The investment banks and hedge funds have come up with a new principle for protecting the capital markets. It is called counterparty discipline. Translated, it means: "Trust us." The term is tossed around as if it were natural law in the financial markets, much like gravity in the physical world. In reality, counterparty discipline is a slogan, a myth, which has been sold to regulators by investment banks and hedge funds so they can operate in the shadows without regulation. - Gary Aguirre February 2008
Broker-dealers commit fraud by deliberately sending false trade confirmations and account statements to customers when settlement fails as contracted. This is done by, a) Crediting "securities" to customer accounts that were paid for but not received as contracted, and b) Transmitting false trade confirmations and account statements to customers after the settlement date delivery requirement. In more precise legal terms, the broker-dealers say they are entitled to credit "securities entitlements" to customers rather than the real contracted for securities.
credit any "securities entitlements" in lieu of the real contracted for securities. Specifically, the settlement cycle rule 15c6-1 and the UCC do not allow the use of "securities entitlements" beyond the settlement date delivery requirement in 15c6-1.
Further more, broker-dealers are failing to deliver bonds and U.S. Treasuries - not just stocks or equities. The FED and not the SEC is responsible for regulating the bond market. However, even worse than the SEC, the FED has left this market almost completely unregulated based on trust between the counter parties. The result is now that nobody trusts anyone anymore and the bond market has broken down with $2 Trillion in fails just in October 2008 alone.
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