Posts tagged ‘CDO fraud attorney’
Securities and Exchange Commission (SEC) recently released a report highlighting key statistics relating to enforcement actions they have taken against individuals and entities regarding “Misconduct that Led to or Arose from the Financial Crisis,” through Feb 1, 2013.
The major topics covered in the report include:
- Concealing from investors risks, terms and improper pricing in collateralized debt obligations (CDOs) and other structured products.
- Making misleading disclosures to investors about mortgage-related risks and exposure.
- Concealing the extent of risky mortgage-related investments in mutual funds and other financial products.
- Other financial misdeeds.
According to the report the SEC has charged 154 entities and individuals for misconduct that led to or arose from the nation’s financial crisis that hit in 2008.
The SEC states that it has ordered or agreed to penalties that amount to approximately $1.53 billion.
Many of the charges relate to losses covered up or omitted entirely from investors by well know agencies such as Citigroup and Commonwealth Advisors. Mizuho Securities USA, a U.S. subsidiary of Japan-based Mizuho Financial Group, was charged with creating “dummy assets” in order to inflate the company’s credit rating while the rest of the market was plummeting.
In an incredibly complex case that defrauded five Wisconsin school districts, the SEC reports that the Royal Bank of Canada Capital Markets has agreed to pay $30.4 million equally divided to the Wisconsin schools districts, in restitution for “misconduct in the sale of unsuitable CDO investments.” (CDOs are collateralized debt obligations).
The SEC further states that Goldman Sachs was hit with the largest penalty for and will pay a record $550 million to settle the charges of defrauding investors and withholding information.
Another very large proposed settlement would require Citigroup to pay $285 million for “misleading investors about a $1billion CDO tied to the housing market.” However, the SEC release states that the Citigroup settlement has yet to be approved by the courts.
According to the report, Citigroup also paid $75 million to settle charges involving company executives misleading investors.
Finally, the SEC report indicates that in addition to the 1.53 billion in penalties, $400milion was “obtained for harmed investors,” through settlements with Evergreen, J.P. Morgan, State Street, TD Ameritrade, and Claymore Advisors.
To read the report in full, click here.
The foregoing information, which is publicly available, is being provided by The White Law Group. The White Law Group is a national securities fraud, FINRA arbitration, and investor protection law firm with offices in Chicago, Illinois and Boca Raton, Florida.
For more information on The White Law Group, visit http://www.whitesecuritieslaw.com, or call the firm’s Chicago office at 312/238-9650 for a free consultation.
The Financial Industry Regulatory Authority (FINRA) recently announced that it has fined Guggenheim Securities, LLC of New York $800,000 for failing to supervise two collateralized debt obligation (CDO) traders who engaged in activities to hide a trading loss.
In October 2008, as the result of a failed trade, Guggenheim’s CDO Desk acquired a €5,000,000 junk-rated tranche of a collateralized loan obligation (CLO). After unsuccessful attempts by Guggenheim’s CDO Desk to sell the position, representatives of the firm persuaded a hedge fund customer to purchase the CLO for $950,000 more than it had previously agreed to pay by falsely presenting the CLO as part of a package of securities a third party offered for sale. FINRA found that in an attempt to hide the trading loss on the CLO position, the traders provided the customer with order tickets that increased the price for the CLO position and decreased the price of the other positions that were part of the transaction. When the customer inquired about the pricing adjustments, agents of the firm lied and said a third-party seller of the CLO position had already settled the trade at a higher price and requested the customer pay this higher price. The customer agreed to overpay for the CLO and in return, agents of the firm agreed to compensate the customer through other transactions, including pricing adjustments on six other CLO trades, a waiver of fees the customer owed in connection with resecuritization transactions, and a cash payment to the customer. The records created to document the transactions did not indicate any connection to the overpayment for the CLO.
FINRA found Guggenheim failed to conduct adequate review of the CDO Desk’s trades, documentation concerning transactions by traders on the desk, and the traders’ email communications.
In concluding the settlement, Guggenheim Securities neither admitted nor denied the charges, but consented to the entry of FINRA’s findings. As part of the settlement, Guggenheim must retain an independent consultant to review and make recommendations concerning the adequacy of its supervisory procedures.
The foregoing information, which is publicly available on FINRA’s website, is being provided by The White Law Group. The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Boca Raton, Florida. For more information on The White Law Group visit http://www.whitesecuritieslaw.com.
The Securities and Exchange Commission recently charged the U.S. investment banking subsidiary of Japan-based Mizuho Financial Group and three former employees with misleading investors in a collateralized debt obligation (CDO) by using “dummy assets” to inflate the deal’s credit ratings.
