September 16, 2014

Regulator Adjust Liquidity Rule for Big Banks

A new rule adopted by U.S. banks will require over thirty of the largest banks, including Citigroup (C) and JPMorgan Chase (JPM), to add another $100 billion in cash or cash-like investments to what they currently hold to make sure that the firms don’t run out of money in a crisis. Previous expectations were for the banks to raise around $200 billion to satisfy the rule’s requirements. However, regulators have since reduced that number.

The liquidity rule is supposed to protect the financial system and the economy during times of stress in the market so that the same issues that led to the failures of Bear Stearns and Lehman Brothers during the 2008 economic meltdown don’t happen. The regulation mandates that firms have enough safe assets to cover 100% of their net cash outflows for 30 days when there is economic turmoil. With the final liquidity ratio banks, with assets between $50 billion and $250 billion will calculate their positions monthly instead of daily. They have until January 1, 2016 to comply with the rule.

According to The Wall Street Journal, The Clearing House, a trade group that represents banks, has expressed approval of the changes to the final rule. U.S. officials have said the liquidity coverage ratio creates a good balance between economic growth and financial stability. For now, municipal debt securities will not be considered safe, “high-quality liquid assets” that can go toward a bank’s compliance. Meantime, however, some people have expressed worry that when the markets and the economy are good the rule could impede banks from investing or lending.

Both the Federal Deposit Insurance Corp and the Fed board unanimously approved the rule. Meantime, Fed officials are also developing three other rules. One targets the funding of banks for periods longer than thirty days. The other is a capital requirement that would make it more costly for banks to depend on volatile kinds of short-term funding. The third is a requirement for banks and other financial market participants to retain minimum amounts of collateral on the margin when short-term funding transactions are involved.

The SSEK Partners Group represents institutional investors and high net worth individual investors in recouping their securities fraud losses.

U.S. Regulators Tweak Final Liquidity Rule for Large Banks, The Wall Street Journal, September 3, 2014

U.S. senator criticizes muni treatment in bank liquidity rules, Reuters, September 16, 2014


More Blog Posts:
FINRA Fines Minneapolis Broker-Dealer $1M for Inadequate Supervision of Penny Stocks, Stockbroker Fraud Blog, September 13, 2014

Government Probe of Height Securities Into Possible Insider Trading Expands to Hedge Funds, Institutional Investor Securities Blog, September 10, 2014

Securities Lawsuit Accuses Deutsche Bank, JPMorgan Chase, Credit Suisse, and Other Banks of Manipulating ISDAfix, Institutional Investor Securities Blog, September 4, 2014

September 12, 2014

FINRA Headlines: SRO Considers Revised Broker Bonus Plan, To Discuss Potential Dark Pool Rules, May Instigate Civil Action Against Wells Fargo, &Warns Investors About Frontier Markets

FINRA to Revive Proposal Mandating that Brokers Disclose Recruitment Incentives
The Financial Industry Regulatory Authority has decided to revive a proposal that would obligate brokers to notify clients of any incentives they received for being recruited by another firm. The self-regulatory organization had withdrawn the rule in June after getting over 180 comment letters.

Now, however, according to the agenda for FINRA’s next board meeting, the SRO intends to look at a revised recruitment practices policy that would make the recruiting firms delineate their compensation packages to clients who are thinking of moving their assets from the a broker’s previous firm to the financial representative’s new firm.

Also during the meeting, the SRO intends to look into possible rule-making initiatives for alternative trading systems, including dark pools that would enhance their transparency.

Wells Fargo May Be Subject to FINRA Action Over Anti-Money Laundering Allegations
Recently, Wells Fargo Advisors received a Wells Notice warning of possible FINRA action over alleged anti-money laundering policy-related failures. The notice, issued in July, indicated that the SRO intended to recommend disciplinary action for the firm’s purported failure to put into place procedures and policies designed to achieve Bank Secrecy Act compliance. The company is also accused of not putting into place regulations allowing it to identify and report suspect activity.

The probe involves a specific Wells Fargo Advisors branch office. Also, in 2010, Wachovia Corp., which Wells Fargo had acquired, paid $160 million to resolve charges alleging that it had laundered drug money from Mexico.

FINRA Issues Alert Warning Investors About Frontier Markets
This week, the SRO put out an alert encouraging investors and their financial advisors to consider the pluses and minuses of investing in frontier markets, such as Argentina, Lebanon, Slovenia, Vietnam, and Nigeria. According to INRA's senior vice president for investor education, investors looking to make higher returns in frontier funds should know that greater risks are typically also involved.

