Securities Industry Commentator by Bill Singer Esq

Bridgewater Associates found to have 'manufactured' false evidence against ex-employees (Reuters)

COVID-19 claims the lives of four Broadridge employees and two of its subcontractor's staff, while another contractor's policies exposed workers, raising questions about SEC 'essential work' rules / The New York-based proxy administrations and technology giant of 10,000-employees blames outsourcers for not abiding by its standards for health, safety; others wonder whether the SEC and FINRA created harmfully inflexible, letter-of-the-law rules in pandemic. (RIABiz by Oisin Breen)

Amateur J.C. Penney Traders Beg Judge to Save Them From Wipeout (Bloomberg by Eliza Ronalds-Hannon)

New Hampshire investigates Merrill Lynch after clients allege $200 million in damages (CNBC by Dawn Giel, Scott Cohn, Scott Zamost, and Louise Connelly)

SEC Charges App Developer for Unregistered Security-Based Swap Transactions (SEC Release)

CFTC Sanctions Two Firms Offering Digital Asset-Based Swaps for Illegal Off-Exchange Trading and Registration Violations (CFTC Release)

Exclusive: Trump administration to soon end audit deal underpinning Chinese listings in U.S. - official (Reuters by Humeyra Pamuk, Alexandra Alper)

Robert Shiller warns that urban home prices could decline (CNBC by Elizabeth Schulze)

Renting and Homebuying Swap Roles in the Covid-19 Market / Normally, people prefer to rent in recessions. This time they'd rather buy. (Bloomberg by Conor Sen)

Time to Tell America's Dogs This Arrangement Won't Last Forever (Bloomberg by Arianne Cohen)

The hedge fund, founded by billionaire Ray Dalio, was found to have "filed its claims in reckless disregard of its own internal records, and in order to support its allegations of access to trade secrets, manufactured false evidence," court documents made public on Monday showed.

"We conclude that Claimant [Bridgewater] did not have a reasonable basis for filing its claims of misappropriation of trade secrets or disclosure of confidential information as to Squire or Minicone," according to the documents, which quoted the findings of a panel of three arbitrators of the American Arbitration Association.

"The Chairperson of FINRA's Board must have a proven track record of leading complex organizations, and above all must have an unwavering commitment to investor protection and market integrity," said Board member Kathleen Murphy, who chairs FINRA's Nominating and Governance Committee. "In conducting our search for Bill's successor, it was clear that Eileen exceeds all of these qualifications and more."

Eileen Murray Elected Chairperson of FINRA Board of Governors / Maureen Jensen and Eric Noll Appointed as New Public Governors (FINRA Release)

https://www.finra.org/media-center/newsreleases/2020/eileen-murray-elected-chairperson-finra-board-governors

The FINRA Board of Governors unanimously elected Eileen Murray, former Co-Chief Executive Officer of Bridgewater Associates, LP, as Chairperson to replace the departing William H. "Bill" Heyman. Also, Maureen Jensen, former Chair and Chief Executive Officer of the Ontario Securities Commission and Eric Noll, Chief Executive Officer of Context Capital Partners were appointed to the FINRA Board as public governors, effective at the August Annual Meeting.

Bill Singer's Comment: As I have long argued and will so persist, FINRA's Board of Governors is a non-representative entity nurtured by an indefensible system of gerrymandering whereby over 91% of the organization's member firms (those designated as "Small" and defined as having at least 1 but no more than 150 registered representatives) are restricted to only 3 of 24 seats (less than 13% of the organization's membership). Worse, FINRA's Nominating and Governance Committee, which nominates candidates for Governors, does not have one Small Firm Governor among its seven member committee https://www.finra.org/about/governance/standing-committees 

With the exception of Small Firm Governor Stephen Kohn, who is now seeking re-election to a second term, I know of no current Governor who is aggressively supporting efforts to seat a Small Firm Governor on the Nominating Committee. 

Given FINRA's social engineering of its Board and key Committees, and given the ongoing demise of FINRA's overall membership, I refuse to afford this so-called self-regulatory-organization any legitimacy and continue to call for its decertification. Consequently, while I welcome the election of Eileen Murray as Chair, I urge her to rectify the outrageous lack of fair representation on FINRA's Board and Committees. 

Hardt is part of a growing number of retail traders -- many driven by lockdown boredom and free online trading -- who have piled into the stock market. Speculation by amateurs is nothing new, but for the first time experts can recall, investors are buying shares of even bankrupt companies. Hertz Global Holdings Inc., oil driller Whiting Petroleum Corp. and J.C. Penney have all seen their stock price surge in recent sessions, despite being in Chapter 11.