According to the SEC’s complaint against Mizuho Securities USA Inc., the firm made approximately $10 million in structuring and marketing fees in the deal. Mizuho agreed to pay $127.5 million to settle the SEC’s charges, and the others charged also agreed to settle the SEC’s actions against them.
The SEC alleges that Mizuho structured and marketed Delphinus CDO 2007-1, a CDO that was backed by subprime bonds at a time when the housing market was showing signs of severe distress. The deal was contingent upon Mizuho obtaining credit ratings it used to market the notes to investors. When its employees realized that Delphinus could not meet one rating agency’s newly announced criteria intended to protect CDO investors from the uncertainty of ratings downgrades, they submitted to the rating firm a portfolio containing millions of dollars in dummy assets that inaccurately reflected the collateral held by Delphinus. Once the firm rated the inaccurate portfolio, Mizuho closed the transaction and sold the notes to investors using the misleading ratings. Delphinus defaulted in 2008 and eventually was liquidated in 2010. Mizuho sustained substantial losses from Delphinus.
If you suffered losses in the Delphinus CDO, you may be able to recover those losses through FINRA arbitration. To speak with a securities attorney, call The White Law Group at 312/238-9650 for a free consultation.
The White Law group is national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Boca Raton, Florida.
For more information on The White Law Group, visit http://www.whitesecuritieslaw.com.
The Financial Industry Regulatory Authority (FINRA) recently announced that it has fined Citigroup Global Markets, Inc. $3.5 million for providing inaccurate mortgage performance information, supervisory failures and other violations in connection with subprime residential mortgage-backed securitizations.
Issuers of subprime residential mortgage-backed securitizations are required to disclose historical performance information for past securitizations that contain mortgage loans similar to those in the subprime residential mortgage-backed securitizations being offered to investors. Historical data on mortgage performance is material to investors in assessing the value of subprime residential mortgage-backed securitizations and in determining whether future returns may be disrupted by mortgage holders’ failures to make loan payments.
FINRA found that from January 2006 to October 2007, Citigroup posted inaccurate mortgage performance data on its website, where it remained until early May 2012, even though the firm lacked a reasonable basis to believe that this data was accurate. On multiple occasions, Citigroup was informed that the information posted was inaccurate yet failed to correct the data until May 2012. For three subprime or Alt-A securitizations, the firm provided inaccurate mortgage performance data that may have affected investors’ assessment of subsequent subprime residential mortgage-backed securitizations.
In addition, Citigroup failed to supervise mortgage-backed securities pricing because it lacked procedures to verify the pricing of these securities and did not sufficiently document the steps taken to assess the reasonableness of traders’ prices. Also, Citigroup failed to maintain required books and records. In certain instances, when it re-priced mortgage-backed securities following a margin call, Citigroup failed to maintain a record of the original margin call, document the supervisory approval or demonstrate that the revised price was applied to the same position throughout the firm.
In settling this matter, Citigroup neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.
The foregoing information, which is publicly available on FINRA’s website, is being provided by The White Law Group. The White Law Group is a national securities fraud, securities arbitration and investor protection law firm with offices in Chicago, Illinois and Boca Raton, Florida.
For more information on The White Law Group visit http://www.whitesecuritieslaw.com.
If you purchased a subprime residential mortgage-backed securitizations based on the information provided to you by Citigroup and would like to discuss this matter with a securities attorney, please call The White Law Group at 312/238-9650 for a free consultation.
According to reports, the Massachusetts Secretary of State has fined a unit of State Street Corp. $5 million for its role in a mortgage-backed debt obligation.
State Street is a Boston-based financial services company registered with FINRA. According to Secretary of State’s office, State Street Global Advisors failed to disclose a hedge-fund’s involvement in a $1.56 billion collateralized debt obligation known as Carina CDO Ltd. State Street purportedly acted as the investment manager of Carina.
Apparently the Carina CDO consisted primarily of mortgage-backed securities and subsequently defaulted.
The settlement order censures State Street and requires it to pay a civil administrative penalty of about $1.4 million to the Commonwealth of Massachusetts and to disgorge to the Commonwealth an additional $3.5 million.
Collateralized debt obligations (CDOs) are a type of structured asset-backed securities with multiple risk “tranches” that are issued by special purpose entities and collateralized by debt obligations including bonds and loans. With the real estate market collapse in 2008, many of these investments plummeted and investors lost billions.
If you have questions about a CDO investment you purchased, the securities attorneys of The White Law Group may be able to help. For a free consultation, please call the firm’s Chicago office at 312/238-9650.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.
For more information on The White Law Group, visit http://www.whitesecuritieslaw.com.