Tag Archives: stock brokerages

Side Trading of Stocks and Bonds: Broker-Client Conflict of Interest . by Alice B. Clagett

Written and published on 18 February 2020; updated on 12 June 2020
Previously titled: Question About Stock Brokerage Integrity and Hidden Client Risk

Image: “A Section of Midtown Manhattan in Daytime,” by user: AngMoKil, in Wikipedia … https://en.wikipedia.org/wiki/Architecture_of_New_York_City#/media/File:Pano_Manhattan2007_amk.jpg … CC BY-A 2.5

Image: “A Section of Midtown Manhattan in Daytime,” by user: AngMoKil, in Wikipedia … https://en.wikipedia.org/wiki/Architecture_of_New_York_City#/media/File:Pano_Manhattan2007_amk.jpg … CC BY-A 2.5

  • PUTTING SAVINGS IN BANKS
    • Potential Risks
  • INVESTING IN STOCKS AND BONDS THROUGH A STOCK BROKERAGE FIRM
    • Potential of Brokers Skimming Margin Cream
      • Question: Is This Type of Skimming Maybe Common Practice?
    • Possible Need to Liquidate a Client’s Holding without Their Knowledge: A Workaround Not in the Client’s Best Interests
      • The Temptation for Stock Brokers to Advocate High-Risk Instruments to Cover ‘Phantom’ Trades

Dear Ones,

It seems possible to me there may be stock and bond brokerage conflict of interest with individual investors because of side trading by brokers. I say this because of experiences I had as an individual investor with a prestigious stock broker in years past. First some background regarding putting savings in banks, and then the question regarding side trading by brokers, and the ensuing conflict of interest …

PUTTING SAVINGS IN BANKS

If banks, say, take our savings into a savings account or CD, they are allowed to provide us a low rate of interest, and then they may invest that money in somewhat riskier ways, so as to earn our profit on the money we invest.

Potential Risks

The potential risk for the person who places his or her savings into a savings account or CD is the possibility of large-scale bank failures, as in the case of the Great Depression, when I recall my mom said people lined up on the streets trying to withdraw their savings from the banks, but were not able to because the banks failed.

These days, as I understand it, our bank savings are secured by the SEC or maybe FINRA, up to a certain per-person limit. That may mitigate the risk of large-scale bank failures … at least, up to a point.

INVESTING IN STOCKS AND BONDS THROUGH A STOCK BROKERAGE FIRM

Potential of Brokers Skimming Margin Cream

When we invest our savings in stocks and bonds, say, in a margin account, then it seems to me that the opportunity exists for the stock broker to benefit from our holdings in a way a little reminiscent of banks. For instance, might not the stock broker use our margin account to day trade equities or maybe bonds in hopes of skimming some cream off our account, with the client being none the wiser?

Question: Is This Type of Skimming Maybe Common Practice? Is that allowed, on Wall Street? Maybe it is common practice amongst stock brokerages, and I am not familiar with the practice?

This is the question I have: Do any of my readers know whether this skimming of margin cream is standard stock brokerage practice? If it is, then, I feel, there would be a potential broker-client conflict of interest …

Possible Need to Liquidate a Client’s Holding without Their Knowledge: A Workaround Not in the Client’s Best Interests

I know, from a year of day trading myself, that it is hard to beat the market through day trading. Sometimes, though, people get into the thrill of day trading, so much so that they do not want to look at the bottom line and find out for sure whether they bettered the market over the course of a year. Do you not feel this to be true?

I myself found, using the best software I could obtain, that after a great deal of work every morning, and plenty of thrills, I ended up with no profits (and no losses) at the end of a year.

The best of stock brokers intent on skimming margin cream would most likely know what I learned … that the chance exists that some of the client’s stocks would need to be liquidated because of a broker’s side traded margin deal gone south, unbeknownst to the client.

I remember in my mom’s time, stocks and bonds were actual pieces of paper that a brokerage handed to a client. Thus the client knew for sure what he or she owned; the stockholder or bondholder had the paper to prove it.

Today, however, investors often chose to leave their stock and bond certificates with their brokers. It is true, the investor can see on their monthly statement that they have such-and-such investments, numbered such and such. That, however, is the only proof they have that they have purchased and now own these stocks and bonds.

