Investor Lawyers Blog

HSBC to Pay $12.5M Settlement to SEC Over Charges That It Violated Securities Laws

Published on: November 25, 2014 | by Shepherd Smith Edwards & Kantas, LLP

The Securities and Exchange Commission is charging HSBC Private Bank (HSBC) with violating U.S. federal securities laws. According to the regulator, the Swiss private banking arm did not register with the agency before providing clients in this country with cross-border brokerage and investment advisory services.

HSBC Private Bank as agreed to pay $12.5 million to resolve the SEC’s charges. It is also admitting to wrongdoing.

According to the SEC order over the settled administrative proceedings, the private banking arm and its predecessors started providing the services at issue over 10 years ago, growing its clients base to up to 368 U.S. accounts while collecting about $5.7 million in fees. Banking personnel came to this country over three dozen times to solicit clients, offer advice, and fulfill securities transactions. The managers who completed these tasks were not registered to provide these services nor were they affiliated with a registered brokerage firm or investment adviser. These managers also communicated via e-mail and postal mail with clients in the U.S.

FINRA Orders Houston-Based USCA Capital Advisors LLC to Pay $3.8M to 19 ExxonMobil Retirees

Published on: November 24, 2014 | by Shepherd Smith Edwards & Kantas, LLP

A Financial Industry Regulatory Authority arbitration panel said that USCA Capital Advisors LLC must pay over $3.8 million to 19 ExxonMobil retirees whose investments were mismanaged the Houston-based wealth management firm. The self-regulatory organization also says that the Texas investment advisory firm misled the investors about its trading strategy.

It is not uncommon for Houston financial advisers to target ExxonMobil retirees as clients. The oil company has a huge outfit and other operations in the area. According to the investors, USCA was tasked with handling their retirement savings because of promises the investment advisors made to protect, oversee, and grow their accounts.

At a presentation by USCA RIA LLC, which is USCA’s investment advisory arm, advisers told investors about their Total Return model program, which they claimed would up S & P 500 gains while lowering the risks involved in trading equities. Investors said they were told the strategy would hold primarily exchange-traded funds and U.S. stocks in a rising market and turn the money into cash when the markets dropped. Trades were to be stimulated by “objective technical factors.”

SEC Enforcement: Wedbush Settles SEC Probe for $2.4M, High-Frequency Trading Firm Gets $16M Penalty, and the Regulator Suspends Companies Touting Ebola Treatment

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

Wedbush Settles Market Access Violation Case for $2.44M

Wedbush Securities has agreed to settle a market access violations case with the U.S. Securities and Exchange Commission by admitting to wrongdoing and paying $2.44 million. The brokerage firm has also agreed to hire an independent consultant.

According to the SEC order, Wedbush violated the market access rule because it didn’t have the proper risk controls in place before giving customers access to the market. Among the customers that were given this access were thousands of anonymous overseas traders.

SEC Issues 2014 Whistleblower Program Report

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

According to the Securities and Exchange Commission’s 2014 Annual Report to Congress on the Dodd-Frank Whistleblower Program, the regulator issued nine whistleblower awards, including one $30 million award issued to one whistleblower.

The report states that over 40% of those who received awards were either former or present employees of the companies on which they reported. 80% of these whistleblowers tried to bring up the issues to the companies first before going to the regulator. They only approached the regulator after an employer did not act to rectify the misconduct. Whistleblower award recipients also included fraud victims, individuals with personal ties to the fraudsters, consultants, and contractors.

The SEC also noted that it brought its first enforcement action against an employer that retaliated against a whistleblower. The Dodd-Frank Act has an anti-retaliation program that is supposed to protect individuals who bring a whistleblower claim. In that action, Paradigm Capital Management got into trouble for retaliating against a trader who told the SEC that the firm had taken part in allegedly unlawful transactions. Paradigm was ordered by the SEC to pay $2.2 million to resolve the employee’s retaliation claim.

RBS Must Pay $88M to UK Regulators

Published on: November 20, 2014 | by Shepherd Smith Edwards & Kantas, LLP

Royal Bank of Scotland Group Plc (RBS) will pay an $88 million fine to Britain’s Financial Conduct Authority and the Bank of England’s Prudential Regulation Authority for the 2012 computer system failure that left millions of customers without account access for weeks. Some 6.5 million customers, which is about 10% of the U.K. population, were impacted.

According to FCA enforcement head Tracey McDermott, the technical glitch happened because of RBS Groups’ failure to identify and handle the risks that can occur from IT incidents. The failure, he noted, exposed customers to the risks.

The system failure happened after a third-party contractor installed a software upgrade. Because of the collapse, bank customers, as well as those in its Ulster Bank and NatWest divisions were unable to take out, transfer, or withdraw funds.

SEC Working on Mutual Fund Regulations, Conducts Dark Pool Probes, Enacts New Exchange Rules

Published on: November 20, 2014 | by Shepherd Smith Edwards & Kantas, LLP

The U.S. Securities and Exchange Commission is developing regulations that would make sure that mutual funds are liquid enough to satisfy client redemptions and money managers have a plan should a fund fail. Part of the regulator’s strategy may include limiting how mutual funds are allowed to place in assets that are hard-to-sell and use derivatives to enhance returns.

