Concluding, from the e-mail from attorney Al Hodges:
=====
High-yield investment programs were/are able to collect large amounts of money for the criminalist operators because initial payoffs to first and second round participants (financed from the stolen money in the case of the giga-scams presided over inter alia by the aforementioned master crooks) gave the scams momentum by spreading news of the sizeable initial payments by word of mouth – a situation that prevails as long as new participants can be found and/or old participants are foolish enough to leave their money in the schemes in the hope of gaining high rolled-up interest on their initial investments. Participants are usually attracted by some form of an appeal to emotion or faith that the program will help them to achieve rapid financial freedom. High-Yield Investment Programs may also mirror pyramid-selling schemes by offering current investors incentive commissions, for instance, 9% of investment by the participant on top of promised accruals, to recruit new investors.
Notorious documented High-Yield Investment Programs include:
(1): OSGold, founded as an e-gold ‘imitation’ in 2001 by David Reed, It folded in 2002. According to a lawsuit filed in US District Court in 2005, operators of OSGold may have made off with $230 million.
(2): The second largest documented High-Yield Investment Program was PIPS (People In Profit System), or Pure Investors. Started by Bryan Marsden in 2004, this scheme spanned more than 20 countries. PIPS was investigated by Bank Negara Malaysia in 2005, resulting in Marsden and his wife being charged in a Malaysian Court with some 97 counts of money laundering more than 77 Malaysian ringgit, equivalent to $20 million [New Straits Times, 11th October 2006]. Yet even after these charges were brought, many of Marsden’s followers continued to support him and to believe that they would be seeing their money in future. A similar rationalisation and denial syndrome can be observed in many other High-Yield Investment Program contexts.
(3): Indicted operators or schemes under investigation:
12DailyPro Autosurf (United States: Securities and Exchange Commission); Ginsystem, Inc. (Singapore: Commercial Affairs Department of Singapore); IT4US (United States); PlexPlay (Norway: HegnarOnline, in Norwegian); Solidinvestment (United States).
The foregoing provides merely a preliminary outline of the background to these scams, concerning which a considerable literature now exists. Promoting or perpetuating Ponzi schemes is a criminal offence punishable by jail terms or fines in most countries. The fact that the High-Yield Investment Program monitoring websites publicise disclaimers to the effect that the sites ‘do not promote the programs advertised’ on their websites, does not absolve the operators from criminal liability.
A disturbing feature of this environment is that a large number of High-Yield Investment Program participants persist in participating in further schemes long after they have already lost money in schemes that have either folded, or in respect of which the operator has disappeared. The fact that most of the publicised schemes are openly labelled scams on the relevant Internet monitor boards, even though their operators are themselves criminally liable, suggests that many participants are well aware of the risks they are running, know that the schemes are fraudulent, but choose to put money in them anyway, like addicted gamblers.
Former officials and members of the US armed forces may have been taken in by indications that the operators were officially connected or even that the scams in which they have participated were legitimate because of such alleged connections, including intelligence backgrounds.
The perpetrators play on the understandable anger felt by those who have been scammed, even though they were originally enticed by the US perpetrators into becoming prospectively felonious participants themselves, a condition which leads psychologically to the state of denial that in turn supposedly provides the perpetrators with the protection that they require.
However the operators, sitting on their stolen funds, may well fear the ultimate outcome, should manipulation of the expectations of the scammed investors cease to remain perversely ‘credible’, or those manipulative counterintelligence Psy-Ops initiatives are closed down.
•Hypothecation:
Originally a pledge of property as collateral for indebtedness without transfer of possession to the party extending the loan. This arrangement is common in the case of mortgages. The borrower retains legal ownership of the property but provides the lender with a lien over the property until the debt is paid off. Rehypothecation occurs when a broker pledges hypothecated client-owned securities in a margin account to secure a bank loan.
The fraudulent finance buried inside the ‘sub-prime’ mortgage nexus of scandals was explained in our report dated 26th December 2007 [www.worldreports.org: Archive]. As described in that report, the ‘homeowner’ has been scammed, either he or she has been coerced into signing several top copies of the same document, enabling the lending bank to claim ownership even though the bank has sold the mortgage on the basis of another top copy, for instance, to one of the co-conspiring Government-Sponsored Enterprises; or because the bank has alienated its ownership of the loan to the GSE in question, or has packaged the mortgage with other loans, as well as with worthless securities underpinned by no real asset, and has sold such packages on to parties (usually abroad) which have not performed due diligence.