In a way, these stock brokerage statements are but figments; surely it might be possible, through sleight of hand, to sell some of the underlying instruments to pay off margin debt, without the client being wiser, the presumption being that similar instruments might be purchased, and their CUSIPs, for example, jimmied round, in the event the client wished to sell the (already sold) stock or bond, or to transfer the entire account to another brokerage.

In a sense, then, the stock and bond holdings of the modern-day brokerage client might be viewed as ‘phantom’ holdings. While possible, it seems to me such an approach to skimming margin cream might cause some last-minute sweat of the brow of the broker if the client were to decide to trade or transfer a ‘phantom’ stock or bond.

The Temptation for Stock Brokers to Advocate High-Risk Instruments to Cover ‘Phantom’ Trades. Here is a more difficult call from an ethical standpoint: The broker might wish to cover losses from ‘phantom’ margin trades by persuading the client to accept risky stocks and bonds that are likely to decrease in value. Then the risky instruments might be sold by the broker … while remaining as if held on the client’s statement … and the money from the sales used in ‘phantom’ day trading, with profit going to the broker, and phantom trading losses covered by the decreased cost of the broker’s purchase of the risky stocks as they go down in price.

What I am thinking is that the desire of stock and bond brokers to profit from ‘phantom’ trades might lead them to push very risky stocks onto a client, to cover the broker’s losses. In such instances, the financial interests of the broker would be opposed to the financial interests of his client, do you not think?

In love, light and joy,
I Am of the Stars

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finance, banks, banking, stock brokerages, stocks, bonds, economy, economics, disclosure,

Amateur Sleuth: The Case of the Phantom Broker . by Alice B. Clagett

Written and published on 6 November 2019

  • URBAN LEGEND: THE PHANTOM STOCK BROKER
  • PHANTOM BROKERS: DAY TRADING WITH CLIENT STOCK ACCOUNTS LIQUIDATED ‘ON THE BACK END’?!
  • CRIME FAMILY URBAN LEGEND: CONFIDENCE GAMESTERS IN KEY ROLES NATIONWIDE
  • ONESIE-TWOSIE GAMBIT: SHEARING THE WARRING ‘SHEEP’
  • THE ‘ONSIE-TWOSIE’ AND THE ‘SHELL’ STOCK BROKERAGE ACCOUNT GAMBIT
  • POOF! THE MONEY DISAPPEARS!
  • THE WRAP
  • STORIES BY ALICE: A BOOK I CO-AUTHORED ABOUT BEING SAFE FROM CRIME

Dear Ones,

On the astral airs, I heard about the most ‘out there’ confidence game featuring the world of high finance, crime families, and subversion of the fiduciary responsibilities of those big-time players, the stock brokerages that are household names worldwide.

URBAN LEGEND: THE PHANTOM STOCK BROKER

Here is the urban legend: There are ‘phantom stock brokers’ who may steal the identities of legitimate stock brokers, by assuming their same name and taking over their accounts. When I heard the astral story, I asked myself: How might this be done?

After all, to my knowledge online security is pretty good for the major stock brokerages. Could it be that their ranks, like those of other industries, have been infiltrated by unethical sorts, members of nationwide confidence gangs, for instance? Might these people be posing as stock brokers … or maybe office staff or custodial personnel … who, by reason of their employment at the brokerages, and through access to computers there, can position themselves to perpetrate ‘broker identity theft’? One is not to know the up and the down of it, in the case of mere rumor.

They might begin using a reputable broker’s name, or a variant of it, instead of their own. What with internet phone services, they might have a phone number with an area code for a brokerage located thousands of miles away, and no one might be the wiser. Or so the story goes.

PHANTOM BROKERS: DAY TRADING WITH CLIENT STOCK ACCOUNTS LIQUIDATED ‘ON THE BACK END’?!

The urban legend goes on like this: Having gained access to client accounts, members of crime families might, on the back end, liquidate the accounts of clients they have ‘stolen’ from reputable brokers in a firm, use the accounts for day trading, pocket the profit. Then on the front end of the client account … the part that the client might view online … they might cover for possible losses in day trading by purchasing for the client stocks or bonds they expect to take a tumble. In that way … so the rumor goes … they might fatten their pockets at the expense of clients they have ‘stolen’ from a reputable broker.

