Articles Posted in Securities Fraud

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AXA Advisors LLC will pay a $100,000 fine to settle Financial Industry Regulatory Authority allegations that it delayed too long before firing a broker who was also the mastermind of a Ponzi scam. The financial firm turned in a Letter of Acceptance, Waiver, and Consent prior to there having to be a regulatory hearing, without denying or admitting to the findings, and without an adjudication of any issue. AXA Advisors is a subsidiary of AXA Financial, Inc., which is an AXA Group member.

Kenneth Neely, a former registered representative, started working with AXA in its Clayton, Missouri office in August 2007. FINRA contends that already by then, Neely had been the subject of four client complaints. Three of these were securities arbitrations over business practices he employed with previous employees. (Prior to working at AXA, he was registered with Stifel, Nicolaus & Co., Inc. and UBS PaineWebber, Inc.) The SRO believes that AXA also knew that Neely was having financial problems at the time.

Neely was permanently barred by FINRA in 2009 for running the Ponzi scam, which bilked its victims of $600,000. Many of the investors he defrauded belonged to his church. According to the SRO, Neely to conceal his financial scheme by having investors pay $2K to $3K to his wife. He also created fake invoices to make them appear as if they were actual ownership certificates. He did pay investors about $300,000. A lot of his investors’ money went toward supporting his extravagant lifestyle. Neely eventually pleaded guilty to the federal crime of mail fraud. He was sentenced to 37 months in months in prison and ordered to pay restitution in the amount of $618,270.

Per the AWC, Neely started running a Ponzi scam in 2001 while he was still working at UBS. He continued his fraud operation while at Stifel and when he went to go work with AXA. He persuaded AXA clients, Stifel customers, and others to take part in the St. Louis Investment Club, which was a fake club and put their money in the St. Charles REIT, which was a bogus real estate investment trust. After he admitted to converting and commingling funds. AXA fired him in July 2009.

However, it was as early as 2008, when AXA conducted its yearly audit of Neely, that a review of his computer brought up an Excel spreadsheet noting eight people’s payment schedules. Per the AWC, these people were investors in Neely’s fraud. An AXA examiner asked Neely to explain the spreadsheet and the broker claimed that the figures were for showing a potential client/friend, who wanted to start a business, how to handle his finances. The AWC alleges that this explanation was a false one.

FINRA found that AXA failed to properly supervise or investigate Neely by not responding appropriately to the spreadsheet, his excuses, or the fact that he had a questionable history. AXA has now been both sanctioned and fined.

AXA Fined $100,000 For Not Axing Ponzi Broker Sooner, Forbes, March 15, 2012

Ex-AXA Broker Barred by Finra After Ponzi Scheme, New York Times, July 28, 2009


More Blog Posts:
Stifel, Nicolaus & Co. and AXA Advisors Broker Charged in Ponzi Scheme Victimizing Church Members, Stockbroker Fraud Blog, November 5, 2009
AXA Rosenberg Entities Settle Securities Fraud Charges Over Computer Error Concealment for Over $240M, February 10, 2011 Continue Reading ›

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The U.S. Court of Appeals for the Second Circuit says that the Securities and Exchange Commission did not abuse its discretion when it determined that broker Scott Mathis “willfully” withheld information from the Financial Industry Regulatory Authority about tax liens. Mathis had submitted a petition seeking for the court to review the SEC order. However, the court, denying the request, found that there was “substantial evidence” backing up the SEC’s findings that he did, in fact, hold back information in a willful manner.

Between 1985 and 2002, Mathis was a principal or broker at numerous financial firms. He had submitted three Form U-4 registrations with FINRA. It was after 1996 that the IRS put in five tax liens against him. The federal agency accused him of not paying his personal income taxes over a several-year period. Mathis is accused of not noting the liens in filings with FINRA even though he is purported to have known about them.

