RBS Securities

Three Ex-Traders Who Worked for Barclays, JPMorgan, and Citigroup Plead Not Guilty to Forex Rigging Charges While BNP Paribas is Fined $246M

Published on: July 17, 2017 | by Shepherd Smith Edwards & Kantas, LLP

In the US, former London traders Rohan Ramchandani, Chris Ashton, and Richard Usher have pleaded not guilty to criminal charges accusing them of conspiring to manipulate prices in the foreign exchange market. Ashton previously worked at Barclays (BARC) as the bank’s global head of spot currency trading. Ramchandani used to be Citigroup’s (C) G-10 spot currency trading head. Usher served a similar role at JPMorgan & Chase (JPM).

Prosecutors are accusing them of conspiring with other traders in a Forex rigging scheme to share sensitive client information through an electronic chat room referred to as the “Cartel,” as well as via phone, in order to quash competitors.

The criminal charges are related to a global probe into currency market rigging. To date, seven banks have paid approximately $10B fines over this type of manipulation, including Citigroup, Barclays (BARC), JPMorgan, and Royal Bank of Scotland (RBS).

FINRA Fines 12 Firms, including RBS Securities, Wells Fargo, and LPL Financial $14.4M for Record Preservation-Related Violations

Published on: December 22, 2016 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority is ordering 12 firms to pay a collective total of $14.4M in fines over deficiencies involving the way they preserved customer and brokerage firm records. The firms who are subject to these sanctions include:

· RBS Securities (RBS) for $2M
· LPL Financial (LPLA) for $750K
· Wells Fargo Prime Services and Wells Fargo Securities (WFC) for a collective $4M fine
· Wells Fargo Advisors, First Clearing LLC, and Wells Fargo Advisors Financial Network for a joint fine of $1.5M
· RBS Capital Markets Arbitrage and RBC Capital Markets for $3.5M
· SunTrust Robinson Humphrey for $1.5M
· PNC Capital Markets for $500K

Under FINRA rules and federal securities laws, electronic records that are business-related have to be maintained in WORM format so that they cannot be modified. According to the US Securities and Exchange Commission, this is necessary to protect investors because monitoring compliance by firms occurs primarily through their records and books.

Investors of $7.7B NovaStar Mortgage-Backed Securities Can Move Forward with Fraud Claims Against Wells Fargo, Deutsche Bank, and RBS Securities

Published on: November 10, 2016 | by Shepherd Smith Edwards & Kantas, LLP

In New York, US District Judge Deborah A. Batts has certified a class of investors to go ahead with fraud claims that they’ve brought against Wells Fargo (WFC), RBS Securities (RBS), and Deutsche Bank (DB). The banks underwrote $7.7B of NovaStar mortgage-backed securities. The lead plaintiff in the MBS fraud case is the New Jersey Carpenters Health Fund. Wells Fargo Advisors LLC was previously Wachovia Capital Markets.

The plaintiffs contend that the defendant banks lied in the securities’ offering documents. Judge Batts held that the fundamental question at issue is whether the bank did, in fact, make the allegedly misleading or materially false statements.

NovaStar issued six residential mortgage backed-securities that the banks underwrote in 2006. These RMBS collectively held over $7.7B in assets. By mid-2009, in the wake of the housing collapse, over half the mortgages backing the securities had defaulted. Investors sustained major losses.

The New Jersey Carpenters Health Fund, which sued not just the banks in 2008 but also subprime lender NovaStar and credit rating agencies Standard & Poor’s and Moody’s, had invested $100K in one of the securities. The credit raters are no longer defendants in the case as the claims against them from this mortgage-backed securities case were dismissed in 2011. Because NovaStar’s successor has filed for Chapter 11 bankruptcy protection, the case against the subprime lender has been stayed.

RBS Securities Settles MBS Fraud Case With Connecticut for $120M

Published on: October 10, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Royal Bank of Scotland (RBS) subsidiary RBS Securities Inc. will pay the state of Connecticut $120M to settle allegations related to its dealings with mortgage-backed securities leading up to the 2008 financial crisis. According to state officials, RBS played a part in the crisis when it neglected to do the proper due diligence around certain tools for mortgage-backed investments. They accused the subsidiary of unethical and dishonest behavior, as well as of making false statements.

They contend that RBS, which was one of the largest underwriters of residential mortgage-backed securities, did not make sure that the information it offered about RMBS deals was accurate. Connecticut Attorney General George Jepsen said that he and the state’s Department of Banking worked together in investigating this matter.