“Frontier market” usually refers to nations that are less developed than emerging markets, such as China, Russia, and Brazil. Their regulatory, legal, and financial accounting infrastructures may be weaker, and there also may be political instability. The SRO is recommending that investors know the risks involved in each market, including currency and political risks, watch for changes in index components, take into consideration fees and costs, which tend to be higher with frontier funds than emerging market ones, and look at a fund’s performance history.

Our FINRA arbitration lawyers represent investors in getting their money back. We work with high net worth individuals and institutional clients. Contact The SSEK Partners Group today.

FINRA Issues New Investor Alert, Frontier Funds—Travel With Care, FINRA, September 11, 2014

Wells Fargo facing possible Finra action over anti-money-laundering failures, Wells Fargo, September 8, 2014

FINRA Mulls Revised Broker Bonus Plan
, ThinkAdvisor, September 12, 2014

Regulators Weighing New Rules for Private Trading Venues, Wall Street Journal, September 10, 2014


More Blog Posts:
Citigroup Global Markets Fined $1.85M By FINRA, Must Pay $638K Restitution Over Non-Convertible Preferred Securities Transaction Valuations, Stockbroker Fraud Blog, August 27, 2014

Securities Regulations News: SEC Looks to Delay Principal Trading Rules, FINRA Adds More Time to REIT Price Changes and 2nd Circuit Says Dodd-Frank’s Whistleblower Protections Don’t Apply Overseas, Stockbroker Fraud Blog, August 22, 2014

FINRA Claims Wedbush Securities Engaged in Supervisory and Anti-Money Laundering Violations, Institutional Investor Securities Blog, FINRA

September 10, 2014

Government Probe of Height Securities Into Possible Insider Trading Expands to Hedge Funds

The U.S. Securities and Exchange Commission is looking into whether anyone from the government illegally leaked to Wall Street traders that there was going to be a change in health-care policy. In 2013, The Wall Street Journal reported that just before the government announced news that was favorable to companies in regards to Medicare payments, health-insurance stocks rose. Investigators want to know whether insider trading was involved.

The stock rise, linked to the announcement that the Centers for Medicare and Medicaid Services would reverse its direction on intended funding cuts for private insurance plans, may have been spurred by an email sent by a Height Securities, a Washington-based policy research firm. The alert appears to have been partially based on information that an ex-congressional health-care aide, who is now lobbyist, gave to the firm.

Sources tell The WSJ that the SEC now possesses evidence of over 20 phone calls, instant messages, and emails between investors and Height Securities analysts from the time the email alert was issued to when the market closed. The exchanges involved the hedge funds Citadel LLC, Visium Asset Management LLC, Viking Global Investors LP, and Point72 Asset Management LP, which was previously called SAC Capital Advisors.

It wouldn’t necessarily have been illegal for investors and Height Securities employees to discuss the note. However, investors could be liable if they knew or should have known the information was obtained illegally—if, in fact, it was obtained illegally—which would violate insider trading rules.

For now, investigators have not said that any alleged wrongdoing occurred. They are, however, trying to find out whether Washington’s habit of issuing tips about policy changes for investors goes against insider trading laws.

The SEC can file civil charges if it can prove that an investor made a trade because of nonpublic, material data that was procured in a manner that violated a duty. Charges can also be brought if an investor acted recklessly in disregarding a “substantial risk” that there might be insider information involved in a trade.


Washington Trading Probe Broadens to Hedge Funds, The Wall Street Journal, September 10, 2014

SEC subpoenas ‘political intelligence’ firms in a case of leaked information, The Washington Post, May 1, 2013


More Blog Posts:

Mortgage Transfers to Nonbanks Get Closer Regulator Scrutiny, Stockbroker Fraud Blog, September 9, 2014

CFTC Notifies Justice Department of Criminal Rate Rigging, Looks at Possible Swaps Loophole, Institutional Investor Securities Blog, September 9, 2014

Securities Lawsuit Accuses Deutsche Bank, JPMorgan Chase, Credit Suisse, and Other Banks of Manipulating ISDAfix, Institutional Investor Securities Blog, September 2, 2014

September 9, 2014

CFTC Notifies Justice Department of Criminal Rate Rigging, Looks at Possible Swaps Loophole

The U.S. Commodities Trading Commission has notified the Department of Justice that there is evidence of criminal conduct related to the alleged manipulation of ISDAfix. The regulator had sent subpoenas to the biggest banks in the world in 2012 to find out if the benchmark, used to establish rates for trillions of dollars of financial products and track prices on interest-rate swaps, was rigged. The CFTC, however, can only file civil charges.