According to the court, in 2003 FINRA asked Mathis to explain why he didn’t reveal the liens. He told the SRO he wasn’t aware that they existed or that he had an obligation to note them down on his Form U-4. FINRA then began proceedings against the broker, ultimately holding that he acted “willfully” in failing to report the tax liens. He was suspended for three months and fined $10,000.

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A Minnesota securities fraud lawsuit, filed by court-appointed receiver R.J. Zayed, contends that because NRP Financial Inc. allegedly failed to properly supervise former broker Jason Bo-Alan Beckman, the brokerage firm ended up assisting in one of the largest Ponzi scams that the state has ever experienced. The $150M financial fraud raised $47.3M from at least 143 clients. Over 900 investors sustained losses as a result of the scam.

Beckman worked as an NRP rep between 2005 and 2008. Last year, he was charged with 13 felony counts related to the alleged financial scheme, including the criminal charges of conspiracy to commit mail and wire fraud, mail fraud, aiding and abetting wire fraud, mail fraud, and money laundering. He also is accused of stealing $7M from Global Advisors LLC, which he owns.

Minneapolis money manager Trevor Cook is the supposed chief architect of the Minnesota Ponzi scam. (He is serving a 25-year prison after pleading guilty to tax evasion and mail fraud.) Involving foreign currency arbitrage, investors were allegedly told that yearly returns of up to 12% would be earned with little, if any, risk to their principal if they bought into the program. Beckman made representations about the currency program between 2006 and 2009.

Per the Ponzi fraud lawsuit, the scam would have ended sooner if only NPR Financial had properly supervised Beckman, denied transfer of investors’ funds to bank accounts maintained on behalf of shell entities, looked into improper transfers of clients’ monies that Beckman had made, and refused to let him hide his actions behind its name and reputation. A lot of the parties that invested were clients of Oxford Private Client Group LLC, which is not only a NRP Financial branch, but also it is partly owned by Cook and Beckman.

Oberlin Financial, which preceded NRP, is accused of having known
way back in April 2006 that Beckman had another business involving trading currencies. NPR also allegedly was aware that Beckman used marketing collaterals that made an inflated claim that there was $3.5B in assets under management.

National Retirement Partners Inc., which is NRP Financial’s parent, sold its assets to LPL for $27M. When the deal was taking place, LPL touted the buy as a way to get into the retirement and pension market. However, according to an LPL Investment Holdings spokesperson, the company is not named in the securities complaint and has not been liable in this case. The broker-dealer was not one of the assets that LPL Holdings bought from NRP.

B-D that sold assets to LPL played role in $150M scam: Lawsuit, Investment News, January 6, 2012
Patrick Kiley, two others indicted in Trevor Cook ponzi scheme, CityPages, January 6, 2011

More Blog Posts:
SEC Sues SIPC Over R. Allen Stanford Ponzi Payouts, Stockbroker Fraud Blog, December 20, 2011
SEC Charges Father and Son with Utah Securities Fraud In Alleged $220M Ponzi Scam Over Purported Real Estate Investments, Stockbroker Fraud Blog, December 15, 2011
SEC Issues Emergency Order to Stop $26M “Green” Ponzi Scam, Institutional Investor Securities Blog, October 13, 2011 Continue Reading ›

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The SEC has charged investment adviser Anthony Fields with selling bogus securities on LinkedIn and other social networking sites. The alleged financial fraud has prompted the agency to put out two alerts warning of the risks that advisory firms and investors must contend with in the social media era.

According to the SEC, Fields used social media sites to offer over $500 billion in fake securities. He used Platinum Securities Brokers and Anthony Fields & Associates, which are his two proprietorships, to make numerous fraudulent offerings. He also allegedly provided misleading and untruthful information about Anthony Fields & Associates’ clients, assets under management, and operational history on the company’s Web site and in filings submitted to the Commission. The SEC claims that Fields did not maintain the necessary records and books, gave the impression that he was a broker-dealer even though he is not SEC-registered, and failed to implement appropriate compliance procedures and policies.

