CNNMoney.com reports the brokerage unit of Prudential Financial Inc. will pay $600M to settle investors into improper mutual fund trading and to avoid criminal prosecution. The settlement is in response to activities between 1999 and 2003 and resolves various probes. "The deceptive trading practices at Prudential were compromising the integrity of many mutual funds. Investors were dealt a bad hand by corporate con-men who stacked the deck against them," Deputy Attorney General Paul McNulty said in a statement.

A number of Prudential brokers hurt mutual funds by blocking frequent trades, using multiple accounts, and multiple identities. Prudential was charged in December 2003 with allowing hedge funds to loot mutual funds by allowing late trading of mutual funds, which is illegal."We take these matters very seriously and deeply regret the conduct of some former employees that led to these problems," said Prudential Chairman and CEO Arthur Ryan in a statement. "As part of our ongoing review of business practices, we have strengthened our compliance programs."

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Posted by Patricia Bowling at 11:22 AM | Permalink | Comments (0) | TrackBacks (0)

A new report that looked at the nation's biggest mergers shows that 41% of $1 billion deals are the result of "abnormal trading." Measuredmarkets Inc., an analytic research firm out of Toronto, conducted the study, by looking at mergers with a value of $1 billion or more announced in a 12-month period ending in July. Of the 90 big mergers in the period, shares of 37 target companies showed unusual trading patterns in the weeks and months prior to when the deals were made public. For those who bought shares during the periods of unusual trading, profits of up to 40% were possibly. Trading on inside information about a merger is illegal.

Measuredmarkets founder Christopher Thomas believes his study is indicative of inside trading. The companies looked at in the study were not the subject of merger buzz, so it is unlikely that investors "by chance" could have anticipated the merger.

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Insider Trading Suspected in Recent Buyouts
MPs May Investigate Insider Trading in Takeover Deals

Posted by Patricia Bowling at 11:35 AM | Permalink | Comments (0) | TrackBacks (0)

In an effort to limit the effects of insider information on crude oil prices, oil companies are changing trading practices. According the The Times, US regulators are investigating how widespread insider information use is in the oil industry and BP is said to be one of the companies looked at. Traders at oil companies have an advantage over other traders because they are given access to production data from key pipelines and refineries, data which can provide great insight into how much crude oil will end up costing. An anonymous oil trader said "the pressure to stop insider trading has really stepped up, and we are getting compliance seminars every week drilling into us what we can and cannot do.”

An oil trader can legally use inside information to protect a company from losses if a refinery is shut down, but they cannot profit from the information. This is in contrast to rules for inside trading of shares, which allows no such protection.

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US Investigates Gasoline and Oil Trading by BP
Feds Probe BP Oil, Gas Trading

Posted by Patricia Bowling at 11:53 AM | Permalink | Comments (0) | TrackBacks (0)

According to a report by Bloomberg News the FBI is concerned that corporate and securities fraud has become more prevalent this year. The FBI is currently investigating over 486 cases of corporate fraud, up from 423 total cases in 2005. In addition, FBI officials have currently initiated over 1,160 securities fraud inquiries, up from 1,388 last year.

The Assistant Director of the FBI remarked, “Our goal has always been to maintain the integrity of the markets to protect the average investors.”

Read more about these disturbing trends

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FBI - Homepage
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Posted by Ryan Jardine at 06:24 AM | Permalink | Comments (0) | TrackBacks (0)

Jon Dudas, the top official in the U.S. Patent Office recently spoke to a group of Bloomington elementary students about piracy. "You wouldn't take a CD off the shelf without paying for it," Dudas said. "And you shouldn't get music on the Internet without paying for it."

Star Tribune

Dudas fielded questions from the children regarding inventions, patents, and music downloads after he had explained copyright laws and intellectual property. Dudas chose to visit Westwood Elementary School after having attended a small business conference in Minneapolis earlier that day. More than half of all students in grades one through five have access to the Internet, so reaching them early about the illegality of free music downloads is important.

