SEC Category Archives — Page 21 of 24 — Investor Lawyers Blog Published By Investment Fraud Attorneys

SEC’s New IDEA Will Let Investors Easily Access Data About Public Companies and Mutual Funds

Published on: September 9, 2008 | by Shepherd Smith Edwards & Kantas, LLP

Securities and Exchange Commission Head Christopher Cox has introduced IDEA, an interactive system that will let investors more easily access key financial data about mutual funds and public companies. IDEA, which stands for Interactive Data Electronic Applications, Is the successor to the SEC’s EDGAR database and will eventually replace the older system.

The majority of SEC filings currently can only be accessed through EDGAR and in government-prescribed forms. Investors that access the information have to sift through each form and re-keyboard the data.

IDEA will let investors collate information from thousands of companies so that they can immediately generate analysis and reports. The new structure will allow both investors and the SEC to be prepared for when information related to financial disclosures are available in interactive form. The SEC has formally proposed that US investment firms provide their financial information in interactive form. A separate proposal has been made to mutual funds about the information related to their public filings.

Interactive data depends on computer “tags” that work like bar codes, which can identify each individually labeled item included in a company’s financial disclosures. Investors, journalists, analysts, and financial intermediaries would be able to take data from thousands of companies and download, reorganize, and analyze the information. The interactive data filings can be accessed through IDEA later this year.

Investors will still be able to access EDGAR while the transition to IDEA takes place, and EDGAR users can avail of IDEA-like features that will be available through the older system. EDGAR will also continue to serve as an archive for older filings. SEC’s Office of Interactive Disclosure Director David Blazkowsky called the agency’s decision to cross the ‘data threshold’ exciting.

EDGAR, SEC Continue Reading ›

SEC Reaches Preliminary Settlement with Merrill Lynch, Pierce, Fenner & Smith to Liquidate About $8.5 Billion in Auction Rate Securities

Published on: September 1, 2008 | by Shepherd Smith Edwards & Kantas, LLP

The Securities and Exchange Commission says it has reached a preliminary settlement agreement with Merrill Lynch, Pierce, Fenner & Smith to liquidate about $8.5 billion in auction-rate securities that are still held by the firm’s institutional and retail investors. Small businesses, individual investors, and charities have until January 15, 2010 to accept Merrill’s offer to repurchase at par value some $7.5 billion in ARS. The investment bank will provide liquidity to some $1.5 billion in ARS that were purchased by institutional investors.

Merrill has “agreed in principal” to the terms of the agreement and is not agreeing to or denying the SEC allegations by settling. The SEC has accused Merrill of misleading thousands of clients into thinking that ARS were highly liquid and equivalent to cash or money market instruments even when the investment bank knew that the market was in trouble.

This settlement does not exempt Merrill from being named in civil lawsuits filed by investors seeking restitution for their losses. As part of its agreement with the SEC, Merrill says it will not deny liability for liquidity loss. The SEC is also evaluating whether an additional fine needs to be imposed on Merrill.

Merrill, along with Goldman Sachs Group Inc. and Deutsch Bank AG, also reached an auction-rate securities market settlement with New York Attorney General Andrew Cuomo. As part of its agreement with the NY AG, Merrill will buy back from retail clients, with account balances up to $4 million, up to $12 billion of illiquid ARS at par. It will also pay a $125 million penalty fee.

Related Web Resources:

SEC Enforcement Division Announces Preliminary Settlement With Merrill Lynch to Help Auction Rate Securities Investors, SEC, August 22, 2008
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Scottrade Agrees to $950,000 Civil Penalty To Resolve SEC Charges of Fraudulent Misrepresentation Regarding Nasdaq Pre-Open Order Executions

Published on: July 16, 2008 | by Shepherd Smith Edwards & Kantas, LLP

Scottrade Inc. agreed to pay a $950,000 civil penalty to settle Securities and Exchange Commission charges that it made fraudulent misrepresentations to clients related to the execution of Nasdaq pre-open orders. The brokerage firm is not admitting to or denying wrongdoing by settling the charges. Scottrade is, however, agreeing to cease and desist from committing future violations.

Pre-open orders are normally placed after the market closes for execution when the market opens next. The SEC alleges that Scottrade made fraudulent misrepresentations when Scottrade told customers it would direct their orders based on a number of factors, including liquidity at market opening.

The SEC says that when a broker-dealer accepts customer orders, the firm is impliedly representing that it will make sure to review the quality of execution on orders. SEC Enforcement Director Linda Thomsen says that Scottrade not only failed to regularly and properly review the execution process but it neglected to consider the way technological advances were impacting the orders.

SEC Director Erik Sirri Says Direct Market Access Systems Guidance For Broker-Dealers Is In The Works

Published on: May 18, 2008 | by Shepherd Smith Edwards & Kantas, LLP

At a Security Traders Association conference in Washington DC earlier this month, the Securities and Exchange Commission’s Division of Trading and Markets Director Erik Sirri told broker-dealers to “look for guidance” when using direct access systems when making trades.

