Chart usGOLD   Chart usSILVER  
 
Food for thought
Politics is the second oldest profession
Ronald Reagan  
Search for :
LATEST NEWS  :
MINING STOCKS  :
Subscribe
Write Us
Add to Google
Search on Ebay :
PRECIOUS METALS (US $)
Gold 1286.96-0.05
Silver 19.44-0.01
Platinum 1418.75-0.75
Palladium 907.258.05
WORLD MARKETS
DOWJONES 1709815
NASDAQ 458023
NIKKEI 1547752
ASX 56295
CAC 40 4373-8
DAX 9461-10
HUI 2463
XAU 1021
CURRENCIES (€)
AUS $ 1.4057
CAN $ 1.4264
US $ 1.3135
GBP (£) 0.7898
Sw Fr 1.2070
YEN 136.9450
CURRENCIES ($)
AUS $ 1.0703
CAN $ 1.0860
Euro 0.7614
GBP (£) 0.6013
Sw Fr 0.9189
YEN 104.2600
RATIOS & INDEXES
Gold / Silver66.20
Gold / Oil13.44
Dowjones / Gold13.29
COMMODITIES
Copper 3.13-0.01
WTI Oil 95.741.19
Nat. Gas 4.050.00
Market Indices
Metal Prices
RSS
Precious Metals
Graph Generator
Statistics by Country
Statistics by Metals
Advertise on 24hGold
Projects on Google Earth
In the same category
What You Need To Know About Wall Street
Published : March 13th, 2010
15440 words - Reading time : 38 - 61 minutes
( 0 vote, 0/5 ) Print article
 
    Comments    
Tweet

 

 

 

 

The book review below explains about the Security Risk on Wall Street.

 

(emphasis mine) [my comment]

 

Review of Wall Street: Security Risk by Hurd Baruch
John A. Humbach
Year 1972

BOOK REVIEW

[This book review is from 1972, but its contents about broker-dealers is very relevant today]

An impressive, sometimes ponderous, array of evidence is produced in support of the conclusion that self-regulation has amounted to no-regulation, except to the extent that regulation serves the purposes of the securities industry giants. Such a conclusion is not especially surprising; what is more surprising is that anyone ever really believed that self-regulation could work in the first place. To perceive why self-regulation was made a key component of federal securities policy and to appreciate the specific short-comings of self-regulation, an understanding must first be had of the conditions in the securities business which give rise to a need for any special regulation at all.

Brokerage houses are custodians of huge amounts of their customers' property. Cash customers leave freely withdrawable money and securities with their brokers, for greater or lesser periods of time, largely for convenience. Customers who receive credit from brokerage houses also leave money and securities on deposit, though credit customers are not free to withdraw until repayment of credits extended. The brokerage firms neither pay nor, in the case of cash customers, render any special services for the use of this property. Nor are the firms subject to extensive regulation (as are, for example. insurance companies and banks) tending to assure safe use of their customers' property.


To be sure, however, customers' cash and securities are used by their brokers. In fact, such property constitutes a major component in the financial structure of New York Stock Exchange member firms. Experience has shown that withdrawals by customers are ordinarily offset by other customers' deposits. There is thus no reason for securities firms to keep sufficient cash and securities on hand to meet all obligations to all of their customers. Indeed, it would be wasteful for a firm to do so when the bulk of such funds could be at work in the firm's business-making money for its owners.

Customers' securities, left with the firm, provide an even more important source of financing than does customers' cash. Most commonly, brokers turn customers' securities into cash by pledging them as collateral for bank loans. This method, despite its simplicity and utility, has the disadvantage of being relatively inefficient: banks do not like to lend more than 75 per cent of the market value of the securities pledged. By lending customers' securities to another broker (on which a 100 percent deposit is required [102 percent today]), or by delivering them in settlement of sales by customers (or sales by the firm itself), the entire market value of the customers' securities can be converted to cash.

The securities industry justifies this cashing in on the ground that it is necessary in order to finance customers' margin (i.e. credit) transactions. This justification is only partial at best. Not only is cash realized far in excess of margin financing needs, but as an everyday occurrence customers' fully paid for securities somehow seem to get accidently (and unlawfully) pledged. If and when disaster strikes, these fully paid customer-owned securities can be redeemed by their owners-but only by paying for them again.

All of which might be highly academic if the securities industry (or even the giants of the securities industry) were built upon the solid rocks of hard capital which the public is led to believe underlie Wall Street.' Unfortunately, however, disasters do strike, as in 1969 and 1970 when over one hundred New York Stock Exchange member firms became basket cases ripe for the receivers. Losses to customers of these firms have so far been measured only in terms of inconvenience, frozen accounts and unrequested transfers of accounts from broker to broker. But this comparatively happy fact derives more from the enlightened benevolence of the New York Stock Exchange than from any built-in protection to which customers were entitled as such. For when a brokerage firm fails, all who have supplied it with financing, including its customers, stand to lose. Moreover, when hard times are coming, the suppliers of a firm's equity financing, who are normally the first to know, seem to find ways to get their money out while the getting is still possible.

 

A financial history of the United States (Google Books) explains the Paperwork Crisis.

 

Paperwork Crisis

The Special Study of the Securities Markets had warned in 1963 of the danger that the securities industry clearance and settlement mechanism could be inadequate to handle large increases in volume. That concern proved to be justified. The facilities of the industry could not handle the volume. One report noted that "[a]s inflation and inflationary expectations rose in recent years, the securities industry was ill-prepared for the unexpected syndrome of go-go speculation for short-term performance. Volume exploded, prices soared, then later plunged, and distortions became alarming as paperjamined the system."33 Many NYSE member firms were losing money on their retail commission business, even though trading volume was rising, because the massive volume generated by the bull market in 1968 resulted in a breakdown in the back offices on Wall Street.
Clerical personnel were required to work overtime and weekends in order to cope with the paperwork generated by increased volume. Second and third shifts were added by the brokerage firms, and trading hours were even curbed. Those efforts were in vain. Losses from errors were sweeping away profits. Increased volume generated a Large number of "fails" to deliver or receive securities and an increase in "DK" (don't know) transactions. These were transactions in which the opposite brokers could not agree on the trades. By December of 1968, fails to deliver exceeded $4 billion. This soon created an accounting nightmare.

The NYSE began reducing its trading hours to allow the brokerage firms to catch up with increased volume. During a six-week period in early 1968, the NYSE's closing time was reduced from 3:30 P.M. to 2:00P.M. In July and August, the securities exchanges closed on Wednesdays to allow the firms to catch up with their paperwork backup, but that bad little effect on the paperwork snarl. Pickard & Co. failed in 1968 as a result of paperwork problems that it could not handle. ….

… Between 1968 and 1970, over 100 NYSE member firms went Out of business as a result of the paperwork crisis. As the chairman of the SEC noted, the brokerage firms were being forced out of business because they had too much business. The NYSE spent over $130 million to rescue firms and protect customers during the crisis. After these expenditures, the NYSE Special Trust Fund was drained, and the exchange refused to provide further indemnificaiions to customers.


The NYSE was later criticized for not strictly enforcing its net capital rule during the paperwork crisis. That rule required member firms to maintain a minimum amount of liquid capital. Critics claimed that the NYSE was allowing firms without the required capital to continue doing business. Robert Haack, the NYSE chairman, responded that, if the net capital rule had been strictly enforced during the paperwork crisis, another 100 NYSE firms would have been put out of business. The SEC was largely on the sidelines during this crisis, although it did bring actions against Estabrook & Co., Schwabacher & Co., and others for failing to remedy their back-office problems.

Legislation

Congress investigated the paperwork crisis and found that it had nearly "brought our Nation's securities market to its knecs."JS Recognizing that the NYSE Special Trust Fund was inadequate. Congress passed the Securities Investor Protection Act of 1970 to provide insurance for customers holding accounts in broker-dealers that became bankrupt. This legislation created the Securities Investor Protection Corporation (SIPC) to administer an investors' protection fund that was to be paid for by assessments on broker-dealers. By 1985, the SIPC fund had reached over $325 million through those assessments. SIPC insured only losses caused by shortages of customer funds or securities when a broker-dealer became insolvent. It did not insure against losses caused by market fluctuations or defaults on bonds owned by customers. Initially, SIPC insured customer accounts up to $50,000, but only 520,000 in cash was insured. SIPC insurance was increased to $100,000 in 1978 and $500,000 in 1980, with $100,000 as the maximum amount of cash that would be covered. [More on "SIPC insurance" in articles below]


A controversy that arose in the wake of the paperwork crisis was the use of customers' free credit balances by brokers.
These balances were simply cash deposits left with brokers by customers. At any given time, a large amount of such funds was on hand, and brokers traditionally used those funds in their operations. Broker-dealers did not pay interest to customers on these deposits because of the prohibition in the 1933 Banking Act against interest on demand deposits. The amounts were substantial. Some $2 billion in free credit balances of customers were used by broker-dealers to fund their operations in 1969. Merrill Lynch had over $300 million in customers' free credit balances in 1970. Earnings from customers' free credit balances accounted for about 50 percent of Merrill Lynch's income that year.