With retail investors turning to LinkedIn, Facebook, Twitter, YouTube, and other online networks to get information about investing, the risks of becoming exposed to fraud are growing. The SEC’s Office of Investor Education and Advocacy is offering investors a number of tips to avoid financial scams online, including:

• Be careful of unsolicited investment opportunities-especially from someone you don’t know.
• Be wary of any investment opportunity that sounds too good to be true.
• Watch out for “guaranteed returns” – there is no such thing.
• Consider it a “red flag” if you experience any pressure to invest or buy immediately.
• Watch out for affinity scams, which usually target group members.
• Make sure that your privacy is always protected online.
• Ask lots of questions about any investment opportunity.
• Do your due diligence.
• Don’t provide your Social Security number, any account information, or other sensitive data to or on social media Web site.
• Watch out for “friend” requests from financial service providers that you don’t know-remember, once you let them “in,” you are giving them access.
• Pick a solid password and don’t use the same one for multiple accounts.
• Deactivate file sharing.
• Be careful when using public computers or Wi-Fi that is accessible to others.
• Arm your computer with a firewall and antivirus software.
• Log out of your social networking accounts when you are not using them.
• Watch out for unfamiliar links sent to you-especially if you don’t know the sender.
• Make sure your mobile device is secure.

Examples of investment scams that have been known to use the Internet and social media:
• Market manipulation schemes • Pump-and-dump scams • Fraud marketed through spam e-mail or online investment newsletters
• High yield investment program scams • Fraud offerings made online
SEC Charges Illinois-Based Adviser in Social Media Scam Agency Issues Alerts on Social Media Risks for Investors and Firms, SEC, January 4, 2012
Read the SEC’s Investor Alert (PDF)

Read the SEC’s investor bulletin on understanding your accounts (PDF)


More Blog Posts:
FBI Arrests Texas Leader of Pump-and-Dump Scheme, Stockbroker Fraud, March 23, 2011
Lancer Management Group LLC Hedge Fund Manager Acquitted of Charges He Ran Market Manipulation Scam, Institutional Investor Securities Blog, May 5, 2011
Barclays Capital Ordered by FINRA to Pay $3M Fine For Alleged Subprime Mortgage Securitization-Related Misrepresentations, Institutional Investor Securities Blog, December 23, 2011 Continue Reading ›

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The Securities and Exchange Commission has issued a proposal seeking to impose larger penalties on wrongdoers. The proposal comes in the wake of criticism that the agency isn’t doing enough to punish the persons and entities that played a role in the recent credit crisis and calls for:

• Capping fines issued against individuals at $1 million/violation rather than just $150,000.
• Raising penalties against firms from $725,000/action to $10 million.
• Multiplying by three how much the SEC can seek using an alternative formula that calculates the violator’s gains.
• Permission to determine penalties according to how much investors lost because of an alleged misconduct.
• Permission to triple the penalty if the defendant is a repeat offender and has committed securities fraud within the last five years.

The proposal was included in a letter sent to Senator Jack Reed by SEC Chairman Mary Schapiro last month. Reed heads up a subcommittee that oversees the Commission. In her letter, Schapiro said she believed the proposed changes would “substantially” improve the agency’s enforcement program.

The SEC has come under fire for failing to detect a number of major scandals before they blew up, including the Madoff Ponzi scam and the Enron fraud. Recently, US District Judge Jed Rakoff, who rejected the SEC’s proposed $285 million securities settlement with Citigroup, questioned a system that allows wrongdoers to pay a fine, as well as other penalties, without having to admit or deny wrongdoing. Now, the Commission appears to be working hard to rehabilitate its image so that it can be thought of as an effective and credible regulator of the securities industry.

According to Investment News, another way that the SEC may be attempting to re-establish itself is by targeting investment advisers. The Commission has reported filing a record 140 actions against these financial professionals in fiscal 2011, which is a 30% increase from 2010. One reason for this may be that a lot of the actions deal with inadequate paperwork that can easily be identified, which is causing the agency to quickly score a lot of “successes.” This approach to enforcement is likely allowing the SEC to discover small fraud cases before they turn into huge debacles. (If only SEC staffers had requested the appropriate documents related to trades made by Bernard Madoff’s team years ago, his Ponzi scam may have been discovered before the losses sustained by investors ended up hitting $65 million.

