Financial Firms

Pension Fund Securities Lawsuits: JPMorgan to Face MBS Case, PERSM Files Class Action Case, & Institutional Clients Can Sue BP

Published on: October 17, 2014 | by Shepherd Smith Edwards & Kantas, LLP

JPMorgan Ordered to Face $10B Mortgage-Backed Securities Case

A federal judge said that JPMorgan Chase & Co. (JPM) must face a class action securities fraud lawsuit filed by investors accusing the bank of misleading them about the risks involved in $10B of mortgage-backed securities that they purchased from the firm prior to the financial crisis.

U.S. District Judge Paul Oetken certified a class action as to the bank’s liability but not for damages. He said it wasn’t clear how investors were able to value the certificates they purchased considering that the market hadn’t been especially liquid. He did, however, say that the plaintiffs could attempt again to seek class certification on class damages.

UBS is Fined $3.6M, Plus Must Pay $1.7M in Restitution Over Puerto Rico Closed-End Mutual Fund Sales

Published on: October 14, 2014 | by Shepherd Smith Edwards & Kantas, LLP

UBS Financial Services Incorporated of Puerto Rico (UBS) has reached a settlement with the Commonwealth’s Office of the Commissioner of Financial Institutions (OCIF) over UBS’s offering and sale of closed-end mutual funds in Puerto Rico. As part of the agreement, UBS will pay a $3.5 million fine, as well as $1.7 million in restitution to 34 clients. As is typical with such settlements, UBS is not denying or admitting to any wrongdoing.

After examining UBS’s operations between the periods of 1/1/06 through 9/30/13, OCFI discovered that UBS had placed clients with conservative risk tolerances in high concentrations of Puerto Rico Closed-End Funds (PRCEF). OCIF further alleged that UBS recommended or allowed these clients to use “non-purpose” loans to buy more PRCEF, which should have never happened. OCFI also reported irregularities in the way some clients’ accounts were managed and said UBS had engaged in inadequate supervision and recordkeeping.

The clients that are entitled to restitution are primarily elderly investors with low net worth and conservative financial profiles. UBS is going to pay them almost $1.7 million in restitution. This offer has to be made within 45 days of the settlement’s execution. The $3.5 million penalty will go to the Securities Trading, Investor Education and Training Fund.

Barclays to Pay $20M To Settle Libor Manipulation

Published on: October 14, 2014 | by Shepherd Smith Edwards & Kantas, LLP

Barclays PLC (BARC) has consented to pay $20 million to settle complaints over the manipulation of the London interbank offered rate benchmark. As part of the accord, the bank will cooperate with a group of Eurodollar-futures traders that have filed lawsuits against other banks over Libor manipulation.

The deal resolves claims by firms and individuals that traded in Eurollar futures contracts and options on exchanges that were Libor based from 1/1/05 to 5/31/10. Now, a district court judge in Manhattan must approve the settlement.

This is the first settlement reached in the U.S. antitrust litigation involving investments linked to Libor. In addition to paying the $20 million, Barclays will help traders with their claims against other banks. This will include giving documents and information and other support to the plaintiffs so that they can bolsters their cases.

Credit Suisse, Goldman Sachs, JPMorgan, and 16 Other Banks Agree to Swaps Contract Modifications to Assist Failed Firms

Published on: October 11, 2014 | by Shepherd Smith Edwards & Kantas, LLP

JPMorgan Chase & Co. (JPM), HSBC Holdings Plc (HSBA), Goldman Sachs Group Inc. (GS), Credit Suisse (CS), and fourteen other big banks have agreed to changes that will be made to swaps contracts. The modifications are designed to assist in the unwinding of firms that have failed.

Under the plan, which was announced by the International Swaps and Derivatives Association, banks’ counterparties that are in resolution proceedings will postpone contract termination rights and collateral demands. According to ISDA CEO Scott O’Malia, the industry initiative seeks to deal with the too-big-to-fail issue while lowing systemic risks.

Regulators have pressed for a pause in swaps collateral collection. They believe this could allow banks the time they need to recapitalize and prevent the panic that ensued after Lehman Brothers Holdings Inc. failed in 2008. Regulators can then move the assets of a failing firm, as well as its other obligations, into a “bridge” company so that derivatives contracts won’t need to be unwound and asset sales won’t have to be conducted when the company is in trouble. Delaying when firms can terminate swaps after a company gets into trouble prevents assets from disappearing and payments from being sent out in disorderly, too swift fashion as a bank is dismantled.

Securities Fraud: Ex-Ameriprise Adviser to Pay $3M for Ponzi Scam, Four Insurance Agents Allegedly Defrauded Senior Investors, and Trading in Nine Penny Stocks is Suspended

Published on: October 8, 2014 | by Shepherd Smith Edwards & Kantas, LLP

Former Ameriprise Adviser Ordered to Jail, Must Pay $3M Restitution

Oscar Donald Overbey Jr., an ex-Ameriprise Financial Services (AMP) financial adviser, must pay back the $3 million he allegedly stole from investors while operating a Ponzi scam. The 47-year-old has been sentenced to three and a half years behind bars.

Court documents say that from 1996 into 2007, Overbey stole about $4 million of client funds that he was supposed to invest. Instead, the money was used to pay earlier investors, cover his personal expenses, and pay off his gambling debts.

