Articles Posted in Miscellaneous

President Obama Supports Senate Bill Raising SEC Registration Exemption to $50M

Published on: September 16, 2011 | by Shepherd Smith Edwards & Kantas, LLP

President Barack Obama says he supports Senate bill, S. 1544, which would let companies sell up to $50 million in securities in a public offering without having to register with the SEC. That’s a huge leap from the current $5 million threshold that is allowed under Regulation A of the 1933 Securities Act.

Called the Small Company Capital Formation Act, Senators Jon Tester (D-Mont.) and Pat Toomey (R-Pa.) introduced the bill earlier this month. If passed, Tester said it would relieve some regulatory burdens. S. 1544 is almost identical to H.R. 1070, which Rep. David Schweikert (R-Ariz.) introduced in the House earlier this year.

Senator Tester says that the new rule will help entrepreneurs create jobs and raise additional capital. Greater transparency of offers would also be enhanced, giving investors access to more information. On his Web site, Tester speaks about the need to do everything possible to push for “innovation, entrepreneurship, and job creation.” Tester says the bill streamlines new companies’ ability to be successful and have the capital they need for growth. With this capital, they can concentrate on succeeding rather than getting mired in “government paperwork.” Senator Pat Toomey has the Small Company Capital Formation Act will make it easier for small companies and start-ups to go public.

Meantime, Republican lawmakers have introduced a series of job bills that could also affect securities laws. The Entrepreneur Access to Capital Act, H.R. 2930, exempts crowdfunding from the 1933 Securities Act‘s registration requirements for business individuals who invest under $10,0000 or under 10% of their annual income and companies that raise under $5 million. In his jobs plan, President Obama has also said that he supports this proposed measure.

Other Republican Bills:
H.R. 2930: Introduced by Rep. Patrick McHenry (R-N.C.), this bill would exclude crowdfunding from the 500 shareholder cap of the 1934 Securities Exchange Act, while preempting state regulation. McHenry said that if passed the bill would give smaller investors a chance to get into startups, which they currently cannot do because of current SEC regulation.

S. 1538: Known as the Regulatory Time-Out Act, this bill would set up a one-year moratorium on key regulations with a $100 million or greater yearly effect on the economy.

Access to Capital for Job Creators Act: Introduced by GOP whip Rep. Kevin McCarthy (R-Calif.), the bill would get rid of the SEC’s current ban on general solicitation. Currently, the Commission’s Section 4(2) of the 1933 Act or its Rule 506 of Regulation D doesn’t let private placement issuers use general solicitation or advertising to get investors to put money in their offerings. McCarthy believes that this ban keeps small companies from being able to draw in capital that they need.

Our securities fraud attorneys are here to help investors that have been victims of financial fraud recoup their losses.

American Jobs Act, White House, September 8, 2011

More Blog Posts:
Wedbush Securities Ordered by FINRA to Pay $2.8M in Senior Financial Fraud Case Over Variable Annuities, Stockbroker Fraud Blog, August 31, 2011

FDIC Objects to Bank of America’s Proposed $8.5B Settlement Over Mortgage-Backed Securities, Stockbroker Fraud Blog, August 30, 2011

SEC Spent $100K More Than Necessary By Failing to Follow Office of Personnel Management Guidelines In Director’s Hiring

Published on: September 10, 2011 | by Shepherd Smith Edwards & Kantas, LLP

According to the Office of the Inspector General, by failing to abide by its own practices when hiring Henry Hu as Division of Risk director, as well as the guidelines provided by the Office of Personnel Management, the Securities and Exchange Commission unnecessarily spent $100,000. Details of these findings were provided in a report released by the SEC late last month.

The “unprecedented arrangement” with Hu covered his living expenses in DC when he worked as an SEC division director between 9/09 through 1/11. He is now back at work as a professor at the University of Texas Law School.