The agency’s revitalized efforts are likely prompting some financial firms to work harder on compliance. Investors can only benefit from this.

SEC’s Schapiro Asks Congress to Raise Limits on Securities Fines, Bloomberg/Businessweek, November 29, 2011

More Blog Posts:
SEC Files Charges in $27M Washington DC Ponzi Scam, Stockbroker Fraud Blog, November 21, 2011

Former Fannie Mae and Freddie Mac Executives Face SEC Securities Fraud Charges, Institutional Investor Securities Blog, December 16, 2011

Banco Espirito Santo S.A. Settles for $7M SEC Charges Alleging Violations of Investment Adviser, Broker-Dealer, and Securities Transaction Registration Requirements, Institutional Investor Securities Blog, November 5, 2011

Continue Reading ›

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The US Securities and Exchange Commission is suing former NFL football player Will Gault for securities fraud. According to US regulators, he and several others participated in a fraud scam that involved inflating the stock price of Heart Tronics, which is a heart-monitoring device company. Other defendants in the Commission’s case include lawyer Mitchell Stein, Heart Tronics Co-CEO J. Rowland Perkins, and Stein’s driver Martin B. Carter. Investors were bilked of nearly $8 million.

Per the SEC’s complaint, between 2006 and 2008 Heart Tronics repeatedly announced that millions of dollars in (bogus) sales orders for its heart-monitoring devices had been placed. To garner investor confidence, Gault was appointed company president and Co-CEO.

Meantime, Stein, who hired promoters to promote the company’s stock online, allegedly made secret trades. The Commission says he used investors’ money to pay for private jets, a number of homes, and exotic motor vehicles.

Stein is also a defendant in a parallel criminal case filed by the US justice department. In the indictment against him, prosecutors charged him with putting out press releases promoting the fake sales, conspiring to obstruct the SEC probe, and taking part in a financial scam to artificially increase Heart Tronic’s stock price through bogus orders from nonexistent clients.

The Commission says that Perkins and Gault hardly ever asked Stein about his actions, as well as failed to fulfill their fiduciary duties. Gault and Stein are accused of defrauding one investor, in particular, who made a substantial investment in the heart-monitoring device company. That investor’s money ended up in Gault’s personal brokerage account.

The SEC is accusing Carter and Stein of generating false documents to support false disclosures that were made to the public. This included sending a letter from a fictitious client in order to deceive auditors, management, and disclosure counsel, as well as sending products to a friend of Carter’s to make it seem as if an actual device was delivered.

The SEC is seeking a permanent bar against Stein, Gault, and Perkins that would prevent them from serving as corporate officers. They also want them to pay financial penalties and give back ill-gotten gains.

Gault was a former University of Tennessee football player who played for the Chicago Bears for 11 seasons. He also belonged to the US Olympic team that boycotted the Summer Games in Moscow in 1980.

Securities Fraud
If you are an investor that was defrauded by people who took advantage of you and took the money for their own personal use and gain, you may have grounds for a securities fraud case.

Ex-NFL Star Willie Gault Sued by SEC in Stock-Pumping Fraud, BusinessWeek, December 23, 2011
SEC Charges California Company, Co-CEOs, and Attorney in Series of Fraudulent Schemes Pumping Company Stock, SEC, December 20, 2011
Read the SEC Complaint (PDF)

More Blog Posts:
Three Investment Advisers Charged with Massachusetts Securities Fraud, Stockbroker Fraud Blog, December 16, 2011
Colorado Securities Fraud: Universal Consulting Resources LLC and Owner Richard Dalton to Pay $15.8M to Settle SEC Lawsuit Over Ponzi Scam, Stockbroker Fraud Blog, December 9, 2011
Former Fannie Mae and Freddie Mac Executives Face SEC Securities Fraud Charges, Institutional Investor Securities Blog, December 16, 2011 Continue Reading ›

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Massachusetts securities regulators have filed three actions accusing investment advisers of defrauding investors of millions. The cases come as the state is getting ready to oversee even more investment advisers in 2012.