Benchmarks are integral to global finance. They help lenders determine what to charge borrowers and pension funds to figure out future obligations, among other uses. Regulators have been investigating claims that banks and brokers seeking to profit helped manipulate certain benchmarks, while investors lost out in the process.

Last week, the Alaska Electrical Pension Fund sued thirteen banks, including UBS (UBS), Citigroup (C), and Bank of America (BAC), and brokerage firm ICAP Plc (IAP) claiming they worked together to rig ISDAfix. UK securities regulators are also looking into the claims.

It was Bloomberg that first reported that CFTC had discovered evidence that big banks had told ICAP brokers to sell or buy as many interest-rate swaps as needed to manipulate ISDAfix to a predetermined level. This would allow banks to make money on swaptions with clients wanting to hedge against moves in interest rates. The ISDAfix rate establishes swaptions prices. However, the Dodd-Frank Act does not allow traders to intentionally intervene in transactions that establish settlement prices.

In other CFTC news, The Wall Street Journal is reporting that the regulator intends to more closely examine U.S. banks that are moving their trading operations abroad to purportedly avoid having to contend with the agency’s rules. Citigroup Inc., JPMorgan Chase and Co. (JPM), Goldman Sachs Group (GS), and Bank of America Corp. (BAC) are among the banks that have terminated their policy of guaranteeing certain swaps that were put out by foreign affiliates, which cuts their ties with the U.S. parent.

Swaps are contracts involving two parties that have consented to trade payments according to fluctuations in benchmarks, such as interest rates. Because of the banks actions, any liabilities for these swaps now fall only with the offshore outfit. However, without the connection to the U.S. parent, contracts won’t be subject to U.S. jurisdiction and the tighter rules established by the Dodd-Frank Act, which includes the requirement that contracts traded over the phone have to be publicly traded on U.S. electronic platforms.

Banks have said this new practice is good for the country because it moves trading activities that might be risky abroad. And while it was U.S. regulators that paved the way for this by mandating that swaps involving firms with no financial ties to the U.S. could get around the rules, now the CFTC is worried that this has created a loophole for banks that exchange swaps in jurisdictions that are not as regulated.

EX-CFTC Gary Gensler has called this the “London loophole,” which he has linked to JPMorgan’s $6 million London whale trading loss. The agency is coordinating its review efforts with the Office of the Comptroller of the Currency, the Securities and Exchange Commission, the Federal Deposit Insurance Corp., and the Federal Reserve.

Our defective swaps fraud lawyers represent investors in recouping their losses. Contact The SSEK Partners Group today.

CFTC Said to Alert Justice Department of Criminal Rate Rigging, Bloomberg, September 8, 2014

CFTC to Scrutinize Swaps Loophole, The Wall Street Journal, September 5, 2014

Agencies Seek Comment on Swap Margin Requirements, CFTC, September 3, 2014


More Blog Posts:
Fidelity Investments Settles Class Action Lawsuits Over 401(K) Plan for $12 million, Stockbroker Fraud Blog, September 5, 2014

Securities Lawsuit Accuses Deutsche Bank, JPMorgan Chase, Credit Suisse, and Other Banks of Manipulating ISDAfix, Institutional Investor Securities Blog, September 2, 2014

SEC Charges Immigration Attorneys with Securities Fraud Involving EB-5 Immigration investor Program, Stockbroker Fraud Blog, September 4, 2014

September 4, 2014

Securities Lawsuit Accuses Deutsche Bank, JPMorgan Chase, Credit Suisse, and Other Banks of Manipulating ISDAfix

The Alaska Electrical Pension Fund is suing several banks for allegedly conspiring to manipulate ISDAfix, which is the benchmark for establishing the rates for interest rate derivatives and other financial instruments in the $710 trillion derivatives market. The pension fund contends that the banks worked together to set the benchmark at artificial levels so that they could manipulate investor payments in the derivative. The Alaska fund says that this impacted financial instruments valued at trillions of dollars.

The defendants are:

Bank of America Corp. (BAC)
Deutsche Bank (DB),
• BNP Paribas SA (BNP)
Citigroup (C)
• Nomura Holdings Inc. (NMR)
Wells Fargo & Co. (WFC)
Credit Suisse (CS)
JPMorgan Chase & Co. (JPM)
• HSBC Holdings Plc. (HSBA)
Goldman Sachs Group (GS)
• Royal Bank of Scotland Group Plc (RBS)
• Barclays Plc (BARC)
UBS AG (UBS)

The banks are accused of using electronic chat rooms and other private means to communicate and colluding with one another by submitting the same rate quotes. The manipulation was allegedly intended to keep the ISDAfix rate “artificially low” until they would reverse its direction once the reference point was established.