Specifically faulted over this matter was ex-SEC Executive Director Diego Ruiz, who the Office of Personnel Management said was the person mainly responsible for the offer to cover Hu’s living costs while he worked for the Commission. Ruiz, who has resigned from the agency, was also allegedly involved in the SEC’s misuses of its independent leasing authority. Because Ruiz is no longer with the agency, no disciplinary action will be taken against him.

“Investor’s Guide to Loss Recovery” Offers Key Information on How to Use Conflict Resolution to Get Your Assets Back

Published on: September 7, 2011 | by Shepherd Smith Edwards & Kantas, LLP

For many investors seeking to recover their lost assets from a Wall Street financial firm, the process can be daunting and confusing. This is why it is so important that you work with a stockbroker fraud law firm that can take you through process, knows how to successfully navigate the legal system, will protect your rights, and is committed to helping you recoup your losses. That said, any understanding you can acquire about the financial recovery process could only help your case, while also alleviating some of your concerns. The “Investor’s Guide to Loss Recovery” by Louis Straney is a reliable resource containing knowledgeable advice and guidance about the arbitration system, how it operates, and how to make it work in your favor.

The book offers detailed coverage and practical information about:

• Key litigation resources and strategies • How to file an effective claim, as well as the outcomes you can expect • Scripts of initial lawyer interviews, mediation, and arbitration • How to organize the massive amount of documents that will be exchanged between parties • Interviews with securities attorneys, investors, and experts • An explanation of how new regulatory reforms are impacting the financial recovery process, as well as the options that are available to victims of financial fraud
• Charts demonstrating the major areas of litigation • Empirical evidence about the growing awareness of investment misconduct
With over 30 years of experience working on Wall Street as a senior manager and director, Straney is an expert guide. He launched his own securities litigation consulting practice in 2007. In addition to having consulted or testified in over 200 engagements, Straney is the author of “Securities Fraud: Detection, Prevention and Control” and other works. He also is a published contributor whose writing has appeared in a number of publications, including the New York Times and the Public Investor Arbitration Bar Association Law Journal.

Shepherd Smith Edwards & Kantas LTD LLP Founder and Securities Fraud Attorney William Shepherd has this to say about Straney: “I have worked with Lou Straney for many years on cases representing clients who have lost money because of securities fraud and other wronging by those who sold the securities. I have also appeared with him in speaking engagements regarding securities fraud. Although we only met about five years ago, each of us had worked for decades for large Wall Street securities firms. Lou and I have discussed for many hours the steady erosion of character and standards in that industry. In his book, Lou covers this and other subjects. As a non-lawyer, his comprehension of legal issues is surprising. But, as a non-youth, Lou’s incredible level of energy is what amazes me the most.”

Securities Fraud Research and Training

By the Book on Amazon.com

More Blog Posts:
SEC Charges Filed in $22M Ponzi Scam that Targeted Florida Teachers and Retirees, Stockbroker Fraud Blog, August 29, 2011
Stifel, Nicolaus & Co. and Former Executive Faces SEC Charges Over Sale of CDOs to Five Wisconsin School Districts, Stockbroker Fraud Blog, August 10, 2011
Ex-UBS Financial Adviser Pleads Guilty to Defrauding Private Fund Investors, Stockbroker Fraud Blog, July 13, 2011 Continue Reading ›

Ex-Bank of America Employee Pleads Guilty to Mortgage Fraud Scam Using Stolen Identities to Buy Homes Not For Sale

Published on: August 30, 2011 | by Shepherd Smith Edwards & Kantas, LLP

Venedie Roberto Valencia, a former Bank of America employee, is now sentenced to 15 months in federal prison for a mortgage scam he was involved in that used stolen identities to buy homes in Southern California that weren’t being sold. The sentence comes after Valencia, 27, pleaded guilty and admitted that he forged a document linked to bogus bank accounts. As part of his penalty, Valencia must pay $51,688 in restitution.