During the paperwork crisis, the SEC required broker-dealers to place customer funds in specifically identified segregated accounts. This "customer protection rule" had the effect of preventing broker-dealers from using customer funds in their business operations. Thereafter, the Securities Investor Protection Act directed the SEC to adopt rules to protect customer funds held by broker-dealers. The SEC then enacted rule 15c3—3, which became effective in 1973. This rule required broker-dealers to compute periodically the amount of customers' free credit balances and to hold those funds in specially designated bank accounts to be held for the exclusive use of customers. Rule 15c3—3 imposed possession and control requirements. It required broker-dealers to make a daily "box count" of fully paid and excess margin securities of customers that should be in the broker-dealer's possession or control. Deficiencies were required to be corrected. [These rules are the same customer protections that
government securities brokers or dealers were given exceptions to in 1987 (for stocks) and 1989 (for bonds)]

 

The Depository Trust Company (DTC)

 

Euromoney reports that the danger and devastating results of the DTCC's stock borrow programme.

 

The DTC and NSCC were created as a response to a paperwork crisis on Wall Street in the late 1960s. Each time a trade was made, physical share certificates were hand delivered by runners who collected cheques from the buying broker to take back to the selling broker. As volumes increased, this became an unacceptably slow trade settlement procedure. In a bid to speed the process up, Congress passed legislation in 1971 for two new service organizations whose objectives were the speeding up of clearance and settlement in the national marketplace. The DTC was then established as the nation's principal securities depository, whose aims were to convert the paper certificates to electronic book entries; and to immobilize those certificates, keeping them in a vault at the DTC. And the NSCC provided clearance and settlement services. It all made sense.

No less sensible was the idea of further speeding up the trade settlement process by creating a stock borrow programme, approved by the SEC in 1981. This enabled the creation of a massive lending pool of shares from brokers' client margin accounts (brokerage accounts in which the broker lends the customer cash to purchase securities. The loan in the account is collateralized by securities and cash).


The brokers would buy securities from a specialist broker (a market-maker) who can short sell them the stock, and if there was a fail to deliver beyond the permitted trade plus three-day (T+3) settlement rule, which occasionally happened, at request of the buy-in from a member, the NSCC could pull out the required shares from the DTC pool and allow the trade to clear, speeding up the trade process. Changes in ownership were then passed on to the DTC. …

What the DTC failed to put in place, claim the defendants, were sufficient [any] incentives to return the stock borrowed from the programme. The source says: "The DTCC never monitored the length of time brokers or market-makers were taking to close out the position. You might not close the position for months or years, and no-one was onto you. It was the perfect loophole for the bad guys. Who cared if you didn't own what you sold – the DTCC would make good on your delivery." When asked whether, before the new short selling regulation came into force, there was no time limit for the return to the stock borrow programme of shares that had been borrowed, a DTCC spokesperson replied: "Essentially that's accurate."

The benefits of the system were similar to other stock loan programmes. Those lending the shares are credited with the full market value of securities borrowed, so they can earn overnight interest on that value by investing the cash. Today, more than 350 brokers participate in the stock borrow programme directly.

"The system means transactions are executed much more efficiently, but it is ripe for a fraudulent and manipulative undertaking," says Christian. If the DTCC is providing the delivery of the share, and is not checking how long the borrower takes to return it, positions can remain open forever, the theory goes.

Failure to deliver

It is hard to ascribe the blame for this to those who set up the programme. The theory was good. The buying investor has his share delivered quickly. The broker gets his commission. The market-maker gets commission from the broker. If the market-maker fails to deliver and there is a buy-in, he will get his collateral back from the DTCC when he returns the borrowed shares – and if he is lucky the share price might have dropped and he won't have to pay back as much. If he is extra lucky, no-one will even ask for a buy-in. The broker whose shares have been taken out of the lending pool and lent on, receives the market value of those shares to earn interest on, until the market-maker closes the position. The DTCC earns 30 cents per delivery of stock which, since it is a not-for-profit organization, is passed back to its members – the brokers and market-makers.

But what about the company? If no one is forced to buy-in its shares, and people don't, its stock price will fall. If there is no delivery and there is no buy-in, then what was initially a buy-and-sell transaction ends up as just a sell.



Devastating results

If the source is correct, however, the result could be devastating for companies, particularly if they are small, illiquid and cash-strapped, as are many of those listed on the OTC bulletin board.
If Company XYZ has bad news, the amount of readily sellable shares is much bigger than it ought to be – Buyer A and Investor B could sell the same shares. XYZ's share price will go down disproportionately, and XYZ might have to issue more shares to raise capital, further diluting the shares. The stock price goes down. This makes it harder to receive financing. The stock price goes down again as the company cannot grow. Investors are less inclined to buy-in.

And so begins a spiral that could ultimately result in XYZ going bankrupt and Market-Maker A getting back the $1 million collateral being held in the DTCC account. The only losers are XYZ and its shareholders, among which are Buyer A and Investor B. A different source estimates that thousands of companies have been bankrupted in this way.
He backs up his claim by pointing out that in 1999 there were twice as many OTC bulletin board companies as today – although the majority of the casualties would have been technology companies wiped out when the equity bubble burst in 2000. Says Global Links' Dobrucki: "The company and its shareholders have the right to expect a fair playing field. When illegal trading occurs, the company cannot meet its goals, and shareholder equity is diluted."


To what extent the brokers who bought the shares on the clients' behalf know that the shares are not real has been questioned in some of the lawsuits. Some sceptics point out that stock held in a margin account is not necessarily owned by the account holder anyway. In order to ensure actual ownership, some companies have advised their shareholders to request delivery of physical share certificates from their brokers. By law, brokers are required to deliver physical certificates upon client request – a service for which they charge about $40. In turn, they ask the DTCC to deliver the certificates, which it should have in its vaults. But getting hold of these share certificates is proving difficult for some investors.

Demanding delivery

Says Global Links' Dobrucki, "I received many phone calls and email messages from stockholders asking why they cannot get delivery of their stock. I received several email messages from shareholders, which were sent by their brokers indicating that share certificates could not be issued at this time because (a) the company is going through a reorganization and that the 'company' was not issuing shares at this time; (b) the transfer agent was not issuing shares at this time; and (c) that the company is in a 'chill' mode and that shares cannot be issued at this time. None of these answers are true.

"If you purchased shares in Global Links, you have the right to demand delivery of your shares. If the shares simply do not exist, then the problem of naked short selling will come to the surface. The broker that sold you the shares has to provide delivery of your shares. Exchange Act, Rule 10a-2 requires delivery of shares sold to our stockholders."

The DTCC says that there should be no problem in getting certificates, and that they will be at the transfer agent or at the DTC. One spokesperson for the DTCC says: "I don't know where that comes from. People can get their certificates." He says it can be time-consuming and costly, however, so brokers tend to suggest to investors that they don't attempt to do it. But what if an investor wants his certificate and pays $40 to get it? "You can get it," he says. So if everyone who owns stock asks for their share certificate tomorrow, will there be enough share certificates to go round? "This is an unlikely occurrence and would paralyze our capital market system, even worse than the paperwork crisis that shutdown the markets in the early 1970s. But because there is some legal naked short selling, the answer is probably not. There can be shortages," says the DTCC spokesperson.

In a response to this non-delivery of physical share certificates, some shareholders are taking their brokers to court.


There are other alleged instances of shares being multiplied. It is claimed that brokers are throwing more than just margin account stock into the DTCC's stock borrow programme. As per the margin rules of the Federal Reserves Regulation T, only shares held in a margin account can be put into the lending pool. It is not permitted for shares held in cash, excess margin, retirement and institutional accounts to be used in the stock borrow programme. In the case brought by Sporn, it is claimed that Trident Systems is an OTC bulletin board company ineligible to have its shares held in a margin account. "In the case of Trident, the shares were unmarginable," says Young, yet "around 50 brokers were trading Trident shares." One industry expert says: "It's obvious that some brokers will get greedy and throw in as many shares as possible to the stock borrow programme, as they make money from it when it is lent out."

 

The SEC provides a letter covering issuers who were prevented from withdrawing from the DTC system.

 

From: Lori Livingston [lori@transferonline.com]
Sent: Thursday, March 06, 2003 4:44 PM
To: rule-comments@sec.gov
Subject: FIle No. SR-DTC-2003-03


I am writing these comments to the Depository Trust Company's ("DTC's") proposed rule change that appeared in the February 21st issue of the Federal Register. My comments represent several viewpoints but primarily I respond in the following capacities:

I am the President of Transfer Online, Inc, and act as the transfer agent for (Nutek, Inc.) one of the Issuers who expressed their desire to withdraw from the DTC system but were denied.
Transfer Online also serves as the transfer agent to several other companies who have inquired about the possibility of withdrawing from the DTC system and finally, I am an experienced member of the financial services industry for the past 20 years where I have specialized in transfer agent and back office services.

As a transfer agent involved in this process I have direct experience of the situation(s) leading to DTC' s request. While acting on the behalf of Nutek, Inc. to notify DTC of their intent to withdraw, Transfer Online was initially told that the request was received and in process. No indication was given that this request to withdraw was a problem until approximately 6 weeks later when we were made aware that DTC's position had changed. Transfer Online was told that if Nutek, Inc. shares were not transferred into their nominee name, "Cede & Co", Transfer Online would be in violation of the operational agreement between our two companies and that we would be held accountable.

This put Transfer Online between the Issuer's request (on whose behalf we act) and DTC's demand and so we inquired to the S.E.C as to what, or if, any legal or statutory obligations existed to either party which superceded our agreement to act as agent for the Issuer. The S.E.C was unable to issue guidance in this matter so having no idea what "being held accountable" would mean to Transfer Online, and having received several phone calls from DTC requesting to know my position and what my intentions were, I suggested to the Issuer that until such time they were prepared to handle any potential legal issues with an entity as large as The Depository Trust Company that they let the shares be processed as usual.