CRIME FAMILY URBAN LEGEND: CONFIDENCE GAMESTERS IN KEY ROLES NATIONWIDE

Here is a wild variant of the ‘phantom stock broker’ urban legend: The phantom broker is in touch with a group of confidence artists that operates across the United States. (For all I know, there may be more than a handful of such con artist networks.) Indeed, the ‘phantom’ may even be a member of such a network, which has its own lawyers (naturally) and has operators in post offices here and there across the nation, and has operants who serve a dual function as ‘ladies or gentlemen of the night’ so as to gain the favor of carefully targeted law enforcement officers. It is also rife with cyber criminals adept at identity theft.

ONESIE-TWOSIE GAMBIT: SHEARING THE WARRING ‘SHEEP’

The con artist network seeks out families who have some money and are not getting along. That way it can ‘scatter the sheep’ and their ‘wolves’ can sneak in an pick the ‘sheep’ of a warring family off, one by one. Apparently, that is the way con artist groups operate; it is called ‘the cull’. Then they will try wooing the sheep, one by one, and shearing them.

A favorite way of shearing the sheep … at least according to the astral airs … is to arrange an illegal gambit with a disgruntled family member … a gambit that purports to shake down another family member with which the disgruntled person is angry. But the ‘onesie-twosie’ game plan of the con artist is a little bit more complex: He or she plans to perpetrate the gambit … either by ‘sidelining’ the targeted ‘sheep’ … That is the ‘onesie’. And the ‘twosie’ is, to get the disgruntled family member arrested for the deed, and leave him or her ‘holding the bag’.

THE ‘ONSIE-TWOSIE’ AND THE ‘SHELL’ STOCK BROKERAGE ACCOUNT GAMBIT

Now on to the complicated stock market gambit, which features the ‘onesie-twosie’. The ‘phantom stock broker’ finds a number of zeroed out client accounts. This is like a ‘shell account’ in the ‘shell corporation’ schemes of old. The confidence network of which the phantom is a member learns that one of these belongs to a ‘sheep’ that is ‘ripe for the plucking’ … as the network knows there is dissension in the ‘sheep’s’ family.

The lawyer in the network reaches out to a disgruntled family member, proposing a shake down. An agreement is reached. A cybercrime specialist in the crime family steals the identity of the ripe ‘sheep’, including brokerage and bank account information, and passes it on to the ‘phantom stock broker’.

The ‘phantom’ funnels money from the ‘sheep’s’ financial accounts, through the zeroed out ‘shell’ brokerage account. Then a token amount of the swiped dough is moved to the disgruntled family member’s financial account. The rest is funneled to the crime family, under a name different from that of the ‘phantom broker’ … maybe to real estate, through a cash transaction, using corporate shell-within-a-shell accounts … or maybe, infamously, offshore.

POOF! THE MONEY DISAPPEARS!

So the stolen money is gone, and the path of its departure is hard to trace, because … according to the urban legend … the ‘phantom stock broker’ can remove notice of the progress of the money through the zeroed out account, on the back end, with the ‘sheep’ never being the wiser (in the same way that the day trading scheme described above is purportedly accomplished ‘on the back end’).

All that remains is to tip off the law that the disgruntled family member has stolen the cash from the ripe ‘sheep’ … who through a separate ploy has been kidnapped, jailed on false charges, or worse yet, maybe murdered.

THE WRAP

This ‘phantom stock broker’ story is quite an amazing urban legend, Is it not? It is so ‘out there’ I feel it could not be true. If it were true, then disclosure would likely make the headlines in every United States newspaper. But, as with the Goldman Sachs and Bank of America debacles of recent years, no doubt the best minds of the finance world would come up with a work-around and a solution.

Gosh, what an urban legend! Its imaginative scope brings to mind the high finance plots of the Reuben Frost Mysteries authored by lawyer James H. Duffy under the pen name ‘Haughton Murphy’ … http://mysteriouspress.com/authors/haughton-murphy/default.asp ..

See also Link: “Likely Upcoming Legal Reforms as a Result of ‘Disclosure’,” by Alice B. Clagett, published on 4 October 2016 … https://wp.me/p2Rkym-6d8 ..

