Posts tagged 'SEC'

What do you want? The Volcker Rule! When do you want it? Last summer when you said we’d have it!

It’s Friday quiz time! Ready? Here goes:

  • Take a couple of clued-up Brooklynites in their 30s.
  • Add section §619 of Dodd-Frank, aka the “Volcker Rule”.
  • Now throw in a lawyer.

What do you get?

[Hint: It's America.] Read more

The SEC charges the (Chinese) Big Four

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“We’re from the SEC. Now give us all the money.”

Just make sure you check their badges first. SEC people carry badges, right? …

SEC staff is issuing this updated Investor Alert because we are aware of continuing fraudulent solicitations that purport to be affiliated with or sponsored by the Securities and Exchange Commission, Commission staff, as well as particular Commissioners (including a recent bogus email scam using the name of Commissioner Daniel Gallagher). Read more

Schapiro steps down

After nearly four years in office, SEC Chairman Mary L. Schapiro today announced that she will step down on Dec. 14, 2012.

A big announcement today from the SEC. Read more

SEC v CR Intrinsic

“This is an insider trading case where affiliated investment advisers and their hedge funds made over $276m in illegal profits…”

Click for the full SEC civil complaint against CR Intrinsic, hedge fund manager Mathew Martoma and neurology professor Dr Sidney Gilman: Read more

Barclays’ new investigations

What do you get when you reveal two new regulatory investigations as part of your slightly disappointing quarterly results? Answer: a 4.4 per cent drop in share price, as Barclays is finding out on Wednesday morning.

From the FT (our emphasis):

Barclays has warned investors that it is facing another fine in the US, this time over its conduct in power trading.

It has also disclosed that it is under investigation by the US Department of Justice and the US Securities and Exchange Commission over whether its relationships with certain third parties breached corruption rules.

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On those alleged Yorkvillians

Since the end of last year, the SEC has been using a proprietary risk analytics system called Aberrational Performance Inquiry. Basically, the plan has been to spot fund managers and hedgies whose outperformance points to potential fraud – the sort of fraud they missed in the case of Bernie Madoff.

Performance that is flagged as inconsistent with a fund’s investment strategy or other benchmarks forms a basis for further investigation and scrutiny by the SEC. Read more

Whistleblowing incentives just got international

This is a guest post from Clive Howard, a senior principal lawyer in RJW Slater & Gordon’s employment department. His high-profile cases include acting for Paul Moore in a whistleblowing case against HBOS, and Brodie Clark, former head of the UK Border Force, against the Home Office.

Whistleblowing incentives just got international Read more

MMFs still fleeing eastwards

The rivals rely on each other in potentially unstable ways. The US Treasury estimates that 105 money market funds with total assets of $1tn could fail in the same way as Reserve Primary if any of their top 20 counterparties defaulted. The latter include many European banks – 30 per cent of the assets of money market prime funds are European bank debt.

That’s from John Gapper’s column on the failure of the Securities and Exchange Commission to tame the $2.6tn US money market fund industry. Cardiff also has a few words to say on the topicRead more

US money market fund reform goes down

Well, it looks like all the lobbying paid off for the money market fund industry and its backers.

Mary Schapiro, chairman of the Securities and Exchange Commission, has announced that her proposal to reform the industry would not go to a vote because three of the SEC’s five commissioners had already announced their opposition to it. (Two were already expected. Until today, the position of Luis Aguilar remained unknown.) Read more

Falcone, the SEC complaints

Click the image for the full docs brought by the SEC against Harbinger Capital and Phil Falcone — containing the tax loan allegation, the client redemption restriction allegation, and the MAAX bond short squeeze allegation…

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The SEC’s Pink Sheet attack

On the day the UK said goodbye to its own little unregulated shop for penny dreadfuls, the SEC has unleashed an altogether more dramatic crackdown on the US equivalent – so-called Pink Sheet stocks traded over the counter.

Washington, D.C., May 14, 2012 — The Securities and Exchange Commission today suspended trading in the securities of 379 dormant companies before they could be hijacked by fraudsters and used to harm investors through reverse mergers or pump-and-dump schemes. The trading suspension marks the most companies ever suspended in a single day by the agency as it ramps up its crackdown against fraud involving microcap shell companies that are dormant and delinquent in their public disclosures.