In our report of 26th December 2007, we advised ALL US ‘homeowners’ facing foreclosure to let the Court know that the underlying contract has been requested from the bank. In most instances, the bank will be unable to supply it, because it has sold on the mortgage to the GSE, having therefore already passed on the risk. People facing foreclosure who ask for the contract can usually expect to be pleasantly surprised at the outcome of their cases.
•Internal Revenue Service (IRS):
The IRS is part of the US Treasury Department, and was officially created by Act of Congress on 1st July 1962. The IRS is responsible for administering and enforcing the Internal Revenue Code (IRC), as established under US Congressional authority, passed in 1913, to levy taxes on the income of individuals and corporations.
In 1939, the IRC was codified from the separate Internal Revenue laws. The IRS Code was further overhauled in 1954, with substantive new provisions being added concerning depreciation, the double taxation of dividends, research and experimental expenditures, carryback on operating losses, tax on ‘unreasonable’ accumulations of surplus, preferred stock bail-outs, and collapsible corporations and partnerships.
Of the enormous changes to the IRC implemented since 1954, the most important for the context we are dealing with here was the Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982 which, inter alia, required US taxpayers to report all sources of income, wherever it was earned anywhere in the world. It follows that all receipts received by American taxpayers since the passage of this Act which have not been reported to the Internal Revenue Service are taxable, which means that all US taxpayer holdings in offshore accounts that have not been declared for tax are liable for tax and penalties. Main source: Michael C. Cottrell, B.A., M.S., ‘Elite Power & Capital Markets’, thesis submitted in partial fulfillment of the requirements for the Degree of Master of Science, for The Administration of Justice Department, Mercyhurst College, Erie, PA, 13th February 2002; see also: Munn, ‘Encyclopedia of Banking and Finance’, page 589.
•Interlocking Directorates:
These reference commercial banks or savings institutions which have individuals on their Boards of Directors who further serve on the Board or Boards of one or more unaffiliated competitor(s) operating in the same marketplace. The US Financial Institutions Regulatory Act of 1978 prohibits management interlocks by banks operating in the same Metropolitan Statistical Area (MSA). But it exempts smaller banks, and also permits interlocks of up to 49% of a bank’s management officers. Source: Thomas P. Fitch, ‘Dictionary of Banking Terms’, 3rd Edition, Happauge: Barron’s Educational Series, Inc., 1997, c.v. ‘Interlocking Directorates’.
•International Banking Act of 1978:
This legislation essentially places American branches and agencies of foreign banks under the supervision of US bank regulators. The provisions included: authorising the Comptroller of the Currency to license and supervise a foreign bank; authorising Federal bank agencies to examine US offices of any foreign bank; subjecting any foreign bank branch or holding company to the Bank Holding Company Act, just like any US bank holding company; and imposing reserve requirements and Federal deposit insurance coverage for foreign banks to the same extent as the US member banks. Sources: Michael C. Cottrell, B.A., M.S., ‘Elite Power & Capital Markets’, thesis submitted in partial fulfillment of the requirements for the Degree of Master of Science, for The Administration of Justice Department, Mercyhurst College, Erie, PA, 13th February 2002; see: Munn, ‘Encyclopedia of Banking and Finance’, page 563.
•International Banking Act of 1987:
Created a Federal regulatory structure similar to the Federal Reserve to examine the assets and liabilities of foreign banks on-site, and to ensure similar licensing and regulation of non-banking activities of foreign banks. It also required the Federal Reserve to maintain the same competitive equity requirements for foreign banks as for US member banks. Sources: Michael C. Cottrell, B.A., M.S., ‘Elite Power & Capital Markets’, thesis submitted in partial fulfillment of the requirements for the Degree of Master of Science, Administration of Justice Department, Mercyhurst College, Erie, PA, 13th February 2002; Munn, ‘Encyclopedia of Banking and Finance’, page 563.