STORIES BY ALICE: A BOOK I CO-AUTHORED ABOUT BEING SAFE FROM CRIME

This reminds me of the now-out-of-print book “1001 Ways to Avoid Being Mugged, Murdered, Robbed Raped and Ripped Off” that I co-authored many years ago with my friend Vivo Bennett. Back then, my pen name was ‘Cricket Clagett’. As I recall, and for what it is worth: On the jacket of the hardcover book, with a neat turn of the pen, we billed ourselves as ‘specialists in criminology’.

In love, light and joy,
Alice B. Clagett
I Am of the Stars

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amateur sleuth, finance, economics, corporations, stock brokers, stock brokerages, law, law enforcement, disclosure, urban legends, identity theft, confidence games, patsy, stories, stories by Alice, killing cults, crime families, money, security, Bank of America debacle, Goldman Sachs debacle, finance, Pomeranian, Ice Man, The Doc,

Call to Action: Calculate Cybercrime Drag on U.S. Economy . by Alice B. Clagett

Written and published on 15 February 2019

Dear Ones,

This is a Call to Action: I ask that economists calculate the current cyber crime drag on the United States economy.

Also that they calculate the tipping point at which an internet presence for banks, stock brokerages, and online stores will become no longer economically feasible.

Has the tipping point already been reached? If not, can the date be extrapolated, and may financial institutions and online merchants be informed of this date, so that the move of financial matters away from the internet may be accomplished in an orderly way?

Telephone and fax offer alternatives to conversations currently taking place online. I gather that phone service may also have been cyber criminalized, and request research into resolving telephone privacy as well as cyber secure faxing, If these cannot be attained, then I suggest advising telephone service customers of this, so that an orderly move can be made back to paper correspondence and to the United States mail.

I note, for instance, the need that will arise for goods catalogs, such as the old Sears catalog, to replace Internet giants such as Amazon.com, and the need that will arise for greater stocks of inventory in local community stores.

I note the coming need of greater personnel in the United States Postal Service, to provide service for transactions formerly posted online.

I note the coming need for more paper production (hence more timber planting) to replace paperless online transactions.

In love, light and joy,
I Am of the Stars
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economics, economy, calls to action, call to action, cyber crime, cybercrime, timber industry, store inventories, United States Postal Service, phone service, telephone service, fax service. industry, banks, financial institutions, stock brokerages, online marketing, communications, telecommunications, internet, finance, timber industry, paper industry, online retail, housed retail, banks, stock brokerages,

Likely Upcoming Legal Reforms as a Result of ‘Disclosure’ . by Alice B. Clagett

Written and published on 4 October 2016

  • THE HIDDEN COST OF FRIVOLOUS LAWSUITS AGAINST FAMILY, FRIENDS AND CO-WORKERS
  • THE PROCESS OF ‘DISCLOSURE’ AT THE GRASSROOTS LEVEL
  • MURDER, STOCK BROKERS, AND THE LAW

Dear Ones,

Some say that American law schools today teach their students:

  • Do whatever you can get away with legally.
  • Look for loopholes.
  • If business is slow, look for ways to start frivolous lawsuits against your family and friends; find a way to hide your participation in these lawsuits, through, for example, a class action lawsuit.

But what does instigating frivolous lawsuits against friends and family really mean?

THE HIDDEN COST OF FRIVOLOUS LAWSUITS AGAINST FAMILY, FRIENDS AND CO-WORKERS

Since telepathy is going global these days, especially in family groups, and groups of friends and co-workers, what will take place is the process of disclosure … in other words, the whole family, all our friends, or all our co-workers will be aware of what we have done. Retribution will be swift, in terms of social censure and ostracism from the group we had hoped to surreptitiously attack and fleece.

So, my take on this is, frivolous lawsuits and unethical lawyer behavior will soon be a thing of the past in the United States. It is the first few disclosures that will be the most painful, though, as these will set the stage for a general overall retreat from these unethical legal practices.

THE PROCESS OF ‘DISCLOSURE’ AT THE GRASSROOTS LEVEL

A lot has been written about the process of disclosure as regards the Awakening process now taking place, but none new that it would not be the bigwigs of the world that would suffer. Instead, we are experiencing a grassroots disclosure process starting with the smallest and most deeply human groupings, those of the natal and extended family, the small group of close friends, and the small group of co-workers with whom we associate daily.

