Articles Posted in Royal Bank of Scotland

Meyers Associates is Fined by FINRA Over Misleading Sales Literature
The Financial Industry Regulatory Authority is ordering Meyers Associates, now called Windsor Street Capital, to pay a $75K fine for a number of securities violations, including sending sales literature that was misleading via email and not supervising books and records preparations. The firm’s principal, Bruce Meyers, is now barred from working as a firm supervisor or principal.

According to the regulator’s National Adjudicatory Council, Meyers Association has been named in 16 disciplinary actions this century. It paid about $390K in sanctions for different issues, including issuing false statements, supervisory deficiencies, omissions related to a securities offering, improper review of emails, inadequate maintenance of books and records, and not reporting customer complaints in a timely manner. Last year, the US Securities and Exchange Commission turned down Meyers’ appeal of a FINRA securities ruling that prevented him from serving as firm CEO.

Ex-RBS Trader Banned and Fined £250,000 for Manipulating Libor
The UK’s Financial Conduct Authority has banned ex-Royal Bank of Scotland Group (RBS) trader Neil Danzinger from the securities industry and ordered him to pay a $338,000 over allegations that he rigged the London interbank offered rate (Libor). According to the regulator, Danziger, a former RBS interest rate derivatives trader, “routinely” asked RBS Libor submitters to modify the rate to benefit his trading positions. He also allegedly factored in certain trading positions when serving as a submitter and on more than one occasion got a broker to help him to rig other banks’ yen Libor submissions.

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According to Reuters, Royal Bank of Scotland Group plc (RBS) has settled a mortgage-backed securities fraud case brought by the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS) for $125M. The settlement resolves claims alleging that the bank made misrepresentations when selling MBSs to the pension funds, which contend that they sustained millions of dollars in losses as a result.

According to California Attorney General Xavier Becerra, a probe by his office determined that the descriptions the firm provided to investors “failed to accurately disclose the true characteristics” of many of the mortgages backing the securities, but that RBS, which knew about the alleged misrepresentations, did nothing to remedy them. The state AG’s investigation also found that RBS did not conduct the necessary due diligence to eliminate the loans that were of “poor quality.” Becerra contends that RBS purposely misled CalPERS and CalSTRS to enrich itself. He noted that the MBS fraud settlement gives back the money to the pension funds that the bank “wrongfully took” from them.

Already, The California AG’s office has gotten back more than $1B over securities that were sold to the state’s public pension funds, which sustained losses during the economic crisis of 2008. Last year, $150M was recovered from Moody’s, the credit rating agency. In 2015, $210M was recovered from another credit rating agency, Standard & Poor’s. Other banks to have settled include Citigroup (C) for $102M, Bank of America for $300M and J.P. Morgan Chase (JPM) for $300M.

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Royal Bank of Scotland Settles DOJ RMBS Fraud Probe for $44M
Royal Bank of Scotland Group Plc (RBS) has agreed to a non-prosecution deal with the US Justice Department to resolve a criminal probe accusing traders of defrauding residential mortgage-backed securities (RMBS) and collateralized loan obligation (CLO) customers. As part of the settlement, RBS will pay a $35M fine. It will also pay at least $9M to over 30 customers, including affiliates of Barclays (BARC), Goldman Sachs (GS), Bank of America (BAC), Citigroup (C) and Morgan Stanley (MS), as well as to the Soros Fund Management and Pacific Investment Management Co. RBS admitted to the misconduct.

The bank’s fraud involved mortgage-backed securities, asset-backed securities, and commercial mortgage-backed securities. The group that handled these securities for the bank is no longer in operation.

According to prosecutors, from ’08 to ’13, RBS lied about bond prices, charged unwarranted commissions, and hid the fraud, all the while enhancing its own profits and costing customers money. In a joint press release, the DOJ and the Special Inspector General for the Troubled Asset Relief Program said that the bank’s employees were encouraged to engage in the wrongful behavior, including misrepresenting material facts to customers, lying about the seller’s asking price to the buyer and lying about the buyer’s asking price to the seller, pocketing the difference between what the buyer paid and what the seller received, and misrepresenting that a non-existent third party was involved in the bond sales so that the bank could charge the extra, unwarranted commission. RBS is also accused of training its CLO and RMBS traders to engage in the fraudulent practices, lying to customers that suspected the fraud, and disregarding its employees who complained about the fraud.

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In a unanimous ruling, a U.S. Court of Appeals for the 2nd Circuit panel has turned down an appeal by Royal Bank of Scotland Group Plc (RBS) and Nomura Holdings Inc. (NMR) to overturn an order mandating that they pay $839M for the false statements, including misrepresentations, that they are accused of making while selling mortgage-backed securities to Freddie Mac (FMCC) and Fannie Mae (FNMA). The MBS fraud award was issued against the two banks in the Federal Housing Finance Agency’s securities lawsuit. FHFA has been the conservator for Fannie and Freddie ever since the US government took them over after the housing market failed in 2008.