RBS doesn’t securitize newly originated RMBSs anymore. It was, however, the lead underwriter for approximately 250 residential mortgage-backed securities between ’05 and ’08. Part of its job was to perform the due diligence on mortgage loans used for collateral. However, Connecticut claims that RBS’s due diligence was “inadequate,” causing “omissions and misstatements” to be made to the public and investors. They even contend that in certain instance, RBS rated certain loans that had already been lower rated by third-party vendors with higher-grade ratings.

Bank of America, Citigroup, JPMorgan Chase, Credit Suisse, Deutsche Bank, and Other Banks Settle ISDAFix Rigging Case for $324 Million

Published on: May 4, 2016 | by Shepherd Smith Edwards & Kantas, LLP

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.

ISDAFix-Rigging Lawsuits Against Bank of America, Citigroup, Deutsche Bank, and Others May Proceed, Says Judge

Published on: March 29, 2016 | by Shepherd Smith Edwards & Kantas, LLP

U.S. District Judge Jesse Furman has turned down the request by Barclays Plc (BARC), Bank of America Corp. (BAC), Deutsche Bank AG (DB), Citigroup Inc. (C), Royal Bank of Scotland Group Plc (RBS), BNP Paribas SA, Credit Suisse Group AG (CS), HSBC Holdings Plc, Goldman Sachs Group Inc. (GS), UBS AG (UBS), JPMorgan Chase & CO. (JPM), Wells Fargo & CO. (WFC), and Nomura Holdings Inc. to dismiss the antitrust lawsuits accusing them of working together to rig the ISDAfix. The benchmark rate is used to establish prices on commercial real estate mortgages, interest-rate swap transactions, and other securities. Another defendant is ICAP Plc, which brokered transactions that set the rate for ISDAfix.

Furman said that plaintiff Alaska Electrical Pension Fund and other investors have brought up “plausible allegations” that there may have been a conspiracy between the defendants that allowed them to collude with one another. The investors are seeking billions of dollars in losses they believe they sustained because ISDAFix was allegedly rigged. In this case, the judge let the breach-of-contract claims and antirust claims proceed to trial but dismissed the other claims.

Senator Warren Accuses the SEC of Poor Enforcement

Published on: January 31, 2016 | by Shepherd Smith Edwards & Kantas, LLP

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.

Former RBS Bond Trader Pleads Guilty to Fraud

Published on: December 21, 2015 | by Shepherd Smith Edwards & Kantas, LLP

Adam Siegel, an ex-Royal Bank of Scotland Group Plc (RBS) bond trader, has plead guilty to fraud over his involvement in a multi-million dollar scheme in which he lied to customers so that they would pay higher prices for bonds. Siegel, 37, served as the co-head of RBS’s U.S. Asset-Backed Securities, Mortgage-Backed Securities and Commercial Mortgage-Backed Securities Trading groups. He supervised and traded fixed income investment securities, including collateralized loan obligations (CLOs) and residential mortgage-backed securities (RMBS).

According to prosecutors, Siegel and others lied about the asking price of sellers to buyers, as well as the price that buyers were willing to pay to sellers, while pocketing the difference. He made misrepresentations so that customers would pay higher prices while those selling bonds would end up getting deflated prices, both of which benefitted RBS.

Sometimes, he and co-conspirators would make misrepresentations to buyers by telling them that a fake third-party was selling the bonds. This allowed the firm to charge an unwarranted commission.

RBS May Be Subject to More Criminal Charges Over Alleged Loan Securities Price Inflations

Published on: November 24, 2015 | by Shepherd Smith Edwards & Kantas, LLP

According to the New York Post, sources say that the US Attorney’s office in Connecticut is going after Royal Bank of Scotland (RBS) and at least two traders over complex debt securities that investors bought up through 2013. Ex-RBS banker Matthew Katke, who pled guilty earlier this year to inflating collateralized loan obligation prices, reportedly provided cooperating testimony in the case.

Federal prosecutors are also reportedly pursuing criminal charges against RBS. That investigation is over the alleged sale of flawed mortgage securities related to the 2008 financial crisis.

The Wall Street Journal says that sources have told them that prosecutors are looking at a $2.2B deal that repackaged home mortgages into bonds eight years ago. It was just two years ago that RBS settled a Securities and Exchange Commission case that described the lead banker as attempting to push the deal through even though the diligence department had raised red flags.

The RBS probe mirrors the $150M civil settlement the bank reached in 2013. That case resolved SEC claims accusing it of misleading investors on a $2.2B subprime mortgage offering.

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.