•Investment Banking:
The sale and distribution of a new offering of securities, carried out by a financial intermediary (an investment banker), who purchases securities from the issuer as principal, and assumes the risk of distributing securities to investors. Source: Thomas P. Fitch, ‘Dictionary of Banking Terms’, the 3rd Edition, Happauge: Barron’s Educational Series, Inc., 1997, c.v. ‘Investment Banking’.
•Investment Company Act of 1940:
This Act requires that all companies which offer securities or investment advice to the public must register with the Securities and Exchange Commission. For instance, any advisory corporation that offers investment advice (not straight reporting, but advice) must register with the SEC. For those who may be interested, this explains why this service does not offer advice and will not respond to the frequent requests for financial investment advice that we routinely receive. Sources: Michael C. Cottrell, B.A., M.S., ‘Elite Power & Capital Markets’, thesis submitted in partial fulfillment of the requirements for the Degree of Master of Science, for The Administration of Justice Department, Mercyhurst College, 13th February 2002; Munn, ‘Encyclopedia of Banking and Finance’, page 589.
•Kakocracy: Rule by the worst elements of society exclusively in their own interests and with cynical and permanent disregard for the interests of anyone else.
•Kleptocracy: The ascendancy of a rapacious, thieving class of co-conspiratorial bandits protected by public office that is bent on maximising the open-ended potential of their office and power for personal enrichment and for the furtherance of clandestine agendas divorced from the interests of the people and the constituencies they are supposed to serve. This term is used in these reports even though kleptomania is strictly defined in the Oxford Senior Dictionary as ‘an uncontrollable tendency to steal things, with no desire to use or profit by them’.
The definition is interesting, because it reveals an element of madness that is clearly inherent in the behaviour of the criminalist snakes identified in these reports. This madness can be observed in the rapacious behaviour, for instance, of the arch-criminalist DVD godfather, George Bush Sr., whose avarice for other people’s money notoriously knows no bounds, despite his age, indicating that he chooses to remain unaware of his own mortality: a characteristic of greed which can only be described as symptomatic of mental derangement.
•Leverage, Financial and Investment:
(1): Financial Leverage: Debt in relation to equity in a firm’s capital structure (such as long-term debt, preferred stock, and shareholders’ equity. Financial leverage is measured by the debt-to-equity ratio: the more long-term debt there is, the greater the financial leverage.
(2): Investment leverage: A means of enhancing return or value without increasing investment: for instance, by buying securities on margin with borrowed money. Extra leverage may be achievable if the leveraged security is convertible into common stock.
(3): Note: Option contracts provide leverage, with NO borrowings, offering the prospect of high return for little or no investment.
Source: John Downes and Jordan Elliot Goodman, ‘Dictionary of Finance and Investment Terms’, 7th Edition, Happauge: Barron’s Educational Series, Inc., 2006, s.v. ‘Leverage’.
•Maloney Act of 1938: An amendment to the Securities Act of 1933 which created the US National Association of Securities Dealers (NASD). The legislation promoted the organisation of member securities dealers as a Self-Regulating Organizations (SRO) under the supervision of the Securities and Exchange Commission (SEC) to institutionalise a code of ethics in the securities industry and its enforcement nationwide. NASD members are known as Broker/Dealers, since they represent both clients that buy and/or sell securities, and themselves, as a principal, when they are engaged in underwriting and/or selling a stock or bond issue directly to the public. The NASD is the only firm operating under the Maloney Act. See: NASD: National Association of Securities Dealers. Sources: Michael C. Cottrell, B.A., M.S., ‘Elite Power & Capital Markets’, thesis submitted in partial fulfillment of the requirements for the Degree of Master of Science, Administration of Justice Department, Mercyhurst College, Erie, PA, 13th February 2002; NASD, ‘National Association of Securities Dealers, Inc.: Manual, April 1998, page 3171.
•Margin Accounts: See Mark to [The] Market and: Margin Requirements
•Margin Requirements:
The minimum amount that a client must deposit in the form of cash or eligible securities in a Margin Account, as is spelled out under Regulation T of the Federal Reserve Board. Regulation T requires a minimum of $2,000 or 50% of the purchase price of eligible securities bought on margin or 50% of the proceeds of short sales. Also referred to as the Initial Margin. Primary source: John Downes and Jordan Elliot Goodman, ‘Dictionary of Finance and Investment Terms’, 7th Edition, Happauge: Barron’s Educational Series, Inc., 2006, s.v. ‘Margin Requirement’.
