SEC’s “re-markable” action against Credit Suisse traders
By Thomson Reuters Accelus – Staff
NEW YORK, Feb.10 (Business Law Currents) - A new SEC complaint against former Credit Suisse (CS) employees shines a harsh light on an underappreciated aspect of the financial crisis: mark-to-market manipulation. Charging four traders and investment bankers with violating securities laws, the commission’s civil action (“the complaint”) alleges a “colossal fraud” to misstate the value of bonds held in the bank’s portfolio. U.S. Attorney Preet Bharara of the Southern District of New York also filed a criminal indictment against CS investment banker David Higgs, a managing director of the bank’s London office. Bharara likewise filed a criminal information against CS trader Salmaan Siddiqui, who held the title of vice president.
Unlike more high-profile litigation revolving around the residential mortgage-backed securities (RMBS) and collateralized debt obligations (CDOs), this particular case is noteworthy in that it attacks the accounting behind publicly filed documents, rather than allegations of material misrepresentations in the sales of securities. (more…)
U.S. ‘microcap’ charges highlight debate over small-firm capital raising
By Stuart Gittleman
NEW YORK, Dec. 6 (Thomson Reuters Accelus) – Federal charges filed last week in a suspected kickback scheme to sell thinly traded stocks highlight concerns over investor safety as Congress making it easier for small business to raise capital. Boston federal prosecutors filed fraud and conspiracy charges last Thursday against 13 people: corporate officers, a lawyer and stock promoter. They were accused of a kickback scheme in which payments hidden by phony consulting contracts were made to an undercover FBI agent, who posed as a hedge-fund representative, in exchange for having the fund buy stock in certain small companies. (more…)
The compliance lessons, so far, arising from the UBS rogue trader
LONDON, Sept. 23 (Thomson Reuters Accelus) – UBS’s loss of $2.3 billion has hit the headlines worldwide, and while full details of what went wrong are unlikely to be public in the near future there are already compliance lessons for other firms. UK and Swiss regulators have launched an investigation into:
- the details of the unauthorised trading activity;
- the control failures which permitted the activity to remain undetected; and
- the overall strength of UBS’ controls to prevent unauthorised or fraudulent trading activity in its investment bank.
Although the investigation is ongoing, and the regulators have expressly stated that they do not, as yet, have an expected timescale, there are a number of lessons or steps for other firms to consider. (more…)
CFTC rules point to crackdown on manipulation: John Kemp
– John Kemp is a Reuters market analyst. The views expressed are his own –
By John Kemp
NEW YORK, Nov 9 (Reuters) – Two proposed regulations published by the U.S. Commodity Futures Trading Commission (CFTC) clarify its power to take enforcement action in cases of market manipulation and are intended to lead to a tougher regulatory regime in future.
The Commission is giving effect to the sweeping provisions of Section 753 Dodd-Frank Wall Street Reform and Consumer Protection Act (PL 111-203) which give it strong new powers over market manipulation and spreading false information.
Section 753 has widened the CFTC’s mandate to include OTC swaps as well as futures and options traded on registered exchanges. It has also clarified and strengthened the Commission’s authority to prevent and punish attempted manipulation wherever it occurs, attempting to remedy some of the weaknesses in the existing law.
PATCHWORK OF LAW AND CASES
from Reuters Investigates:
Morbid money-spinners
If the life settlements market seems ghoulish, here’s a British scandal which isn’t doing the image of the business any favours. It’s one of the worst the country’s seen.
Around 30,000 mainly elderly investors in the UK put their money into a company called Keydata, hoping to make a little extra cash to fund their own retirement with the promise of a healthy return.
What they were buying sounded kosher, even if it did depend on how fast their wealthy American counterparts were dying. Of course, the investors may not have known that.