One of the securities fraud actions filed is against unregistered adviser John B. Wilson, who regulators want to ban from the securities industry for life. Wilson is accused of defrauding 25 investors who gave him over $1.5M. The funds were placed in JBW Capital LLC.

Wilson lost over 90% of the funds in 2 trades he made during one month in ’08. He has admitted to having a trading addiction.

In the second Massachusetts securities case, RIA Daniel A. McKenna allegedly raised over $1M from investors over a 17-year period. He did this by selling shares in Principle Profits Asset Management. In fact, the shares were worthless. He also allegedly persuaded investors to lend his company money, which he never paid back.

Meantime, state regulators are accusing another RIA, Sean Michael O’Brien and Andover Equity Investment Group LLC of using clients’ money to pay for his own expenses, charging “exorbitant” fees, and issuing untrue statements to investigators. For example, he allegedly told the state that TD Ameritrade Holding Corp. division “thinkorswim,” which was his custodian broker-dealer, never asked him about his advisory fees. (His management fee was 15.54% even though the average for the industry is .5%-2%.) However, it turns out that TD Ameritrade asked O’Brien about the fees and eventually terminated his use of the company’s platform.

The state wants investors to get their money back. Regulators also want to take back the registrations of both O’Brien and McKenna.

Currently, there are 739 RIA’s under Massachusetts’ watch. Per the Dodd-Frank Wall Street Reform and Consumer Protection Act, which mandates that midsize investment advisers go from federal to state supervision next year, another 200 more RIA’s will fall under the state’s watch. (Midsize advisers have assets ranging from $25M and $100M).

Referring to these latest securities actions, Massachusetts Secretary of the Commonwealth William Galvin said that they show the state’s willingness to go after investment advisers that have violated securities laws.

Our stockbroker fraud lawyers represent investors throughout the US. If you believe that a registered investment adviser or broker-dealer may have defrauded you, please contact our securities fraud law firm. You may have a Massachusetts securities claim on your hands.

Over the years, Shepherd Smith Edwards and Kantas LTD LLP has helped thousands of investors throughout the US to recoup their investment. Your first consultation with us is free.

Massachusetts Signals Strict Oversight Of Investment Advisers, The Wall Street Journal, December 14, 2011
Massachusetts charges three advisers with varying flavors of fraud, Investment News, December 18, 2011

More Blog Posts:
Colorado Securities Fraud: Universal Consulting Resources LLC and Owner Richard Dalton to Pay $15.8M to Settle SEC Lawsuit Over Ponzi Scam, Stockbroker Fraud Blog, December 9, 2011
LPL Financial Ordered to Pay $100K for Lack of Adequate Oversight that Resulted in Unsuitable Investments for Clients, Stockbroker Fraud Blog, November 29, 2011
Texas Securities Fraud: Unregistered Adviser Confesses to Selling Almost $400K in Promissory Notes and Investments Despite Cease and Desist Order, Stockbroker Fraud Blog, December 5, 2011 Continue Reading ›

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The Securities and Exchange Commission has charged six ex-executives of the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae) with securities fraud. The Commission claims that they not only knew that misleading statements were being made claiming that both companies had minimal holdings of higher-risk mortgage loans but also they approved these messages.

The six people charged are former Freddie Mac CEO and Chairman of the Board Richard F. Syron, ex-Chief Business Officer and Executive Vice President Patricia L. Cook, and former ex-Single Family Guarantee Executive Vice President Donald J. Bisenius. The three ex-Fannie Mae executives that the SEC has charged are former CEO Daniel H Mudd, ex-Fannie Mae’s Single Family Mortgage Executive Vice President Thomas A. Lund, and ex- Chief Risk Officer Enrico Dallavecchia.

