Wall Street: Stocks and gold rise

Gold: Trading now at $1,647 an ounce, up 2.1% from Thursday. Dow Jones industrial average: Trading now at 11,738.45, up 1.7% from Thursday.

Looking to Europe. European leaders are beginning crucial talks aimed at finding a solution to the sovereign debt crisis, and investors seem to be optimistic about the outcome.

Citi's roadblock. Citi is trying to put its subprime mortgage problems behind it with a settlement this week -- but first the settlement has to make it past a judge who has rejected past deals that let banks off without any admission of guilt.

Main Street needs Wall Street. Time magazine takes a look at why the recent struggles of Wall Street banks are not a good thing for Main Street.

Baldwin on the Fed. On a walk through the Occupy Wall Street encampment, Alec Baldwin calmly takes on a number of Ron Paul supporters asking the actor to throw his weight behind ending the Federal Reserve.

-- Nathaniel Popper in New York
Twitter.com/nathanielpopper

Photo credit: Stan Honda / Getty Images

Report: Justice Department joins probe of Chinese firms' accounting

The Nasdaq Stock Market is getting hit today, with the composite index down 1.1% at about 12:45 p.m. PDT, even as the Dow industrials and most other U.S. market indexes are positive.

One factor in Nasdaq’s slump: A report that the Justice Department has joined the Securities and Exchange Commission in looking into possible accounting fraud at Chinese companies that list their stocks on U.S. markets.

That is slamming some popular Chinese Internet-related issues on Nasdaq, including Youku.com (down 23% so far today), Baidu Inc. (down 11%) and Sohu.com (down 6%). They already were under pressure as Chinese shares in Shanghai hit a new 52-week low overnight.

From Reuters:

A top securities regulator said U.S. criminal authorities are investigating accounting irregularities at Chinese companies listed on U.S. stock exchanges.

"There are parts of the Justice Department that are actively engaged in this area," said Robert Khuzami, director of enforcement at the U.S. Securities and Exchange Commission.

In an interview with Reuters this week, Khuzami revealed that a number of federal prosecutors around the country are looking into the issue, but declined to name them.

The involvement of the Justice Department adds investigative firepower to the SEC and the FBI, which are also probing Chinese accounting fraud.

"I think that you will see greater (Department of Justice) involvement as time goes on," said Khuzami, a former federal prosecutor himself, when asked why no criminal charges have yet been filed in the massive Chinese accounting scandal.

But it's a tough day for many Nasdaq tech issues in general. Market darlings Apple Inc. and Amazon.com are down 2% and 4.2%, respectively, which may be tied to end-of-quarter profit-taking. The third quarter ends Friday.

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China central bank chief says policy remains stable

-- Tom Petruno

Follow me on Twitter: Twitter.com/tpetruno

Photo: Robert Khuzami, center, the enforcement chief at the Securities and Exchange Commission. Credit: Jacquelyn Martin / Associated Press.

Wall Street: Stocks rise at the open; gold up

Gold: Trading now at $1,787 an ounce, up 0.6% from Monday. Dow Jones industrial average: Trading now at 11,431.30, up 0.3% from Monday.

Mixed news. U.S. stock markets wavered at the open; there was disappointing news about the housing market, but that was tempered by speculation that the Federal Reserve may announce a new stimulus plan.

Morgan Stanley's feud. Wall Street has become increasingly divided between its trading operations and its more traditional investment banking operations -- and at Morgan Stanley, this division has become personal.

Downgrade insiders. The Securities and Exchange Commission is reportedly probing whether some big trading firms took advantage of last month's downgrade of the United States' credit rating by Standard & Poor's.

Rogue trader. UBS executives will meet later this week in Singapore to review the fallout from the disclosure of a rogue trader's $2.3-billion losses.

Quiet protest. Protesters are continuing their demonstrations on Wall Street, but their numbers and strength have not been overwhelming.

-- Nathaniel Popper in New York
Twitter.com/nathanielpopper

Photo credit: Stan Honda / Getty Images

Debt collectors, college roommates: Your weekly ScamWatch

Here is a roundup of alleged cons, frauds and schemes to watch out for.