As is so often the case with these things, the projections were a little optimistic. And then some other irregularities blew up. Around 100 million pounds went missing, one of the business’s partners dropped dead in Singapore and the investment company was shut down by the regulators, leaving British pensioners like Tony and Pam Tobin out of pocket. The Serious Fraud Office is investigating.
Tony and Pam Tobin
Undeterred, the other key character behind Keydata is determined to fight the regulators’ decision. "I am someone who can make the impossible possible," he tells us.
Paulson reassures clients on Goldman deal, no exits yet
By Svea Herbst-Bayliss BOSTON, April 20 (Reuters) – Clients with Paulson & Co, which was involved in a mortgage deal that prompted civil fraud charges against Goldman Sachs <GS.N>, spoke with the manager on Monday, but so far no one has notified the firm of plans to leave his fund, several investors said. (more…)
UK’s Brown wants investigation into Goldman Sachs
By Adrian Croft LONDON, April 18 (Reuters) – Prime Minister Gordon Brown said on Sunday he wanted Britain’s financial watchdog to investigate U.S. bank Goldman Sachs <GS.N> after it was charged with fraud by U.S. regulators. (more…)
US Senate panel: high-risk loans brought down WaMu
By Dan Margolies WASHINGTON, April 12 (Reuters) - Despite fraud rates of over 58 percent and 83 percent at two of Washington Mutual Bank’s top-producing loan production offices in 2005, the bank did nothing to address the problem, according to findings released Monday by a congressional panel. (more…)
New York charges Bank of America, ex-CEO with fraud; SEC settles
By Jonathan Stempel and Joe Rauch
NEW YORK/ORLANDO, Fla., Feb 4 (Reuters) – New York’s attorney general charged Bank of America Corp former Chief Executive Kenneth Lewis and former Chief Financial Officer Joe Price with fraud for allegedly misleading shareholders about the acquisition of Merrill Lynch & Co.
The U.S. Securities and Exchange Commission separately said Bank of America agreed to pay a $150 million civil fine and bolster disclosure and governance practices to settle its two lawsuits alleging poor disclosure of Merrill’s losses and $3.6 billion of bonus payouts. That accord requires court approval.
Thursday’s civil lawsuit by New York Attorney General Andrew Cuomo could complicate efforts by new Bank of America CEO Brian Moynihan to revive the largest U.S. bank.
Moynihan replaced Lewis, who retired under pressure at the end of 2009 after four decades at the bank.
Lewis, 62, joins Countrywide Financial Corp’s Angelo Mozilo among major U.S. financial services chief executives to face civil regulatory fraud charges over conduct since a global credit crisis began in the middle of 2007.
Separately, Senator Carl Levin criticized Bank of America for failing to scrutinize questionable accounts by a notorious arms dealer and flag them for possible money laundering.
SocGen scandal prompts EU bank watchdog crackdown
LONDON, Dec 21 (Reuters) – European Union bank supervisors unveiled draft guidelines on Monday to apply lessons from a trading scandal that forced Societe Generale to book billions of euros in losses.
The Committee of European Banking Supervisors (CEBS), made up of national banking regulators from the 27 EU states, said it would consult on its guidelines that are due to take effect by the end of 2010.
They flesh out how high level risk management and remuneration principles should be applied to control risks in trading activities to make fraud harder to hide.
“Past and recent cases show that when institutions do not adhere to basic principles of sound internal governance, the severity of operational risk events in market-related activities can be very high, jeopardising the institution’s earnings, the existence of the particular business area or even the existence of the whole institution,” CEBS said in a statement.
“As an example, the failure of internal governance mechanisms, at multiple levels, was the main cause of the rogue trading event discovered at SocGen in early 2008,” CEBS said.
In September this year, Jerome Kerviel was ordered to stand trial on charges of breach of trust, fraud and manipulating French bank Societe Generale’s computer system.
SocGen said the 4.9 billion euros ($7.02 billion) of losses it unveiled in January 2008 were due to unauthorized deals carried out by Kerviel, a former junior trader at the bank.
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