•Margin Security:
This is a security that may be bought or sold in a Margin Account. Regulation T of the Federal Reserve Board defines margin securities as:
(1): Any registered security (a listed security or a security having unlisted trading privileges);
(2): Any OTC margin stock or OTC margin bond, which are defined as any unlisted security that the Federal Reserve Board (FRB) periodically identifies as having the investor interest, marketability, disclosure and solid financial position of a listed security;
(3): Any OTC security designated as qualified for trading in the National Market System under a plan approved by the Securities and Exchange Commission;
(4): Any mutual fund or unit investment trust registered under the Investment company Act of 1940. Other securities that are not exempt securities must be transacted in cash. Source: John Downes and Jordan Elliot Goodman, ‘Dictionary of Finance and Investment Terms’, 7th Edition, Happauge: Barron’s Educational Series, Inc., 2006, s.v. ‘Margin Security’.
•Mark to [The] Market:
Adjustment of the valuation of a security or portfolio to reflect current (prevailing) market values. For instance, Margin Accounts are marked to market in order to ensure compliance with financial maintenance requirements. (In UK parlance, the definite article is dropped). Source: John Downes and Jordan Elliot Goodman, ‘Dictionary of Finance and Investment Terms’, 7th Edition, Happauge: Barron’s Educational Series, Inc., 2006, s.v. ‘Mark To The Market’.
•Money laundering:
Passing illegally acquired funds or taxable funds on which no tax has been paid inter alia with the intent to evade tax and to hide the funds from relevant national authorities. American legislation addressing money-laundering includes:
(1): The Bank Secrecy Act of 1970;
(2): The Money Laundering Control Act of 1986;
(3): The anti-Drug Abuse Act of 1988;
(4): The Annunzio-Wylie Money Laundering Act of 1992;
(5): The Money Laundering Suppression Act of 1944; and:
(6): The Terrorism Prevention Act of 1996.
The Money Laundering Control Act of 1986 made money laundering a Federal crime corresponding to the previously passed Organized Crime Control Act of 1970. See separate entries in Glossary.
Sources: Michael C. Cottrell, B.A., M.S., ‘Elite Power & Capital Markets’, thesis submitted in partial fulfillment of the requirements for the Degree of Master of Science, The Administration of Justice Department, Mercyhurst College, Erie, PA, 13th February 2002; Munn, Encyclopedia of Banking & Finance, page 109; also: John Madinger and Sydney A. Zalopany, ‘Money Laundering: A Guide for Criminal Investigators’, New York, CEC Press, LLC, 1999, page 43; Howard Abadinsky, ‘Organized Crime’, 6th Edition, Belmont: Wadsworth/Thompson Learning, Inc., 2000, page 411; FINCEN, ‘The Global Fight Against Money Laundering’, Financial Crimes Enforcement Network (FINCEN, 1999, available from: http:// www.occ.treas.gov/launder (Internet).
•Money Laundering Control Act of 1986:
This legislation made money laundering a Federal crime corresponding to the previously passed Organized Crime Control Act of 1970. See: Money laundering.
•Money Laundering Suppression Act of 1994: Legislation which required that ‘any person who owns or controls a money services business’ must register with the Secretary of the Treasury. Source: FINCEN, ‘The Global Fight Against Money Laundering’, Financial Crimes Enforcement Network (FINCEN, 1999, available from: http:// www.occ.treas.gov/launder (Internet).
•Municipal Securities Rulemaking Board (MRSB): See Self-Regulatory Organization (SRO), below.
•NASD: National Association of Securities Dealers:
A non-profit organisation that was formed under the joint sponsorship of the Investment Bankers’ Conference and the US Securities and Exchange Commission (SEC) in order to comply with the requirements of the Maloney Act. NASD Members include virtually all investment banking houses and firms dealing in the Over-the-Counter Market.
Operating under the supervision of the SEC, the basic purposes of the NASD are to:
(1): Standardise practices in the field;
(2): Establish high moral and ethical standards in the securities trading business;
(3): Provide a representative body to consult with the Government and investors on matters of common interest;
(4): Establish and enforce fair and equitable rules of securities trading;
(5): Establish a disciplinary body capable of enforcing the above provisions.