Debt collection –- There are few things more intimidating than a telephone call from a collection agency. Some scam artists have been using that fear to bully people into giving up their debit card numbers on the telephone, then draining their bank accounts, the Better Business Bureau said in a recent alert. In some instances, the callers have personal information about the target, including actual debts, making the call seem legitimate. The bureau said anyone who receives a suspicious call about an outstanding debt should demand written proof of the debt and should never provide bank or credit card information over the phone until making sure the collection firm is legitimate.

Going away to college -– In addition to worrying about keeping up with their studies, new college students should take steps to prevent themselves from becoming victims of identity theft, the Better Business Bureau said. The group said it’s not always strangers who commit identity theft -– sometimes it’s a new roommate. To avoid being victimized, students should keep bank and credit card statements in a safe place and have sensitive mail sent to their parents’ homes, the bureau said. “In this day and age, you can’t always trust your peers,” said Stephen A. Cox, president and chief executive of the Council of Better Business Bureaus.  “It’s extremely important for students to be vigilant in monitoring bank and credit card statements to spot unauthorized activity.”

Life settlement company –- The Securities and Exchange Commission has obtained an emergency court order shutting down a Los Angeles company that claimed to invest in life insurance policies, but instead allegedly used investor money to finance the owner’s luxury lifestyle. The SEC accused Daniel C.S. Powell and his company, Christian Stanley Inc., of defrauding investors by making false claims that it invested in so-called life settlements. Powell raised at least $4.5 million from at least 50 investors nationwide but never used the money to buy life insurance policies as he said he would, the SEC said. Instead, he spent the money on luxury hotels, expensive cars and visits to nightclubs and restaurants, the SEC said. At the request of the SEC, U.S. District Judge George H. King issued a temporary restraining order freezing the assets of the company and placing a receiver in charge of the company’s assets. Powell could not be reached for comment. Life settlements are transactions in which policy holders sell life insurance policies to third parties.

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--Stuart Pfeifer

Photo: U.S. currency. Credit: Brian Vander Brug / Los Angeles Times 

L.A. firm accused of stealing millions from investors shut down

The Securities and Exchange Commission has obtained an emergency court order shutting down a Los Angeles company that claimed to invest in life insurance policies, but instead allegedly used investor money to finance the owner’s luxury lifestyle.

The SEC accused Daniel C.S. Powell and his company, Christian Stanley Inc., of defrauding investors by making false claims that it invested in so-called life settlements. Powell raised at least $4.5 million from at least 50 investors nationwide but never used the money to buy life insurance policies as he said would, the SEC said. Instead, he spent the money on luxury hotels, expensive cars and visits to nightclubs and restaurants, the SEC said.

At the request of the SEC, U.S. District Judge George H. King issued a temporary restraining order freezing the assets of the company and placing a receiver in charge of the company’s assets. Powell could not be reached for comment.

Life settlements are transactions in which policy holders sell life insurance policies to third parties.

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Hugh Hefner's son-in-law accused of insider trading [Updated]

Former Nasdaq executive pleads guilty to insider trading

-- Stuart Pfeifer

Photo: The Securities and Exchange Commission. Credit: Jonathan Ernst/Reuters 

Stock markets expect to open on time Monday

The New York Stock Exchange and the Nasdaq Stock Market were expected to open as usual for trading on Monday, as the worst of Hurricane Irene passed.

It wasn't clear how many market employees would be able to get to work, however, with New York public transit systems still shut down.

The Securities and Exchange Commission said on its website Sunday that "the  securities exchanges have informed the SEC that they will open for regular hours on Monday. The decision to open was made in consultation with the SEC following a series of discussions throughout the weekend."

Trading was expected to be light this week, in any case, with many market players on vacation during the unofficial last week of summer.

The Securities Industry and Financial Markets Assn., Wall Street's main trade group, said Sunday that it recommended a normal trading session in the bond market on Monday as well.

Several economic reports are due on Monday, including U.S. personal income and personal spending figures for July, pending home sales for July, and manufacturing activity in August in the Southwestern region covered by the Federal Reserve Bank of Dallas.

-- Tom Petruno

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Photo: A man walks across 42nd Street in Times Square in New York on Sunday as Hurricane Irene hits the city. Credit: Timothy A. Clary / AFP / Getty Images

Hugh Hefner's son-in-law accused of insider trading [Updated]

Playboy founder Hugh Hefner's son-in-law has been accused by the Securities and Exchange Commission of using inside information to gain profits and avoid losses totaling more than $100,000 in trades of Playboy stock.