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U.S Government Brings Anti-Counterfeiting and Piracy Program to Northern Virginia
Just Say No to Downloading

Posted by Patricia Bowling at 10:13 PM | Permalink | Comments (0) | TrackBacks (0)

According to CNNMoney.com, JPMorgan Chase may increase its dividend as soon as next year, assuming the company's earnings grow as expected. "When we are comfortable growing quality earnings over time, we'll take up the dividend," said Chief Executive Jaime Dimon. "I'm not saying that it's this year. We'd like to do it soon, soon like sometime next year."

JPMorgan currently pays an annual dividend of $1.36/ year, a yield of about 2.9 percent. JPMorgan is the number 3 bank in the U.S. and is improving in its trading operation. Concerns were raised last year after the company missed Wall Street forecasts for revenue. JPMorgan merged with Bank One in 2004 and is looking at other smaller mergers for the future.

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Posted by Patricia Bowling at 10:37 PM | Permalink | Comments (0) | TrackBacks (0)

According to a report in Bend Weekly, Phyllis Marks Rich, the former Chief Operating Officer for Pac Equities pleaded guilty of conspiracy to commit securities fraud and faces a possible sentence of five years in prison and over $250,000 USD in fines.

Rich acknowledged conspiring with her husband, Michael Marks Rich, to cheat investors of their money for fraudulent use in real estate investments. Rich admitted to deliberately reallocating new investor’s funds in order to make the business appear successful.

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Securities Fraud - Wikipedia
SEC Securities Fraud Complaints

Posted by Ryan Jardine at 11:59 PM | Permalink | Comments (0) | TrackBacks (0)

Edward Jones has agreed to pay $127 million after reaching a tentative settlement on nine class-action lawsuits. Edward Jones did not tell investors that it accepted revenue-sharing payments from mutual fund companies to promote their funds.

Edward Jones Pays $127M In Revenue-Sharing Suits

The settlement must still be approved by the United States District Court for the Eastern District of Missouri. Edward Jones reached a $75 million settlement in 2004 following an SEC investigation that discovered it had not disclosed revenue sharing agreements with seven mutual fund companies.

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Edward Jones settles 9 suits on mutual fund disclosures
The brokerage firm will pay $127.5 million over allegations it accepted payment for funds it sold.

Posted by Patricia Bowling at 12:12 AM | Permalink | Comments (0) | TrackBacks (0)

A commentary article by Chuck Jaffe ponders whether Google should be considered a mutual fund or a stock. While Google is considered a stock and has little in common with the typical fund or management firm, it has a considerable amount of cash, enough to represent 40% of the company's assets. According to the SEC's Investment Company Act of 1940, the definition of a mutual fund is "any firm with more than 40 percent of its assets tied up in non-controlling stakes of other investments or companies."

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Google Attracts Mutual Fund Label

Posted by Patricia Bowling at 11:52 PM | Permalink | Comments (0) | TrackBacks (0)

Bloomberg.com reports that New York Federal Reserve Bank President Timothy Geithner says that financial regulators need to pay more attention to whether margin requirements placed on investors are adequate. Geither said that efforts to strengthen capital markets should be "reinforced with more attention by supervisors to margin practice and limits around the counterparty risk-management process."'

Geithner's speech was on the tenth anniversary of 1997 Asian financial crisis and focused on how regulators can reduce markets' vulnerability to low-probability events and make self-regulation more effective. "The changes that have reduced the vulnerability of the system to smaller shocks may have increased the severity of the large ones,'' he said. Geithner did not comment on the direction of interest rates or the economic outlook.

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Ratings of Hedge Funds Poor Gauge of Investment Risk
Unchecked Hedge Funds a Threat to Stability

Posted by Patricia Bowling at 11:24 PM | Permalink | Comments (0) | TrackBacks (0)

Timothy J. Clyman, of Encinitas, has been accused by the U.S. Securities and Exchange Commission of defrauding at least 70 investors of about $18 million. Clyman is a financial planner and a college-planning advisor. He is believed to have participated in the fraudulent offer and sale of securities from May 2004 until October 2005.

Encinitas Man Accused in $18 Million Hedge Fund Fraud

Clyman did not return requests for comment. The SEC says Clyman and three others created a hedge fund called Seaforth Meridian Limited. Clyman's group told investors on fixed incomes that their money would only be invested in ssecure investments, such as bonds and stocks of medium to large U.S. companies, and that the investments would result in a monthly income for the investors. Instead, Clyman's group took the money and put $13.5 million of the $18 million received into two offshore accounts with no history of monthly returns.

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Academy of College Planning
Wikipedia: Hedge fund

Posted by Patricia Bowling at 11:12 PM | Permalink | Comments (0) | TrackBacks (0)

Business Week reports that investigators working on behalf of Hewlett-Packard misled others to believe they were telecom employees to obtain phone records of Verizon Communications customers. Verizon is cooperating with California Attorney General Bill Lockyer to discover the source of the company leaks to news outlets.

Hewlett Packard is believed guilty of "pretexting." Pretexting involves misrepresenting one's identity to convince the telecom system to give confidential information about phone customers. HP is believed to have obtained confidential records of Verizon customers. Among the targeted customers were HP directors and employees, as well as nine journalists who reported on HP. AT&T also is cooperating with investigators because it is yet unknown if phone companies other than Verizon were targeted.

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Three are at center of Hewlett Packard Scandal
Hewlett Packard

Posted by Patricia Bowling at 10:57 PM | Permalink | Comments (0) | TrackBacks (0)

The Securities and Exchange Commission is conducting an informal inquiry into Keithley Instrument, Inc.'s option grant practices and has asked that the company voluntarily produce information. Keithley's Board of Directors formed a special committee to investigate stock practices and has notified the SEC of its own pending investigation. Keithley is fully cooperating with the SEC.

Securities and Exchange Commission To Conduct Informal Inquiry Into Keithley's Option Grant Practices

Keithley Instruments, Inc. produces equipment for measurement needs. They are "a world leader in advanced electrical test instruments and systems from DC to RF (radio frequency)." Their "customers are scientists and engineers in the worldwide electronics industry involved with advanced materials research, semiconductor device and wafer characterization, and the production of end products such as electronic assemblies or portable wireless devices."

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Keithley Instruments, Inc.
SEC Looks at Keithley Options Practices

Posted by Patricia Bowling at 08:11 PM | Permalink | Comments (0) | TrackBacks (0)

The Associated Press reports that Securities America Inc. of Omaha is to be fined $2.5 million and that it must pay $13.8 million in restitution for failing to supervise a broker who is believed to have misled 32 former Exxon employees, as ruled by the National Association of Securities Dealers. NASD says that Securities America broker David L. McFadden "lured long-time employees of Exxon Corp. into retiring early with unreasonable and exaggerated promises of high returns from reinvested funds from their company retirement plans."

NASD said that retirees investing with McFadden "lost millions." The 32 customers represented in the case had deposited cash and securities of more than $22.2 million in value to buy variable annuities, mutual funds, and exchange-trade funds for their retirement programs. The rate of returns promised by McFadden never actualized and accounts were depleted. McFadden is being charged with securities fraud in a separate complaint.

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NASD Panel Awards Exxon Mobil Retirees
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Posted by Patricia Bowling at 07:48 PM | Permalink | Comments (0) | TrackBacks (0)

Pershing Square Capital Management, a hedge fund, may be able to increase its stake in McDonald's up to $793.8 million in stock. In a filing with the Securities and Exchange Commission, McDonald's said Pershing plans to file the required notifications under antitrust law to gain that much stock. Pershing founder Bill Ackman could not be reached for comment.

