FINRA Doesn’t Want Oversight Over Financial Advisers, Says CEO Ketchum

According to Financial Industry Regulatory Authority CEO Richard G. Ketchum, the regulator no longer wants to be given oversight over financial advisers. Speaking to The Wall Street Journal, Ketchum said the self-regulatory agency had done all it could to be granted authority over investment advisers and has decided to stop with additional attempts.

FINRA currently oversees brokers. Meantime, the Securities and Exchange Commission and the states oversee registered investment advisers. The SEC had been exploring having FINRA or another agency police RIAs instead. However, the majority of investment advisers were against such a move because of the way FINRA handles enforcement. They don’t think the regulator understands the way investment advisers operated.

Ketchum is now saying that Congress should give the SEC the resources it needs to enhance its examination program of advisers. The Commission has been asking for more money because it can only afford to examine investment advisor firms about once a decade, which isn’t much oversight at all.

Ketchum also said that he approves of the way investment advisers, like brokers, must now uphold fiduciary standards that mandate that they always act in the best interests of a client. However, it is only brokers who need to ensure that the investment strategies and products they recommend are suitable for a customer.

Meantime, reports InvestmentNews, a five-year bull market is causing advisers to experience the highest levels of compensation and assets under management in seven years. A study just released by Fidelity Investments reports that in the last year approximately 95% of advisers saw their business grow. Also, average compensation was at about $24,000 and average assets under management was at around $60 million. However, many advisory firms are finding it hard to draw in young clients, which could slow long-term growth.

Our securities lawyers represent investors that have lost money because of investment adviser fraud and other forms of financial fraud.  If you feel you are the victim of investment adviser fraud, please do not hesitate to email or call the The Berger Law Group at 1 (813) 207-0000 for a confidential, no obligation consultation.

SEC Says Investment Advisors Can Publish Third-Party Endorsements Online

The Securities and Exchange Commission says that investment advisers are allowed to publish comments from the public about their services on an independent social media website but that they must include both negative and positive reviews in unedited form. Also, the adviser must not have any affiliation with the site or the ability to influence it. The SEC made the announcement this week in a guidance update.

SEC rules typically don’t allow “testimonials.” The guidance, however, now says that Commission-registered advisers can direct potential clients to the reviews as long as certain conditions are met. The changes are in part because of the rapidly evolving social media market and the fact that this area is becoming a primary way that businesses communicate with prospective customers.

The regulator said that client reviews could only appear on review sites or independent social media. This means, for example, that they cannot be published on an adviser Facebook page. Also, an adviser cannot promise a customer anything in return for favorable reviews and employees are not allowed to write these testimonials.

Advisers cannot use client endorsements as part of their advertising materials. They can, however, publish these testimonials from an independent review site in a way that is “content-neutral,” such as alphabetically or chronologically.

Investment advisers that want to use Facebook, Twitter, or LinkedIn as part of their business will likely feel relief about the new guidance. The SEC’s guidance says that even a “fan” page of the adviser set up by an independent party would not be a violation of the testimonial rule. The regulator, however, warned against investment advisers including a hyperlink to the third party site on its own web pages.

Our investment adviser fraud law firm is here to help investors recoup their securities fraud losses.   If you feel you are the victim of Securities Fraud, please do not hesitate to email or call the The Berger Law Group at 1 (813) 207-0000 for a confidential, no obligation consultation.

Bank of America, Its Ex-CEO To Pay $25M to Settle Securities Case with NY Over Merrill Lynch Deal

Bank of America Corp. (BAC) and its ex-CEO Kenneth Lewis have consented to pay $25 million to settle the remaining big securities fraud case accusing them of misleading investors about the financial state of Merrill Lynch & Co. during the 2008 financial crisis. The New York securities case accuses the bank of deceiving shareholders by not disclosing Merrill’s increasing losses before the acquisition deal was closed or letting them know that the deal let Merrill give its officials billions of dollars in awards.

As part of the settlement, the bank will pay the state of New York $15 million and it will enhance its oversight. Lewis, meantime, has consented to pay $10 million and he cannot work at or serve as a director of any public company for three years.