In a lawsuit filed Wednesday in federal court in Illinois, the SEC said that William Marovitz sold shares of Playboy between 2004 and 2009 ahead of public announcements related to Iconix’s potential acquisition of Playboy and Playboy negative earnings announcements.

Marovitz, 66, of Chicago has been married to former Playboy Enterprises Inc. chief Christie Hefner since 1995. Christie Hefner, 58, was chief executive of Playboy from 1988 to 2009.

In one trade highlighted in the lawsuit, Marovitz purchased shares of Playboy on Nov. 10, 2009, using inside information obtained from his wife, two days before a public announcement that Playboy was in talks to be acquired by Iconix. Playboy stock increased by 42% that day.

Playboy and Marovitz were not immediately available for a comment.

The lawsuit seeks the return of Marovitz’s "ill-gotten gains," plus civil penalties.

[Updated, 12:55 p.m., Aug. 3: The SEC said in news release that Marovitz, without admitting or denying guilt, has agreed to pay $168,352 in restitution, interest and penalties in a settlement with the SEC. The settlement is subject to approval by the court.]

From the lawsuit:

Marovitz bought and sold shares of Playboy in his own brokerage accounts between 2004 and 2009 ahead of public news announcements related to Iconix’s potential acquisition of Playboy, Playboy’s negative earnings announcements and Playboy’s offering of stock. As a result of his misuse of confidential information about Playboy, Marovitz gained profits and avoided losses totaling $100,952.40.

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Playboy said to be in takeover talks

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-- Stuart Pfeifer 

Photo: Hugh Hefner. Credit: Kirk McKoy / Los Angeles Times

 

SEC's controversial proxy access rule tossed out by court

A federal appeals court on Friday invalidated a  controversial Securities and Exchange Commission rule to make it easier for shareholders to force out company directors.

The rule allowed large shareholders to have their board nominees listed on company-mailed proxy ballots along with the management's preferred candidates instead of being forced to spend the money to send out separate ballots.

The rule was supported by public pension funds, labor unions, shareholder advocates and some investment managers as a way to help shareholders force changes at under-performing companies and curb high executive compensation.

But many large companies opposed the rule. They argued it would open the door for hedge funds and corporate raiders to manipulate companies and would give too much power to special interest groups, such as labor unions.

The U.S. Chamber of Commerce and the Business Roundtable filed suit last year to challenge the rule, which was approved 3-2 by the SEC's Democratic majority. The two large business organizations argued that the contested shareholder elections would distract company management and would benefit labor unions in contract negotiations.

On Friday, a three-judge panel of the U.S. Court of Appeals for the District of Columbia agreed and tossed out the rule.

The judges, all Republican appointees, said the SEC acted "arbitrarily and capriciously" in not properly evaluating the impact on companies. Among the potential consequences of the rule were increased costs companies would face fighting shareholder nominees.

The court decision leaves the door open for the SEC to do more analysis and try to enact the rule again. Last year's sweeping overhaul of financial regulations gave the SEC the authority to enact rules increasing shareholder access to company proxy mailings.

The rule was one of the first enacted after the legislation was enacted last year.

The U.S. Chamber of Commerce and Business Roundtable cheered Friday's court decision.

“This is a big win for America’s job creators and investors,” said Chamber President Tom Donohue. “We applaud the court’s decision to prevent special interest politics from being injected into the boardroom."

He said the decision also "sends a strong message that regulators need to meet their statutory requirement to clearly prove that the benefits of regulation outweigh the costs."

Ann Yerger, executive director of the Council of Institutional Investors, said the court decision was "deeply disappointing" to long-term shareholders.

"We will continue to advocate for proxy access and will encourage the SEC to promptly address the court’s concerns," she said. "Proxy access is a core shareowner right that is standard in many countries. It would invigorate board elections and make boards more responsive to shareowners and more vigilant in their oversight of companies."

RELATED: 

Shareholders get new access to proxy ballot process

 -- Jim Puzzanghera

 Photo: SEC Chairwoman Mary Schapiro. Credit: Getty Images.

