Market Timing

HSBC Brokerage Ordered by NASD to Pay $250K to Settle Best Execution Charges

Published on: June 11, 2007 | by Shepherd Smith Edwards & Kantas, LLP

HSBC Brokerage, a New York firm which allegedly directed all government securities orders to an affiliated broker-dealer, agreed to pay $250,000 to settle NASD charges it failed to have adequate systems in place to ensure the best execution for its clients.

Allegedly the firm routed orders to affiliate, HSBC Securities (HSI), without taking adequate steps to ensure that its customers could not get better prices through other sources. The NASD said in a news release that “HBI’s inability to provide documentary evidence of its supervisory review for best execution of trades inhibited NASD’s ability to review transactions for best execution.” HBI settled this action without admitting or denying the charges.

Prior to a merger of the two related firms, HBI’s retail brokerage business was primarily located in HSBC bank branches, the NASD said. To support the retail business, HBI operated a trading desk to handle orders placed by brokers.

Is the Stock Market Boom Really a Bust?

Published on: May 8, 2007 | by Shepherd Smith Edwards & Kantas, LLP

Stock market cheerleaders these days sound as inebriated as New Year’s Eve drunks on Y2K. Too bad their hangovers have apparently affected their memories since 1/01/2000.

Since that date, over 88 months or more than two-thirds of a decade have passed by, yet the Dow Jones Average Industrial Average and the Standard and Poor’s index of 500 stocks have barely moved an inch. Imagine an S& P stock unit, consisting of fractional shares of each stock in the index, costing in dollars the value of the S& P index. On the first day of 2000, that unit would have been worth $1,469.25. At the end of April, 2007 it was worth $1,482.37.

Measured by these widely recognized yardsticks, if your retirement portfolio was invested only into blue-chip stocks and if you did not spend a dime, the portfolio you held at the birth of the Millennium has finally recovered its losses. After suffering the slings and arrows of anxiety and despair, you finally broke even. But is even this any cause for celebration?

Johnson Capital Management Inc. and Samaritan Asset Management Services Inc. Are Sued For Alleged Illegal Market Timing Scheme

Published on: December 15, 2006 | by Shepherd Smith Edwards & Kantas, LLP

The New York Attorney General’s Office has announced that Attorney General Eliot Spitzer, also now Governor-elect of New York, is filing a lawsuit against Samaritan Asset Management Services Inc., Johnson Capital Management Inc., and the principals of both companies for allegedly participating in a fraudulent mutual fund market timing scheme. The principals are Edward T. Owens and Michael A. Johnson, respectively. According to the lawsuit, all parties knew they were being deceptive by “flying under the radar” so they could avoid the monitoring systems geared toward detecting market timing in regard to mutual funds. The lawsuit is looking to enjoin the defendants from engaging in such deceptive practices and wants there to be a restitution of money for their fraudulent actions.

Johnson Capital, Samaritan, and their principals are believed to have been “piggybacking” their trades onto investment accounts of retirement plans that were customers of trust company and national banking association Security Trust Company (STC) and of varying the amount of each trade so the mutual funds wouldn’t notice.

In an October 22, 2001 email sent to Johnson Capital by an STC employee: