PrefBlog

Different crimes for different times!

Sergio Natera and Anna McElaney are scheduled to be sentenced in Hartford’s federal court in August after pleading guilty to fraud. Their crime involved persuading lenders to approve the sale of homes for less than the balance owed –known as a short sale — without disclosing that there were better offers. They then flipped the houses for a profit.
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A prevalent scam involves a practice called “flopping,” [special inspector general for the Troubled Asset Relief Program Neil] Barofsky said. In that scheme, investors or home buyers hire brokers to assess a home for less than its market value and convince banks to accept a sale at that level. The buyer conceals from the lender that he has lined up a higher offer and then quickly resells the property for a profit, as in the Connecticut case.
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In the Connecticut case, Regions Bank in April 2008 agreed to a short sale of a Bridgeport house for $102,375, unaware that Natera and McElaney had a bidder willing to pay $132,500, according to the plea agreements. Eight weeks after the bank sold for a loss, the pair resold the house for a $30,125 gain.

The SEC wants to make competition illegal:

U.S. Securities and Exchange Commission Chairman Mary Schapiro said the agency may regulate the speed of stock orders in response to a surge in electronic trading and the May 6 plunge that wiped out $862 billion of market value in 20 minutes.

The SEC needs “to explore whether bids and orders should be regulated on speed so there is less incentive to engage in this microsecond arms race that might undermine long-term investors and the market’s capital-formation function,” she said at a conference in Montreal. “The markets have to serve that function for companies to raise money, create jobs and allow the economy to grow.”

The basic trouble is that old,school, comfortable, well connected, incompetent portfolio managers are having their lunch eaten by High Frequency Traders – which are often brokerage firms, hedge funds, and individuals with, say $10-million to play with. Since they can’t compete on results, they’ll compete on regulation.

The pace of the rally in the Canadian preferred share market continued at a slower pace today, with PerpetualDiscounts up 18bp and FixedResets up 12bp.

This entry was posted on Thursday, June 10th, 2010 at 6:48 pm and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.