Valencia’s sentence comes two years after co-conspirator licensed real estate agent Felix Pichardo was sentenced to eight years over the same mortgage scam. Pichardo was asked to pay $770,000 in restitution. Per court documents, the latter used bogus identities on loan applications to buy mortgages on real estate properties that weren’t for sale.

After pleading guilty in 2009, Pichardo admitted that he used to people’s identities to gain access to mortgage loans for properties even though their owners weren’t selling.. Pichardo then cause separate loan applications for $360,000 and $417,000 to be sent to AmTrust bank. The applications were turned in without the consent of the property owner. Pichardo and another conspirator, Latrice Shaunte Borders pocketed the loan proceeds.

Borders also pleaded guilty to criminal charges (for bank fraud) in 2009. She too was ordered to pay $ restitution.

Mortgage Scams
Unfortunately, mortgage fraud occurs more often than we’d like to think. In the process, lenders and borrowers are being bilked of millions of dollars.

Last year, the owners of Premier One Lending Group were indicted for allegedly securing over $30 million in loans through the use of hundreds of loan applications that upped the actual assets and income of the borrowers. Bogus bank documents and income verification documents were also given to lenders. Also last year, more than a dozen people were arrested in connection with a mortgage scheme in Ventura County, California that resulted in the loss of millions of dollars when the homes foreclosed.

In a separate mortgage fraud case, prosecutors filed a civil lawsuit accusing a number of real estate professionals over their involvement in an alleged scam to get unqualified buyers mortgage loans that were insured by the government. Bank statements, pay stubs, government agency letters over benefits that didn’t exist, and other documents were allegedly fabricated.

Meantime, in an unrelated case, mortgage brokerage firm owner Mikhail Kosachevich and his loan processor Jeffrey Gerken were sentenced to 33 months and six months in prison, respectively, over a mortgage scam that cost lenders at least $7 million.

Recently, three mortgage professionals and a title agent were accused of scamming senior citizens. Using the 1st Continental Mortgage Company in Florida, in 2009 and 2010, they allegedly processed 14 reverse mortgages and secured $2.5 million in reverse mortgage loans that the Federal Housing Administration had insured. The money wasn’t used to pay for existing loans and about $1 million in illegal loan proceeds were said to have been pocketed.

Former Bank of America employee sentenced in mortgage fraud scheme, Los Angeles Times, August 29, 2011

LANCASTER REAL ESTATE AGENT SENTENCED TO EIGHT YEARS IN FEDERAL PRISON FOR MORTGAGE FRAUD SCHEME, Justice.com, December 14, 2009

More Blog Posts:

Securities Lawsuits Expected to Reach Record High in ’11, Says Advisen Ltd. Report, Institutional Investor Securities Blog, April 23, 2011

SEC’s Proxy Access Rule is Rejected by Appeals Court

Published on: August 5, 2011 | by Shepherd Smith Edwards & Kantas, LLP

The U.S. Court of Appeals for the District of Columbia Circuit has struck down a Securities and Exchange Commission rule that would have let company shareholders nominate one or two director nominees to their boards. The proxy access rule would have allowed groups with possession of a minimum 3% voting power of a company’s stock for a minimum of three years to nominate board candidates. Companies would have had to include information about these shareholder-nominated director candidates in their proxy materials.

The SEC had approved the regulation last year. It would have gone into effect in November, but the Commission stayed it after the US Chamber of Commerce and the Business Roundtable filed their legal challenge asking for the stay. The Business groups had said the rule was in violation of the Administrative Procedure Act and would “handcuff directors and boards,” exclude the majority of retail shareholders, and worsen the “short-term focus” considered among the main causes of the economic crisis. There were also concerns that the proxy access rule would let hedge funds, union-connected pension funds, corporate raiders, and hedge funds elect directors who would do as they directed.