The Alaska fund said the rigging was an attempt by the banks to make money on swaptions with clients looking to hedge against interest rate fluctuations. The defendants purportedly wanted to modify the swaps’ value because the ISDAfix rate determines other derivatives’ prices, which are used by firms, such as the fund. The rigging allegedly occurred via rapid trades just before the rate was established. ICAP, a British broker-dealer, was then compelled to delay the trades until the banks shifted the rate. Meantime, the brokerage firm, which is also a defendant in this lawsuit, would post a rate that did not accurately show the market activity.

The Alaska fund is adamant that the submission of identical numbers by the banks when they reported price quotes to establish ISDAfix could not have occurred without the financial institutions working together, which it believes occurred almost daily for over three years through 2012. It wants to represent every investor that participated in interest rate derivative transactions linked to ISDAfix between 01/06 through 01/14. The Alaska fund wants unspecified damages, which, under U.S. antitrust law, could be tripled.

Investors and companies utilize ISDAfix to price structured debt securities, commercial real estate mortgages, and other swap transactions. At The SSEK Partners Group, our securities lawyers represent pension funds and other institutional investors that have been the victim of financial fraud and are seeking to recoup their losses. Your case consultation with us is a free, no obligation session. We can help you determine whether you have grounds for a securities claim or lawsuit. If we decide to work together, legal fees would only come from any financial recovery.

An Alaska pension fund sues banks over rate manipulation allegations, Reuters, September 4, 2014

Barclays, BofA, Citigroup Sued for ISDAfix Manipulation, Bloomberg, September 4, 2014


More Blog Posts:
Lloyds Banking Group to Pay $370M Fine Over Libor Manipulation, Institutional Investor Securities Blog, July 29, 2014

Lloyds, Barclays, to Set Aside Hundreds of Millions of Dollars for Allegedly Mis-Selling to Victims, Stockbroker Fraud Blog, August 27, 2013

Texas Money Manager Sued by SEC and CFTC Over Alleged Forex Trading Scam, Stockbroker Fraud Blog, August 6, 2013

September 3, 2014

US Banks May Need $644B in Collateral Under Revised Swaps Rules

The revised rules for non-cleared swaps could require banks to have $644 billion in collateral to offset risks involved in swaps trading among themselves. The Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, and the Federal Reserve adopted a proposal for collateral requirements for swaps traded between firms, manufacturers, banks, and others this week. However, the Securities and Exchange Commission and the Commodity Futures Trading Commission still have to vote on the regulations.

The proposal seeks to lower risk and improve transparency by mandating that swaps be guaranteed at central clearinghouses and are traded on platforms. It also looks to limit the effect on global liquidity and smaller companies, as well as free end-users from requirements.

Ever since the 2008 economic crisis, when unregulated trades played a part in the financial meltdown, regulators have wanted to enhance oversight of the global swaps market. Under the proposed rules, banks would need to finance collateral and hold custody accounts that might not be as profitable as other uses they could engage in instead.

For swaps that aren’t cleared and are traded between sellers and buyers, regulators are proposing standards for mandating that banks and clients trade collateral to keep risks from rising. The OCC, six-foreign-bank branches, and the regulator for nine national banks would supervise approximately 80% of the swaps market that would be affected. These banks would likely have to contend with over $650 million in administrative expenses to get the system ramped up, as well as another $149 million a year to be in compliance.

The proposal regulation also would determine the amount of collateral required to lower market risks for swaps that are traded directly between Goldman Sachs Group Inc. (GS), JPMorgan Chose & Co. (JPM), BP Plc (PB/)—these would not be clearinghouse guaranteed-trades.

To assist end-users, regulators did pull back from an idea that would mandate for banks to compel non-financial firms to post collateral if they went over certain creditworthiness thresholds. Instead, banks will have to collect collateral based on their assessment of clients’ risks.

The revised proposal limits how much in assets can be tied up in collateral. For examples, firms would not be required to post the first $65 million of collateral spurred by trades. The Federal Reserve estimates that U.S. banks and clients would need around $30 billion in initial margin to offset trade risks.

Also under the revised proposal, firms wouldn’t be required to post the first $65 million of collateral that their trades prompt. They would have to broaden the kinds of assets eligible to be considered collateral.

If you suspect that you have been the victim of swaps securities fraud, contact The SSEK Partners Group today. Your initial case consultation is a no obligation, free consultation.

