Articles Posted in UBS

 Nomura Home Equity Loan, Inc. and Nomura Asset Acceptance Corporation have agreed to jointly pay over $3M to settle allegations that they engaged in the sale of faulty residential mortgage-backed securities (RMBS) to the Western Corporate Federal Credit Union and the U.S. Central Federal Credit Union. The National Credit Union Administration brought the RMBS fraud case on behalf of the  two corporate credit unions.
 
It was in 2011 that the NCUA Board, while serving as liquidating agent for both financial institutions, brought the claims against the Nomura entities. The RMBS lawsuit was brought in federal district courts in Kansas and California.
The $3M settlement dismisses NCUA’s pending cases against the two firms. By settling, neither firm is denying or admitting to the alleged wrongdoing.

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Bloomberg reports that according to sources, Matt Gardiner, a former UBS Group AG (UBS) trader who was part of the instant-messaging group the federal government identified when obtaining guilty pleas from Barclays PLC (BARC), Royal Bank of Scotland (RBS), UBS, Citigroup (C), and JPMorgan Chase & Co.(JPM) over currency-rate manipulation, is working with prosecutors to pursue certain individuals over the rigging allegations. The Cartel chat room to which Gardiner belonged existed from at least 12/07 through 1/013.

According to prosecutors, traders who were part of the chat room communicated in code to share information about orders made by clients and to coordinate euro-dollar trades so that they could make more money. Having someone like Gardiner working with the government could help prosecutors understand what the traders were doing together. It’s unknown at this time whether his cooperation is part of a prosecution deal he may have reached.

His former firm, UBS, was granted immunity from antitrust charges because it was the first financial institution to report the market misconduct. Meantime, the banks whose traders were in the Cartel have turned over chat transcripts to the U.S. Department of Justice and foreign authorities. A lot of the chats occurred right before daily fixes, which is the short period of time when data providers are able to get a picture of trading in order to establish daily rates.

A FINRA arbitration panel has ordered Wells Fargo Advisors LLC (WFC) to pay UBS Financial Services Inc. $1.1M to resolve a claim involving financial adviser David Kinnear who went to work for the Wells Fargo & Co. brokerage arm after leaving the UBS Group AG (UBS) unit. UBS claims that Kinnear stole thousands of client and business records, as well as proprietary information, after resigning from the firm.

The Wall Street Journal reports that according to a source, Kinnear downloaded the data and distributed it to clients. UBS contends that the compensation Kinnear received at Wells Fargo was related to his ability to successfully bring UBS clients with him. UBS also claims that Kinnear owes it promissory notes.

Wells Fargo denies UBS’s allegations. It submitted a counterclaim accusing the firm of unfair completion, including preventing clients from moving from UBS to Wells Forgo.

Under the Protocol for Broker Recruiting, brokers are only allowed to bring the names and contact information of clients that they serviced while having worked at a firm when moving to another brokerage firm.

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Seven big banks have resolved a U.S. lawsuit accusing them of rigging ISDAFix rates, which is the benchmark for appraising interest rate derivatives, structured debt securities, and commercial real estate mortgages, for $324M. The banks that have reached a settlement are:

· Barclays PLS (BCS) for $30M (In 2015, Barclays paid $115M to U.S. Commodity Futures Trading Commission to resolve charges of ISDAfix rigging.)
· Bank of America Corp. (BAC) for $50M
· Credit Suisse Group AG (CS) for $50M
· Citigroup Inc. (C) for $42M
· JPMorgan Chase & Co. (JPM) for $52M
· Deutsche Bank AG (DB) for $50M
· Royal Bank of Scotland Group plc (RBS) for $50M

The deal must be approved by a Manhattan federal court. The defendants had sought to have the case dismissed, but US District Judge Jesse Furman in Manhattan refused their request. stating that the case raised “plausible allegations” that the defendants were involved in a conspiracy together.

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UBS (UBS) is on trial in Manhattan federal court. According to Reuters, the civil case was brought by UBS Bancorp (USB) for three trusts. The trusts claim that in their contract with the Swiss banking giant, UBS agreed that the mortgages backing the securities would satisfy certain standards. However, they contend, when it became clear the mortgages were faulty, UBS would not repurchase them. Now, the trusts want back the $2.1B that they lost.

