Securities Industry Commentator by Bill Singer Esq

Prepping portfolios for next market storm? Not just gold and govvies (Bloomberg by Saikat Chatterjee and Dhara Ranasinghe)

Speculative Fervor in U.S. Stocks Surges to 'Stunning' Levels (Bloomberg by Cormac Mullen)

Day Traders Are a New Wrinkle in the Negative Oil Price Mystery (Bloomberg Businessweek by Matthew Leising)

SEC Obtains Final Judgment Against Recidivist Investment Adviser, Including Enforcement of an SEC Order (SEC Release)

California man who falsely claimed ties to Moroccan royal family in $10 million dollar advance fee fraud scheme is sentenced (DOJ Release)

CFTC Orders UK Company to Pay Over $490,000 for Registration and Supervision Violations (CFTC Release)

FINRA Arbitrators Award Damages in Health Benefits Dispute. In the Matter of the Arbitration Between Ignatius Lou DeSimone, Claimant, v. Mirae Asset Securities (USA) Inc., Respondent (FINRA Arbitration Decision)

Warren Buffett's lack of big moves during sell-off is 'tied to his age,' Ken Fisher says (CNBC Release by Jesse Pound)

FINRA Arbitrator Sings Signed, Sealed, Delivered and Return to Sender In Default Award (BrokeAndBroker.com Blog)

During the 2008 global financial crisis for instance, a portfolio comprising equity and government bonds in a 60:40 ratio would have lost 2%. But in March-April this year, a similar portfolio lost 13%, according to investment advisory firm BCA Research.

The reason bonds find it harder to move inversely to equities is that German and U.S. 10-year yields are 500 bps and 350 bps lower than they were on the eve of the 2008 crisis.

"A stronger cross-asset correlation is the worst nightmare for any portfolio manager, and this has been a defining feature of this crisis, prompting the search for alternative assets," said Dhaval Joshi, chief European strategist at BCA.

At the heart of the speculative activity are smaller investors, according to Sundial. Small trader call buying made up more than 50% of total volume last week, the highest since 2000, it said.

Past instances when bullish small trader positions made up 45% or more of volume preceded a median loss for U.S. stocks of about 3% in two months time and 15% in a year, according to the note.

[B]en Whitesides was trading on ETrade from his home near Salt Lake City when he bought three 500 barrel oil contracts at an average price of 75 ¢ a barrel, he says. When prices turned negative, he wanted to sell immediately, but ETrade's system froze. Whitesides says he couldn't buy or sell, and was completely shut out. He estimated the most he could lose was about $1,500. Two days later, ETrade withdrew $57,000 from his account. "Their system had no ability to exit those contracts," Whitesides says. "I was at the mercy of the market with no ability to get in or out based on ETrade's system."

against Copeland enforces the SEC's July 2019 order against him and orders him to comply with all relief provided for in that order, permanently restrains and enjoins him from violations of the antifraud provisions of Section 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder, and orders him to pay an additional civil penalty in the amount of $192,768. The final judgment against Copeland Capital permanently restrains and enjoins it from violations of the antifraud provisions of Section 206(4) of the Advisers Act and Rule 206(4)-8 thereunder.

[H]assan Ra El operated a scheme to defraud business owners across the country who were seeking loans. El claimed that he was a wealthy investor and a member of the Moroccan Royal Family. El fraudulently claimed that he had access to Moroccan Royal Family funds that would be used to fund business loans. El created fraudulent documentation showing that insurance companies were offering default insurance policies on the loans. El convinced prospective loan applicants that they had to pay default insurance fees, typically 10% of the loan amount, before the loans would fund. When the loans failed to fund, El used fees from later loan applicants to partially refund fees from previous loan applicants.

In furtherance of the scheme, El created fraudulent bank statements purportedly showing that he or companies that he controlled had millions in bank accounts. El also created fraudulent email accounts and correspondence purportedly from insurance executives stating that loans had been approved. El used fees from loan applicants to fund his lifestyle, pay his living expenses, and to rent high-end automobiles, including a Ferrari, Range Rover and Lamborghini. El fraudulently induced victims to pay over $10 million dollars in advance fees. Neither El nor his companies funded any of the promised loans and loan applicants lost over $5 million dollars in the fraud scheme.

[F]rom at least February 6, 2014 to March 8, 2019, Gain UK acted as a counterparty to retail foreign exchange (forex) customers who were located in the United States, without registering as an RFED as required by the CEA and CFTC regulations. Gain UK accepted customers who used U.S. mailing addresses in account applications and provided documents such as lease agreements, utility bills, and health-insurance enrollment letters suggesting that they were located in the United States. Furthermore, one customer informed a Gain UK employee that she was a student at a U.S. university when questioned about her account application and U.S. mailing address. Nevertheless, Gain UK failed to register as an RFED as required.

The order also finds that Gain UK failed to diligently supervise the handling of the account of a retail forex customer who was located in the United States. Specifically, Gain UK failed to detect warning signs of the underlying fraudulent conduct by an unregistered CTA who solicited the retail forex customer to open an account with Gain UK. For example, a Gain UK employee had extensive communications with the unregistered CTA and was aware that the CTA had been rejected from managing accounts with Gain UK and its affiliates because the CTA may have been soliciting managed accounts through social media and a website without registering with the CFTC. Despite the unregistered CTA not being named on any of the account documents, the CTA had extensive communications with Gain UK's employee about creating the account, directed the trading in it, and refunded commissions to the customer to reimburse significant trading losses. Due to the unregistered CTA's fraudulent conduct, the customer suffered approximately $280,000 in losses while Gain UK earned $241,671.  

Based upon my interpretation of Par. 3(c)(ii)(b) of the subject Employment Agreement, I would have awarded Claimant the sum of $849,999.96 (his base salary of $300,000 for the period from November 1, 2018 through August 22, 2021, the balance of the term of the subject Employment Agreement).

"The reality of great investors, including my father, is that when they get to a certain age they lose their edge. I'm not suggesting that Mr. Buffett has lost his edge, but I can't find a history of people his age who don't become relatively static in a crisis," Fisher said. "They just become inactive in a crisis . . . My sense of Mr. Buffett is that's what's happening to him. He's moved into a relatively inactive phase tied to his age." 

• Securities Industry Commentator
• Bill Singer