The Chamber of Commerce and Business Roundtable also accused the SEC of disregarding studies and evidence that revealed the” adverse consequences of proxy access,” attempting to restrict the ability of shareholders to stop special interest groups from starting up expensive election contests, and not giving full consideration to state laws about access to principles about and related to proxy that already exist.

Democrats Call for Shareholder Approval of Corporate and Political Spending

Published on: August 2, 2011 | by Shepherd Smith Edwards & Kantas, LLP

Senate and House Democrats have brought forward a revised proposal that would mandate that shareholders are notified of and approve any spending of corporate money towards political spending. The Shareholder Protection Act of 2011, which was introduced by Rep. Mike Capuano (D-Mass.) and Sen. Robert Menendez (D-N.J.), will hopefully curb unaccountable political spending by company executives, while giving shareholders a say in whether a company should get involved in electoral politics.

Prior to 2010, corporations weren’t allowed to spend on federal campaigns—that is, until the US Supreme Court ruled last year that they could give money to non-profit groups with issue-based advertising. The decision, in Citizens United v. Federal Election Commission, worried many Democrats because that kind of spending is protected from public disclosure laws dealing with campaign contributions. (Prior to that there was the legislature known as the DISCLOSE ACT, which Congress blocked in 2010. The DISCLOSE ACT mandated that there be more disclosure regarding union and corporate money that is given to outside organizations for political purposes.

Per this new measure, companies that want to put money into campaigns would have to get shareholders to approve a budget for this. A corporation’s board of directors would have to approve expenditures greater than $50,000 and these would have to be publicly disclosed. Payments to outside organizations for political purposes would also have to be disclosed.

The bill also covers spending for:
• “Electioneering communications” involving a federal candidate.
• Messages directly calling for a vote for or against a candidate.

Melendez, who served as Democratic Senatorial Campaign Committee chairman, said that he considers it “fundamentally wrong” for corporations to influence elections and be able to make decisions about our nation’s policies. He said that during his time as chair, he saw corporate funding of about $70 million to combat candidates that he supported.

It does not appear likely that Republicans and campaign finance regulation opponents will back this new proposal. Center for Competitive Politics President Sean Parnell has said that with its “regulations on their political speech,” the Shareholder Protection Act is a “thinly disguised effort to silence the business community.” He called the bill an attack on the First Amendment and wants Congress to reject it.

Citizens United v. Federal Election Commission
In a 5-4 decision, the Supreme Court ruled that the government is not allowed to ban corporations from engaging in political spending in candidate elections and that to do so is a regulation of political speech and free speech. President Barack Obama said the Supreme Court’s decision was a victory for Wall Street firms, oil companies, health insurance companies and other powerful interests.

Citizens United v. Federal Election Commission overruled two precedents. McConnell v. Federal Election Commission upheld the portion of the Bipartisan Campaign Reform Act of 2002 (it limits union and corporate campaign spending) and Austin v. Michigan Chamber of Commerce upheld limits on corporate spending directed at either opposing or supporting a political candidate.

Our institutional investment fraud lawyers work hard to help our clients, who have suffered financial losses because of misconduct by Wall Street firms and/or their their employees get their money back. Unfortunately, it is the investors who end up suffering because of broker misconduct.

Related Web Resources:

Justices, 5-4, Reject Corporate Spending Limit, NY Times, January 21, 2010

Citizens United v. Federal Election Commission (PDF)

H.R. 2517: Shareholder Protection Act of 2011, GovTrack

More Blog Posts:
Securities Lawsuits Expected to Reach Record High in ’11, Says Advisen Ltd. Report, Institutional Investor Securities Blog, April 23, 2011

Dodd-Frank Reforms Will Lower Deficit by $3.2B Over the Next Decade, Estimates CBO, Institutional Investor Securities Blog, April 8, 2011

Reductions to SEC’s Budget Will Cause Staff Furloughs, Says Schapiro, Stockbroker Fraud Blog, March 24, 2011

Securities Lawsuits Expected to Reach Record High in ’11, Says Advisen Ltd. Report

Published on: April 23, 2011 | by Shepherd Smith Edwards & Kantas, LLP

Per Advisen Ltd’s latest quarterly report on securities litigation, the number of securities lawsuit filings will likely set a new record high for yet another year in a row. Records were set in 2008, 2009, and 2010 following the credit crisis. Advisen’s quarterly report was sponsored by ACE.