The NASD requires members to maintain 'quick assets' in excess of current liabilities at all times.
Within the NASD, a special Investment Companies Department concerns itself with the problems of investment companies and has the responsibility of reviewing companies’ sales literature in that segment of the securities industry.
Michael C. Cottrell, M.S., has described the NASD’s contemporary responsibilities as including the following (to be read in conjunction of the foregoing information):
(1): Nationwide inspections of member firms;
(2): Provision of centralised computerised surveillance of the trading of NASD Automated Quotations, of its sister company NASDAQ;
(3): Enforcement of Securities and Exchange Commission rules and regulations, as well as of its own rules for members;
(4): To review underwriting arrangements for securities offered to the public;
(5): To perform and monitor qualification examinations of personnel of members; and:
(6): To coordinate and cooperate with the SEC, the States and with other Federal agencies.
The responsibilities of the SEC do NOT include trading on own account [see text], a gross abuse of which it has been and continues to be accused. This abuse is inconsistent with its responsibilities as a regulator and is considered by experts to be a scandalous development. See also: Financial Industry Regulator Authority (FINRA). Sources: John Downes and Jordan Elliot Goodman, ‘Dictionary of Finance and Investment Terms’, 7th Edition, Happauge: Barron’s Educational Series, Inc., 2006, s.v. ‘NASD’; Michael C. Cottrell, B.A., M.S., ‘Elite Power & Capital Markets’, thesis submitted in partial fulfillment of the requirements for the Degree of Master of Science, The Administration of Justice Department, Mercyhurst College, Erie, PA, 13th February 2002; Munn, ‘Encyclopedia of Banking & Finance’, page 696.
•National Market System: See: Securities and Exchange Commission (SEC).
•Non-Disclosure agreement:
An illegal document which, if signed by a participant to a transaction, precludes any recourse to official regulators for protection after the participant has predictably been scammed, and likewise precludes any legal recourse.
•Office of the Comptroller of the Currency (OCC):
This is the chief regulator of US National Banks. The Comptroller of the Currency is appointed by the President of the United States for a five-year term, with Senate confirmation. The OCC, the supervisory agency covering nationally chartered banks, is the oldest US Federal regulator of financial institutions. The Comptroller of the Currency also serves as one of the three Directors of the Federal Deposit Insurance Corporation. Source: Thomas P. Fitch, ‘Dictionary of Banking Terms’, 3rd Ed., Happauge: Barron’s Educational Series, 1997, c.v. ‘Comptroller of the Currency’.
•Office of Thrift Supervision (OTS):
This US Federal agency was established under the Financial Institutions Reform, recovery and Enforcement Act of 1989 to examine and supervise Savings and Loan Associations (‘thrifts’) and Federal Savings Banks. It replaced the Federal Home Loan Bank Board as the primary regulator of State chartered and Federally chartered savings institutions. It is a bureau within the US Treasury Department. The Director and Chief Operating Officer (CEO) of OTS is appointed by the President of the United States with Senate confirmation, and is also one of five directors of the Federal Deposit Insurance Corporation (FDIC). The fact that the OTS is structured within the US Department of the Treasury parallels the position with the Office of the Comptroller of the Currency. Source: Thomas P. Fitch, ‘Dictionary of Banking Terms’, 3rd Edition, Happauge: Barron’s Educational Series, Inc., 1997, c.v. ‘Office of Thrift Supervision’.
•‘Open outcry’:
A non-electronic method of communication between professionals on a stock or futures exchange involving shouting and the use of hand signals to transfer information primarily about buy and sell orders. The component of the trading floor where this takes place is often called the pit. The best-known ‘open outcry’ markets in the United States remain the New York Mercantile Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade, the Chicago Board Options Exchange, and the Minneapolis Grain Exchange. In the United Kingdom, the London Metal Exchange (LME) still makes use of the 'open outcry' method. Many traders prefer the ‘open outcry’ system on the basis that physical contact in the pit allows traders to speculate as to the motives or intentions of buyer/seller, so that positions can be adjusted accordingly.
•Organized Crime Control Act of 1970:
See Money Laundering Control Act of 1986; and Money laundering.
