How to Get a Piece of Wall Street Profits Without the Wall Street Corruption

There's simply no limit to how far Wall Street will go to make a buck.

It's no wonder. With corporate offenses and "bad behavior" routinely going unpunished, perpetrators have developed a sense of immunity.

But just weeks ago there was an indictment in a case of alleged manipulation of commodities futures.

It's the first ever federal prosecution for "spoofing," a tactic I recently discussed.

While we wait to see if it either sets the tone for a wider crackdown or proves to be little more than a slap on the wrist, we can also take the opportunity to profit.

Here's how we're going to play a non-bank investment against a rigged services industry...

This Fed Action Is a Step in the Right Direction... Will It Stick?

In a recent article I told you how you could turn the tables on the market manipulators.

Essentially, we discussed how the CME Group (one of the largest options and futures exchanges) was implementing new rules to eliminate "disruptive practices" and "market rigging."

Now we have news of the first ever federal prosecution of its kind for just such infractions.

The U.S. Attorneys' Office posted a press release indicating that "a high-frequency trader was indicted for allegedly manipulating commodities futures prices and illegally profiting nearly $1.6 million as a result of trading orders he placed through CME Group and European futures markets in 2011."

More specifically, the registered commodities trader was hit with six counts of commodities fraud and six counts of "spoofing." You'll remember that the CME's new rules make it unlawful to engage in "spoofing," which is the bidding or offering with the intent to cancel the bid or offer before execution.

In this first indictment, the trader "designed two computer programs he allegedly used in 17 different CME Group markets and three different markets on the London-based ICE Futures Europe exchange, including gold, soybean meal, soybean oil, high-grade copper, Euro FX, and Pounds FX currency futures, to implement his fraudulent strategy."

I'll spare you further details, but suffice it to say that his strategies involved high-frequency trading and were quite elaborate.

Of course, the next question a reasonable person would ask is, is this indicative of a new trend? Is it a watershed moment, or just a blip?

Remember too that, for now, it's still only an indictment.

I'll admit it's an encouraging sign that we can work our way towards at least freer markets.

But, given their recent history, especially in the wake of the 2008 financial implosion, you'll forgive me for doubting a serious crackdown will ever apply to the "banksters" with the same intensity as a lone trader.

Instead, they have extensive track records of neither admitting nor denying guilt, and escaping instead with a negotiated fine.

Given their propensity to generate bloated profits from massive leverage and fractional reserve banking, those fines are simply a tiny cost of doing "business as usual."

Still, this indictment appears to be a step in the right direction.

Only time will tell just how serious regulators are, and how level a playing field they really want.

Invest in a Little-Known, Diversified Giant and Profit

The financial services industry offers many non-bank investment opportunities that boast a compelling case for those wary of the theatrics of the Street banks.

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One such company is Manulife Financial Corporation (NYSE: MFC). MFC was founded in 1887, is headquartered in Canada, and has 84,000 employees and agents worldwide.

The company is nicely diversified: it operates in individual and group life insurance, long-term care insurance, offers annuities, pension contracts, mutual fund products, individual and group retirement products, and even some limited banking products and services.

Manulife also engages in asset management, property and casualty reinsurance, and accident and health insurance.

One of the aspects I especially like about Manulife is its international diversification, operating in Canada, the U.S., and across Asia where MFC issued its first Asian policy in Shanghai back in 1897. In the U.S., MFC operates as John Hancock.

Manulife is a $33 billion company with annual revenues of $35 billion. MFC has a profit margin over 10% and return on equity at 14.25%. Its cash position of $22 billion is 1.5 times its debt level of $14 billion.

Meanwhile, with a current P/E of just 9.5 (nearly half the industry average) the stock is yielding a generous 3.1%.

Right now lots of investors love to hate the financial services sector with a passion. I get it.

But Manulife is primarily an insurer and asset manager, rather than a traditional bank operating on a fractional reserve basis (although these often make for very profitable investments in certain market cycles).

I see Manulife as a great way to share in the profits of financial services, while benefiting from North American and Asian growth prospects.

Of course the cynic in me wonders whether this first indictment for "spoofing" is just lip service. Still, it could be the start of a wider crackdown on this kind of behavior across the sector. It will be interesting to watch just how this case develops.

Either way, you can profit from owning Manulife - a solid play in this sector that's undervalued and underappreciated. Just what we're looking for to garner outsized returns.