InvestmentNews reports that according to a report issued by the International Monetary Fund last month, mutual funds’ holdings of leveraged loans, junk bonds, and other assets that don’t trade often had higher market and liquidity risks. The IMF said that this could “compromise” financial stability unless the matter is dealt with. Mutual funds also have come under the Financial Stability Oversight Council’s scrutiny.

Per the SEC’s agenda, regulators could propose new mutual fund rules in October of next year. Earlier this year, when Commission Chair Mary Jo White talked about an action plan that the agency was developing to enhance asset management oversight, she noted that the regulator intends to mandate that mutual fund investments provide more disclosures. The SEC has been seeking to gain greater insight into whether the asset management industry presents a risk to the financial system.

Insider Trading Roundup: Ex-Broker Pleads Guilty to Securities Fraud Involving IBM Acquisition, BNP Officials Are Under Scrutiny, and Ex-Billionaire Is Tried In Historic Brazilian Case

Published on: November 19, 2014 | by Shepherd Smith Edwards & Kantas, LLP

Former Stockbroker Pleads Guilty to Insider Trading in IBM Case

Daryl Payton, an ex-trader at Euro Pacific Capital Inc., has pleaded guilty to conspiracy to commit securities fraud. Payton was involved in an insider trading scam that revolved around software manufacturer SPSS Inc., which IBM acquired in 2009. A U.S. judge accepted his plea.

Three other people have admitted that they shared and traded on secret information about the deal when it was in the works. The confidential data came from Michael Dallas, a corporate lawyer who has not been charged but was identified in a related S.E.C. securities fraud lawsuit.

Puerto Rico’s Prepa Sees 219% Rise in Overdue Accounts With At Least $1.75 Billion Owed

Published on: November 18, 2014 | by Shepherd Smith Edwards & Kantas, LLP

Puerto Rico’s Electrical Power Authority, also known as PREPA, is experiencing a surge in overdue accounts. According to a report from an FTI Consulting subsidiary, since 2012, the U.S. territory’s electrical authority has seen a 219% increase in the number of company and residential accounts that are at least 120 days late in making their payments. The report was generated as part of an agreement with the creditors, which retain more than $9 billion of the electrical utility company’s debt.

By September 2014, late balances owed to PREPA not just among businesses and residents, but also by government entities had hit $1.75 billion. At least $708.6 million were payments that were late by a minimum of four months.

Puerto Rico’s governmental entities owe about $758 million, with certain public corporations unable to even pay their electricity bills and refusing to agree to payment plans to get their accounts current. The FTI report recommends that Prepa put into place an amnesty period for clients that are delinquent, retain a collection agency, increase late fees and charges for reconnection, and push for timely payments.

Bank of Tokyo Mitsubishi Ordered By NY Regulators to Pay Another $315M in Penalties Over Transactions Involving Sanctioned Nations

Published on: November 18, 2014 | by Shepherd Smith Edwards & Kantas, LLP

The New York Department of Financial Services says that Bank of Tokyo Mitsubishi UFJ must pay another $315 in penalties for misleading Benjamin M. Lawsky, the state’s Superintended of Financial Services, about transactions involving Iran, Myanmar, and Sudan. All three nations are subject to U.S. economic sanctions. The Japanese bank also agreed to take disciplinary action against three employees that allegedly took part in diluting a report submitted to Lawsky about the transactions.

One employee, who was a manager in the bank’s anti-money laundering compliance office, stepped down. The other two, who work in the compliance department, have been barred from conducting business with any financial institutions. As part of the settlement, Bank of Tokyo admitted to misleading the regulator.

Lawsky’s office fined the bank $250 million in a settlement last year over allegations that it had routed $100 billion of payments via 28,000 transactions involving the three countries through its New York office. The year before, Bank of Tokyo arrived at a separate agreement with the U.S. Department of Treasury for $8.6 million over allegedly 97 transfers valued at $5.9 million.

SEC Wants $602M Fund Set Up for Victims of SAC Capital’s Insider Trading

Published on: November 17, 2014 | by Shepherd Smith Edwards & Kantas, LLP

The U.S. Securities and Exchange Commission is asking a district judge to authorize a fair fund to pay back people shareholders who didn’t participate in an insider trading scam involving shares of Wyeth LLC and Elan Corp. PLC. The regulator is seeking to reimburse people who traded the stocks over a seven-day period in July 2008, which is the week when SAC Capital Advisors LP liquidated a $700 million position in both companies because of illicit tips obtained by former fund manager Mathew Martoma. The SEC is suggesting that the $602 million it collected from SAC Capital over the matter should be used to repay the shareholders.

SAC Capital, now known as Asset Management LP, had agreed to pay $1.8 billion to settle a criminal indictment for the insider trading allegations. Of that money, $616 million was a penalty to the SEC over related charges. However, not all SEC commissioners are on board with the regulator’s fair fund recommendation. Commissioners Michael Piwowar and Daniel Gallagher have expressed their dissent.

Meantime, Martoma has just lost a bid to stay out of jail while he appeals his conviction. Martoma was sentenced to nine years behind bars after he was found guilty of three counts of conspiracy and securities fraud.