John Molka III , the report’s author, says that even with the credit crisis has eased up, the submission of securities lawsuits has not. 1,293 securities lawsuits were filed in 2010. Now, Advisen is saying that based on the number of securities complaints filed during the first quarter of 2011, you can expect the number of lawsuits for this year to beat that number. Molka speculates that this “elevated level of filings” could be the “new normal.”

During Q1 2011, 362 securities lawsuits were filed—a 47% jump from the number of complaints that were submitted in Q1 2010. Compare this first quarter to last year’s last quarter when 342 securities complaints were filed. Also, with 1,448 new filings as this year’s first quarter annualized rate, that’s already12% more than last year’s total filings. The complaints include those for breach of fiduciary duty, shareholder derivative cases, securities fraud, and securities class actions.

Although securities fraud complaints comprised the greatest portion of filings for the first quarter, breach of fiduciary duties lawsuits, which include merger objection complaints, are the real cause of securities lawsuit growth. Meantime, 18% of new filings were securities class action complaints, which in the past made up over 1/3rd of securities lawsuits. Securities class action lawsuits, however, still make up for the majority of the largest settlements. During this first quarter, the average securities class action case settled for $54.6 million.

More Blog Posts:

Class Members of Charles Schwab Corporation Securities Litigation Can Still Opt Out to File Individual Securities Claim, Stockbroker Fraud Blog, December 6, 2010

Securities Fraud Lawsuit Against Calamos Investments Filed on Behalf of Calamos Convertible Opportunities and Income Fund Shareholders, Stockbroker Fraud Blog, September 17, 2010

No Need for New SRO Overseeing Investment Advisers, Says NASAA Official to Congress

Published on: April 10, 2011 | by Shepherd Smith Edwards & Kantas, LLP

Florida’s Office of Financial Regulation’s securities director Frank Widman says Congress should ignore calls for a new SRO to help the Securities and Exchange Commission oversee any investment advisers. Widmann spoke last month at the North American Securities Administrators Association’s public policy conference in DC.

Widmann, who previously served as NASAA president said that rather than set up a new SRO for IA’s, Congress should concentrate on making sure that state regulators and the SEC are fully funded so they are able to do their job. Widmann says that unlike the SEC, the federal regulator, and state securities regulators, SROs aren’t sovereign. Widmann says that giving SROs too much independence has proven problematic in the past.

As our stockbroker fraud law firm reported previously, SEC staff recently put out a report recommending that Congress either set up at least one SRO to oversee investment advisers, impose user fees on industry members to support Office of Compliance Inspections and Examination’s probes, or appoint the Financial Industry Regulatory Authority as the SRO for investment advisers. FINRA is already the SRO for broker-dealers.

Also at the NASAA Conference was SEC Commissioner Luis Aguilar, who said that the federal regulator was in the process of putting into place a system to gather and examine data from money market funds. He says funding limitations at the SEC have impeded the system’s implementation. Aguilar called on the financial services industry to “re-dedicate itself to basic principles,” including those of meaningful disclosure, fair dealing, integrity, and good business practices.