According to the SEC filing, Pershing plans to file the notifications on or about August 15. McDonald's shareholders will have to decide in coming weeks whether to exchange their shares for those of Chipotle Mexican Grill.

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Pershing Square to Present Revised Proposal to McDonald's
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Posted by Patricia Bowling at 05:12 PM | Permalink | Comments (0) | TrackBacks (0)

CNNMoney.com reports that California Attorney General Bill Lockyer may file criminal charges within the next in his investigation of tactics used by Hewlett-Packard Co. in an inquiry into boardroom leaks. Lockyer says his office has enough evidence to file charges against HP officials and outside contractors.

Hewlett Packard is experiencing changes in its board as a result of the scandal. Chairwoman Patricia Dunn is taking blame for the boardroom scandal and will leave her post next year to be succeeded by CEO Mark Hurd. Dunn will stay as a director. Board member George Keyworth, who was discovered to be the source of company leaks, resigned from his post immediately. HP has been involved in scandal since it disclosed that an outside investigator may have used illegal methods to spy on directors and reporters and the company probed leaks of corporate information.

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The Rise and Fall of Patricia Dunn
HP Leak Spurs Federal Investigation

Posted by Patricia Bowling at 10:25 PM | Permalink | Comments (0) | TrackBacks (0)

reports that a federal judge has granted a request by Bristol-Myers Squibb and Sanofi-Aventis to halt sales of a generic version of the blood thinner Plavix, but did not actually recall the generic product. Plavix has dramatically dropped in U.S. sales since Apotex introduced a generic version August 8. Bernard C. Sherman, the chief executive of Apotex, said yesterday that it planned to appeal. “We believe that the ruling is erroneous in many respects,” he said.

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Posted by Patricia Bowling at 02:28 PM | Permalink | Comments (0) | TrackBacks (0)

Yahoo! News reports that, following the lead by many other U.S. companies, DuPont has said it will cut its contributions to workers' pensions by two-thirds after 2007. DuPont reasons that the change will make it more competitive and will boost earnings, but unions responded the changes only will make it more difficult for long-time employees to retire. Jim Briggs, a representative in Niagara Falls, New York, for the United Steelworkers Union said "it is unfortunate that a company of DuPont's size, with ties to American workers, has now decided to erode benefits for long-time employees."

DuPont is one of the first major U.S. companies to cut pensions after President Bush signed into law new rules which will overhaul the pension system. A recent ruling which found that IBM did not discriminate against older workers when it shifted to a new pension plan likely spurred the move.

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Posted by Patricia Bowling at 07:44 PM | Permalink | Comments (0) | TrackBacks (0)

Money Magazine recently wrote a cautionary tale about retirement plans. Tom Donofrio, with the help of a MetLife financial advisor, transferred money from his 401(k) into an IRA rollover account invested in mutual funds. Unknown to Tom, though, the bulk of his savings actually ended up in a variable annuity, an insurance product that carries much higher fees than fund-like portfolios. Donofrio is not easily going to be able to transfer his money into a more practical account because withdrawal penalties can run as much as 7%. "I suppose I should have done a better job researching this," says Donofrio, "but basically you trust the adviser's expertise."

Annuities come in many types. A fixed annuity pays a guaranteed interest rate. A variable annuity allows investment in mutual-fund-like portfolios called sub-accounts. An equity-indexed annuity is a hybrid because it pays a minimum rate of interest but also allows a chance to share in the gains of the stock market. Annuities can be very confusing and annuity sales tactics have long topped securities regulators' lists of scams and scandals.

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Posted by Patricia Bowling at 02:05 PM | Permalink | Comments (0) | TrackBacks (0)

According to CNNMoney.com, those who purchased long-distance phone service between March 2003 and July of 2006 are eligible for a refund of up to $60 on their 2006 tax return. The refund is the result of an antiquated excise "luxury" tax which dates back to 1898 to help pay for the Spanish American War. Treasury Secretary John Snow characterized the tax as an "outdated, antiquated tax that has survived a century beyond its original purpose, and by now should have been ancient history."

