Royal Bank of Scotland

Nomura & Royal Bank of Scotland Must Pay $806M in Mortgage-Backed Securities Case

Published on: May 18, 2015 | by Shepherd Smith Edwards & Kantas, LLP

Nomura Holdings (NMR) and Royal Bank of Scotland group Plc (RBS) must pay $806 million in the mortgage-backed securities lawsuit filed against them by the Federal Housing Finance Agency. $779.4 million will go to mortgage lender Freddie Mac (FMCC) while $26.6 million will go to Fannie Mae (FNMA).

Judge Denise L. Cote of the Federal District Court in Manhattan was the one who found the two banks liable for making false statements when selling the securities to the two lending giants. The banks will also take back the mortgage bonds that are the basis of this lawsuit. As of the end of March, these bonds were worth up to $479 million.

It was Nomura that sponsored $2 billion of the securities purchased by Freddie and Fannie. RBS was the underwriter on four of the deals.

Barclays, Citigroup, J.P. Morgan Chase & Royal Bank of Scotland to Settle FX Rigging Allegations

Published on: May 7, 2015 | by Shepherd Smith Edwards & Kantas, LLP

The Wall Street Journal says that U.S. prosecutors are getting ready to announce settlements reached with Barclays PLC ( BCS), Citigroup Inc. (C), Royal Bank of Scotland Group (RBS), and J.P. Morgan Chase & Co. (JPM) over allegations involving foreign currency exchange rate rigging. All four banks are expected to plead guilty to charges of criminal antitrust related to their traders’ alleged collusion in foreign currency markets. The Department of Justice has been investigating whether traders manipulated exchange rates so that their positions would benefit even if this meant financially hurting customers.

Barclays is expected to settle with a number of agencies in the U.S. and Europe for over $1 billion. Also expected to settle is UBS AG (UBS), which was the first bank to cooperate with federal investigators in this probe. The Swiss bank, however, will reportedly be granted immunity from prosecution.

Guilty pleas by the other firms, however, aren’t going to resolve all of the investigations into forex rigging. Other banks are still under scrutiny and settlements from them may be pending.

U.S. Department of Justice Wants Citigroup, Barclays, JPMorgan Chase, and Royal Bank of Scotland to Plead Guilty to Criminal Charges In Currency Antitrust Investigation

Published on: February 10, 2015 | by Shepherd Smith Edwards & Kantas, LLP

According to The Wall Street Journal, the Justice Department is going to try to make four big banks plead guilty to criminal anti-trust charges related to its traders’ alleged collusion in foreign-currency markets. The financial institutions are Citigroup Inc. (C), Barclays PLC (BARC), Royal Bank of Scotland (RBS), and J.P. Morgan Chase & CO. (JPM). Meantime, separate criminal fraud cases are being pursued against the individuals whose involvements are suspected.

The DOJ’s probe is examining whether bank employees manipulated foreign-currency exchange rates to their benefit, and in certain cases, hurting customers. In a separate investigation, New York’s Department of Financial Services is looking at whether some of the biggest banks used computer programs to manipulate foreign exchange rates. The department installed monitors at Deutsche Bank AG (DB) and Barclays in 2014 and has sent subpoenas to Goldman Sachs (GS), Société Générale, and BNP Paribas about the way they use these types of programs. The subpoenas were sent not because there was necessarily evidence of wrongdoing but because the banks are actively involved in these markets.

As we mentioned in a recent blog post, JPMorgan has just agreed to pay $99.5 million to settle its portion of a currency rigging case. In that litigation, institutional investors are accusing 12 banks of rigging prices in the foreign exchange market. By settling the financial instruction is not denying or admitting to wrongdoing.

JPMorgan Suspends Forex Trader for Alleged Disclosures Involving Royal Bank of Scotland-Related Activities

Published on: January 14, 2015 | by Shepherd Smith Edwards & Kantas, LLP

Bloomberg is reporting that according to a source, JPMorgan Chase & Co. (JPM) has suspended currency dealer Gordon Andrew for alleged wrongdoing involving his work at Royal Bank of Scotland Group Plc. (RBS). According to The Wall Street Journal, people familiar with the matter say that the firm discovered evidence that Andrew disclosed trading data to employees of other banks. The forex trader does a lot of work converting huge amounts of euros into pounds at benchmark rates related to subsidies that the EU pays to British farmers every year.

Andrew began working for JPMorgan in October 2012 after Richard Usher, an RBS colleague, also switched to the firm. Usher was JPMorgan’s chief currency dealer in London until 2013 when he was put on leave during a global probe into foreign exchange market manipulation. He left the firm the following year. Regulators in the U.K. and the U.S. have since fined JPMorgan $1 billion related to the rigging probe. RBS was ordered to pay a $634 million fine.

Today, the WSJ reported that the probes into currency market manipulation have led to new signs of possible wrongdoing. Sources tell the newspaper that JPMorgan has even put aside another $900 million to cover investigation-related costs as well as legal bills. Meantime, broker-dealer Tullett Prebon PLC (TLPR) has started an internal review into its currency market practices. One of its brokers was allegedly referred to as a trade conduit in one chat room. That broker still works for the firm. In 2014, British fraud prosecutors charged an ex-Tullet broker with assisting other bank traders in manipulating trades.

WGF Investments, Deutsche Bank Securities, Royal Bank of Canada Subject to Fines for Securities Violations and Misconduct

Published on: December 22, 2014 | by Shepherd Smith Edwards & Kantas, LLP

FINRA Fines WGF Investments $700,000 for Supervisory Failures

The Financial Industry Regulatory Authority is fining WGF Investments $700,000 for failing to commit the attention, time, and resources to certain duties related to supervising registered representatives. WGF is a midsize independent brokerage firm.