Also named as a defendant in the securities lawsuit but who refused to settle is ex-Bank of America CFO Joe Price. NY Attorney General Eric Schneiderman intends to pursue a summary judgment against him, as well as ask a judge to reach a decision without a trial. Schneiderman reportedly wants Price permanently banned from serving as a director or working at a public company.

Previously, Lewis and other Bank of America directors agreed to pay $20 million to settle a securities fraud lawsuit by investors accusing them of not disclosing needed data about Merrill before the takeover was approved. In 2012, the bank consented to pay $2.43 billion to resolve a class-action securities case with investors accusing the institution and its officers of making misleading and false statements about Merrill’s financial health. Just two year before that Bank of America agreed to pay $150 million to settle with the SEC over charges that it did not disclose material data about Merrill.

Bank of America acquired Merrill in a $50 billion deal in September 2008, which is when Lehman Brothers Holdings went into bankruptcy. While the deal was at first considered good news, especially as the rest of Wall Street appeared to be in so much trouble, analysts started to wonder if Lewis paid too much. There was also Merrill’s losses right before the acquisition was finalized.

Because of investors’ fears about the financial crisis, share prices of Bank of America dropped significantly, causing the value of the deal to drop to about $19 billion by the time it actually was finalized in January 2009. Securities fraud lawsuits then followed.

Bank of America’s decisions to purchase Merrill and Countrywide Financial Corp. have since compelled it to put aside over $42 billion to cover lawsuit costs, reserves, and payouts. Many of the securities cases contend that Countrywide, once one of the biggest subprime mortgage lenders, sold faulty mortgage securities to investors leading up to the 2008 economic crisis.

In October, a jury found Bank of America liable for securities fraud over the mortgages that Countrywide originated as home loans that in then sold to Freddie Mac and Fannie Mae.

Please contact our stockbroker fraud lawyers if you suspect your investment losses are because of financial fraud.

Madoff Ponzi Scam: Five Ex-Aides Convicted of Securities Fraud, Victims to Recover $349 Million

In a new round of payments by Bernard L. Madoff Investment Securities LLC trustee Irving Picard, victims of the $17 billion Madoff Ponzi Scam are slated to receive around $349 million. The US Bankruptcy Court in New York must still approve the distribution, which would bring total payouts to $6 billion—34% of the principal lost.

A hearing for the distributions is scheduled in April. Payouts by Picard include up to $500,000 in advances each to victims that were made by the Securities Investor Protection Corp. Picard said that he hope to give victims full reimbursements.

One way he is doing this is by pursuing claims of approximately $3.5 billion from HSBC Holdings PlC (HSBA), UBS AG (UBS) and UniCredit SpA (UCG), which allegedly benefited from the multibillion-dollar Ponzi scam. In January, JPMorgan Chase & Co. (JPM) arrived at $325 million accord with Picard over allegations that the bank was negligent in not identifying the fraud and made money money from Madoff’s scam. Picard was able to recover $10 billion—59% of the principals lost by thousands of Madoff customers. The financial firm also consented to pay another $218 million to settle two related class actions filed with the help of Picard.

Madoff is currently serving a 150-year prison term over his Ponzi scam after he pleaded guilty to securities fraud. At least seven other people, including his brother Peter Madoff, also pleaded guilty to their involvement.

On Monday, a jury convicted 5 ex-Madoff employees of 31 counts of aiding his Ponzi scam. The defendants had argued that their ex-employer was the only one who knew what was really going on and that they had trusted in his honesty.

The government accused portfolio managers Annette Bongiorno and JoAnn Crupi and former operations director Daniel Bonventre of conspiring and lying to customers, falsifying records, and cheating on taxes while they worked at Bernard L. Madoff Investment Securities. Allegations against computer programmers George Perez and Jerome O’Hara included claims that they helped keep the Ponzi scam afloat by designing computer programs that would generate bogus records and trades.

Please contact our securities fraud lawyers if you suspect you were the victim of a Ponzi scam and sustained financial losses.  If you feel you are the victim of Securities Fraud, please do not hesitate to email or call the The Berger Law Group at 1 (813) 207-0000 for a confidential, no obligation consultation.