U.S. Regulators Tighten Swaps Collateral Regulations, Bloomberg, September 3, 2014

Swaps Collateral Rule Eases Impact on Nonfinancials
, CFO, September 4, 2014


More Blog Posts:
“Substituted Compliance” Should Regulate Cross-Border Swaps, Says SEC Chairman Elisse Walter, Institutional Investor Securities Blog, April 3, 2013

SEC May Propose New Swaps Margins & Title VII Rules, Institutional Investor Securities Blog, November 11, 2013

Ex-Morgan Stanley Trader to Settle SEC Unauthorized Swaps Trading Claims for $150,000, Stockbroker Fraud Blog, June 13, 2011

September 2, 2014

Texas-Based Halliburton Settles Oil Spill Lawsuit for $1.1B

Halliburton Co. (HAL) has consented to pay $1.1 billion to settle most of the lawsuits related to the massive 2010 oil spill in the Gulf of Mexico. A court must still approve the deal, which covers claims for punitive damages that were filed by the commercial fishing industry and others impacted by the spill.

BP P.c (BP) Spill victims accused Halliburton, which is based in Houston, Texas, of defective cementing on the Macondo well prior to the spill. Halliburton blamed BP Plc., which was operating the rig. This is Halliburton’s most significant payout related to the spill to date.

The oil spill occurred when there was an explosion on the Deepwater Horizon drilling rig. Eleven workers died and millions of oil barrels poured out into the gulf. Hundreds of lawsuits against Halliburton, BP, and Transocean Ltd, (RIG) which owned the rig ,soon followed.


Already, BP has paid over $28 billion in settlements. In 2013, Transocean paid $1.4 billion in settlements.

The Halliburton settlement will be put placed in a trust until all appeals are settled. However, the certain number of claimants have to agree to it or the company can cancel ideal. Still, the agreement will not resolve a number of lawsuits filed by certain U.S. states against Halliburton.

Meantime, the company, Transocean Ltd. and BP are defendants in an upcoming nonjury trial over whether they were at fault. They are accused of acting with gross negligence and setting back the development of deep-water resources by years. The decision could establish the scope of future payments for the three of them.

According to investigators, deficient cementing directly played a part in the well blowout. Halliburton has countered, saying the cement mix was made according to BP’s specifications and that the latter and Transocean were the ones who did not test the cement’s integrity. All three companies deny that they were grossly negligence.

If BP is found negligent, it could face up to $18 billion in penalties under the Clean Water Act. Anadarko Petroleum Corp. (APC), which owned a 25% stake in the well, could also be found liable under the act. In July, Anadarko offered to settle with the U.S. Justice Department for $90 million.

Our Texas securities fraud lawyers at The SSEK Partners Group represents high net worth individuals and institutional investors. Contact us today to ask for your free case consultation.

Halliburton to Settle Deepwater Horizon Claims for $1.1 Billion, The Wall Street Journal, September 2, 2014

Halliburton to pay $1.1 billion to settle gulf oil spill lawsuits, The Washington Post, September 2, 2014


More Blog Posts:
Supreme Court to Hear Texas-Based Halliburton’s Class Action Securities Fraud Case Again, Stockbroker Fraud Blog, November 18, 2013

U.S. Supreme Court Issues Ruling in Halliburton Case Involving Fraud-On-The-Market Theory, Class Action Securities Cases, Stockbroker Fraud Blog, June 28, 2014

Just Because Supreme Court’s Rulings in Amgen and Halliburton Give Defendants Less Tools to Beat Weak Class Certifications But Doesn’t Mean Plaintiffs Can Rest Easy, Institutional Investor Securities Blog, April 27, 2013

August 30, 2014

Bond Insurer Says Detroit Pension Debt Lawsuit is Fraudulent

Financial Guaranty Insurance Company is challenging the city of Detroit, Michigan’s efforts to invalidated $1.45 billion in borrowings that were supposed to resolve unfunded pension liabilities. Instead, they have been named as one of the reasons that the city went into Chapter 9 bankruptcy. The bond insurer is asking a bankruptcy judge to turn down the adversary complaint brought by Detroit to nullify debt that is pension-related.

The city maintains that the debt was issued by its former administration's mayor and violated state law. It contends that the debts, which were viewed as contract payments, were really concealed borrowings that improperly went beyond the municipal debt limits of the Home Rule City Act.

FGIC says that this stance is a switch for the city, which for years insisted that the obligations were valid. The bond insurer wants damages from Detroit and says the city deceived it so that FGIC agreed to guarantee the transactions.

If the city has its way, it would be able to repudiate the debts and give the payments to other creditors. FGIC would not be able to assert claims based on payouts on the defaulted certificates of participation (COPs).

The bond insurer says that the city is looking to put the burden of paying for the city’s pensionary duties on the entities that already paid for the transactions for pension funding. FGIC maintains that Detroit’s case has no merit.