In separate securities fraud lawsuits, the SEC accuses the ex-executives of causing Freddie Mac and Fannie Mae to issue materially misleading statements about their subprime mortgage loans in public statements, SEC filings, and media interviews and investor calls. SEC enforcement director Robert Khuzami says that the former executives “substantially” downplayed what their actual subprime exposure “really was.”

The SEC contends that in 2009, Fannie told investors that its books had about $4.8 billion of subprime loans, which was about .2% of its portfolio, when, in fact, the mortgage company had about $43.5 billion of these products, which is about 11% of its holdings. Meantime, in 2006 Freddie allegedly told investors that its subprime loans was somewhere between $2 to 6 billion when, according to the SEC, its holdings were nearer to $141 billion (10% of its portfolio). By 2008, Freddie had $244 billion in subprime loans, which was 14% of its portfolio.

Yet despite these facts, the ex-executives allegedly continued to maintain otherwise. For example, the SEC says that in 2007, Freddie CEO Syron said the mortgage firm had virtually “no subprime exposure.”

It was in 2008 that the government had to bail out both Fannie and Freddie. It continues to control both companies. The rescue has already cost taxpayers approximately $150 billion, and the Federal Housing Finance Administration, which acts as its governmental regulator, says that this figure could rise up to $259 billion.

Today, Freddie Mac and Fannie Mae both entered into agreements with the government that admitted their responsibility for their behavior without denying or admitting to the charges. They also consented to work with the SEC in their cases against the ex-executives.

The Commission is seeking disgorgement of ill-gotten gains plus interest, financial penalties, officer and director bars, and permanent and injunctive relief.

SEC Charges Former Fannie Mae and Freddie Mac Executives with Securities Fraud, SEC, December 16, 2011


More Blog Posts:
Former US Treasury Secretary Henry Paulson Told Hedge Funds About Fannie Mae and Freddie Mac Bailouts in Advance, Institutional Investor Securities Blog, November 30, 2011

Morgan Keegan Settles Subprime Mortgage-Backed Securities Charges for $200M, Stockbroker Fraud Blog, June 29, 2011

Freddie Mac and Fannie May Drop After They Delist Their Shares from New York Stock Exchange, Stockbroker Fraud Blog, June 25, 2010

Continue Reading ›

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The Securities and Exchange Commission says that it has resolved its Colorado securities fraud lawsuit against Universal Consulting Resources LLC (UCR) and the financial firm’s owner, Richard Dalton. Per the agreement, both will pay $15,842,948, including a $7,549,458 penalty, over allegations that investors were given materially misleading and false information about the Diamond Program and the Trading Program, which are investment contracts.

According to the United States District Court for the District of Colorado, which is where the judgments were entered, Dalton told investors they would get yearly profits of 48-120%. In actuality, he was running a Ponzi scam.

The SEC contends that Dalton raised about $17 million from 130 investors located in 13 US states. He told Trading Program investors that their money would be held in an escrow account with an American bank and that a European trader would use the account’s value to get leveraged funds to buy and sell bank notes. Under the Diamond Program, profits were supposed to come from the trading of diamonds.

In actuality, Dalton used $2.5 million of investor funds for personal expenses. New investors’ money was also used to pay existing investors their investment “profits.”

UCR and Dalton are permanently enjoined from further violations of:

• Securities Act of 1933, sections 17(a) and 5 • Securities Exchange Act of 1934, section 10b • Rule 10b-5 thereunder
Dalton also is enjoined from violating Exchange Act Section 15(a).

Named as a relief defendant is Marie Dalton, who is Richard’s wife. The SEC claims that she used more than $900,000 in investor money to buy a home in Colorado. The court has ordered her to disgorge $115,000 in investor money.

A few months ago, the couple was charged in criminal court with conspiracy, interstate transportation of stolen funds, and wire fraud.

Ponzi Scams
With hardly (if any at all) actual earnings made, Ponzi scams can collapse suddenly when the money from new investors starts to dry up or too many current investors decide to pull out. Most Ponzi schemes work for as long as they do because investors believe that they are making a real profit rather than just being given other people’s investment money.