MURDER, STOCK BROKERS, AND THE LAW

And in the realm of fiction,  there are more flagrant cases of disregard of legal ethics. Take, for instance, the novels of popular murder mystery writer Haughton Murphy (1) …

Link: “Haughton Murphy” at Goodreads …   http://www.goodreads.com/author/show/483130.Haughton_Murphy ..

The name ‘Haughton Murphy’ is a pen name used by James H. Duffy, retired from the law firm Cravath, Swaine, and Moore, LLP, which has offices in New York and London (2) …

Link: “Wall Street; A ‘Specialist’ on the Fly-by-Night,” by Diana B. Henriques, 1991 …  http://www.nytimes.com/1991/12/01/business/wall-street-a-specialist-on-the-fly-by-nights.html and Link: “James H. Duffy, Retired Partner, Corporate,” at Cravath, Swaine and Moore LLP …  https://www.cravath.com/jhduffy/ ..

… so this well-known writer has in-depth knowledge of the field of law. Altogether, Mr. Murphy has written six Wall Street and corporate acquisition murder mysteries.

Although these accounts are fictional, they do point to the possibility that, given the financial incentive, legal indiscretions as great as murder might be contemplated through an under-the-table alliance between the industries of investment and the law.

In these days of disclosure, however, it is risky to contemplate these sorts of endeavors, for reasons similar to those stated above: social censure, legal reprisal, and possible ostracism from the Bar.

In love, light and joy,
I Am of the Stars

See also … Link: “Amateur Sleuth: The Case of the Phantom Broker,” by Alice B. Clagett, Written on 6 November 2019 … https://wp.me/p2Rkym-eTl ..

P.S. While this blog is about the field of law, the process of disclosure will no doubt be affecting every occupation and every industry as the Awakening unfolds for humankind.

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FOOTNOTES

(1) See Link: “Haughton Murphy” at Goodreads …   http://www.goodreads.com/author/show/483130.Haughton_Murphy ..

By way of serendipity, I note from the Goodread writeup that Haughton Murphy served for 6 months in the military prior to joining the law firm Cravath, and so it will be clear that he is a patriot as well as a distinguished lawyer.

(2) More serendipity: I was surprised to learn that there is a person with a similar name who actually is a New York stock broker: See Link: “James Duffy,” at Morgan Stanley Smith Barney, http://financial-advisors.credio.com/l/289379/James-Duffy Maybe the lawyer by a similar name knew this broker, and so was able to gain insight into the realm of investments while writing his novels under the pen name Haughton Murphy?

I took a look at the FINRA BrokerCheck Report on the James Duffy who is Executive Vice President of Morgan Stanley’s Riverhead, New York, branch. I noticed there were 7 disclosure events … https://files.brokercheck.finra.org/individual/individual_1652887.pdf ..

I also saw online some news about a lawsuit regarding Puerto Rican Bonds which went ‘belly up’ …

Link: “Investors Sue Morgan Stanley in Puerto Rican Bond Debacle” …  https://stockbrokerfraud.com/james-duffy/ ..

I guess it may be the same person, as the article speaks of a Riverhead, New York, stock broker employed by Morgan Stanley.

Well, enough idle speculation; there are plenty of James Duffy’s in the world. For instance, there is a James R. Duffy, also an eminent lawyer in New York, who is a Senior Trial Lawyer for the firm Duffy and Duffy … see http://www.duffyduffylaw.com/attorney-profiles/james-r-duffy-esq/  …  And I see from the U.S. Census … http://howmanyofme.com/ … that there are 758 people in the United States with the name James Duffy; that will be quite a few.

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BACKGROUND INFORMATION

Link: “Transforming the Earth: A New Paradigm, Disclosure, and Ascension,” by Wes Annac …  https://cultureofawareness.com/aquarius-channelings-introduction/transforming-the-earth-a-new-paradigm-disclosure-and-ascension/ ..

Link: “Saturn Retrograde: The Prophecy of the Popes,” by Salvatore Russo …  http://spiritofmaat.com/magazine/march-2013-spring-equinox-edition/saturn-retrograde-the-prophecy-of-the-popes/ … See the section “Coming Changes”

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law, disclosure, legal reforms, frivolous lawsuits, social issues, ethics, telepathy, grassroots, family life, class action lawsuits, ethics and the law, law, finance, James Duffy, stock brokerages, economics, lawsuits, ostracism, social censure,