The COPs were sold by the city to the public. Proceeds were given to retirement systems through shell companies: The Detroit Police and Fire Retirement Systems Service Corp. and Detroit General Retirement System Service Corp.

With its counterclaim, FGIC says that it either wants a declaration that the COPSs are valid or damages for misrepresentations it says Detroit made when pitching for insurance for the debt.

The city purportedly said that two law firms had said that the transactions were solid. Now, however, Detroit is claiming that a lot of the statements and representations it made related to the pension funding transactions were false. FGIC maintains that had it known this it wouldn’t have issued the polices. The insurer doesn’t believe the city should benefit from the policies, which received pristine ratings from credit rating agencies, while leaving FGIC with liability for the debt.

The SSEK Partners Group represents securities fraud victims in getting their money back. Contact our securities lawyers today.

FGIC Wants Damages In Detroit's Bid To Undo $1.5B Debt, Law360, August 14, 2014


Bond insurer claims fraud in Detroit pension debt lawsuit, Reuters, August 14, 2014

Home Rule City Act (PDF)


More Blog Posts:
Detroit Becomes Largest US City to File Bankruptcy Protection, Institutional Investor Securities Blog, July 18, 2013

Former LPL Financial Broker Must Pay Almost $2 Million For Bilking Clients, Including Elderly Investors, Stockbroker Fraud Blog, August 29, 2014

J.P. Morgan Targeted in Possible Cyber Attack, Institutional Investor Securities Blog, August 29, 2014

August 29, 2014

J.P. Morgan Targeted in Possible Cyber Attack

J.P. Morgan Chase & Co. (JPM) and up to four other banks were the victims of a possible cyber attack. According to the media, the financial institution is working with law enforcement authorities to figure out what happened.

Reuters reports that sources say the firm began its own probe after malicious software was found in its network, which indicates there had likely been a cyber attack. The Federal Bureau of Investigation is looking to see whether Russian hackers may have been involved. A possible motive for them could be retaliation for sanctions against Russia because of its role in the Ukraine military conflict. It is not unusual for Russian organized crime to target big financial institutions. Also looking into the matter is the U.S. Secret Service.

According to the Wall Street Journal, the hackers appear to have gotten in through the personal computer of employee and penetrated the bank’s inner systems. Gigabytes of customer and employee data may have been targeted. Authorities are trying to determine whether any data that might have been stolen has been used to move funds.

It was JPMorgan’s office in Hong Kong that was reportedly infected with the Zeus Trojan horse malware earlier this summer. The malware is capable of stealing banking credentials. Another of its offices, this one in India, was infected with the Sality malware, which can compromise Web servers and nab information. One bank that was hacked was reportedly targeted with “Zero-day,” a software flaw that makes it easy for hackers to take control of a computer via remote.

Banks have a duty to disclose when customer data has been breached. Often, companies can’t immediately tell what has been stolen or who was impacted. Should a theft arise as a result of a data breach, consumers have greater protections than corporations.

Unfortunately, cyber security has been a worry for large banks in the last last few years. In 2012, Iranian hackers targeted JPMorgan, Wells Fargo & Co. Inc. (WFC), PNC Financial Services Corp. (PNC), and U.S. Bancorp (USB) a distributed denial of service threats (DDoS) cyber attack. DDoS involves kicking websites offline by sending useless traffic to them.

In his latest yearly shareholder letter, JPMorgan CEO and Chairman James Dimon said that by the end of the year the firm would have spent over $250 million annually. He estimates that the firm will have had 1,000 people working on cyber security. Dimon cited the increase in cyber attacks globally as a reason for the heightened efforts.

Cyber crooks have also lately been targeting high-net worth individuals who have substantial accounts and other holdings. Brokerage firms, registered investment advisers, and wealth management companies are also under risk of cyber attacks.

Cybersecurity threats to financial firms on the upswing in 2014, InvestmentNews, January 10, 2014

FBI Probes Possible Hacking Incident at J.P. Morgan
, Wall Street Journal, August 28, 2014


More Blog Posts:
JPMorgan Will Pay $614M to US Government Over Mortgage Fraud Lawsuit, Stockbroker Fraud Blog, February 8, 2014

JP Morgan VP Barred from Securities Industry By FINRA for Insider Trading Scam, Stockbroker Fraud Blog, January 25, 2014

Christ Church Cathedral Sues JPMorgan Chase Over Proprietary Product Sales, Institutional Investor Securities Blog, August 13, 2014

August 28, 2014

MF Global Wants to Pay $925M to Creditors

Now that it has repaid the majority of its customers, MF Global Inc. wants the U.S. Bankruptcy Court in Manhattan to let it pay $295 million to its creditors. Most of the funds would go toward unsecured creditors, who would get a first distribution of approximately 20%. Holders of priority claims, as well as administrative and secured claims that were resolved, would get all of the money owed to them.