•Over-the-Counter:
(1): Of a security: A security that is not listed and traded on an organised exchange;
(2): Of a market: A market in which securities transactions are conducted through a telephone and computer network connecting dealers in stocks and bonds, rather than, as classically, on the floor of an exchange. Over-the-counter stocks are traditionally those of smaller companies that do not meet the listing requirements of the New York Stock Exchange or the American Stock Exchange.
In recent years, however, many companies that qualify for listing have chosen to remain with Over-the-Counter trading, because they consider that the system of multiple trading by many dealers is preferable to the centralised trading approach of the New York Stock Exchange, where all trading in a stock has to go through the Exchange specialist in that stock. The rules for Over-the-Counter stock trading are written and enforced largely by the US National Association of Securities Dealers (NASD), which is self-regulating (see NASD).
Prices of Over-the-Counter stocks are published in daily newspapers, with the National Market System stocks listed separately from the rest of the Over-the-Counter market. Over-the-Counter markets incorporate markets in both Government and municipal bonds. Source: John Downes and Jordan Elliot Goodman, ‘Dictionary of Finance and Investment Terms’, 7th Edition, Happauge: Barron’s Educational Series, Inc., 2006, s.v. ‘Over-the-Counter (OTC)’.
•Pass-Throughs:
Pass-Through Securities: Pools of fixed-income securities that are backed by a package of assets. A servicing intermediary collects monthly payments from issuers and, after deducting a fee, remits or passes them through to the holders of the pass-through security. This device is also known as a ‘pass-through certificate’ or a ‘pay-through security’. The most common type of pass-through is a mortgage-backed certificate, whereby ‘homeowners’’ payments pass from the original lending bank through a Government agency or investment bank to the investors (per the supposed model).
•Ponzi Scheme:
A scam designed to entrap the unwary investor, as described in the following analyses published on this website [see Archive) and in International Currency Review:
(1): ‘Treasongate Update: Omega ‘Ponzi Game’ scams, 13th January 2007;
(2): ‘Treasongate Background: Intel Ponzi Scams’, 22nd January 2007.
So-called 'lending programs’, a.k.a. High-Yield Investment Programs operating along Ponzi or Pyramid Scheme lines promoted clandestinely inter alia by corrupt elements of the criminalist US intelligence community (including the CIA’s OMEGA OPS scams) will comply with none of these stringent regulations and requirements, and are accordingly, by definition, ALL ILLEGAL IN THE UNITED STATES. This may well be the basis upon which non-payment of these accounts has been predicated. The question therefore arises: why have these illegal schemes been so widespread, having given rise to a colossal constituency of the American ‘broken hearted’, who have been scammed in one way or another but who have been clinging to the hope, like Rip van Winkel, that they, their family trusts or their restless associations of ‘the scammed’, will finally be paid out one sunny day far out into the future?
The generic answer to this question is that the cynical, criminalised fraudster élite, headed by the crooks controlling and inside the intelligence community, have taken precautions to instal their own corrupt operatives within and in control of certain enforcement institutions, including the SEC.
Enron and the Federal Deposit Insurance Corporation (FDIC) have been used to proliferate and perpetuate these illegal securities scams: indeed, it is from operations such as the CIA’s nefarious Enron scamming system, that the derivatives overhang and crisis have mainly arisen.
As a consequence, blind US official (Federal and State) eyes have been turned to what has been going on, the securities regulations have not been enforced with respect to such illegal Ponzi frauds, and the old system whereby anyone involved with trading securities was blackballed for life if caught engaged in irregular activities, has been moribund since the 1970s.
When an uncorrupt SEC Commissioner tried, quite recently, to enforce the regulations, he was removed from his post on some typically trumped-up pretext or other. In other words, the wolves are and have been in charge of the chicken coops.
So key enforcers are, as matters stand, co-conspirators in the despicable, hitherto (but since the Wantagate and the subsequent exposures, no longer) proliferating intelligence community-driven Ponzi Game operations that have devastated an unknown number of American families – with the proceeds channelled through corrupt participating banks into offshore accounts. See Appendix to this report for the narrative of the original Ponzi fraud.
•Principal:
(1): The person with highest authority in a business, or a person for whom another acts as an agent.
(2): A capital sum as distinguished from the interest on it.
(3): See also: Principal, of a Securities firm.
Source: Oxford Senior Dictionary, Oxford University Press, 1984.