According to the SEC, the Daltons stopped issuing payments to investors when they found out they were under investigation. They then continued to tell investors that their payments were coming but had been delayed. For example, investors were led to believe that a plane transporting diamonds was forced to land Holland. Another excuse that investors were given is that 18,000 diamonds turned out to be fake.

SEC RESOLVES FRAUD-BASED LAWSUIT AGAINST DENVER-AREA COMPANY AND ITS OWNER, SEC, December 2, 2011
Golden couple accused of Ponzi scheme, arrested, Business Journal, September 30, 2011

More Blog Posts:
Former Bernard L. Madoff Investment Securities LLC Employee Faces SEC Charges for Creating Fake Trades to Enable Ponzi Scam, Stockbroker Fraud Blog, November 23, 2011
SEC Files Charges in $27M Washington DC Ponzi Scam, Stockbroker Fraud Blog, November 21, 2011
SEC Issues Emergency Order to Stop $26M “Green” Ponzi Scam, Institutional Investor Securities Blog, October 13, 2011 Continue Reading ›

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Bank of America, Corp. has agreed to pay investors $315 million to settle their class action claim accusing Merrill Lynch of misleading them about the risks involved in investing in mortgage-backed securities. If approved, the proposed settlement would be one of the largest reached over MBS that caused investors major losses when the housing market collapsed. The lead plaintiff in this securities case is the Public Employees’ Retirement System of Mississippi pension fund.

The class action lawsuit accused Merrill of misleading investors about $16.5 billion of MBS in 18 offerings that were made between 2006 and 2007. They are claiming possible losses in the billions of dollars. (The offerings occurred before Bank of America bought Merrill.)

The plaintiffs contend that Merrill’s offering documents were misleading. They also believe that the original investment-grade ratings for the securities, which had been backed by loans from Countrywide, IndyMac Bancorp Inc., First Franklin Financial unit, and New Century Financial Corp. were unmerited. Most of these investments were later downgraded to “junk” status.

By agreeing to settle, Bank of America is not admitting to or denying wrongdoing.

This settlement must be approved by US District Judge Jed Rakoff, who just last week rejected the proposed $285M securities settlement between Citigroup Global Markets Inc. and the Securities and Exchange Commission. He ordered that the case be resolved through trial. Rakoff was also the one who refused to approve another proposed Bank of America securities settlement—the one in 2009 with the SEC—for $33 million over misstatements that were allegedly made regarding the purchase of Merrill. Rakoff would later go on to approve the revised settlement of $150 million.

Rakoff has criticized a system that allows financial firms to settle securities fraud allegations against them without having to admit or deny wrongdoing. He also has expressed frustration at the “low” settlements some investment banks have been ordered to pay considering the amount of financial losses suffered by investors.

Our securities fraud lawyers represent individual and institutional clients that sustained losses related to non-traded REITs, private placements, principal protected notes, auction-rate securities, collateralized debt obligations, mortgage-backed securities, reverse convertible bonds, high yield-notes and other financial instruments that were mishandled by broker-dealers, investment advisers, or their representatives. We also work with victims of Ponzi scams, affinity scams, elder financial fraud and other financial schemes.

BofA Merrill unit in $315 mln mortgage settlement, Reuters, December 6, 2011

Public Employees’ Retirement System of Mississippi


More Blog Posts:
Citigroup’s $285M Settlement With the SEC Is Turned Down by Judge Rakoff, Stockbroker Fraud Blog, November 28, 2011

Citigroup’s $285M Mortgage-Related CDO Settlement with Raises Concerns About SEC’s Enforcement Practices for Judge Rakoff, Institutional Investor Securities Blog, November 9, 2011

Ex-Lehman Brothers Holdings Chief Executive Defends Request that Insurance Fund Pay Legal Bills, Stockbroker Fraud Blog, October 19, 2011

Continue Reading ›

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