Many Issuers have come forward with their opinions and interest in joining the exodus from DTC.
They are frustrated by dramatic unexplained price movements, confounded when in a single day, in companies with a high percentage of shares held by insiders, more than the number of shares outstanding for their company are traded, and they are frustrated by their inability to access the information they need to determine the cause. The company is essentially cutoff from the majority of stock transactions that take place behind the closed doors of DTC in book entry movements of shares. Should the Issuer request information it is only available to them at the prices that are determined by DTC.


Transfer agents, while able to provide transaction history which happens when stock certificates are involved, cannot provide the information from DTC because we do not have access to the majority of the shareholder records as they sit on our books as one large position in the name of Cede & Co. that seldom changes. This leaves an Issuer powerless to research the trading of their own stock, communicate with the shareholders or take action against those who might be harming their company with questionable even perhaps illegal trading practices.


In regard to DTC's proposed rule change that states, "DTC will only honor the requests of the participants", I feel compelled to point out that the participants of DTC are ultimately only holding shares for the benefit of their customers who are in fact the shareholders of the company. Almost daily, particularly when an Issuer is attempting to have their shareholders pull their shares from street name and obtain certificates, Transfer Online receives phone calls from shareholders who tell us that their broker told them they cannot have a stock certificate, or that the transfer agent will charge you $75 - $100 dollars for a certificate, or the transfer agent won't issue the shares. How can a shareholder get a stock certificate if their broker (or the participant) is the obstacle? If, as DTC states only the participant's request will be honored, and the participant will not honor the request of the beneficial owner, then ultimately the shareholder has no right to their own property nor the ability to do what the Issuer has determined is in the companies best interest.

My experience over the years suggests that shareholders are seldom fully advised of the different types of ownership they can have, or of the full implications of holding shares in street name. Requesting certificates is always riddled with obstacles to deter this form of ownership.

Like many of the Issuers seeking withdrawal from DTC, I have often been suspicious of oversold stock. When tabulating shares for a Proxy Vote oftentimes there will be more shares voted by the brokers than there are shares outstanding in the company. When the question is raised with ADP (another representative of participants) their response is that they simply report what the brokers tell them they have. Why are brokers reporting more shares than they could possibly hold and why is it the obligation of the company or its agent to research why the numbers are wrong at their expense?

DTC's solution has been the development of the Direct Registration System (DRS). This allows a shareholder to hold their shares in their own name on the books of the corporation while still in the DTC system attached to a particular participant or brokerage account. This allows for direct ownership on the books of the company, while allowing the broker to retain control of the account by remaining attached to the account in case of sale.

There is a problem with this system as there are many Issuers, and some transfer agents, that cannot meet the requirements that are set by DTC nor can they afford to participate in the DTC FAST system because once an Issuer enters into the FAST system, DTC will no longer pay fees for any activity they request and the Issuer then becomes responsible for those fees.
Since those very same fees were paid for services by DTC when stock is in physical form, it is difficult to comprehend why this is the case when there are no certificates. Ultimately, the result is that the Issuer is excluded from FAST and DRS, as are their investors. As in any case where a company holds a monopoly you have to play by their rules or you don't play at all.

The financial burden on a small company is tremendous and very few small companies are able to participate.
Those who do not are excluded from DRS and thus have no access to their shareholder records unless the shareholder holds the shares on the books of the company. The entire system has been designed for larger companies who do not think twice about spending great deals of money on their transfer agent fees, but smaller corporations who don't have the resources and consequently cannot afford to participate use withdrawing from DTC as their only method of having some control over their shareholder records.

What will happen as the industry moves toward immobilization and same day settlement? What will happen to those companies that cannot participate and have no access to their stock activity?
DTC stated in their proposal that they have "discussed the substance for this proposed rule change with various DTC participants and industry groups and received favorable reaction." I suggest that many were excluded from this conversation that have a great deal at stake. There is more than one way for the prompt and accurate settlement of securities transactions to occur and also preserve the integrity of the Issuers shareholders records. Presently, all solutions are based on a system where DTC is basically taking on the role of transfer agent as well as being an organization for and by the brokers. Over the years I have watched most companies move from majority of ownership held on their records toward a situation where over half the shares are held as registered to Cede & Co. and these shares usually represents 3-4 times the number of shareholders that appear on the records of the company.

I think the rule change should not be approved until a sufficient amount of time is put into investigating the complaints of the Issuers and time is spent looking at the existing system in general.

----------------------------------------------

Lori Livingston
President/CEO
Transfer Online, Inc.
P 503.227.2950 F 503.227.6874

 

Euromoney reports that an example of the insanity facing small companies.

 

April 2005
Naked shorting: Stung by the German connection
by Peter Koh

Thousands of US stocks are being traded on a little-known Berlin exchange, without the knowledge of many of the companies involved. Have the naked short sellers exported their practice overseas?

A YEAR AGO Ted Noble, chief financial officer at Advanced ID Corporation, a Calgary-based microchip-tracking company, received some surprising news.

"We were congratulated by a third party who saw that our shares were trading on the Berlin Stock Exchange," he recalls. "That came as news to us because we'd not done anything to get listed in Germany. I talked to a few people and we couldn't figure out whether it was good or bad."

Noble soon found out when his company's shares started behaving oddly on the US OTC bulletin board. "April 29 [2004] was a slow day, and only about 10,000 of our shares had traded. Then 370,000 shares traded in the last 20 minutes before the close. It knocked our stock price down from 58 cents to 41 cents, before closing nearly 20% down at 48 cents. That was very unusual for our stock. I'd never seen anything...

[Incidentally, selling "phantom" US stocks to German investors helps prop up the dollar (euros used to "buy" these securities instead end up in dollar-denominated collaral at the DTC]

 

WALL STREET'S PHANTOM BONDS

 

New Geography reports about Wall Street's Phantom Bonds.

 

Blame Wall Street's Phantom Bonds for the Credit Crisis
by Susanne Trimbath 11/26/2008

The "credit crisis" is largely a Wall Street disaster of its own making. From the sale of stocks and bonds that are never delivered, to the purchase of default insurance worth more than the buyer's assets, we no longer have investment strategies, but rather investment schemes. As long as everyone was making money, no one complained. But like any Ponzi Scheme, eventually the pyramid begins to collapse.

For the last couple of months trillions of dollars worth of US Treasury bonds have been sold but undelivered. Trades that go unsettled have become an event so common that the industry has an acronym for it: FTD, or fail to deliver.

What's the result? For the federal government, it's an unnecessarily high rate of interest to finance the national debt. For states, it's a massive loss of potential tax revenue. And for the bond buyers, brokerage houses, and banks, it's yet another crash-and-burn to come.

First, a primer: The Federal Government issues as many bonds as Congress authorizes (the total value is an amount that basically covers the national debt).
Many are purchased by brokers and investors, who then re-sell them in "secondary" trades. The way the system is supposed to work is that the broker takes your bond order today and tomorrow takes the cash from your account and 'delivers' the bonds to you. The bonds remain in your broker's name (or the name of a central depository, if he uses one). If there is interest, the Treasury pays the interest to your broker and he credits your account for the amount.

What is happening today that strays from this model? Because the financial regulators do not require that the actual bonds be delivered to the buyer, your broker credits you with an electronic IOU for them, and, eventually, with the interest payments as well. But the so-called "bonds" that you receive as an electronic IOU, called an "entitlement", are phantoms: there aren't any bonds delivered by your broker to you, or by the government to your broker, or by anyone.

[Key point here is that what you THINK you own and what you DO own in your brokerage account are two VERY different things.]

The significant result of the IOU system is that brokers are able to sell many more bonds than the Congress has authorized.
The transactions are called 'settlement failures' or 'failed to deliver' events, since the broker reported bond purchases beyond what the sellers delivered. Since all of this happens after the US Treasury originally issues the bonds, the broker's bookkeeping is separate from US Treasury records. That means there is no limit on the number of IOUs the broker can hand out...and there are usually more IOUs in circulation than there are bonds.

The ramifications are far reaching for the national budget. Wall Street, by selling bonds that it cannot deliver to the buyer — in selling more bonds than the government has issued — has been allowed to artificially inflate supply, thereby forcing bond prices down. These undelivered Treasuries represent unfulfilled demand by investors willing to lend money to the US government. That money — the payment for the bonds — has been intercepted by the selling broker-dealers. The subsequently artificially low bond prices are forcing the US government to pay a higher rate of interest than it should in order to finance the national debt.




[note: settlement failures in treasury markets have happened mainly during periods of crisis (when everyone is selling stocks and buying treasuries). Broker dealers keep their customers cash without delivering treasuries into customer's account (failing to deliver) mainly because they need to pay back other customers (for example, they need money to pay customers selling their "phantom" stocks). It's a ponzi scheme.]

The market for US Treasury bonds has been in serious disarray since the days immediately following September 11, 2001. Despite reports, reviews, examinations, committee meetings, speeches, and advisory groups formed by the US Treasury, the Federal Reserve, and broker-dealer associations, massive failures to deliver recur and persist. Somehow, government, regulators and industry specialists alike believe that it's OK to sell more bonds than the government has issued. It shouldn't take a PhD-trained economist to tell you that prices are set where supply equals demand. If a dealer can sell an infinite supply of bonds (or stocks or anything else for that matter), then the price is, technically-speaking, baloney. And the resulting field of play cannot be called a "market".


This week's drop in the yield on US Treasuries was accompanied by a spike in bond prices. The data won't be released until next week, but you can expect to see that a precipitous drop in fails-to-deliver occurred at the same time. Don't get your hopes up, though. One look at the chart above will tell you that the good news won't last until real changes are made to the system.