Giddens is also seeking to set up a reserve fund of over $400 for unresolved claims while placing a cap on how much each claim would get. MF Global has paid back the majority of its customers. Most of them got everything owed to them.

The brokerage firm and parent company MF Global Holdings Ltd. went into crisis when investors left after finding out that Jon S. Corzine, the CEO at the time and formerly a Goldman Sachs (GS) chairman and ex-governor of New Jersey, made big bets on European sovereign debt. Their departure created an approximately $1.6 billion shortfall in the accounts of customers that should have been kept separate from the firm’s money pool. The shortfall has since been recovered.

Meantime, a judge has ordered PricewaterhouseCoopers (PwC) to face a $1B lawsuit filed against it by MF Global’s bankruptcy plan administrator. The company is accused of giving the financial firm poor accounting advice that purportedly played a key role in MF Global Holdings Ltd. having to file for bankruptcy protection in 2011.

The district judge said PwC’s advice on “repurchase-to-maturity” transactions, which former MF Global head Jon Corzine used to purchase $6.3 billion of European sovereign debt, impacted the way the firm put into effect its strategy. The latter was a factor in the alleged losses. Marrero said that there is a plausible claim that PWC proximately caused harm to the firm.

In other MF Global news, Judge Martin Glenn of the U.S. Bankruptcy Court in Manhattan has decided that Corzine and other ex-executives of the firm can use more insurance money to cover their legal bills. He set a $55 million soft cap while stressing that he is not pleased about the costs.

Several of the ex-executives are dealing with regulatory proceedings and civil actions related to the brokerage firm’s bankruptcy.The former MF Global executives have already spent around $47.5 million in insurance funds for such bills.

The ex-executives want to be able to access the insurance money without having to get clearance from the court. Glenn has not ruled on this matter.

MF Global’s administrator and bankruptcy trustee had opposed the former executives’ request. Also, MF Global customers have said that some of the insurance money should go to them.

Contact our securities lawyers today.

MF Global Seeks Permission to Repay Creditors, The Wall Street Journal, August 26, 2014

PwC must face $1 billion lawsuit over MF Global advice, Reuters, August 27, 2014


More Blog Posts:
Regulators Also At Fault in MF Global Debacle, Says House Report, Stockbroker Blog Fraud, November 16, 2012

$1.2 Billion of MF Global Inc.’s Clients Money Still Missing, Stockbroker fraud Blog, December 10, 2011

Ex-MF Global CEO John Corzine Says Bankruptcy Trustee’s Bid to Join Investors’ Class Action Securities Litigation is Hurting His Defense, Institutional Investor Securities Blog, September 5, 2012

August 26, 2014

FINRA Claims Wedbush Securities Engaged in Supervisory and Anti-Money Laundering Violations

The Financial Industry Regulatory Authority has filed a disciplinary complaint against Wedbush Securities Inc. that accuses the firm of violations related to anti-money laundering and systemic supervision. The self-regulatory organization says that from January 2008 through August 2013, Wedbush did not put enough of its resources towards a supervisory systems, risk-management controls, and procedures. At the time, the firm was one of the largest market access providers, making millions of dollars from the business.

Because of purported violations, contends FINRA, market-access customers, including non-registered participants, were able to permeate U.S. exchanges and make thousands of trades that could have been manipulative and may have even involved spoofing and manipulative layering. The agency says that even though it was Wedbush’s duty to look out for suspect and possibility manipulative trades, the firm depended mostly on its market access customers to self-report such trading, as well as self-monitor.

FINRA contends hat even though Wedbush received notice about the risks involved in its market access business, the firm ‘s supervisory procedures and risk management controls were not reasonably designed to deal with these factors. Wedbush even established incentives for compensation to be based on the value of market customer access trading. FINRA says that Wedbush should have set up, kept up, and enforced satisfactory AML policies and procedures, and it purportedly failed to report suspect transactions.

The disciplinary complaint is the start of FIRNA's formal proceeding against Wedbush. However, the findings with regards to the allegations made have not been made yet. Now, Wedbush can respond to the complaint. To date, the firm remains adamant that its supervisory procedures and market-access risk procedures were designed to reasonably achieve compliance with regulatory requirements.

In June, the Securities and Exchange Commission filed similar charges against Wedbush, Jeffrey Bell, who is ex-EVP in charge of market access, and Christina Fillhart, a market access division Sr. VP. The Commission’s claims are over alleged violations that would have taken place between 7/11 and 1/13. Wedbush says the trading activities under examination in the SEC’s case didn’t lead to any losses. The firm is challenging the claims.