Those gains almost always prove fleeting, leaving retail traders with little to show for their stakes other than an expensive lesson in the U.S. corporate bankruptcy process -- where shareholder value disappears almost as a rule. That's because all creditors have to be made whole before equity owners get anything. For J.C. Penney investors, there's little to suggest this time will prove any different.

In 2019, the case eventually went to a final hearing in front of an arbitration panel, and despite the strongly worded assertions by the firm denying Levine's allegations, Merrill Lynch decided to settle, before the arbitration panel announced its decision, for a record $40 million. The settlement is the largest single payout to an individual claimant in at least a decade. . .

According to the SEC's order, Abra developed and owns an app that enabled users to bet on price movements of U.S.-listed equity securities.  Using the app, individuals were able to enter into contracts that provide synthetic exposure to price movements of stocks and exchange-traded fund (ETF) shares trading in the U.S. through blockchain-based financial transactions with Abra or with related company Plutus Technologies Philippines Corp.  The order finds that Abra told users they could choose securities whose performance they wanted to mirror, and the value of their contract would go up or down the same amount as the price of the underlying security.  The order further finds that these contracts were security-based swaps subject to U.S. securities laws. 

As described in the order, in February 2019 Abra started offering the contracts to investors in the U.S. and abroad.  The order finds that Abra marketed its app to retail investors, yet Abra took no steps to determine whether users who downloaded the app were "eligible contract participants" as defined by the securities laws.  According to the order, Abra stopped offering contracts in February 2019, after conversations with SEC staff, but resumed the business in May 2019, this time attempting to limit the offers and sales to non-U.S. people.  Although Abra moved certain operations outside the U.S., the order finds that its employees in California designed and marketed the swap contracts, and screened and approved users who would be allowed to buy the contracts.  The order further finds that Abra's U.S.-based employees effected thousands of stock and ETF purchases in the U.S. to hedge the contracts. 

[F]rom approximately December 2017 to October 2019, the respondents accepted orders for and entered into thousands of digital asset and foreign currency-based contracts via a mobile phone application. These contracts, which constituted swaps under the CEA, enabled customers to enter into financial transactions, with the respondents acting as the counterparty, to gain exposure to price movements of over seventy-five digital assets. By entering into these contracts via their app, respondents violated Section 2(e) of the CEA, which makes it unlawful for any person, other than an eligible contract participant, to enter into a swap unless the swap is entered into on, or subject to the rules of, a board of trade designated as a contract market. Additionally, in soliciting and accepting orders for these contracts, the respondents illegally operated as an unregistered futures commission merchant. 

The deal, which set up a process for a U.S. auditing watchdog to seek documents in enforcement cases against Chinese auditors, was initially welcomed as a breakthrough in U.S. efforts to gain access to closely guarded Chinese financial information and bestowed a mark of legitimacy on Chinese regulators.

But the watchdog, known as the Public Company Accounting Oversight Board (PCAOB), has long complained of China's failure to grant requests, meaning scant insight into audits of Chinese firms that trade on U.S. exchanges.

Shiller, co-founder of the index, said the benefits of city living, such as restaurants, museums or theater shows, have been put into question during the pandemic. Amid social distancing restrictions and work-from-home policies, many city dwellers have fled to the suburbs. 

Suburban housing could be a better investment for homebuyers given uncertainty around the coronavirus, Shiller added.

Yet because of the pandemic and work-from-home policies, there's no need to live close to the office for the time being. And with bars and restaurants shut or operating with very limited capacity, the play option isn't as attractive either. So when apartment leases expire, as some do every month, it makes sense for some of these renters to put their belongings in storage and move back in with parents or friends and family with extra space to both have more social connections during a time when distancing is the norm and to save money. Because it's unclear when knowledge workers will go back to the office, or if new rounds of layoffs are coming, it make sense to keep your options open rather than get locked into a new one-year lease in an expensive downtown apartment.

"Cats are annoyed," says William Berloni, who trains animals for the stage (Annie, Legally Blonde) and screen (Billions). "Mine are like, Why are you in the bedroom? What are you doing here?" But dogs are in paradise, certain-or as certain as we can be about what dogs think-that this newfound dynamic will last forever. "They assume it's a new lifestyle," Berloni says. "They're thinking, Finally our owners know that we want to be with them 24/7."

But there's a problem: Dogs are becoming "overly bonded," which means they're intensely reliant on our presence to stay calm. Dogs signal this when they can no longer self-soothe and panic after an owner leaves a room or, God forbid, the house. It has to be addressed now-long before your dog is left home, solo, for long stretches when you return to the office-to avoid doggie meltdowns.

• Securities Industry Commentator
• Bill Singer