As a bonus insult to government, consider the $270 million in lost tax revenues to the states. This is because investors (unknowingly) report the phony interest payments made to them by their brokers as tax exempt; interest earned on US Treasury bonds is not taxed by the states.

For the bond buyer, the situation poses other problems and risks. As an ordinary investor, you're not notified that the bonds were not delivered to you or to your broker. Of course, your broker knows, but doesn't share the information with you because he or she plans to make good on the trade only at some point in the future when you order the bond to be sold.

The electronic IOU you received can only be redeemed at your brokerage house, and no one knows what will happen if it goes under, although I suspect we'll find out in the coming quarters as more financial institutions get into deeper trouble. You're probably not aware that, in order to cash in that IOU when you're ready to sell, you depend not on the full faith and credit of the US government, but on your broker being in business next month (or next year) to make good on the trade. In other words, you're taking Lehman Brothers risk, and receiving only US Government risk-free rates of return on your investment. [not a smart investment strategy]

 

Treasurydirect reports about the reaffirmation of aged fails treatment.

 

Aged Fails Treatment - Reaffirmation

May 31, 2006

Nikki M. Poulos
Vice President and General Counsel
Fixed Income Clearing Corporation
55 Water Street
New York, NY 10041

Dear Ms. Poulos:

[this letter shows how regulators deliberately accommodated naked short selling (ie: taking customer's money and pretending to deliver securities)]

This is in response to
your letter of February 3, 2006, in which you request reaffirmation of the exemptions from certain capital and customer protection rules granted in 1989 to government securities broker and dealer participants of the predecessor of the Fixed Income Clearing Corporation ("FICC").

We understand the facts to be as follows. FICC is a registered clearing agency under Section 17A of the Securities Exchange Act of 1934, as amended. In a letter from the Bureau of the Public Debt dated November 22, 1989, Treasury granted exemptions to government securities brokers and dealers that are FICC netting members from the following capital and customer protection requirements regarding aged fails: (i) as incorporated in 17 CFR 402.2(d), paragraphs 17 CFR 240.15c3-1(c)(2)(iv)(E) and (c)(2)(ix); (ii) as incorporated in 17 CFR 403.4, paragraph 240.15c3-3(d)(2) and Exhibit A (Note D of Item 4 and Item 12); and (iii) 17 CFR 403.5(c)(1)(iii). …

[These "capital and customer protection requirements" were the ones design to prevent another "paperwork crisis"]


FICC has put forth this request because one of the facts on which the original granting of the relevant exemptions was based will soon change. Specifically, at the time of the exemptions, fails were not netted with other fails or new trades. FICC has received Securities and Exchange Commission (SEC) approval to amend its rules to implement a daily fail netting process whereby outstanding participant fail obligations will be netted with current settlement activity on a daily basis. FICC plans to implement this netting process early in 2006.



Based on these facts and your representations of the proposed daily fail netting process's risk management of fails, we believe that the exemptions granted in 1989 from certain capital and customer protection requirements regarding aged fails should continue to remain in effect.



Sincerely,

Van Zeck
Commissioner

 

Securities Investor Protection Corporation (SIPC)

 

The Wall Street Journal Blogs asks is the SIPC Sick? (yes)

 

January 30, 2009, 11:01 AM ET
Is the SIPC Sick? [yes]
By Mary Pilon

Earlier this week, Stephen P. Harbeck, the president and CEO of the Securities Investor Protection Corp. (SIPC), testified before the Senate. He's pushing for congress to reevaluate the U.S. Treasury's pipeline of credit to then SIPC, which provides financial protection to consumers whose brokerage firms fail. No, not market losses, but when a brokerage fails completely (think Lehman Brothers). (Read as
a PDF here or watch video here.)

The SIPC is not a government entity, but membership among securities brokers is required by law. It was created in 1970 [because of brokerage fraud during paperwork crisis]. The Federal Deposit Insurance Corp., or FDIC, by contrast, insures customers' deposits at failed banks and was created to help prevent bank runs. The FDIC is not funded by individual tax dollars, but by insurance premiums that member institutions pony up. It's like group health insurance for deposits.

But the SIPC works a little differently. It has $1.7 billion in total assets, partially supported in assets from its member firms. It has a $1 billion line of credit with the U.S. Treasury. The SIPC can advance up to $500,000 per customer for missing securities, up to $100,000 of which may be cash.

According to Harbeck's testimony, through 2007, the SIPC liquidated 317 brokerage firms and returned over $15.7 billion in cash or securities to customers. "To date, SIPC has never used any government funds or borrowed under its commercial line of credit," Harbeck said.

But with the dual investing megabombs of Lehman and Bernard Madoff in 2008, "significant challenges" are ahead for the SIPC. Although it is still unknown what the total losses suffered by brokerage clients will be, "it cannot be determined if SIPC's resources will be adequate" to cover them, Harbeck said. The SIPC's line of credit has not been raised since 1970.

The fate of the SIPC has obvious repercussions for Lehman or Madoff investors, but also for taxpayers, should the line of credit be extended.


Just thought you should know.

 

The Telegraph reports that Hedge funds do battle for Lehman Brothers cash.

 

Hedge funds do battle for Lehman Brothers cash
A multi-billion pound legal battle pitching top hedge funds against each other and the collapsed Lehman Brothers is to commence in the High Court.

By Helia Ebrahimi
Published: 8:14PM GMT 08 Nov 2009

The hedge funds claim that client cash – amounting to billions of pounds – should have been put in a ring-fenced account by Lehman under FSA rules so that in the case of a liquidation the money is segregated and distributed immediately back to clients.

But 13 months after Lehman went bust, no cash has yet been returned with more than half of it still missing.

Although there is about $1bn (£600m) in the fund linked to specific hedge funds, many others are clamouring for a share of it because their money is no longer traceable.

As result, hedge funds run by Goldman Sachs, GLG and Paragon Capital, whose cash was correctly put into the segregated account, are trying to fight off claims by rivals CRC and Claren Road that they should receive some of the money also.

A twist to the case is that while hedge funds are involved in skirmishes with each other they are united against Lehman, whose collapse last year rocked the whole financial world.

As administrator to Lehman's European arm, PricewaterhouseCoopers has taken the case to the High Court to seek guidance on how to deal with the situation.

The administrator wants to know whether to divide the money between the names which have been left on the account, or to divide the $1bn between all the hedge funds whose cash should have been protected. Alternatively, it is also looking at whether it needs to put its hand into the house fund to make up any shortfall before addressing the claims of any other unsecured creditors.

It is common practice for hedge funds to deposit clients' cash with banks' prime brokerage arms which offer services to hedge funds and other investors, but that money is supposed to be left untouched by the bank, which did not happen in Lehman's case.

While some money was in segregated accounts when the bank went bust, other accounts were unsegregated. Lehman's London prime brokerage arm had about 900 hedge funds and other asset managers as clients.

[Aside from the multitude of "exemptions", consumer protection rules offer little actual protection if broker-dealer ignore them. Lehman failed to segregate "vast sums" of client money]

 

The NYpost reports that Madoff victims say SIPC promises like 'snake oil'.

 

Madoff victims say SIPC promises like 'snake oil'
1:38 PM, February 25, 2010 ? KAJA WHITEHOUSE

Investors duped by Ponzi schemer Bernard Madoff have some harsh words for the directors of the Securities Investor Protection Corporation, saying they're running a "bait-and-switch" scheme and likening their promises to "a bottle of snake oil."

The investors have filed a fraud lawsuit against the federally mandated non-profit, which is responsible for protecting investors from harm when a brokerage firm fails.


They allege that SIPC, which promises insurance coverage of up to $500,000 for duped brokerage customers, has toyed with the payout process in the Madoff case, where as much as $65 billion was swindled. As a result, some folks are getting zippo.

"American investors are being manipulated by the very people who are required by law to protect their life savings," said the attorney behind the case, Helen Davis Chaitman. "SIPC pulled a bait and switch. It promised investors that their investments were insured, but then when it came time to pay up, it changed the rules. The SIPC guarantee on the account statements of American investors is no better than a bottle of snake oil."

 

The SIPC reports about the largest liquidation proceeding in its history.

 

...
On September 27, 2001, SIPC initiated the largest liquidation proceeding in its history. MJK Clearing ("MJK") in Minneapolis, Minnesota cleared for approximately 65 introducing firms and had approximately 175,000 customers. At the present time, the liquidation proceeding has cost SIPC over $110 million. This loss of customer assets raised a number of questions concerning SIPC's risk exposure and the adequacy of its fund to carry out its mission of protecting customers in the event of financial failure of stockbrokerage firms.

Although MJK may have been experiencing cash flow or other difficulties before it failed, its collapse was immediately induced by its inability to fund its reserve deposit required under Rule 15c3-3, the SEC's Customer Protection Rule. As discussed above, in August of 2001, MJK had ceased receiving mark to the market payments from Native Nations on the securities it had borrowed from it, but nevertheless continued to pay those marks to the market to its securities lending counter parties. MJK temporarily funded those payments by borrowing against customer margin securities, but was required to later fund its Rule 15c3-3 Reserve Account deposit following its reserve computation later that week. It funded that deposit by further borrowing against customer securities, only to raise the following week's requirement even further. This cycle or "spiral" continued until MJK ran out of customer margin securities to borrow against.

 

What You Need To Know About Brokers

 

Smith Investment Management reports about what you need to know about brokers.