Please contact our securities lawyers if you suspect you were the victim of financial fraud.

Wedbush Securities Defends Market-Access Risk Management Practices, The Wall Street Journal, August 19, 2014

FINRA Charges Wedbush Securities for Systemic Market Access Violations, Anti-Money Laundering and Supervisory Deficiencies, FINRA, August 18, 2014


More Blog Posts:
SEC Sues Wedbush Securities and Dark Pool Operator Liquidnet Over Regulatory Violations, Institutional Investor Securities Blog, June 6, 2014

Goldman to Buy Back $3.15B in RMBS to Resolve FHFA Claims
, Stockbroker Fraud Blog, August 26, 2014

Bank of America to Pay $16.65 Billion to Settle DOJ Mortgage Probe, Institutional Investor Securities Blog, August 23, 2014

August 23, 2014

Bank of America to Pay $16.65 Billion to Settle DOJ Mortgage Probe

Bank of America (BAC) and the U.S. Department of Justice have arrived at a $16.65 billion mortgage settlement. Under the agreement, the lender will pay $9.65 billion to the DOJ, the SEC, other government agencies, and six states. The remaining $7 billion will be paid in the form of aid to struggling consumers. This is the largest settlement between the U.S. and just one company. It resolves claims not just against Bank of America, but also against its current and past subsidiaries, including Merrill Lynch and Countrywide Financial Corporation.

The numerous probes now resolved involve the packaging, sale, marketing, structuring, and issuance of collateralized debt obligations and residential mortgage-backed securities, as well as mortgage loan origination and underwriting practices. As part of the settlement, the bank issued a statement of facts acknowledging that it did not disclose key information to investors about the quality of billions of dollars of RMBS that it sold to them. When the securities failed, investors, including financial institutions that were federally insured, lost billions of dollars. Bank of America acknowledges that it originated mortgage loans that were high-risk and made misrepresentations about the loans to the Federal Housing Administration, Freddie Mac, and Fannie Mae.

Merrill Lynch and Countrywide made a lot of the loans at issue before Bank of America purchased both entities in 2008. However, the government also had a problem with Bank of America’s own mortgage securities, as well as the latter's attempts to circumvent internal underwriting standards by revising the financial data of applicants.

The bank is just one of several lenders accused of knowingly giving credit to borrowers who couldn’t afford the loans and then selling the mortgages to investors. When borrowers defaulted on the loans, they went into foreclosure. This cost investors big time.

As part of the settlement, the bank will pay $5 billion to settle the DOJ claims under the Financial Institutions Reform, Recovery and Enforcement Act. The deal also settles securities claims by the Federal Deposit Insurance Corporation, the states of Illinois, California, Kentucky, Delaware, Maryland, New York, and the U.S. Attorney’s Office for the Western District of North Carolina. The relief to consumers will include principal reduction loan modifications, new loans to credit worthy borrowers, money to help communities still recouping from the financial crisis, and the financing of affordable rental housing.

Meantime, prosecutors in Los Angeles, California are getting ready to file civil charges against former countrywide CEO Angelo Mozilo and other ex-Countrywide executives. The DOJ dropped its criminal probe of Mozilo three years ago. Still, others have sought to hold him responsible for his involvement in the way the mortgages were handled. In 2010 the SEC ordered Mozilo to pay $67.5 million to settle allegations that he misled Countrywide investors. The deal allowed him to avoid going to trial on civil fraud and insider trading charges. Now, also invoking FIRREA, the U.S. attorney’s office in LA is getting ready to sue Mozilo and others.

Bank of America settles mortgage probes for $16.65 billion, Reuters, August 21, 2014

Deal Done: Bank of America, Justice sign $16.7 billion deal over bad mortgages, BizJournals, August 21, 2014

Countrywide CEO Mozilo settles with SEC for $67.5M, The Christian Science Monitor, The Christian Science Monitor/AP, October 15, 2010

Countrywide’s Mozilo Said to Face U.S. Suit Over Loans, Bloomberg, August 20, 2014


More Blog Posts:

Bank of America, Its Ex-CEO To Pay $25M to Settle Securities Case with NY Over Merrill Lynch Deal, Stockbroker Fraud Blog, March 31, 2014

Bank of America Settles Mortgage Bond Claims with FHFA for $9.3B
, Institutional Investor Securities Blog, March 29, 2014

Bank of America’s $8.5B Mortgage Bond Settlement Gets Court Approval, Institutional Investor Securities Blog, January 31, 2014

Contact Us

(800) 259-9010

Our Other Blog

Recent Entries