Related Web Resources:
NASAA Official Says Congress Should Ignore Calls to Create New SRO, BNA Securities Law Daily, March 29, 2011

Speech by SEC Commissioner Luis Aguilar, SEC, March 28, 2011
North American Securities Administrators Association

More Blog Posts:
FINRA Will Customize Oversight to Investment Adviser Industry if Chosen as Its SRO, Stockbroker Fraud Blog, April 8, 2011
SEC Staff Wants an SRO to Oversee Investment Advisers, Stockbroker Fraud Blog, January 31, 2011 Continue Reading ›

Dodd-Frank Reforms Will Lower Deficit by $3.2B Over the Next Decade, Estimates CBO

Published on: April 8, 2011 | by Shepherd Smith Edwards & Kantas, LLP

According to the Congressional Budget Office, between 2010 and 2010 the Dodd-Frank Wall Street Reform and Consumer Protection Act will lower the federal deficit by $3.2 billion as it takes in more money than what will go toward enforcement and implementation. CBO Director Douglas Elmendorf released the cost projection at a recent House Financial Services Oversight and Investigations Subcommittee hearing on the reform law.

Although Dodd-Frank will require $10.2 billion in direct spending over the next decade, it will take in $13.4 billion, said Elmendorf. He said that revenues would come mainly from fees assessed on different financial institutions and participants as new rules determine how financial firms can do business and what it will cost them.

The Government Accountability Office has said it could cost over $1 billion to implement Dodd-Frank, a bill that nearly all House Republicans were against. CBO said that even though Dodd-Frank calls for $37.8 billion in spending, savings that the law creates will lower that amount by $27.6 billion, which equals the $10.2 billion projection for final spending. Also, federal deposit insurance changes will lower costs by $16.3 billion and lower TARP authority by $11 billion.

CBO also noted that to create new agencies, including the Financial Stability Oversight Council, Office of Financial Research, Consumer Financial Protection Bureau, and Office of National Research, the government will spend $6.3 billion. It will also spend $100 million to change the current oversight structure, as well as $1.5 billion for subsidies to assist homeowners in foreclosure. A liquidation program for insolvent financial entities is expected to cost $20.3 billion.

Throughout the US, our securities fraud attorneys represent clients that have sustained financial losses because of broker and investment advisor misconduct.

CBO Says Dodd-Frank Act Will Reduce U.S. Deficit by $3.2 Billion, Bloomberg, March 30, 2011

Congressional Budget Office

More Blog Posts:
Commodities Industry Fears being held to Regulatory Standards of Securities Industry, Stockbroker Fraud Blog, February 4, 2011

Impartiality of SEC Report by Boston Consulting Group Questioned by Key House Republicans, Institutional Investors Securities Blog, March 30, 2011

AIG Reorganizes Property and Casualty Insurer Chartis

Published on: March 31, 2011 | by Shepherd Smith Edwards & Kantas, LLP

American International Group Inc. is reorganizing Chartis, its property and casual insurer, into two global groups—one consumer and one commercial. AIG executive vice president, finance, risk and investments Peter D. Hancock has been named Chartis’s chief executive officer, while current Chartis CEO Kristian P. Moor is to become vice chairman.

John Q. Doyle, who was formerly Chartis US’s CEO will head the global commercial business, while current chief administrative officer Jeffrey L. Hayman will be in charge of the global consumer business group. Both men will report to Hancock. The reorganization will section Chartis into four regions: U.S./Canada, Europe, Growth Economies, and Far East.

It was just this February that Chartis had to put aside $4.2 billion for loss reserve increases. According to AIG CEO Robert Benmosche, strengthening claims management, underwriting, risk management, and reserving so that the right risk-adjusted returns are earned remain top priorities. Benmosche promised to rebuild businesses needed to pay back the firm’s $182.3 billion government rescue. Benmosche, who is undergoing treatment for cancer, intends to step down in 2012.

Chartis has over 45 million clients internationally located in over 160 nations. Last year, the insurer wrote $31.6 billion in net premiums. Meantime, AIG’s stock performance has been less than stellar with a 26% drop since the start of the year.

Related Web Resources:
AIG Revamps Chartis, Makes Hancock Head After Reserve Boost, Bloomberg, March 31, 2011