 

I. What you need to know about brokers.

PART A. HYPOTHECATION & REHYPOTHECATION

Hypothecation– definition

'The pledging of securities or other property as collateral for loans. When securities are pledged for a loan the title to them is surrendered to the bank or other lender with which or whom they are pledged. On the London Stock Exchange stock pledged as collateral is said to be pawned.'

http://teachmefinance.com/Financial_Terms/Hypothecation.html

Margin accounts are hypothecated

'Hypothecation of securities typically occurs when you execute a margin agreement with a brokerage firm. In some instances, you may be defaulted into a margin account when you open a new account with a brokerage firm.'
Source: John M. Gannon, Senior Vice President, Investor Education, FINRA.

http://docs.google.com/Doc?id=dznpmsr_438nc54q6rk

Hypothecation effectively puts your securities in the hands of your broker. They are held in his name – or 'street name' – as security against the loan that's available on your margin account.

Street name exposes your assets to serious complications or loss.

'In a liquidation proceeding….the fund of customer property (which) includes all of the customer securities held in street name… are divided on a pro rata basis with funds shared in proportion to the size of claims.'

'If securities are not registered in your name, you could not go directly to the issuer of the security.'
SIPC e mail correspondence.

Investors may not even 'own' their own street name investments!

'When securities in your account are held in street name", says Eric Brunstad, visiting Lecturer in Bankruptcy Law at Yale Law School, "it's really not your property. Every security you buy, even if you pay for it in full, might technically belong to your brokerage firm. It could be that all you really own is a claim on the firm for those stocks and bonds.'

In the same article, Mike Offitt, founder of the Commercial Real Estate and Mortgage Group at Deutsche Bank & former head trader at Goldman Sachs, says:

'For many years, virtually all securities have been held and registered electronically. The elegantly-engraved paper certificates you might remember are largely historical curiosities. Rather, most securities have been dematerialized, and exist only on the electronic books of the issuer and an electronic depository house known as DTCC. The securities industry has promoted this practice of holding in street name as good for investors for a variety of reasons. They will tell you that it makes buying and selling much easier for you, collecting interest payments more timely and simple, and even protects you against the loss or theft of those nettlesome stock or bond certificates, while reducing the costs associated with transfers and deposits. These things are all true.'

'As is typical with most things brokerage firms and their regulators tell you, however, there is far more to this than meets the eye. In fact, when your securities are held in the name of your brokerage or bank, they, not you, have most of the rights of ownership.'

(The) 'fine print of an account agreement generally…….. means your broker, subject to SEC rules, can lend your stock (and charge a hefty fee) to short sellers, hedge funds, corporate raiders and buyout funds and possibly even give them voting rights and control for key periods, and not have offsetting collateral in house. In short, they can mine these vast holdings of other people's securities for all sorts of fees and income – earnings that run into the billions every year. Your broker generally keeps all this money.'


http://seekingalpha.com/article/68980-how-safe-are-your-investments

'Safekeeping' – a forgotten term.

This used to be the common practice of brokerage firms. Brokers would buy stock in their customer's name and either ship it to him or hold it in a vault or safe on his behalf. The centuries-old term for it is 'safekeeping', and it's self-explanatory!

Almost all of the brokers we spoke to recently had never heard of the term. That, alone, says a lot about the current state of play in brokerage firms.

Even more telling is the fact that many firms no longer offer this as a service. It seems that if you won't allow the brokerage firm to register your assets in their name, they don't want your business at all! What does that tell you? It tells me that rehypothecation may be more lucrative for the brokerage firms than the 'paltry' fees they earn from running your money!

Rehypothecation – definition

'Using collateral that secures one loan to secure a second loan. Rehypothecation significantly increases the original lender's risk because the collateral is pledged twice.'

http://www.yourdictionary.com/finance/rehypothecation

Rehypothecation is carried out by your broker with a third party. He uses your assets as security to secure loans from a third party to fund his own trading and speculation. The following definition paints a fuller picture:

Rehypothecation – The hypothecation again of collateral already hypothecated. Rehypothecation, except by consent of the owner of the collateral, is illegal. When a customer deposits with a broker securities instead of money as margin he hypothecates the securities with the broker. In effect he obtains a loan on them. The margin represents the loan. He signs an agreement with the broker whereby the broker is permitted to rehypothecate the securities (and) is permitted to use them as collateral in obtaining a loan for himself. If the broker defaults on the loan he has obtained on the securities and the securities are sold to satisfy the loan the owner of the securities (the broker's customer) cannot recover the securities. He is without recourse except that he may proceed against the broker to recover the difference between the value of the securities and what he may owe the broker in margin or otherwise. Also, when stocks (or bonds) are bought on margin the broker's customer gives the broker the right to hypothecate them. This is necessary as the customer is the real owner of the securities they are bought for his account and risk.
http://teachmefinance.com/Financial_Terms/Rehypothecation.html

By signing your margin account form you are agreeing to allow your broker to rehypothecate your assets. We have not found a single exception to this statement.

Two main ways to rehypothecate.

Brokerage firms 'borrow' customer assets in two principal ways:

a) they pledge them as collateral to either raise loans or accept risk for pay;
b) they physically lend out customer securities to other companies for a fee.

For further information on loaning stocks, see B8.

Securities in some cash accounts can be borrowed or pledged.

Many firms have gained the right to pawn the assets in non-margin (cash) accounts. Although a customer may not have a hypothecation agreement between himself and his broker, the broker might still be able to hypothecate his cash account investments with a third party.

In the following reply to our enquiry from a FINRA executive, it is clearly stated that cash accounts can be hypothecated:

'Dear Mr. Smith,
Thank you for your email about hypothecation. Hypothecation of securities typically occurs when you execute a margin agreement with a brokerage firm. In some instances, you may be defaulted into a margin account when you open a new account with a brokerage firm. Securities in cash accounts (non-margin accounts) also can be hypothecated, but typically you would need to execute an agreement to do this.'
Source: John M. Gannon, Senior Vice President, Investor Education, FINRA

http://docs.google.com/Doc?id=dznpmsr_438nc54q6rk

Rehypothecation is illegal, except….

The practice of borrowing assets to either raise money against them or to loan them out to generate income is deemed to be illegal in US law, except where consent is given.

It seems that, while consent may have been gained on paper, in practice it has not been given because the investor is often unaware that he granted any such consent when he signed his account form.

While this situation may satisfy the written law, it completely fails to satisfy the moral law that the written law is seeking to enforce!

Here is the excerpt, taken from US Law:
(Read bold words to get the essential meaning):

United States Code, Title 15 – Commerce & Trade, Chapter 2B: Securities Exchanges, section 78H:
Restrictions on borrowing and lending by members, brokers, and dealers.
'It shall be unlawful for any registered broker or dealer, member of a national securities exchange, or broker or dealer who transacts a business in securities through the medium of any member of a national securities exchange, directly or indirectly –
(a) In contravention of such rules and regulations as the Commission shall prescribe for the protection of investors to hypothecate or arrange for the hypothecation of any securities carried for the account of any customer under circumstances
(1) that will permit the commingling of his securities without his
written consent with the securities of any other customer
,
(2) that will permit such securities to be commingled with the securities of
any person other than a bona fide customer, or
(3) that will permit such securities to be hypothecated, or subjected to any lien or claim of the pledgee, for a sum in excess of the aggregate indebtedness of such customers in respect of such securities.
(b) To lend or arrange for the lending of any securities carried
for the account of any customer without the written consent of such customer or in contravention of such rules and regulations as the
Commission shall prescribe for the protection of investors.'

Brokerage firms gain the right through clauses in their account agreements.

Most people grant these rights without realizing it. They are put off reading their account agreement because they are usually very large documents and because they are often written using English that can be extremely difficult to read and understand.

We looked at documentation from four of the very large broker-dealers: TD Ameritrade, Morgan Stanley, Merrill Lynch and Schwab. The results are following.

TD Ameritrade – let's have our cake, and eat it!

We found the following clauses in TD Ameritrade's Client Agreement, which applied to both cash and margin accounts.

Page 4, Item G, Security for indebtedness. 'I (the investor) consent to you (TD Ameritrade) having a continuing security interest in, right of set-off to and lien on all securities, cash and other property in my account("collateral"). Subject to applicable rules, and without prior notice to me, you may sell or transfer the collateral to satisfy my obligations. You also have the discretion to determine which securities and other properties are to be sold and which contracts are to be closed. You have all rights of a secured party under the uniform commercial code". Page 4 item H, Loan of Securities. "You (TD Ameritrade) are authorized to lend to yourself or others any securities you hold in my account and to carry all securities lent as general loans. In connection with such loans, you may receive and retain certain benefits that I will not be entitled to such as interest on collateral posted for such loans. In certain circumstances, such loans may limit my ability to exercise voting rights with respect to the securities lent'.
http://www.tdameritrade.com/forms/AMTD182.pdf

What a deal … The firm gets the profit while the customer gets the risk.
That is the definition of a win/lose deal!

It appears the customer also gives up some or all of his rights – 'in certain circumstances' – to decide what happens to his own property whenever it has been loaned out to a third party. The 'certain circumstances' are not defined, and could mean anything, but it looks open-ended.

Morgan Stanley claims the right to rehypothecate everything in your account.

Morgan Stanley's Private Wealth Management Client Margin Agreement is an additional agreement that must be signed along with the actual account form. Under heading 6, Maintenance of Collateral, the account holder consents to the following:

'All securities, commodities or other propertyin your (Morgan Stanley's) possession….in connection with account no. *%^~ (the customer's account) …may from time to time and without notice to the Undersigned (the customer), be carried in your general loans and may be pledged, repledged, hypothecated or rehypothecated
….for the sum due to you thereon or for a greater sum and without retaining in your possession and control for delivery a like amount of similar securities, commodities, or other property.'

