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Finra lambasts trading fraud, laments lack of greater authority

There are various ways to construe the fundamentals relevant to recent news noting a stated concern of the federal Financial Industry Regulatory Authority.

Finra recently cited what a Reuters article terms a "disruptive trading activity," with the agency pronouncing that it equated to a manipulative market practice having the potential to harm legions of investors across the country in a material way.

In one sense, the Reuters piece can be seen primarily in terms of a warning that bad actors in the securities industry are simply doing what they always do, namely, engaging in new and creative ways to defraud the public. We have noted in prior select posts broker activities such as overconcentration, inappropriate private placement investments, unsuitable margin trading, churning and other flat-out breaches of fiduciary duty.

The Reuters article notes that Finra now has a new concern embodied in the practices of so-called "spoofing" and "layering." Those unlawful activities revolve around fake securities orders being placed and then canceled, with traders benefiting from the temporary window of heightened public interest engendered by spiked interest by buying or selling at better prices.

Although Finra is understandably up in arms over such practices, the agency is signaling that it does not wield enough power presently to respond adequately to such fraud. Regulatory principals say they are stymied by responsive processes and procedures that take too long and that provide only stopgap solutions.

What is needed, the agency says, is an expedited process pursuant to which regulators can issue permanent cease-and-desist orders against underhanded traders.

Unscrupulous brokers and other money managers have always existed, of course, and activities like spoofing and layering offer up evidence that they are always developing new ruses and scamming techniques to fleece the public.

Questions or concerns regarding any fraud-related investment matter can be directed to a proven securities attorney who advocates exclusively on behalf of investors seeking meaningful remedies against the wrongdoing of bad-faith brokers and financial advisers.

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