Welcome back to the channel everyone today, i want to talk about how hedge funds hire criminals, those that have previously broken fcc rules and have been caught for it are being hired by hedge funds. All the time the dtcc have just made a new filing 2020 op. 1, that should hopefully put a stop to this kind of trust. Me guys.

You do not want to miss this video, so stay tuned and let's make some money, but guys before i dive into the video. I just want to give a massive shout out to the 3 200 of you that are currently doing that notification bell, because you guys are always the first to watch a new video as soon as it's released so guys be sure to drop a like down below Subscribe to the channel and ding that notification bell, if you haven't already so that you don't miss another video, just like this one and now i want to dive straight in with the key information, so new rule approved 30th of july sr, finra, 2020, 041 member firm's Implication of employee misconduct, it's another rule, squeezing those bad actors. The rule has been approved after being proposed in november 2020. I have not gone through the detail, including the letters and comments submitted as part of the review process.

The process has taken a while, and there was a predetermined deadline of the 30th of july 2021 to approve or disprove. Hey presto, it's approved just my own quick interpretation. It appears that some firms are consistently and willingly recruiting rogue employees with a history of misconduct. Who then go on to continue breaking the rules? Firms who employ these people will now either have to get rid of those rogues or pay financial deposit that is not accessible by the firm who pays it.

The amount reflects the risk of employing such people. Firms will also be publicly displayed as restricted firms to give investors more transparency about the risk associated with the firm relating to the people it employs. If i was to read between the lines, firms are proactively employing rogue traders who have breached the rules previously because they are exactly the type of people who will happily comply with their new employer's request to break more rules, commit crimes, manipulate systems cover evidence, turn a Blind eye to fraud lie to regulators, misrecord data etc. So why are these rogue new employees also attractive, they're, less likely to whistle blow or squeal? These firms are rogues who are employing rogues, who make money for more rogues.

I've not read through the entire document or response letters from firms, i'm sure there's more juicy info to find i've actually got that filing open on another tab and in a second we're going to digest it together. This proposal is designed to address persistent compliance issues that arise at some finra member firms that generally do not carry out their supervisory obligations to achieve compliance with applicable securities laws and regulations and finra rules and act in ways that could harm their customers and erode confidence. In the brokerage industry, according to finra, recent academic studies have found that some firms persistently employ registered representatives who engage in misconduct and that misconduct can be concentrated at these firms. Finra states that these studies also provide evidence that the past disciplinary history and other regulatory events associated with a firm or individual can be predictive of future events, while these firms may eventually be forced out of the industry through finra action or otherwise.

Finra observed that these compliance issues included a persistent if limited population of firms with a history of misconduct that may not be acting appropriately as a first line of defense to prevent customer harm. Basically, what this means is that there's a small group of firms or hedge funds that persistently and regularly employ people that have broken sec rules. These people have been caught and fined and then re-employed only expected to be breaking the rules. Yet again, i personally don't even think this should be allowed.

I think if somebody breaks the rules, they should get disqualified from being an investment advisor and being allowed to work in a hedge fund or an institution. Similarly, to accounting, if you breach the code of ethics, you get banned from being an accountant ever again, or at least banned for say, 10 years, for example, but yet with a hedge fund. If somebody breaks the rules, they just get a slap on the wrist. A small fine and a new job down the road.

So, looking at that new ruling, the first point is to require member firms that are identified as restricted firms to maintain a deposit in a segregated account from which withdrawals would be restricted from doing a quick search for restricted firms. It does look like they're going to be making available to member firms a list of expelled firms or a list of those restricted firms. However, from doing a quick search, it looks like that. Restricted firm list isn't yet publicly available.

Hopefully, as this regulation goes through and is implemented over the next few days, that list is published for all to see. It does also say here. If the commission approves the proposed rule, change finra will announce the effective date of the proposed rule change in a regulatory notice to be published no later than 60 days following commission approval. So therefore, hopefully, in the next 60 days, there should be a publicly available list of all restricted member firms that consistently and persistently re-employ people that have broken sec rules.

Although i'm not quite sure if the obligations could include requiring a member firm to maintain a specific deposit amount is the best way to go about it. Considering that these huge, huge hedge funds have tons of cash on hand, putting a small amount of it into a separate bank account that they can't touch, isn't necessarily the best way to deter them from hiring previous criminals. Although it does say, the obligations could also include conditions or restrictions on the operations and activities of the member firm and its associated persons that relate to so maybe they could restrict these restricted firms from investing in certain securities or from promoting certain products, for example, that Might benefit a little bit more and might make the hedge fund think twice about employing these criminals. Again, i'm not quite sure it's the best way to go about it, but at least it is a step in the right direction.

I personally would love to know how many restricted individuals or previous criminals are employed by market makers such as citadel and virtue guys be sure to. Let me know down in the comments below what you think about this ruling. Do you think it's fair that hedge funds and market makers can employ previous criminals with a history of misconduct and guys, if you haven't already i'd, really consider joining the patreon and becoming part of the team? So you can get urgent, updated due diligence and news on amc like this before i even make a video linked in the description below and as always guys, if you enjoyed this video, be sure to check out some of my others. Alternatively, subscribe to the channel and ding that notification bell, because that way, you'll be alerted when i upload a new video cheers.