In this single paragraph Morgan Stanley claim the right to do the following with your money:

* borrow money against your account ('hypothecate & rehypothecate')
* cite your account as security against a deal or deals they might make ('pledge or repledge')
* borrow or pledge up to the value of the margin used (for the sum due to you)
* borrow or pledge up to the value of the whole account (or for a greater sum)
* do these things without having to retain in their possession similar stocks and shares to the ones in your account that have been borrowed against or pledged (without retaining in your possession and control for delivery a like amount of similar securities, commodities, or other property).

All in all, that's a pretty big license that has been granted to Morgan Stanley by the account holder!

Unless you're a lawyer, it is possible to look at the above clause and, after putting precise definitions on the terms used, still not be absolutely sure just what it all means! Why can't they nail down precise terms in plain English? Maybe it has something to do with the fact that not many people would sign the form if its meaning was spelled out the way we have….

Merrill Lynch – hypothecation of cash accounts.

In the excerpt below, Merrill Lynch claim the right to hypothecate cash accounts.

'All of your securities and other property in any account – margin or cash – in which you have an interest, or which at any time are in your possession or under your control, shall be subject to a lien for the discharge of any and all indebtedness or any other obligations you may have to Merrill Lynch.
You agree that Merrill Lynch holds all of your securities and other property as security for the payment of any such obligations or indebtedness to Merrill Lynch in any account in which you have an interest. Merrill Lynch, subject to applicable laws, may at any time and without giving you prior notice, use and/or transfer any or all securities and other property in any account in which you have an interest, without regard to Merrill Lynch having made any advances in connection with such securities and other property and without regard to the number of accounts you may have with Merrill Lynch. In enforcing the lien, Merrill Lynch, at its sole discretion, may determine which securities and other property are to be sold or which contracts are to be closed.'
http://www.mldirect.ml.com/publish/public/agreement.asp?filename=public_client_relationship_agree.txt See section 3: LIENS

(We cannot figure out what the '&151' means that appears twice on the first line.)

However, in the statement, Merrill Lynch claims the following:

* the right to use any or all of the assets in your account,
* the right to transfer any or all of the assets in your account
* exemption from having to make any advances to you in connection with your securities when they use or transfer them.
* no obligation to tell you when they use/transfer your assets.
* the right to apply these conditions to all types of account, not just margin accounts.

It also seems that TD Ameritrade take this right because the item 'Loan of Securities' (see above, A10) comes under Brokerage Services in their documentation and not under the specific heading relating to margin accounts.

Schwab's conflicting statements: Your money's safe – actually, no it's not!

Throughout our investigation we have consistently bumped into the problem of ambiguity. Many times we have been unable to figure out what was actually being said by the words that were used in statements. Even after hours spent breaking down meanings and making comparisons, we were often unable to establish clear meaning.

Further, we have sometimes encountered what appear to be openly conflicting statements made by the same company or organization. For example, consider the following Schwab statement taken from their promotional document entitled, 'How Your Assets Are Protected at Schwab'.

This is the second paragraph, complete, including the title:

'Your Assets Are Yours'.

'Customer securities – such as stocks and bonds that are fully paid for or excess margin securities – are segregated from broker-dealer securities in compliance with the SEC's Customer Protection Rule. This is a legal requirement for all broker-dealers. In the unlikely event of insolvency of a broker-dealer, these segregated assets are not available to general creditors and are protected against creditors claims. There are reporting and auditing requirements in place by government regulators to help ensure all broker-dealers comply with this rule.'

If I read that, I would confidently conclude that any securities I held at Schwab would be safe if they went into liquidation! The statement appears to be watertight.

But just to be absolutely sure, let's do a little more research and check out exactly what they are making promises for.

The promise relates to 'customer securities, so here's the full definition of 'customer securities' taken from SEC rules:

'Securities received by or on behalf of a broker or dealer for the account of any customer and securities carried long by a broker or dealer for the account of any customer; and Securities sold to, or bought for, a customer by a broker or dealer.'

http://www.law.uc.edu/CCL/34ActRls/rule15c3-3.html

Does that look like any and all the securities I have with Schwab? It does to us.

And it goes on to say that customer securities are 'segregated' and 'protected against creditors' claims'. That's all absolutely clear – we cannot see how it can mean anything else – all my assets are protected against creditors' claims.

Now consider the following apparently contradictory statement made in Schwab's account application form in relation to margin accounts:

'I understand that when I buy securities on margin or enter into short sales or short options….I am borrowing money from Schwab for part of the transaction(s). All securities and other assets in my Schwab Account(s) are pledged as collateral to secure this loan.'

The section goes on to say:

'All securities and other assets now or hereafter held in this account may be pledged, repledged, or otherwise used as collateral, separately or together with securities of other customers, for the amount I owe Charles Schwab & Co., Inc., or for a larger amount.'
Schwab One account application form, page 10 of 11 under Accounts with Margin Features.

If you hold securities in a margin account, Schwab claims the right to pledge or collateralize everything you have in all of your Schwab accounts regardless of the amount you have borrowed from them.

Now, if Schwab pledges your securities, will those securities be liable to creditors' claims? Absolutely! Yet, in the first statement, they appear to say your assets will not be liable to creditors' claims!

When we look at this, we have to ask ourselves, 'Is this a genuine mistake, or is the first statement deliberately misleading?' We are still not sure, but one would imagine that, with 8,800,000 client accounts and deposits of 1.2 trillion dollars, they could be a little clearer about it!

At best, it's all extremely vague and imprecise. For example, how many casual readers considering investing with Schwab would have any clue what 'excess margin securities' are? We searched out the meaning of 'excess margin securities' and it means 'the securities in a margin account that are in excess of 140% of the account's debit balance'. How many people know that!?

(In fact, it seems that this definition alone clearly demonstrates that at least some of a customer's assets are not 'protected from creditors' claims' – only the margin securities that are in excess of 140% of the margin balance are.)

It may well be that the first statement is absolutely correct – it's just that it no longer applies once you grant rehypothecation rights!

Deloitte: Brokers don't obey the rules

We looked up the SEC's Customer Protection Rule that is cited in Schwab's statement above. It is SEC rule 15c3-3, and we found that there are at least three exemptions to the rule that are available to brokers! (We have not examined these in detail yet.)

Further, in a report on the matter published by Deloitte, they say,

'Unfortunately, some firms may not be completely and consistently compliant with the provisions of SEC Rule 15c3-3. A lack of broker-dealer regulatory awareness and industry expertise tends to be a frequent theme for firms that are not in compliance.'
us_fsi_sec_reg_update_Mar2005.pdf

Did you get that? Is Deloitte saying that some brokers are breaking the rules established by the SEC to protect customers? [yes] Look again that that last sentence. Are they saying some broker-dealers are not aware of the rules, and that they lack expertise to do their job – including complying with SEC rules? It certainly seems so!

SIPC 'acknowledge' that some broker-dealers may not be obeying the rules.

In our e mail correspondence with SIPC, they make a statement tantamount to an open admission of the same thing. They say:

'Today the majority of securities held by broker-dealers for customers are held in "street name." Street name or book entry securities are not registered in customer name. Street name means that it is registered to the broker so that it can be quickly sold, if necessary, but the broker's records reflect that the investor is the true owner. While fully paid for securities are supposed to be segregated by the failed firm, and thus should be held by the firm even in the event of a financial failure, that requirement may be breached. In other words, it is not outside the realm of possibility that fully paid for securities could be stolen or misappropriated by an agent of the failed firm. The SIPC member broker-dealer becomes the subject of a liquidation proceeding under the Securities Investor Protection Act. It is SIPC's function to return securities to you that were in your account on the filing date of a liquidation proceeding regardless of the reason the securities are missing.'

The wording is suggestive of malpractice: 'While fully paid for securities are supposed to be segregated…'
If a firm failed to segregate fully paid for securities, (i.e. broke SEC rules), would SIPC call that 'misappropriation' or 'stealing'? It appears so.


(As an aside, we couldn't help but wonder if, in the last sentence, SIPC is exempting itself from liability in such a scenario.)

Conclusion.

It would be a shocking indictment to conclude that this is an industry that is incapable of communicating simple, clear terms to its customers over the way it handles trillions of dollars of their money while, at the same time, many member firms are blatantly breaking the rules regarding the safety of that money!

Any used car dealer caught doing business like that would probably be thrown in jail.

PART B. SOME CONSEQUENCES OF REHYPOTHECATION



Example of how broker failure exposes rehypothecated assets to loss.

'When a client allows Lehman to rehypothecate its assets, the client is giving Lehman permission to use its assets (i.e. the investment account) as collateral in a loan made to Lehman. The administrator has reviewed the rehypothecation agreements and determined that the clients who agreed to this arrangement are general creditors not depositors.'
Source: James Brender, Director, Standard and Poor's in relation to Lehman failure. http://docs.google.com/Doc?id=dznpmsr_445hsxbd8f7

Procedure for rehypothecated assets in a brokerage firm liquidation.

PricewaterhouseCooper (UK administrator for Lehman) answers a question:

Q. If my assets have been rehypothecated, will they be returned?
A. Client positions will be reviewed on a case-by-case basis to determine the extent, if any, of rehypothecation of their assets. Title to securities transfers when assets are rehypothecated in accordance with Prime Brokerage agreements and therefore these assets become part of the estate. If assets have been rehypothecated, these will not be available for return to you. The extent to which your assets could be rehypothecated is set out in your agreements with LBIE.
http://www.pwc.co.uk/eng/issues/lehman_faq_1008.html



The final slap: Lending your stock can disqualify you from SIPC's protection.