FINRA Bars Former Raymond James Advisor for Elder Financial Fraud, Charges SWS Over Variable Annuity Supervision

Published on: October 6, 2014 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority has barred Jo Ellen Fischer, an Raymond James independent financial advisor, for purportedly stealing nearly $1 million from a 95-year-old client. At the time, Fisher worked for Peoples Bancorp.

According to the self-regulatory organization, from July to December 2013, the Raymond James advisor converted $924,750 from the elderly customer’s trust without permission. She did this by moving funds and securities into a brokerage account under her daughter’s name. Fisher then liquidated securities and used the money to cover her personal spending, including two Rolexes, motor vehicles, a 2-carat diamond ring, and other expenses.

FINRA says that Fisher claimed that the elderly client was her daughter’s godfather and he wanted her to have the money when she was older. The SRO, however, contends that the Raymond James advisor falsified documents regarding this matter. She has agreed to the bar without denying or admitting to the findings alleging elder financial fraud.

Former Axa Advisors Broker Faces SEC Charges Over Alleged $1.5M Ponzi Scam

Published on: September 30, 2014 | by Shepherd Smith Edwards & Kantas, LLP

The SEC is charging Dennis Wright, an ex-Axa Advisors broker, with operating a Ponzi scam for 14 years and bilking customers of $1.5 million. According to the regulator, from 1998 and into 2012, Wright allegedly persuaded at least 28 customers to take money out of Axa variable annuity accounts under the guise that he would move the money to mutual fund accounts that had higher returns and also were run by the brokerage firm.

The Commission claims that rather than invest clients’ money, what ended up happening is that Wright put the money into a bank account under his control and used the funds to pay other investors. The SEC says that Wright purposely manipulated Axa Advisor clients so he could steal their savings. Alleged victims included members of Wright’s community, including childhood friends, and unsophisticated investors.

Axa Advisors let Wright go in 2012 after the firm found out about the alleged fraud. Axa has since paid back the customers whose funds were misappropriated.

Citigroup Inc. Must Turn Over Bank Records Over Banamex Unit to Oklahoma Pension Fund

Published on: September 30, 2014 | by Shepherd Smith Edwards & Kantas, LLP

A judge has ordered Citigroup Inc. (C) to give over certain internal records to the Oklahoma Firefighters Pension and Retirement System related to the bank’s Banamex unit. The pension fund is a Citigroup shareholder.

Earlier this year, Citigroup revealed that its retail bank in Mexico City had been deceived in an accounting fraud involving Oceanografia, an oil-services company. Meantime, federal prosecutors have also been looking into whether Banamex USA did enough to protect itself so that customers couldn’t use it to launder money. Now, the U.S. Department of Justice and the Securities and Exchange Commission are examining Banamex USA and Banamex.

The Oklahoma fund submitted a complaint earlier this year asking to be able to look into whether Citigroup board members and executives had violated their fiduciary duty to shareholders related to the loan fraud scandal involving the Mexican unit. In its complaint, the pension fund alleged that Citigroup’s officers and directors may have known of the risks or existence of illegal activities and fraud but ignored them, as well as the likely civil and criminal penalties that could result.

Bank America to Pay $7.65M to SEC Over $4B Capital Error

Published on: September 28, 2014 | by Shepherd Smith Edwards & Kantas, LLP

Bank of America Corp. (BAC) will pay a $7.75 million penalty to settle U.S. Securities and Exchange Commission charges alleging violations of civil securities laws involving record keeping and internal controls. The case is over the $4 billion capital error that the bank disclosed earlier in the year.

In April, Bank of America said that it had been miscalculating certain capital levels since 2009. By the end of last year the error was over $4.3 billion. The violations took place after the firm took on a huge portfolio that included structured notes when it acquired Merrill Lynch.

The SEC says that when Bank of America acquired Merrill Lynch it permissibly recorded the notes it inherited at a discount to par. Bank of America then should have realized losses on the notes while they matured and deducted them for purposes of figuring out and reporting regulatory capital.

Virginia Files $1.15B Securities Lawsuit Against Citigroup, Credit Suisse, JPMorgan Chase, and Other Big Banks

Published on: September 27, 2014 | by Shepherd Smith Edwards & Kantas, LLP

The state of Virginia is suing 13 of the biggest banks in the U.S. for $1.15 billion. The state’s Attorney General Mark R. Herring claims that they misled the Virginia Retirement System about the quality of bonds in residential mortgages. The retirement fund bought the mortgage bonds between 2004 and 2010.

The defendants include Citigroup (C), JPMorgan Chase (JPM), Credit Suisse AG (CS), Bank of America Corp. (BAC), Goldman Sachs Group Inc. (GS), Morgan Stanley (MS), Deutsche Bank (DB), RBS Securities (RBS), HSBC Holdings Inc. (HSBC), Barclays Group (BARC), Countrywide Securities, Merrill Lynch, Pierce, Fenner & Smith Inc., and WAMU Capital (WAMUQ). According to Herring, nearly 40% of the 785,000 mortgages backing the 220 securities that the retirement fund bought were misrepresented as at lower risk of default than they actually were. When the Virginia Retirement System ended up having to sell the securities, it lost $383 million.

The mortgage bond fraud claims are based on allegations from Integra REC, which is a financial modeling firm and the identified whistleblower in this fraud case. Herring’s office wants each bank to pay $5,000 or greater per violation. As a whistleblower, Integra could get 15-25% of any recovery for its whistleblower claims.