UBS’s legal defense team argued that the lawyers of the trust are assessing the loans from the perspective of “hindsight bias.” They want U.S. District Judge Kevin Catel to evaluate whether when the loans were considered defective at the time that they were issued in 2006 and 2007.

According to the mortgage-backed securities lawsuit, over 17,000 loans were pooled into three trusts, which issued securities granting investors the right to borrower-made payments. The problem was, contend the plaintiffs, over 9,600 of the loans were defective, primarily because of borrower fraud or because they did not meet underwriting requirements. The trusts believe that UBS did not properly vet the loans, which it obtained through shady lenders that would go on to fail.

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A judge has ruled that the $1B mortgage fraud case brought against Credit Suisse (CS) unit DLJ Mortgage Capital can be resubmitted. This ruling reiterated U.S. Bank National Association’s contention that a six-year statute of limitations did not bar its claims, which it brought as a trustee.

In 2015, New York Supreme Court Judge Marcy S. Friedman had dismissed the case because the trustee had not made a repurchase demand of Ameriquest, the loan’s originator, according to the pre-suit requirement. However, she rejected DLJ’s claim that because these conditions were not met prior to the statute of limitations they were time barred. Friedman said that if U.S. National were to refile the case, then the issue of the repurchase demand’s impact on the trustee’s ability to file litigation in this matter would be determined on a “fully developed record.”

U.S. National sued DLJ Mortgage Capital in 2013, accusing the securitizer of not complying with its duty to buyback loans that breached of a number of warranties and representations that DLJ made in a contract presiding over the sale of 4,534 residential mortgage loans. The loans, originated by Ameriquest Mortgage Co., were securitized by the trust, sold by DLJ to investors, and came with multiple assurances about their quality. Such guarantees were supposed to place any risks from faulty mortgages with the originator.

The plaintiff contends that rather than construct a loan pool with quality mortgages, Ameriquest, which is no longer in operation, used faulty loans. As a result, contends U.S. National, the trust lost $227M.

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US Supreme Court Turns Down Banks’ Bid that It Examine FDIC Case
The U.S. Supreme Court has decided not to review the 2015 ruling made by the Fifth Circuit Court of Appeals that revived the Federal Deposit Insurance Corporation’s (FDIC) securities case accusing Goldman Sachs (GS), Royal Bank of Scotland (RBS), and Deutsche Bank (DB) of misrepresenting the quality of securities it sold to Guaranty Bank, which later failed. The FDIC took the Texas bank into receivership in 2009 and sued the banks in 2014.

A judge in Austin, Tx. dismissed the case, citing a state law requiring that lawsuits be brought within five years of a mortgage-backed security’s sale. The complaint had been filed at least 9 years after the MBSs were sold.

Last August, the Fifth Circuit cited a 1989 federal law and revived the case. The appeals court said that the FDIC is allowed an extended time period to file complaints for institutions that it insures and have gone into receivership. Circuit Judge Carolyn Dineen King wrote that it was this federal law that made it possible for the FDIC to concentrate on dealing with bank failures rather than worrying about possible statutes and their limitations.

RBS, Goldman, and Deutsche then filed their petitioned with the U.S. Supreme Court. The banks pointed to a past holding by the highest court that barred other courts from preempting state law unless the U.S. Congress has made such a preemption clear.

Credit Suisse Resolves MBS Case for $29M
Credit Suisse (CS) must pay $29M to settle the National Credit Union Administration’s claim that it sold bad mortgage-backed-securities to credit unions. NCUA’s lawsuit revolves around MBSs that UBS (UBS) underwrote and sold to Members United Corporate Federal Credit Union and the Southwest Corporate Federal Credit Union for over $228M from ’06 to ’07. Both credit unions have since failed.