Brokers are quick to point out the guarantee provided for your assets by SIPC, the Securities Investor Protection Corporation. What they fail to mention is that, by lending out your securities for their own gain, they effectively invalidate SIPC's ability to guarantee your money against loss.

In our communication with FINRA, they had this to say:

'SIPC Protection. Borrowed stock is not always covered by SIPC. This means that if the institution that borrowed your stock fails, you don't have any SIPC protection for the borrowed stock. You will be treated as a general creditor of the institution.'
Source: John M. Gannon, Senior Vice President, Investor Education, FINRA.
http://docs.google.com/Doc?id=dznpmsr_438nc54q6rk

It seems that brokers can put your securities into the hands of anyone they choose, and if that party goes bust, you stand to lose your assets along with the industry's guarantee for them. So, it might not be just a question of 'how sound is my broker?', because your wealth might be in the hands of someone you've never heard of. Now it's a case of any Tom, Dick or Harry that goes bust might jeopardize your wealth!

Of course, if that happened and our system was not falling apart at the time, the brokerage firm would likely pay the customer back to avoid opening a can of worms and to avoid the bad publicity. Nevertheless, the fact remains – you are not covered.

Further reading.

State Street flowchart illustrating lending of securities
Trans_Chart_Final.pdf

Lending securities and short selling: slammed in press article.

Market_CTaylor_FinancialNews_Oct_2008.pdf

 

Signs of the system collapsing

 

Zerohedge reports that suspending money market redemptions is now legal.

 

Suspending Money Market Redemptions Is Now Legal; SEC Approves New Money Market Regulation In 4-1 Vote
Submitted by Tyler Durden on 01/27/2010 11:31 -0500


Zero Hedge discussed a month ago the disastrous prospects of what would happen if the new proposal contemplated by the SEC, which would allow the suspension of redemptions from Money Market Funds, were to pass. Well, in a nearly unanimous vote, Money Market Funds now have the ability to suspend redemptions, courtesy of the SEC's just passed 4-1 vote. This explains the negative rate on bills: at this point, should there be another meltdown, money market investors will not, repeat not, be able to withdraw their money purely on the whim of Mary Schapiro. As the SEC noted:
"We understand that suspending redemptions may impose hardships on investors who rely on their ability to redeem shares." Too bad investors' hardships considerations ended up being completely irrelevant.

As a reminder, here is the gist of the proposal as pertains to redemption suspension:

Proposed rule 22e–3(a) would permit a money market fund to suspend redemptions if: (i) The fund's current price per share, calculated pursuant to rule 2a–7(c), is less than the fund's stable net asset value per share; (ii) its board of directors, including a majority of directors who are not interested persons, approves the liquidation of the fund; and (iii) the fund, prior to suspending redemptions, notifies the Commission of its decision to liquidate and suspend redemptions, by electronic mail directed to the attention of our Director of the Division of Investment Management or the Director's designee. These proposed conditions are intended to ensure that any suspension of redemptions will be consistent with the underlying policies of section 22(e). We understand that suspending redemptions may impose hardships on investors who rely on their ability to redeem shares. Accordingly, our proposal is limited to permitting suspension of this statutory protection only in extraordinary circumstances. Thus, the proposed conditions, which are similar to those of the temporary rule, are designed to limit the availability of the rule to circumstances that present a significant risk of a run on the fund.

 

Zerohedge reports that it's Going To Implode.

 

It's Going To Implode: Buy Physical Gold - NOW
Submitted by Gordon_Gekko on 03/11/2010 07:29 -0500
For previous articles by the author go to: Gordon Gekko's Blog


Citibank recently issued this notice to its checking account (remember the type of account where you thought you could withdraw your money whenever you wanted? Well, not anymore) customers (via Market Ticker):

Withdrawal Notice:

We reserve the right to require seven (7) days advance notice before permitting a withdrawal from all checking, savings and money market accounts. We currently do not exercise this right and have not exercised it in the past.





Hmm…let me see. Why would a bank need to impose withdrawal restrictions? Has this kind of a thing happened before somewhere? Could it be because of the danger of a bank run/capital flight from the United States? Why would Citibank fear bank runs? Why would money flee the US banking system/US? Could it be because the entire US banking system and the US Government is INSOLVENT and people - fearing a collapse in the dollar's value (in terms of real goods i.e. for all you Prechterites out there) - rush to withdraw money convert it into real goods such as precious metals? You tell me. Also, could they maybe increase this notice period from seven to whatever the hell they want whenever they want? What will you do then? Even if you don't buy Gold with it, withdrawing your cash from America's insolvent banks is a very wise strategy at this point.



The cracks are already appearing in the Bond market. Foreigners are increasingly fleeing the Treasury auctions. The only thing keeping them going is manufactured "deflation" fears from time-to-time. A recent 30 year auction (10th February, 2010 to be precise) practically failed. This is what Mr. Denninger had to say about it:

Bad. Actually, let's go worse than bad and call it what it is - by any definition this is just one step off from "Failed."

The more-worrying factor here is that we've got this "mystery" direct buyers out here again taking nearly 25% of the offered amount (who is bidding for that undisclosed?) and another 11% taken down by The Fed for the SOMA account.

Yet even with this Treasury had to pay up to get it to go and the bid-to-cover was anemic at best.

Given the Primary Dealer system we have in this country, any BTC under 2.0
is an effective fail. To get an auction that behaves in this sort of fashion, complete with mystery direct bidders and heavy SOMA (Fed) participation, yet Treasury has to pay up in the form of a significantly higher coupon is not a good sign at all.

And this is what happened on 23rd February, 2010 for a 4-week $37 billion Treasury Bill auction (Per Graham Summers):

There are times in life when one witnesses something so outside the scope of normal experience, that at first you don't see it.

Captain Cook's diaries tell us that upon first seeing his ships offshore in Australia, the aborigines expressed "neither surprise nor concern." Cook notes that it was not until he and his men approached the shore in smaller, more familiar vessels that the villagers reacted, arming themselves as "the sight of men in small boats was comprehensible to them: it meant invasion."

Well, I had a similar experience during yesterday's bond auction.

Roughly, 27% of the auction took place at the highest rate. This means nearly one third of the demand from competitive bidders (those who care about yield) came at the HIGHEST yield that was accepted. In plain terms, this alone tells you that investors want higher yields from Treasuries since nearly a full third of the debt issuance took place at the highest REQUIRED yield.

Of the competitive bids (meaning those bids coming from folks who care about yield), roughly 70% went to Primary Dealers (investors who HAVE to buy the debt and who usually turn around and try to sell it afterwards). To put this number into perspective here is the percentage of competitive purchases made by Primary Dealers in the last four 4-week Treasury issuances:




...yesterday's auction featured MORE buys from Primary Dealers than almost any of those occurring in 2010. Remember, Primary Dealers HAVE to buy Treasuries. So to see them buying a high percentage of Treasuries at debt auctions means that few investors who can pick and choose what to buy are actually looking to buy US debt.

Of the remaining competitive buys (about $8.86 billion), only 32% came from Direct Bidders or those who bought debt directly from the Treasury: orders that can easily be tracked. The other 68% ($5.9 billion) came from Indirect Bidders: folks who we cannot track.

Even more bizarre, only $5.9 billion in Indirect Bidder competitive buys were ACTUALLY OFFERED. So we had a 100% acceptance rate for Indirect Bidder competitive buys.

Let's put this in perspective:




This means that the Treasury took up EVERY single cent of competitive bids coming from indirect buyers. Remember, indirect buyers are usually assumed to be foreign governments (even the Treasury website admits this).

If this was the case yesterday, then foreign governments barely bought much of anything in yesterday's auction (only 19% of total debt issued). Moreover, it implies that Primary Dealers (those having to buy) had to gorge on the auction to make up for the fact that few if any foreign governments are interested in buying our debt anymore (including even short-term debt).

So basically the demand from the indirects (i.e. foreigners) for US Debt is drying up and the Treasury is taking all of whatever miniscule amounts they are offering. As if that was not enough, we had another similar auction on 9th Match, 2010 (via zerohedge):

Two weeks after the indirect hit ratio in the 4 week auction came at a record 100%, today it was once again at almost at the all time possible high, with Indirect Bids of just $6.744 billion taking down $6.683 billion, resulting in a 99.1% hit ratio. The chart of the recent Indirect hit ratio in recent 4 week bill auctions is attached:






What's more, the yield doubled from two weeks ago. What we are witnessing here, in my opinion, is the beginning moves of a complete and total repudiation of the US Bond market, and indeed, all dollar denominated paper financial assets.

Jim Sinclair recently had two gentlemen from Poland and Russia speak up at his Toronto meeting. This is what they had to say (in Jim's words):

Dear Extended Family,

I believe the most important event at our Toronto CIGA meeting was the testimony of two attendees.

Two men spoke independently. One is a Canadian resident from Russia and the other from Poland.

Both said the same thing, "All the signs that preceded our inflation of more than 100% per year are here now in the West."

What more do you need to know?


Regards,

Jim

Any unbiased observer who knows how to put two and two together will be able to tell that something very fishy is going on. The urgency with which trillions in debt is being shoved down the market's throat at the worst possible time for the US Economy has the distinct smell of the government trying to extract every last bit of money from those stupid enough to buy the bonds before it all blows up. Rest assured, a huge chunk of this money is being funneled to the insiders who are most likely covertly using it up to buy real assets for themselves while keeping the crowds distracted with the stock market circus.