The announcement that direct access systems guidance was pending comes after Goldman Sachs Execution and Clearing L.P., a prime broker and clearing affiliate of Goldman Sachs Group Inc., settled SEC charges over its alleged involvement in a customer fraud scheme that involved the use of direct access trading systems.

Also called sponsored access systems, direct access trading systems lets brokers quickly and efficiently handle large quantities of trades for clients. Sirri says that the guidance would help broker-dealers determine what controls need to be implemented to determine when customers are engaging in illegal trades. He says that the SEC and the Financial Industry Regulatory Authority have been in dialogues with direct access systems users.

SEC Involved in 36 Subprime Mortgage Industry Probes

Published on: February 22, 2008 | by Shepherd Smith Edwards & Kantas, LLP

The Securities and Exchange Commission is conducting three dozen open investigations into misconduct in the subprime mortgage industry. The probe is taking a look at possible misconduct involving:

• The origination process • Insider trading • Securitization and sales of mortgage-backed securities

According to SEC Division of Enforcement Associate Director Cheryl Scarboro, the SEC wants to know who may have been involved, who knew about any misconduct, and who acted inappropriately. Scarboro also directs the SEC Subprime Working Group, which coordinates these probes with other SEC divisions.

FINRA, SEC, and NASAA Announce New Initiative for Protecting Senior Investors

Published on: February 21, 2008 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority (FINRA), the Securities and Exchange Commission (SEC), and the North American Securities Administrators Association (NASAA) have announced a new group initiative to protect senior investors from becoming the victims of investment scams.

SEC, NASAA, and FINRA will work with investment advisers and broker-dealer companies to identify effective compliance and supervisory practices involving senior investors. Areas of exploration will include:

• Opening accounts • Training company employees • Marketing practices • Advertising practices • Review of products and accounts • Fulfilling the evolving needs of aging investors • Regularly reviewing products

Pondering the SEC’s Role in the Subprime Mortgage Crisis

Published on: February 11, 2008 | by Shepherd Smith Edwards & Kantas, LLP

What was the role of the Securities and Exchange Commission in the collapse of the subprime mortgage bubble? Although mortgage brokers, investment banks, and ratings agencies are frequently held responsible for the demise, little is said about the roles of the Financial Industry Regulatory Industry (FINRA) and the SEC-both watchdog agencies that are responsible for monitoring complex credit derivatives and their suitability requirements for investors.

Yet where was the SEC when it was time to oversee investment banks and determine whether they had sufficient capital for their balance sheets, trading positions, and the appropriate risk management systems so that major losses could be avoided?

One notable problem is that there is not enough clear data available about the credit derivatives market. Structured finance products, including collateralized debt obligations (CDOs) are traded over-the-counter in the United States. This means that price information for these products is not easily accessible.

Heartland Advisors Inc. Settles SEC Charges for $3.9 Million

Published on: February 5, 2008 | by Shepherd Smith Edwards & Kantas, LLP

Heartland Advisors Inc. and several of the investment adviser’s employees have agreed to pay $3.9 Million to settle Securities and Exchange Commission charges that they allegedly violated the Federal Securities Act.

The SEC case stems from incidents that allegedly took place from March through October 2000, when Heartland “negligently mispriced certain bonds owned by two high-yield municipal bond funds.” Because the funds were mispriced during that time period, net asset values for the funds were incorrect and so were the prices for funds’ shares.

Redeeming investors therefore benefited at the expense of new and remaining investors when investors bought and redeemed fund shares at these incorrect prices.

SEC Investment Management Division Director Wants Mutual Funds to Call Their “Distribution Fee” a “Sales Charge”

Published on: December 28, 2007 | by Shepherd Smith Edwards & Kantas, LLP

The director of the Securities and Exchange Commission’s Investment Management Division is calling for mutual funds to rename their 75 basis point “distribution fee” and call it a “sales charge”-regardless of whether the sales charge is deducted right away or over a period of time.

At the Investment Company Institute’s 2007 Securities Law Developments Conference in Washington, Donohue issued a call out for “truth in labeling.” He said that financial advisers should notify investors about the sales charge and the information about the charge should also be in the prospectus and the confirmation.

Last year, the mutual fund industry collected 12b-1 fees totally $11.8 billion. These fees are authorized under the 1940 Investment Company Act Rule 12b-1 in 1980.

FINRA Says Democrats Nominate Picks For SEC Commission

Published on: December 14, 2007 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority (FINRA) says that Senate Majority Leader Harry Reid has sent to the White House the Democrats’ choices to fill their two slots on the Securities and Exchange Commission.

The two names put forward are Luis Aguilar, a partner at the Atlanta law firm of McKenna, Long & Aldridge and Elisse Walter, a senior FINRA official.

The SEC is under pressure to not act on a controversial proxy initiative until all members are appointed. SEC Chairman Christopher Cox and SEC Commissioners Annette Lazareth, Paul Atkins, and Kathleen Casey are currently on the commission. Lazareth is the only Democrat on the panel. She plans to step down. Another commissioner, Roel Campos, left the SEC in August.