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UBS to Pay $33M to NCUA Related to MBS Sold to Credit Unions
UBS AG (UBS) will pay $33 million to resolve a lawsuit filed by the National Credit Union Administration accusing the bank of selling toxic mortgage-backed securities to credit unions. The case revolves around MBS that were underwritten and sold by UBS. The securities were purchased by Members United Corporate Federal Credit Union and Southwest Corporate Federal Credit Union for almost $432.4M from ’06 to ’07.

NCUA alleged that offering documents for the securities sold included untrue statements claiming that the loans were originated in a manner that abided by underwriting guidelines when, in fact, the loans’ originators had “systematically abandoned” said guidelines. The false statements made the securities riskier than what was represented to the credit unions. Eventually, the MBS failed, resulting in substantial losses.

To date, NUCA has recovered almost $2.46B from banks over MBS sales that occurred prior to the 2008 financial crisis.

US, UK Regulators May Pursue More Banks Over Libor
According to the The Wall Street Journal, the US Commodity Futures Trading Commission and the UK Financial Conduct Authority are working on pressing the last civil charges against a number of banks for alleged rigging of the London interbank offered rate. LIBOR is the benchmark that underpins interest rates on trillions of dollars of financial contracts around the globe.

Sources tell WSJ that the firms under scrutiny include Citigroup (C), J.P. Morgan Chase & Co (JPM)., and HSBC Holdings (HSBC)—although the FCA has already dismissed its probe into J.P. Morgan.

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U.S. Senator Elizabeth Warren has issued a report in which she claims that the U.S. Securities and Exchange Commission and the U.S. Department of Justice have been doing a poor job on enforcement when it comes to going after companies and individuals for corporate crimes.

In Rigged Justice: How Weak Enforcement Lets Corporate Offenders off Easy, Warren takes a closer look at what she describes as the 20 worst federal enforcement failures of 2015. The Senator noted that that when federal agencies caught large companies in illegal acts, they failed to take substantial action against them. Instead, companies were fined for sums that in some cases could be written off as tax deductions.

Some of the 2015 cases that Warren Mentions:
• Standard & Poor’s consented to pay $1.375B to the DOJ, DC, and 19 states to resolve charges that it bilked investors by putting out inflated ratings misrepresenting the actual risks involved in collateral debt obligations and residential mortgage-backed securities. Warren Points out that the amount the credit rater paid is less than one-sixth of the fine the government and states had sought against it, and at S & P did not have to admit wrongdoing. No individuals were prosecuted in this case.

Citigroup (C), Barclays (BARC), JPMorgan Chase (JPM), Royal Bank of Scotland (RBS), and UBS AG (UBS) paid the DOJ $5.6B to resolve claims that their traders colluded together to rig exchange rates. As a result, the firms made billions of dollars while investors and clients suffered. While admissions of guilt were sought, no individuals were prosecuted. Also, the SEC gave the banks waivers so they wouldn’t have to deal with collateral damages from pleading guilty.

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The state of Virginia has arrived at a $63M settlement with 11 banks to resolve claims that they bilked the state’s retirement system by purportedly misrepresenting the quality of residential mortgage-backed securities in the run up to the 2008 financial crisis. The resolution settles all claims against the financial firms accused of causing financial harm to the Virginia Retirement system and its taxpayers and pensioners.

The banks involved will pay the following amounts respectively to settle, including:

· UBS Securities for $850K
· Bank of America’s Merrill Lynch, Pierce, Fenner & Smith, Inc. and Countrywide Securities Corp. (BAC) for $19.5M
· Credit Suisse Securities (CS) for $1.2M
· RBS Securities (RBS) for $10M
· HSBC Securities (HSBC) For $2.5M
· Barclays Capital (BARC) for $9M
· Goldman Sachs & Co. (GS) for $2.9M
· Morgan Stanley & Co. (MS) for $6.9M
· Citigroup Global Markets (C) for $4.8M
· Deutsche Bank Securities (DB) for $5.6M

The state lost $383M over RMBS it purchased from 2004 to before 2010 and it had to sell most of these securities, which were toxic and constructed on junk mortgages. The settlement is the largest non-healthcare related financial recovery in a case involving Virginia Fraud Against Taxpayers Act-related violations. However, according to the state’s Attorney General Mark Herring, even though the firm is settling it is not denying or admitting liability.

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