The bond market is the backbone of the US Ponzi Finance system. When it goes – and the day is not far in my opinion - the whole enchilada will come crashing down. Any type of financial asset that has a counterparty – which is pretty much all the paper assets in the world – bonds, futures, any and all derivatives and yes, even the paper currency – will crash. What will they crash against? Yes, that's right – Gold
[and real producing assets like farmland]. All the world's capital – trillions, perhaps quadrillions of it - will come rushing into the very tiny physical (NOT paper) Gold market. Remember, the world's real physical capital – real assets such as land, oil-refineries, mines, infrastructure, etc. will not vanish, only it will be re-priced in terms of Gold and its ownership transferred to those who hold it. Since everything stays on this planet, it is a zero-sum game and the winner will be Gold. In other words, an ounce of physical Gold will command a lot more in real purchasing power than it does today. Just like a national currency is a claim on goods and assets within that country, Gold will be a claim on global goods and assets worldwide.

 

Federal Reserve's balance sheet reaching breaking point

The Fed is running out of room on its balance sheet, which leaves it caught between a rock and a hard place. the only way it can now continue purchasing US debt over the next year is by significantly increasing bank reserve balances (printing a lot of money).


 

Look at the dollars in the financial system in the graph below. As the growth of bank reserve balances accelerates, it will undermine what little confidence is left in the dollar, sending it plummeting.




customers' cash and securities are used by their brokers
as an everyday occurrence customers' fully paid for securities somehow seem to get accidently (and unlawfully) pledged

Conclusion


In
*****2010 Food Crisis for Dummies*****, I outlined the crisis which will bring the US financial system down. Here, with articles above, I am trying to convey how bad the damage will be.


The Real Danger: losing of control over investments

The real danger in the US financial system right now is that investors will experience a loss of control over their investments. Money Market Funds and even banks now have the ability to suspend redemptions, and the moment that true panic begins (triggered by out of control food inflation) investors will find access to their assets (even checking accounts) to drastically limited.

The same loss of control will occur at brokerages. Lehman clients have already experience the joy of losing control of their assets from more than a year.

It will be during the period where investors can no longer access or sell their investments that those investments will lose most, if not all, their value.

The Fed will the engine of inflation

Faced with the collapse of the government securities market, the Treasury's only choice to keep the government running will be to instruct the Fed to monetize the national debt, as was done during World War II.

The Minneapolis Fed explains
Fed Policy during WWII.

 

World War II saw the end of most of the gold inflows, but financing the substantial deficits the government assumed to fight the war made the government securities market an even more critical factor in Treasury operations. With the full approval of Federal Reserve officials, the Treasury mandated a wartime pattern of yield rates and prices on three types of marketable government securities: 3/8 of 1 percent for 90-day Treasury bills, 7/8 of 1 percent for one-year Treasury certificates and 2 1/2 percent for the longest-term marketable bonds. This configuration was known as "the peg."


Maintaining the pattern of Treasury-dictated interest rates guaranteed a subsequent inflation. As the Treasury sold its securities to finance the government's spending excesses, security prices tended to fall and their yield rates to rise. To fulfill its commitment to maintain security prices and keep market rates low, the FOMC had to buy securities in the open market and create the money to pay for them. More money in circulation put upward pressure on prices. These dynamics further aggravated the pressures on the government securities market. As long as the Treasury prescribed monetary policy, the Fed was the engine of inflation infamously portrayed in economists' treatises.

 

The graph below shows how much the Federal Reserve's balance sheet expanded as a result of WWII's Treasury-dictated interest rates (fed printed money to buy these assets).




Inflation increase the budget deficit

Inflation will forced to increase spending, and the only way to finance this spending will be more money creation. CNN explains
why the U.S. can't inflate its way out of debt.

 

It's true that inflation could reduce a small portion of U.S. debt.

But the mother lode of the country's looming debt burden would remain and the negative effects of inflation could [will] create a whole new set of problems.

For starters, a lot of government spending is tied to inflation. So when inflation rises, so do government obligations, said Donald Marron, a former acting director of the Congressional Budget Office (CBO), in testimony before the Senate Budget Committee.


"[W]e have an enormous number of spending programs, Social Security being the most obvious, that are indexed. If inflation goes up, there's a one-for-one increase in our spending. And that's also true in many of the payment rates in Medicare and other programs," he said.


Inflation would also make future U.S. debt more expensive, because inflation tends to push up interest rates. And the Treasury will have to refinance $5 trillion worth of short-term debt between now and 2015. [most of which the Fed will need to monitize]

"[The debt's] value could go down for a couple of years because of surprise inflation. But then ... the market's going to charge you a premium interest rate and say 'you fooled us once but this time we're going to charge you a much higher rate on your three-year bonds,'" Marron said.

The Treasury is increasing the average term of its debt issuance so it can lock in rates for a longer time and reduce the risk of a sudden spike in borrowing costs.
But moving that average higher won't happen overnight. And, in any case, short-term debt will always be part of the mix.

Another potential concern: Treasury inflation-protected securities (TIPS), which have maturities of 5, 10 and 20 years. They make up less than 10% of U.S. debt outstanding currently, but the Government Accountability Office has recommended Treasury offer more TIPS as part of its strategy to lengthen the average maturity on U.S. debt.

The higher inflation goes, of course, the more the Treasury will owe on its TIPS.

Just last week, the CBO noted that interest paid on U.S. debt had risen 39% during the first five months of this fiscal year relative to the same period a year ago. "That increase is largely a result of adjustments for inflation to indexed securities, which were negative early last year," according to the agency's monthly budget review.

What's more, the knock-on effects of inflation are not pretty. A recent report from the IMF outlined some of them: reduced economic growth, increased social and political stress and added strain on the poor -- whose incomes aren't likely [won't] to keep pace with the increase in food prices and other basics. That, in turn, could [will] increase pressure on the government to [try to] provide aid -- aid which would need to keep pace with inflation.

 

With the government financing an exponentially rising budget deficit (increased spending due to inflation) through the printing press, it will be a matter of months for the dollar to lose all value.

US Economic Disintegration

70% of the US economy is consumer spending, with at least 20% of it directly tied to commercial retail real estate. Less than 10% of our economy is related to the production of basic goods and services. This style of economy cannot handle a pull back in consumer spending.

As the dollar loses most of its value, America's savings will be wiped out. The US service economy will disintegrate as consumer spending in real terms (ie: gold or other stable currencies) drops like a rock, bringing unemployment to levels exceeding the great depression. Public health services/programs will be cut back, as individuals will have no savings/credit/income to pay for medical care.

Value of most investments will be wiped out

The US debt markets will freeze again, this time permanently. There will be no buyers except at the most drastic of firesale prices, and inflation will wipe away value before credit markets have any chance at recovery.

The panic in 2010 will see the majority of derivatives end up worthless. Since global derivatives markets operate on the assumption of the continued stable value of the dollar and short term US debt, Using derivatives to bet against the dollar is NOT a good idea. The panic in 2010 will see the majority of derivatives end up worthless.

The dollar's collapse will rob US consumers of all purchasing power, and any investment depend on US consumption will lose most of its value.


The DTC nightmare

With the dollar collapsing, the stocks of companies that have real value (mining companies, manufacturing companies, etc) will start rising exponentially. This will trigger near universal default on all loans of those securities (financial institutions are insolvent and doesn't have the cash for "mark-to-market" adjustments of these security loans). This means the ownership question will be critical: the winners will get ownership of stocks with real worth and the losers will get virtually nothing.

Reconciling who owns what shares in the DTC is going to be an absolute nightmare, far worse than the paperwork crisis, and it will take years to clear up. This means that even the eventual "winners" (those who end up with ownership of shares) will in most cases have to wait years to get their stocks.

As the first article put it: "when a brokerage firm fails, all who have supplied it with financing, including its customers, stand to lose."


Escaping the US financial system

To preserve their wealth, investors need to get out of the US financial system. This means

1) buying real assets (gold, land, etc).
2) buying assets in countries relatively insulated from the imminent US collapse (places like China, Russia, etc). The more deeply, a country's connection to the US financial system the more damage that country will experience (think of those German investors buying those "phantom" stocks for example).

Again, if you wait to long, you will find yourself locked into your money market/checking/brokerage accounts, and watch helplessly as the real value of your assets crashes with the dollar.


Personally, I am moving to Russia and
launching a fund to invest in Russian agriculture.

 

Eric de Carbonnel

Market Skeptics

Support Market Skeptics with a donation  : please click here

 

 

 

 

 

 

 

Tweet
Rate :Average note :0 (0 vote)View Top rated
Previous article by
Eric de Carbonnel
All articles by
Eric de Carbonnel
Next article by
Eric de Carbonnel
Receive by mail the latest articles by this author  
Latest comment posted for this article
Be the first to comment
Add your comment
TOP ARTICLES
Editor's picks
RSS feed24hGold Mobile
Gold Data CenterGold & Silver Converter
Gold coins on eBaySilver coins on eBay
Technical AnalysisFundamental Analysis
Most recent articles by Eric de Carbonnel
11/20/2013
2/13/2012
12/20/2011
11/30/2011
11/23/2011
All Articles
Comment this article
You must be logged in to comment an article8000 characters max.
 
Sign in
User : Password : Login
Sign In Forgot password?
 
Receive 24hGold's Daily Market Briefing in your inbox. Go here to subscribe or unsubscribe.
Disclaimer