An irreverent Wall Street Blog
Dirty Deeds Done Dirt Cheap On Wall Street
June 2, 2016
George Bernard Shaw observed that "The love of fairplay is a spectator's virtue, not a principal's." For a socialist playwright, Shaw certainly got some things right!
Watch a professional soccer game: Players writhing on the ground and seemingly crippled for life by a phantom trip miraculously recover when a penalty is called.
Watch a professional baseball game: Pitchers with seemingly ageless arms test positive for performance enhancing drugs.
Watch a professional football game: Defensive players grab a breakaway receiver's jersey or deliver a late hit to the quarterback's helmet -- and then sheepishly grin when caught.
Watch a professional basketball game: While rebounding, one player "accidentally" kicks another in the groin.
Watch a professional track or bicycling event: Which athlete is blood-doping this year?
To some extent, Wall Street is just another sports venue where professionals will do whatever it takes to win. The truth, the sad truth, folks, is that there is little integrity in the markets and the only thing on the level on Wall Street is the water in the toilet bowls.
Which is not to say that an honest trader can't make money in a rigged market. Which is not to say that everyone on Wall Street is a cheat. But it is to say that those who know better should stop pretending that Wall Street is afflicted with only a handful of crooks and that our markets are paragons of virtue. It's a game played dirty and for keeps -- and, at times, the dirty deeds are done dirt cheap.
When you step onto the playing field that's Wall Street, watch your back, put your mouthpiece in, and don't expect the refs to protect you.
Case In Point
For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Gary Donovan submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Gary Donovan, Respondent (AWC 2015045600101, May 27,, 2016).
In 1979, Donovan first became registered, and during the period from October 2005 through January 2016, he was registered with FINRA member firm Sagepoint Financial, Inc.
The MIXX Up
The AWC asserts that during the relevant time from August 28, 2014 through May 11, 2015, Donovan placed 180 Buy order for shares of Mix 1 Life, Inc. ("MIXX"), which the AWC characterizes as "an illiquid OTC security." Purportedly, the cited purchases were placed in 90 customer accounts, of which Donovan allegedly had trading discretion in 83 -- buy orders were also entered into two accounts owned by Donovan and his immediate family members. During the 21-days of the relevant period, Donovan's MIXX trades allegedly exceeded 20% of the market for MIXX. The AWC asserts that:
Donovan made the purchases based on the representations of a stock promoter, with whom he was in near-daily contact by telephone.
Wall Street Karma?
The AWC alleges that in violation of FINRA Rule 2010, Donovan placed 100 buy limit orders for MIXX that were matched in both amount and price with recently placed sell limit orders and that Donovan's orders were frequently priced above either the market and/or the inside Ask. The AWC asserts that the effect of such matched orders was to stabilize MIXX around $6 per share. The AWC asserts that Donovan knew or should have known that that he was facilitating the manipulation of MIXX through entering the matched orders.
In an example of getting hoisted on one's own petard and invoking the mystic karmic forces of Wall Street, the AWC asserts that:
After Donovan ceased dealing with the stock promoter, the price of MIXX fell to less than $1.00 per share causing Donovan, his family, and his customers to lose most of their investments.
Unaffiliated
According to online FINRA BrokerCheck records as of June 2, 2016, Sagepoint Financial "Discharged" Donovan on January 21, 2016, based upon allegations that:
MR. DONOVAN'S AFFILIATION WAS TERMINATED AFTER THE FIRM DETERMINED HE HAD FAILED TO FOLLOW THE FIRM'S POLICIES REGARDING SALES OF UNLISTED SECURITIES AND INTERACTIONS WITH STOCK PROMOTERS
FINRA Bar
In accordance with the terms of the AWC, FINRA imposed upon Donovan a Bar from association with any FINRA member firm in any capacity.
Bill Singer's Comment
Compliments to FINRA for a succinct and well-crafted AWC. Also, kudos for a swift regulatory investigation and settlement -- note that the last cited matched trade occurred only about one-year ago.