The IRS announced $30 can be claimed on a 2006 return with one exemption, $40 for two exemptions, $50 for three exemptions, and $60 for four or more exemptions. The IRS still is debating what estimation businesses and nonprofits can use to figure their refund.

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Posted by Patricia Bowling at 02:42 PM | Permalink | Comments (0) | TrackBacks (0)

J.D. Power and Associates reports that Edward Jones has ranked highest in investor satisfaction for the second year in a row. "As a firm, all of us are committed to providing outstanding client service," said Ben Graham, an investment representative in Tehachapi.

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Posted by Patricia Bowling at 08:07 PM | Permalink | Comments (0) | TrackBacks (0)

According a press release, NASD, federal, and state securities regulators and the Department of Justice announced $600 million in monetary sanctions against Prudential Securities. Prudential Securities is now known as Prudential Equity Group. NASD's settlement with PSI resolves charges of fraudulent activities and supervisory deficiencies relating to mutual fund market timing and for record-keeping violations. "The scale of the fraudulent market timing activity that was allowed to occur through this firm and that went unchecked by the firm's supervisory systems is unprecedented," said NASD Senior Executive Vice President Stephen Luparello. "The firm was aware that this activity was occurring and yet failed to take action to halt the conduct -- except in its own proprietary mutual funds."

NASD found that PSI processed mutual fund orders after market close. Though other firms also engage in this practice, PSI lacked a supervisory system to make certain that only orders submitted by the customers before the market close received that day's NAV (net asset value.)

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Posted by Patricia Bowling at 07:29 PM | Permalink | Comments (0) | TrackBacks (0)

UPS's pilots union has worked out a new labor contract that took four years to negotiate and provides wage and pension improvements. 56.5% of the Independent Pilots Association, which includes 2,700 UPS pilots, voted for the new agreement. Tom Nicholson, union president, said the contract will increase pilot compensation, retirement, and benefits, while providing job protection for pilots flying international cargo. "This is not a small thing," Nicholson said. "Our pilots are now secure in flying that stuff internationally."

Shares of UPS fell slightly on the Stock Exchange after the announcement. The new contract will not be valid until 2011.

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Posted by Patricia Bowling at 05:30 PM | Permalink | Comments (0) | TrackBacks (0)

According to the Los Angeles Times, the online file-swapping site Kazaa must pay more than $115 million to the movie and music industries and create and authorized online service that allows users to share copyrighted music, film, and software and share the appropriate royalties.
"This is a journey, and no individual event is going to transform the marketplace from total chaos to total order," said Mitch Bainwol, chief executive of the Recording Industry Assn. of America. "But this is an important chapter in that journey, because for a long time Kazaa defined what peer-to-peer was. Every time one of these illegal download services falls, it creates new oxygen for the legal marketplace."

It is in question as to whether the legalized version of Kazaa will meet with success. Other file-sharing companies saw a sharp decline in users once the free music and video were taken away. Online piracy has been a huge concern for the music and movie industries in recent years. The recording industry alone has filed 18,000 copyright-infringement lawsuits since 2003. However, many doubt that this ruling will discourage online piracy. "I don't think anything has been accomplished here," said Michael Goodman, a senior analyst with the Yankee Group in Boston. "From a legal perspective, this is a yawner. They won the battle, but the battlefront moved on about three years ago. That's the problem with court systems. Technology and markets move way faster than courts can typically keep up with them. By the time you win that battle, who cares?"

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Unauthorized Trading on Legal View
Technology to End Illegal File Sharing?
Will People Pay for Online Music?

Posted by Patricia Bowling at 08:19 PM | Permalink | Comments (0) | TrackBacks (0)