Finra had authority to examine Madoff’s firm

The Investment Adviser Association is concerned about the impression that readers may have received from the article that appeared on investmentnews.com Jan. 5, "Finra needs more clout, reps at Madoff hearing say."

The Investment Adviser Association is concerned about the impression that readers may have received from the article that appeared on investmentnews.com Jan. 5, “Finra needs more clout, reps at Madoff hearing say.”

Based on all reports to date, Bernard Madoff operated a Ponzi scheme through his New York broker-dealer firm, Bernard L. Madoff Investment Securities LLC, for decades.

Until September 2006, he was registered solely as a broker-dealer.

Throughout this period, both the Securities and Exchange Commission and the Financial Industry Regulatory Authority Inc. of New York and Washington had the authority to examine every single financial record related to every single account held at the firm, including all discretionary and non-discretionary brokerage accounts.

Even after the firm became dually registered as an investment adviser in September 2006, all books and records related to all client accounts held at the firm — including discretionary brokerage accounts deemed to be advisory accounts — remained subject to Finra and SEC inspection.

Any suggestion that Finra didn’t have the authority to examine Mr. Madoff’s firm, including his advisory “affiliate,” is simply incorrect.

At all times, there was a single entity involved in the fraud, even after the firm became dually registered.

It appears that Finra may be attempting to use the Madoff scandal to argue for expanding its jurisdiction to investment advisers (for the record, the IAA has consistently opposed the idea of establishing Finra as the self-regulatory organization for the advisory profession).

Instead, responsible parties should be asking why Finra failed to uncover Mr. Madoff’s massive fraud at a firm over which it had clear authority.

Neil A. Simon
Vice president, government relations
Investment Adviser Association
Washington

Uptick rule was effective, should be restored

I have been in the investment business for more than 50 years.

I read the article “Academics call short-selling ban ineffective,” which appeared in the Jan. 5 issue.

In my judgment, the ban is totally ineffective.

I strongly believe that we should restore the uptick rule, which was dismissed several years ago.

It was very effective when it was in place.

Why don’t you start a campaign to restore that rule?

Carl. H. Tiedemann
Chairman
Tiedemann Investment Group
New York

Pershing, NFS might end up with independent brokers

I read with interest the article “Clearing firms face client defections,” which appeared in the Jan. 12 issue.

I wonder how these independent clearing firms might benefit as larger producers from large wirehouses shift to independent platforms for future business.

I expect many brokers to go independent.

Now that Citigroup Inc. and Morgan Stanley, both of New York, are joining forces, many of those brokers might also go on their own and end up with clearing firms related to Pershing LLC of Jersey City, N.J., or National Financial Services LLC of Boston.

Bradley R. Teets
President
KDT Investments
Punta Gorda, Fla.

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