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SEC charges Egan-Jones

Washington, D.C., April 24, 2012 — The Securities and Exchange Commission today announced charges against Egan-Jones Ratings Company (EJR) and its owner and president Sean Egan for material misrepresentations and omissions in the company’s July 2008 application to register as a Nationally Recognized Statistical Rating Organization (NRSRO) for issuers of asset-backed securities (ABS) and government securities. EJR and Egan also are charged with material misrepresentations in other submissions furnished to the SEC and violations of record-keeping and conflict-of-interest provisions governing NRSROs.

Full SEC Order here. The regulator has alleged that Egan-Jones made a material misrepresentation in claiming to have rated government debt and ABS — and that it hadn’t — when making its NRSRO application, and that conflicts of interest were present: Read more

Huddle, huddle, toil and (legal) trouble

From the SEC on Thursday:

The Securities and Exchange Commission (“Commission”) deems it appropriate and in the public interest that public administrative and cease-and-desist proceedings be, and hereby are, instituted pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934 (“Exchange Act”) against Goldman, Sachs & Co. (“Respondent” or “Goldman”).

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Be very, very quiet – we’re hunting AIGs

As part of the Dodd-Frank Act, various types of participants in derivatives markets need to be defined. According to the jersey one ultimately gets as a trader of interest rate swaps, credit default swaps and so on, different regulations may apply.

(Where “security-based”, regulator equals SEC, otherwise CFTC.) Read more

Probably not cool: getting inside info via your recovery buddy

Dear readers,

Okay, seems some of you didn’t especially like Paul’s take on the FSA’s “charades” inside information case on Tuesday. Well the SEC has laid charges over an alleged insider trading case that we can all get behind (if it turns out to be correct, of course). Read more

SEC scrutinising private equity

The SEC has begun a broad examination of the private equity industry, says NYT DealBook, citing two people with direct knowledge of the matter. The regulator’s enforcement unit sent a letter late last year to several private equity funds as part of what it called an “informal inquiry” into the industry, according to the sources, but the blog said it was not clear which firms received the letter. While the SEC. emphasised that the request should not be construed as an indication that it suspected any wrongdoing, its goal in gathering information was to investigate possible violations of securities laws, the sources said. The way private equity firms value their investments and report performance was said to be one aspect of the investigation.

Editorialising, SEC-style

Maybe we are making too much of this, but when the SEC is on its 30th or so figurative lynching related to the Galleon rat case, does it really need to juice up its press releases in the hope of a tabloid pickup?


American swap regulation: a class apart

Take a moment to imagine what it must be like to be an American regulator. There are plenty to imagine being: the OCC, the Fed, the CFTC, SEC, FDIC, and that thrift one, until it subsumed into the OCC. Got one?

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Bighead leaves SEC


While I will miss doing this important work, I am gratified knowing that nearly every aspect of the SEC has been significantly improved in the four years since I was named Inspector General.

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Hedgies’ next target: rule 502(c), Regulation D

Hedge fund lobbyists are pushing the SEC to repeal the Depression-era regulation which officially prohibits funds from all general advertising and solicitation, the FT reports. Funds have long complained that rule 502(c) of Regulation D makes it too difficult to find out whether managers are providing enough information for their clients, or even to discover new funds. Even the largest funds have little more than basic contact information on their websites as a consequence of the rule. Rule 502 emerged after the 1929 Wall Street Crash in order to prevent private funds taking advantage of “unsuitable” investors. However, rules in the US Investment Company Act have since restricted funds to taking money only from “qualified purchasers”, leading lobbyists to argue that the older rule has become redundant.

Hedge funds lobby against SEC secrecy rule

The FT says fund lobbyists have petitioned the US Securities and Exchange Commission to repeal the rule that lies behind one of the industry’s most notorious traits: its secrecy. The Managed Funds Association, which counts George Soros, John Paulson and Louis Bacon as members of its founding council, has implored the SEC to eliminate rule 502(c) of Regulation D – an arcane piece of Depression-era legislation that defines how the modern hedge fund industry operates. The rule officially prohibits all general advertising and solicitation by hedge funds. But it is so broadly defined that it means most do not communicate with unqualified outsiders, especially the press, at all.

SEC wants more information on European exposure

The Securities and Exchange Commission has warned that US financial institutions’ disclosures have been “inconsistent in both substance and presentation”, specifically regarding sovereign debt exposure and financial and non-financial debt exposure, reports the WSJ. In guidance released on Friday, the SEC asked banks to consider providing a breakdown of exposure to each type of debt, by country. Regulators also are seeking information on how gross exposures are hedged through instruments such as credit-default swaps, as well as a discussion of “the circumstances under which losses may not be covered by purchased credit protection”, says the newspaper. The guidance is not binding.