Credit Suisse Officials Accused of Telling Staff to Ignore Due Diligence Standards, Accept Questionable Loans Involving

According to documents filed by Credit Suisse (CS) in Massachusetts state court, reports The New York Times, top officials at the financial firm encouraged subordinates to ignore due diligence standards and approve questionable loans that ended up packaged into mortgage investments. Also included in the papers are finding that there were internal audits showing that activities at the mortgage unit got progressively worse in 2004 and the firm knew it could end up being exposed to higher risks as a result. The documents are part of a mortgage securities case in which Credit Suisse is a defendant.

In this mortgage securities lawsuit, brought nearly four years ago, Cambridge Place Investment Management is seeking $1.8 billion in damages on about 200 mortgage securities that it purchased from over a dozen banks leading up to the economic crisis. The asset management company has settled with most of the banks, with Credit Suisse among the few exceptions.

Issuing a statement, a spokesperson for Credit Suisse said that the firm felt confident that the evidence in its totality would demonstrate that its due diligence practices were dependable and healthy. However, the documents, once confidential, are causing some to wonder why the bank decided to combat rather than settle the different mortgage securities cases filed against it, including those submitted by the New York attorney general and the Federal Housing Finance Agency.

While the housing market was booming, Credit Suisse bundled about $203 billion of mortgages into securities that it then sold to private investors between 2005 and 2007. Now, Credit Suisse is under scrutiny. In 2013, ex-Credit Suisse mortgage trader Kareem Serageldin was found guilty of concealing over $100 million in mortgage bond losses at the firm. He did this by inflating the value of the bonds at the housing market failed.

In February, four of the banks’ leading executives testified in front of Congress about the firm’s role in helping US citizens conceal their money abroad so they wouldn’t have to pay taxes. Earlier this month, US senators blamed the Justice Department for obtaining just 238 of the 22,000 names of Americans with credit Suisse accounts.

Credit Suisse may have helped these account holders hide up to $10 million. Meantime, prosecutors and Credit Suisse are still working out a settlement that would compel the firm to give over more names of account holders and end the investigation. There will likely be a deferred prosecution deal after any charges that are filed and the bank is expected to pay a fine.

The Berger Law Group mortgage-backed securities lawyers represent investors with securities claims against banks and their financial representatives. Many investors sustained losses as a result of broker negligence—especially during the 2008 financial crisis. Our securities fraud law firm represents institutional and individual investors.

SEC Investigates Whether Currency Traders Distorted ETF and Options Prices, Manipulated Currency Markets

InvestmentNews is reporting that according to sources in the know, the Securities and Exchange Commission is trying to figure out whether currency traders at the biggest banks fixed benchmark foreign-exchange rates and distorted the process for exchange-traded funds and options.

The regulator, which oversees the options and ETFs involved with the rates, joins the ongoing US and European regulatory investigations into possible currency market manipulation. Also probing the matter is the Commodity Futures Trading Commission, the Federal Reserve, the US Justice Department, New York’s lead banking regulator, and the Office of the Comptroller of the Currency.

European and US authorities have talked to at least 12 banks as they look into allegations reported by Bloomberg News last year accusing dealers of saying they shared data about client orders to manipulate currency benchmark spot rates. Options and other derivatives comprise over 50% of the $5.3 trillion/day foreign exchange market, with the remaining consisting of spot transactions.

In London today, with the Bank of England’s governor, Mark J. Carney talked to lawmakers about concerns that banking officials might have known about and tolerated currency market manipulation. Independent directors are currently conducting a review. Carney testified in front of the Treasury Select Committee.

The bank now has tighter policies obligating employees to internally escalate any reports of improper conduct and speak about they knew of past wrongdoing. Carney said that the bank would establish a new deputy governor position accountable for banking and markets.
In the ongoing international probe into currency market manipulation allegations, 20 traders have already either been let go or placed on leave following internal probes at a number of large banks involved in foreign exchange trading, including JPMorgan Case (JPM), Barclays (BCS), and UBS (UBS). Deutsche Bank (DB) and Citigroup (C) have even terminated the employment of certain staffers. Authorities, however, haven’t accused any of the traders or their banks of doing anything wrong.

Our securities lawyers represent investors that have sustained losses because of exchange-traded fund fraud. Contact The Berger Law Group today.