Summer burglaries, penny stocks: Your weekly ScamWatch

Here is roundup of alleged cons, frauds and schemes to watch out for.

Burglary season -- The summer months of July and August typically have the highest rate of home burglaries, in part because many people leave town for vacations, the Better Business Bureau said in a recent alert. Homeowners should consider installing security systems before they vacation this summer, the BBB said. Homes without such systems are about three times as likely to be burglarized than those with the systems, it said. Consumers who buy such systems should be careful to ask for a report of all costs upfront and only use professional installers, the BBB said.

Penny stocks -- The Securities and Exchange Commission has filed civil lawsuits against several chief executives who paid bribes and kickbacks to artificially inflate the value of their companies’ stock. Some of the cases involved an undercover FBI agent who posed as an associate of a corrupt pension fund trustee who would buy stocks in the companies if he received a kickback. The companies involved included Real American Brands Inc., KCM Holdings Corp. and SmokeFree Innotec Inc., the SEC said in a news release. “Investors deserve better than secret investment strategies based on kickbacks and bribes,” said Robert Khuzami, director of the SEC’s enforcement division.  “As our charges make clear, these CEOs got more than they bargained for but exactly what they deserved for making illicit payments to manipulate microcap stocks.”

Beauty pageants -- Parents should be careful when responding to promotions for beauty pageants, which can sometimes include hidden fees and result in expensive disappointments, the Better Business Bureau said in a recent bulletin. In 2010, the BBB received more than 10,000 inquiries from consumers about beauty pageant promotions, the BBB said. Parents should investigate the pageants on the Internet to determine their qualifications and such things as whether refunds are allowed, it said.

-- Stuart Pfeifer

Wall Street Roundup: JPMorgan's credit card problem, starving the police

Gold: Trading now at $1,511 per ounce, down 0.7% from Thursday. Dow Jones industrial average: Trading now at 11,966.59, down 0.7% from Thursday.

JPMorgan's credit card problem. The Wall Street Journal tells a fascinating tale of how JPMorgan Chase is calling off its collection efforts on credit card debt as it deals with internal concerns about its paperwork; the best material is buried low in the story.

Starving the police. Just as the Securities and Exchange Commission is receiving new responsibilities to police Wall Street, Congress voted down a measure to increase its funding.

Details of a default. Moody's explains what it might mean if the United States defaults on its debt.

Perils of celebrity. A number of big-name hedge fund managers have been falling on hard times in recent months -- is all the attention bad for investors?

-- Nathaniel Popper

Credit: Stan Honda / Getty Images

 

Former Nasdaq executive pleads guilty to insider trading

A former Nasdaq executive pleaded guilty Thursday to trading stocks based on inside information he gained while working for the stock exchange.  

Donald Johnson admitted in a Virginia federal court that he made trades on eight occasions between 2006 and 2009 using information he received as part of his work for Nasdaq's Market Intelligence Unit in New York.

"This case is the insider-trading version of the fox guarding the henhouse,” Robert Khuzami, director of enforcement at the Securities and Exchange Commission, said in a statement.

The SEC announced it was filing a civil suit against Johnson at the same time that Johnson pleaded guilty to one count of securities fraud. The SEC pegged Johnson's gains from his illegal trades at $755,000.

Johnson retired from Nasdaq in 2009 and now lives in suburban Virginia. While he was with the company he worked as a managing director on a team that took confidential information from companies listed on Nasdaq in order to provide the companies with analysis.

Among the stocks he traded were Central Garden and Pet Co., Digene Corp. and United Therapeutics Corp.

In 2007, he learned from executives at United Therapeutics that the company had succesfully completed trials on a new blood pressure medication, Tyvaso. Johnson bought 10,000 shares in the company and then sold them after the trial results were publicly announced, earning $175,000 according to the Department of Justice.

The SEC's complaint says Johnson placed the trades at work, but used a brokerage account in his wife's name to try to hide them. His wife was named as a defendant in the SEC's suit.

Johnson, 56, could face a prison sentence of up to 20 years. He is scheduled to be sentenced Aug. 12.

-- Nathaniel Popper

[Updated at 3:05 p.m.: An earlier version of this post incorrectly referred to the blood pressure medication as Tyvasco.]

Photo: The Nasdaq building on Times Square. Credit: Daniel Barry / Getty Images