Fortress CEO takes leave after being named in suit

Fortress Investment Group’s CEO Daniel Mudd has announced that he is taking a leave of absence from the hedge fund, the WSJ reports. This comes after being named as a defendant in a civil securities-fraud lawsuit brought by the SEC last Friday, with respect to his prior role as the CEO of Fannie Mae. The suit alleges that risks that the firm was taking on, with respect to mortgage holdings, were not accurately disclosed to investors. While representatives of Fortress have stated that the suit doesn’t affect their business, there was concern among executives that it could alienate investors.

SEC charges GSK unit with fraud

The US Securities and Exchange Commission has charged a subsidiary of GlaxoSmithKline and its former chief executive with defrauding employees and shareholders out of more than $100m by buying back stock from them at undervalued prices when the unit was a private company, the FT reports. The SEC on Monday alleged that Charles Stiefel and Stiefel Laboratories, which was bought by GSK in 2009, failed to tell shareholders and employees the true value of Stiefel’s stock when the company used low valuations for buy-backs from 2006 to 2009. An attorney representing Mr Stiefel could not immediately be reached for comment. GSK said it intends to “vigorously” defend itself against the charges. NYT DealBook says the civil action against Mr Stiefel, filed in federal court in Miami, is unusual because it involves privately held stock, rather than publicly traded shares.

SEC presses companies on Syria and Iran links

The SEC has asked companies including Sony, Caterpillar and American Express to provide more disclosure about their business activities in Syria, Iran, Sudan and Cuba, amid growing Congressional scrutiny, the FT says. The US Congress is focusing on a loophole that allows some US subsidiaries to operate in countries where sanctions are in place. Caterpillar told the SEC in May that non-US subsidiaries “have sold and continue to sell” products to Syria, estimating that its sales there totalled $600,000 in the first quarter. All of the companies said in their filings that they did not think a reasonable investor would deem the amounts sold to these countries a material risk, although the SEC is considering requiring even non-material ties to Syria, Iran or Sudan to be disclosed.

SEC demands companies reveal Iran, Syria links

At least a dozen US-listed companies have been told by securities regulators to disclose business activity in and with Syria, Iran and others deemed “state sponsors’’ of terror by the state department, reports the FT. The US Securities and Exchange Commission has written to several companies in the past few months asking why they had not disclosed business dealings in Syria, Iran, Sudan and Cuba. The inquiries are part of SEC reviews of companies’ investment risks to security holders. Sony, Caterpillar, American Express, Aecom Technology, Iridex, and Veolia Environnement are among the companies that received letters from the SEC’s corporate finance division. Their responses show how sales have shrivelled with tighter international sanctions and how some companies, such as Sony, have found middle-men in Dubai and other countries to keep limited supply lines open.


SEC Confidential: investors allowed to conceal stakes

Fifty money managers ranging from Warren Buffett to Carl Icahn have used exemptions from the SEC to avoid disclosing large investments in companies this year, affecting 154 quarterly filings, the WSJ reports. While the SEC usually requires that managers owning more than $100m disclose acquired stakes in quarterly filings, this can be waived if the disclosure would cause “substantial harm” to their competitiveness. Other investors argue that the SEC is not doing enough to explain why it gives the exemptions. Warren Buffett’s recent disclosure of a $10.7bn stake in IBM has reignited debate over the practice.

All Know Holdings vs SEC

Securities and Exchange Commission Civil Action No 11 CV 8605.

Presented without comment, obv. Read more

Don’t offer this man a Rakoff

Jed Rakoff is quite the hero. A New York District judge, he has done what the rest of us would love to do, and busted a cosy deal between bankers and their regulators. In early 2007, just when everything was starting to slide, the caring, sharing boys at Citigroup assembled a $1bn fund of, ahem, less-than-prime mortgage-backed securities. As Judge Rakoff explained.

That allowed [the bank] to dump some dubious assets on misinformed investors. This was accomplished by Citigroup’s  misrepresenting that the fund’s assets were attractive investments rigorously selected by an independent investment adviser, whereas in fact Citigroup had arranged to include in the portfolio a substantial percentage of negative projected assets and had then taken a short position in those very assets it had helped select.

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