According to the self-regulatory organization, from 3/07-1/14, WGF did not supervise private securities transactions of one representative and failed to keep up an adequate supervisory system to make sure that the customer transactions taking place were suitable. The broker-dealer also is accused of not properly supervising one representative’s alternative investment sales.

Citibank, JPMorgan Among Firms to Pay $4.3B For Currency Rigging Penalties

Published on: November 12, 2014 | by Shepherd Smith Edwards & Kantas, LLP

Royal Bank of Scotland Group Plc (RBS), UBS AG (UBS), (HSBC), Bank of America Corp (BAC), HSBC Holdings Plc, JPMorgan Chase & Co. (JPM), and Citigroup Inc. (C) will pay $4.3 billion in penalties to regulators in the United States and Europe for failing to stop traders from attempting to manipulate the foreign exchange market. Further penalties could also result not just for the banks but also for certain individuals in the wake of litigation accusing bank dealers of colluding amongst themselves to rig benchmarks that are used in determining foreign currency.

According to authorities, the dealers exchange confidential data regarding client orders and worked it out so their trades would enhance profits. This information was purportedly exchanged in online chat rooms. Regulators say the misconduct occurred from 2008 through October 2013. The probe has also widened to look into whether traders used confidential information to take bets on unauthorized personal accounts and if clients were charged excessive commissions by sales desks.

The currency rigging probe has led to the firing or suspension of over 30 traders while the number of automated trade transactions have increased. In the U.S. the Federal Reserve, the Justice Department, and New York’s financial regulator continue to investigate banks over foreign exchange trading. Meantime, some lawyers have spoke out about how the settlement doesn’t address client compensation.

European Commission Takes Action Against JPMorgan, UBS, RBS & Credit Swiss for Cartel Conduct

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

The European Commission has found that Royal Bank of Scotland (RBS), JPMorgan (JPM), UBS AG (UBS) and Credit Suisse (CS) engaged in cartel behavior. Except for RBS, which received immunity from having to pay any fines by disclosing the cartel conduct, the other banks were fined $120 million for their activities. For cooperating, UBS and JPMorgan received fine reductions. Along with Credit Suisse, both banks got a 10% reduction for consenting to settle.

All four financial institutions are accused of running a cartel involving bid-ask spreads of Swiss franc interest-rate derivatives in the European Economic Area. Banks and companies typically use interest rate derivatives to manage interest rate fluctuation risks. A “bid-ask spread” is the difference between how much a market maker is willing to sell and purchase a product.

According to the European Commission, between May and September ’07, the four banks agreed to quote to third parties wider fixed bid-ask spreads on certain short-term, over-the-counter Swiss franc interest rate derivatives while keeping narrower spreads for trades between them. The purpose was to reduce their transaction costs and keep liquidity among themselves, as well as keep other market makers from competing on equal terms in the Swiss franc derivatives market. In one action, JPMorgan Chase (JPM) was fined €61.7 million euros for purportedly manipulating the Swiss franc Libor benchmark interest rate in an illegal cartel with RBS, which, again, had immunity from fees.

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.

Citigroup and Royal Bank of Scotland Fail Federal Stress Test

Published on: March 26, 2014 | by Shepherd Smith Edwards & Kantas, LLP

A capital plan to reward investors with stock buybacks and dividends by Citigroup Inc. (C) was one of five to fail Federal Reserve stress test. The others that did not succeed were those involving the US units of Royal Bank of Scotland Group Plc. (RBS), HSBC Holdings Plc. (HSBA), Zions Bancorporation (ZIONS) and Banco Santander SA (SAN). The central bank, however, did approve plans for 25 banks, including those from Bank of America (BAC) and Goldman Sachs (GS) after both lowered their dividend and buyback requests.

Regulators have been trying to prevent another financial crisis like the one in 2008 by conducting yearly tests on the way the biggest banks would do in a similar crisis. According to analysts, banks had intended to pay out about $75 billion in excess capital to raise returns and reward shareholders. This is the second year in a row that the Fed has taken issue with certain plans.

While Citigroup requested the least capital return among the five biggest banks in the country last year after its plan was turned down in 2012, this year it could have passed on just quantitative grounds. However, the central bank found numerous deficiencies in Citigroup’s planning practices, including whether it could project revenues and losses while under stress, as well as be able to properly measure exposures.

Lloyds, Barclays, to Set Aside Hundreds of Millions of Dollars for Allegedly Mis-Selling to Victims

Published on: August 27, 2013 | by Shepherd Smith Edwards & Kantas, LLP

Britain’s largest banks expected to set aside hundreds of millions of dollars to compensate customers that were the alleged victims of mis-selling. As of the end of July, the Big Four Banks reportedly had budgeted at least $20.2 billion (the figure was converted from pounds) to pay back clients that were mis-sold insurance policies. Lloyds Banking Group (LLOY) and Barclays (BCS) are among the institutions needing to pay such provisions.

According to the Financial Conduct Authority, in April and May both, banks across Britain paid just over $642.6 million in compensation. This is a significant jump from February, when they paid $625.7 million and in March when the amount as $573.75 million U.S. dollars.

Borrowers bought payment protection insurance (PPI) policies, which were supposed to guarantee that they could pay back loans if they were no longer able to work or became unemployed. That said, the policies were purportedly sold to customers that either would not have been able to avail of the coverage because they were either on benefits or self-employed or people that didn’t want to be covered.