Nomura sponsored $2B of securities that were sold to the mortgage companies. RBS was the underwriter on four of the deals. In a filing submitted to US securities regulators last month, RBS said it is looking to be indemnified by Nomura for the losses.

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In the UK, the US government is suing several banks over Libor rigging allegations in High Court. The defendants in the London Interbank Offered Rate (Libor) manipulation lawsuit include Deutsche Bank (DB), Barclays (BARC), Royal Bank of Scotland (RBS), Lloyds Banking Group, UBS (UBS), Rabobank (RABO), and several other banks, in addition to the British Bankers Association.

According to the Federal Deposit Insurance Corporation’s claim, the banks would engage in lowballing by turning in estimates that were artificially low when participating in the daily process to set the Libor rate. The US agency said that it is suing for 39 US banks, which were once collectively valued at over $400M, that failed after they depended on the US dollar denominated-Libor variant for derivative and other transactions. FDIC contends that the inaccurate figures submitted by the European banks caused the US banks to sustain massive losses.

It believes that if the Libor rate had been set honestly, the benchmark’s rate would would have been higher and these banks would have achieved higher prices and larger returns on different mortgages, loans, options, swaps, and other Libor-tied agreements. Instead, the plaintiffs allegedly colluded together to keep borrowing rates down to make it appear as if the banks were in more robust financial health than what was actual. The FDIC argued that the joint efforts of the banks and the British Bankers Association resulted in the “sustained and material suppression of Libor” from August 2007 through at least 2009.

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This week, Royal Bank of Scotland Group PLC (RBS) has agreed to pay the Federal Housing Finance Agency $5.5B to resolve the latter’s investigation into the UK government-controlled bank’s sale of toxic mortgage-backed securities to mortgage giants Freddie Mac and Fannie Mae leading up to the 2008 financial crisis. RBS has come under fire for the way it packaged and sold subprime mortgages. The violations allegedly involved private-label residential mortgage-backed securities (PLS) trusts that were purchased between 2005 and 2007.

RBS will pay Freddie Mac about $4.5B and approximately $975M to Fannie Mae to resolve this RMBS fraud case. However, the bank is eligible for a $754M reimbursement according to certain indemnification agreements.

RBS had previously reached, for $1.1B, separate settlements over similar MBS fraud claims that the US National Credit Union Administration had brought in Kansas and California. It remains under investigation by the US Department of Justice and several US agencies who are conducting their own mortgage-backed securities fraud probes.

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$165M Class Action Settlement Reached in MBS Fraud Case Involving NovaStar Securities
Royal Bank of Scotland Group Plc (RBS), Wells Fargo & Co. (WFC), and Deutsche Bank AG (DB) have reached a $165M with investors in their class action mortgage-backed securities case involving underwriting for NovaStar Mortgage Inc., a former subprime lender. The lead plaintiff in the case is the New Jersey Carpenters Health Fund.

NovaStar, which filed for bankruptcy last year, had specialized in low quality residential mortgages. Many of these were bundled into risky securities that were issued prior to the 2008 financial crisis. The class action settlement resolves claims contending that the offering documents put together by the banks misled investors into thinking that the loans underlying about $7.55B of NovaStar MBSs were safe and had been underwritten properly.

A district court judge must still approve the settlement. Meantime, despite the resolution, the banks continue to deny wrongdoing.
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In London, six traders have pleaded not guilty to charges accusing them of trying to rig Euribor, which is the Brussels-based equivalent of the London Interbank Offered Rate (Libor). Euribor is key in establishing the rates on financial contracts, loans, and other financial products around the world.

The defendants include former Deutsche Bank (DB) trader Christian Bittar, current Deutsche trader Achim Kraemer, and former Barclays (BARC) traders Philippe Moryoussef, Colin Bermingham, Carlo Palombo, and Sisse Bohart. They are charged with one count of conspiracy to defraud through the making or obtaining of false or misleading Euribor rates in order allegedly enhance trading profits.

The criminal charges are related to a probe by the Serious Fraud Office. Five other traders from Deutsche Bank and Societe Generale were previously charged.

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Another Jury Finds Ex-Jefferies Group Trader Guilty of RMBS Fraud
A federal jury has convicted Jesse Litvak of one count of securities fraud. The ex-Jefferies Group LLC (JEF) bond trader was tried again on allegations that he bilked customers of $2M when he inflated the prices that he claimed he paid for residential mortgage-backed securities. As a result of his claims, professional investment managers and hedge funds paid too much for bonds.

Another jury had found Litvak guilty of fraud two years ago. However, in 20015, a federal appellate court dismissed parts of the RMBS fraud case against him. The securities fraud charges were retried before a new jury.

During this trial, prosecutors claimed that Litvak’s customers had totally relied on him for bond pricing information. His legal team, however, argued that his customers were sophisticated investors and did what they wanted regardless of his advice.

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 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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