Mary Schapiro is no money manager

July 27, 2009

Let’s hope Securities and Exchange Commission Chairman Mary Schapiro is a better regulator than a money manager.

That’s because The Financial Industry Regulatory Authority, the last place Schapiro ran, lost $696 million last year. Almost all of FINRA’s red ink stemmed from losses on investments, including ownership stakes in hedge funds and private equity firms, stocks and bonds.

In all, investment related losses totaled $624.1 million, compared with a $156 million gain in the value of those investments in 2007.

FINRA’s tale of woe is included in its most recent annual report, a copy of which was posted recently on the regulator’s website.

Oddly, FINRA’s miserable year has received no media attention, even with Schapiro regularly testifying on Capitol Hill about greater regulatory reform. Schapiro, of course, is the former chief executive officer of FINRA.

The regulatory agency doesn’t provide a detailed list of its specific investments, so there’s no way of knowing which hedge funds or limted partnerships it has sunk money in. The losses in 2008 reduced FINRA’s still substantial investment portfolio to $1.56 billion.

The portfolio, which is managed by several unidentified money managers, represents the proceeds from sale of stock FINRA had in the Nasdaq Stock Market. FINRA’s predecessor, the NASD, had acquired the block of stock when the electronic stock market went public.

Up until last year, the five-year-old portfolio had posted an average annual return of 9.6 percent. The peak value of the portfolio came in 2007, when it had $2.24 billion in assets. Even with last year’s 26.5 percent decline, the value of FINRA’s portfolio is 20 percent higher than what it began with in 2004.

In the annual report, FINRA tries to rationalize its losses with the same kind of half-hearted apology that many hedge fund managers have used in letters to investors:

This last year proved to be an extremely challenging environment for the global economy and investment markets. Investors experienced one of the worst performance periods in modern times, marked by record market declines and volatility, massive financial failures and the beginning of a painful deleveraging process.”

But the good news is that FINRA appears to have learned a lesson and intends to lower the volatility and risk profile of its portfolio going forward.

9 comments

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Harry Markopolos testified before the House Financial Services Committee regarding his longstanding investigation of Bernie Madoff. He fried the SEC. As a result the head of the SEC enforcement division lost her job. In answering commtittee questions Markopolos also testified that although the SEC was incompetent he did not believe it was corrupt. FINRA however was corrupt. Ladies and gentleman the head of FINRA

The head of FINRA is now the head of the SEC.

I was lead to believe that FINRA acting on priveleged information pulled out of the the hedge funds just prior to the downfall?

The other question would be suitability; as a member NASD/FINRA I had no idea of the speculative nature of these investments.

Posted by Mike | Report as abusive

I believe the stories embedded iN FINRA’s portfolio hold the keys to a number of interesting stories. What hedge funds and fund of funds was FINRA invested in? Over and above that, FINRA is the epicenter of the greatest fraud on Wall Street.

I refer to the Auction-Rate securities market. $165 Billion ARS held by thousands of investors remain frozen. FINRA owned $647 million ARs and liquidated them in Spring 2007. I have written extensively on this topic. The details of FINRA’s ARS sale are screaming to be told.

Wall Street’s Greatest Fraud

http://www.senseoncents.com/2009/07/wall -streets-greatest-fraud/

An Open Letter to the Board of FINRA Regarding Auction-Rate Securities

http://www.senseoncents.com/2009/07/an-o pen-letter-to-the-board-of-finra-regardi ng-auction-rate-securities/

$165 BILLION and the Wall Street SRO FINRA exited the market as it was failing….time for some transparency!!!

Please share so FINRA knows it has to protect investors not protect itself!!

[...] FINRA: Sucks at managing money, great at investor letters: While returns from FINRA’s investments were quite positive for the four years prior to 2008, the [...]

FINRA is supposed to protect investors. Did they? Well there are 165 billion reasons outstanding that they did not. To what do I refer? The Auction-Rate Securities market, the greatest fraud on Wall Street, still has thousands of investors left frozen with $165 Billion in ARS.

How does FINRA factor into this? FINRA owned and liquidated $647 million ARS in 2007. What did they know? When did they know it? All details on FINRA’s sales of ARS should be released.

Wall Street’s Greatest Fraud

http://www.senseoncents.com/2009/07/wall -streets-greatest-fraud/

Posted by Larry Doyle | Report as abusive

Yesterday, I wrote an Open Letter to the Board of FINRA Regarding Auction-Rate Securities. I can only hope in the spirit of promoting transparency and integrity in our markets and in our regulators that members of FINRA’s Board will feel compelled to release all details on FINRA’s involvement with ARS (as an investor and regulator).

Thousands of investors and $165 Billion remain frozen.

http://www.senseoncents.com/2009/07/an-o pen-letter-to-the-board-of-finra-regardi ng-auction-rate-securities/

Posted by Larry Doyle | Report as abusive

[...] Commentaries » Blog Archive » Mary Schapiro is no money manager … [...]

Sadly, Mary Schapiro is a horrible money manager and an even more inept money manager.

FINRA is dysfunctional in every sense of the word. Even worse, the mission of FINRA staffers and executives is to ensure FINRA never accepts responsibility for its failures or admits its shortcomings. They are simply in denial and refuse to take any actions that would make them more effective. Its beyond horrible.

Posted by Big Al | Report as abusive

[...] Re: FINRA is Totally Corrupt and Inept             Go to Top Anyone see this on Mary Shapiro? Commentaries Blog Archive Mary Schapiro is no money manager | Blogs | [...]

Glad to see SOMEONE is catching on to what an incompetent and unctuous blowhard Mary Schapiro is. The financial press treats her like the North Korean press treats Kim Jong-Il.

Posted by Max | Report as abusive

GOOD NEWS!!! There is finally a great movie out about stock market manipulation, the SEC, and short selling called: “Stock Shock.” Amazon has it or stockshockmovie.com has a trailer.

Posted by J.D. | Report as abusive