•Principal, of a Securities firm:
An NASD member firm is directed by a Registered Principal, who can be the sole proprietor, an officer, a partner, a manager of an office of Supervisory Jurisdiction, and/or a Director of the firm.
The Registered Principal is answerable for all actions taken on behalf of the firm, and all trades submitted by the firm, and all actions of its registered representatives, subject to the rules and regulations of the NASD, SEC and the State of registration. The Registered Principal must pass the Series 24 (General Securities Principal) and also the Series 7 (General Securities Representative) Examinations conducted by the NASD, and must pass the written procedures and oral interview before assuming this position for the firm. Sources: Michael C. Cottrell, B.A., M.S., ‘Elite Power & Capital Markets’, the thesis submitted in partial fulfillment of the requirements for the Degree of Master of Science, Administration of Justice Department, Mercyhurst College, Erie, PA, on 13th February 2002; NASD, ‘National Association of Securities Dealers, Inc.: Manual’, April 1998, page 3171; NASD, NASD Compliance Check List, Gaithersburg: NASD MediaSource, 1992.
•Principle:
A basic truth or a general law or doctrine used as a basis of reasoning or a guide to action or behaviour; a fundamental truth or doctrine, as of law; a comprehensive rule or doctrine which furnishes a basis or origin for others; a settle of action, procedure or legal determination. Also defined as: a truth so clear that it cannot be proved or contradicted unless by a proposition which is still clearer. Sources: Oxford Senior Dictionary, Oxford University Press, 1984.; Henry Campbell Black, M.A., ‘Black’s Law Dictionary’, Revised 4th Edition, St Paul, West Publishing Company, 1968, s.v., ‘Principle’.
•Prudent Man Rule:
This is the fundamental American principle that is applicable in respect of professional money management, originally asserted by Judge Samuel Putnum in 1830 as follows:
‘Those with responsibility to invest money for others should act with prudence, discretion, intelligence, and regard for the safety of capital as well as income’ [1830 Massachusetts Court decision: Harvard College v. Armory]. The Prudent Man Rule directs trustees ‘to observe how men of prudence, discretion and intelligence manage their own affairs, not in regard to speculation, but in regard to the management and disposition of their funds, considering the probable income as well as the probable safety of the capital to be invested’. Investments in risky Ponzi and Pyramid Schemes and in ‘programs’ such as those referenced, typically breach the Prudent Man Rule.
•Public Offering Price: See: ‘Underwrite’ below.
•Pyramid Scheme or scam: See: Ponzi Scheme.
•Registered Principal: See: Principal, of a Securities firm.
•Registered Representative, of a Securities firm:
This officer is licensed and authorised to purchase and/or sell stocks, bonds, options, limited partnerships, tax shelters, mutual funds, and variable annuities on behalf of a customer or the firm.
The Registered Representative must have qualified by passing the Series 7 (General Securities Representative) Examination and must be registered with the firm as an authorised representative. Additionally, all licensed representatives must have passed the NASD Series 63 (Uniform State Law) AntiFraud Examination, and must register with each State the firm intends to operate in.
Source: Michael C. Cottrell, B.A., M.S., ‘Elite Power & Capital Markets’, thesis submitted in partial fulfillment of the requirements for the Degree of Master of Science, The Administration of Justice Department, Mercyhurst College, Erie, PA, 13th February 2002; NASD, ‘National Association of Securities Dealers, Inc.: Manual’, April 1998, page 3201; NASD, 'NASD Compliance Check List'.
•Risk:
Uncertainty as to whether an asset will earn an expected rate of return, or whether a loss may occur: Various categories of risk apply in the securities market environment:
(1): Delivery risk: The possibility that the buyer or seller of an instrument or foreign exchange may be unable to meet obligations at maturity.
(2): Liquidity risk: The possibility that a bank may have insufficient cash or short-term marketable assets to meet the needs of depositors and borrowers.
(3): Settlement risk: The possibility that the failure of a major bank, or its inability to honour payment commitments in a wire transfer network, could have a domino effect on other institutions, causing similar failures elsewhere. In the United Kingdom, this is usually referred to as ‘systemic risk’.
Source: Thomas P. Fitch, ‘Dictionary of Banking Terms’, 3rd Edition, Happauge: Barron’s Educational Series, Inc., 1997, s.v. ‘Risk’.
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