchange Commission (SEC) in the past.

“I want to be clear, I do not respect the SEC. I do not respect them”, said Elon Musk in an interview with CBS’s 60 Minutes.

Musk’s war with short sellers goes beyond advocating for his company.

He spoke out against shorts during the ‘Meme Stock’ frenzy of 2021, when large groups of retail investors on Reddit squeezed short sellers from their short positions in GameStop, AMC, and other companies.

“u can’t sell houses u don’t own u can’t sell cars u don’t own but u *can* sell stock u don’t own!? this is bs — shorting is a scam legal only for vestigial reasons,” Elon said in a tweet in January 2021.

Failure in Regulation for Short Selling in America

Regulators have strengthened punishment for naked short selling in South Korea and other parts of the world.

For example, The Financial Investment Services and Capital Markets Act of South Korea was revised in April 2021 so that illegal short sellers will face pecuniary penalties instead of fines.

According to the amended act, the maximum pecuniary penalty is equal to the amount of illegal short selling.

In addition, violation may lead to at least one year in prison or a fine equivalent to 300 to 500 percent of the illegal profit or avoided loss.

This model is raising attention in the United States as the predatorial practice has dominated the industry for decades.

But CEOs such as Roger Hamilton of Genuis Group (GNS) and John Brda, formerly of Torchlight/Meta Materials, and others have begun to take legal action against naked short selling.

The retail community has raised awareness through social media activism and peaceful protests, as seen on Occupy The SEC 2023, of the market injustices investors face today.

One of the most recent and most alarming frauds in Wall Street takes shape in the FINRA and MMTLP scandal – where investors’ money disappeared out of thin air when the self-regulatory agency halted buying and selling prior to delisting the ticker completely.

MMTLP shareholders have their money stuck in limbo with Project Veritas founder James O’Keef now looking at the story.

And with Elon Musk’s new litigation team going after Wall Street short sellers, it certainly brings about a new confidence in the possible changes that may occur in the markets this decade.

Market News Published Daily

Market News Today - Elon Musk's New Litigation Team is Taking on Wall Street.
Market News Today – Elon Musk’s New Litigation Team is Taking on Wall Street.

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SVB Distributed Bonuses Hours Before Bank Collapsed

Banking News: SVB gave company-wide bonuses hours before it collapsed.
Banking News: SVB gave company-wide bonuses hours before it collapsed.

Silicon Valley Bank employees received their annual bonuses on Friday just hours before the government took control of the company, according to Fox Business.

The Santa Clara, California-based band collapsed last week and is now under the control of federal regulators.

SVB had been the 16th-largest bank in the U.S. prior to the bank run that led to its downfall.

The bank held a reputation as a go-to for a number of Silicon Valley industries and startups.

Y Combinator, an incubator startup that launched Airbnb, DoorDash and DropBox, regularly referred entrepreneurs to them.

SVB’s collapse was so quick that, hours before its closure, some industry analysts were hopeful that the bank was still a good investment.

The bank’s shares had fallen by 60% on Friday morning after a similar drop the day before. 

Anxious depositors rushed to withdraw their money over concern for the bank’s health, causing its collapse, which may serve as “an extinction-level event for startups,” according to Y Combinator CEO Garry Tan.

Entrepreneur and Dallas Mavericks owner Mark Cuban called for federal regulators to buy out the bank earlier on Friday.

“The Fed should IMMEDIATELY buy all the securities/debt the bank owns at near par, which should be enough to cover most deposits,” Cuban wrote as part of a lengthy Twitter chain last week. “Any losses paid for in equity and new debt from the new bank or whoever buys it. The Fed knew this was a risk. They should own it.” 

SVB traditionally processes annual bonuses on the second Friday of March, unnamed sources associated with the bank told CNBC.

The bonuses were reportedly for work completed in 2022.

Banking News: Wall Street Banks Face Distress

Silicon Valley Bank (SVB) isn’t the only bank experiencing serious distress.

Wall Street banks lost $55 billion in just one day last week.

Four of America’s biggest banks lost a combined $55 billion of market value in a single day as financial stocks plunged.

US bank shares took a beating Thursday amid fears of contagion effects from the turmoil at Silicon Valley Bank and Silvergate.

JPMorgan saw the biggest tumble in market value among US lenders, losing $22 billion. 

(Markets Insider) JPMorgan Chase, Bank of AmericaWells Fargo and Morgan Stanley – the four most valued US lenders – saw $55 billion wiped off their combined market capitalization on Thursday, Refinitiv data show.

JPMorgan, the biggest US bank, alone saw a $22 billion tumble in its market value as its stock slid 5.41% to $130.34.

Wall Street’s Bank of America lost $16.16 billion as its share price fell 6.20% to $30.54.

Wells Fargo and Morgan Stanley saw their market capitalization drop by $10.3 billion and $6.2 billion, respectively.

Credit Suisse Bank Sees Billions in Withdraws

Credit Suisse (NYSE:CS) clients have withdrawn billions of dollars in the past several months.

In November, the bank warned investors in a 6-K filing of potential losses due to naked short covering, which as scared investors from losing most if not all of their money.

Credit Suisse also took a massive hit of $4.09 billion in Q3 and hinted at occurring losses in an upturn in markets.

This has fueled widespread withdraws from the bank leading it to borrow money.

The bank hired 20 banks for a $4 billion injection in effort to pivot from Q3’s disaster.

Credit Suisse has postponed publication of its annual report after a last-minute call from the United States Securities and Exchange Commission (SEC), which raised questions about its earlier financial statements.

The unusual intervention by the U.S regulator is the latest blow to Credit Suisse as it attempts to rebuild investor confidence after a series of scandals and setbacks that have sent its shares plunging and led clients to withdraw billions.

Market News Published Daily

Banking News: SVB gave company-wide bonuses hours before it collapsed.
Banking News: SVB gave company-wide bonuses hours before it collapsed | SVB News.

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Franknez.com is the media site that keeps retail investors informed.

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