Investor Lawyers Blog

Barclays to Pay $3.75M FINRA Fine for E-mail Retention and Record Preservation Violations

Published on: December 30, 2013 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority said it is fining Barclays Capital Inc. (ADR) $3.75 million for systemic failures that prevented it from making sure certain instant messages, emails, and electronic records are preserved in the way they are required be for at least a decade. The financial institution is settling without denying or admitting to the findings. It has, however, agreed to an entry of the SRO’s findings.

According to FINRA, between 2002 and 2012, Barclays did not preserve a lot of records and electronic books in WORM format, per regulator mandate. This included trade confirmations, trade information, order and trade ticket data, blotters, accounting records, and other records. WORM (Write-Once, Read-Many) Format is the non-erasable, non-rewriteable format that business-related electronic records are supposed to be kept in-per FINRA rules and federal securities laws. The Securities and Exchange Commission says that this format and the preservation of records are essential in protecting investors and ensuring that compliance with securities laws is taking place.

In regards to Barclays over this matter, FINRA says that the issues were widespread and affected all of the firm’s business. It said that because of this, Barclays couldn’t determine whether all of its e-books and records were kept in an a manner that was unalterable. Also, Barclays is accused of not properly keeping certain attachments to Bloomberg emails and not properly keeping about 3.3 million Bloomberg instant messages. Also, Barclays purportedly did not set up and maintain a proper system and written procedures so it could comply with FINRA, SEC, and NASD regulations and rules involving the requirements noted in the violations.

Bank of America’s Countrywide to Pay $17.3M RMBS Settlement to Massachusetts

Published on: December 30, 2013 | by Shepherd Smith Edwards & Kantas, LLP

According to Massachusetts Attorney General Martha Coakley, Countrywide Securities Corp. (CFC) will pay $17 million to settle residential mortgage backed securities claims. The settlement includes $6 million to be paid to the Commonwealth and $11.3 million to investors with the Pension Reserves Investment Management Board. Countrywide is a Bank of America (BAC) unit.

Coakley’s office was the first in the US to start probing and pursuing Wall Street securitization firms for their involvement in the subprime mortgage crisis. Other RMBS settlements Massachusetts has reached include: $34M from JPMorgan Chase & Co. (JPM), $36M from Barclays Bank (ADR), $52 million from Royal Bank of Scotland (RBS), $102 million from Morgan Stanley (MS), and $60 million from Goldman Sachs. (GS).

Meantime, a federal judge is expected to rule soon on how much Bank of America will pay in a securities fraud verdict related to the faulty mortgages that Countrywide sold investors. A jury had found the bank and ex-Countrywide executive Rebecca Mairone liable for defrauding Freddie Mac and Fannie Mae via the sale of loans through that banking unit. The US government wants Bank of America to pay $863.6 million in damages. Mairone denies any wrongdoing.

FINRA Arbitration Panel Says Wells Fargo Must Repurchase $94M of Auction-Rate Securities from Investors

Published on: December 29, 2013 | by Shepherd Smith Edwards & Kantas, LLP

A Wells Fargo & Co. (WFC) brokerage unit must buy back almost $94 million in auction rate securities from the family who said their adviser misrepresented the investments. The claimants are the relatives of deceased newsstand magnate Robert B. Cohen, who founded the chain Hudson News. Cohen died in 2012.

His family contends that Wells Fargo Advisors and one of its advisors made misleading and fraudulent statements about municipal auction-securities. They are alleging breach of fiduciary duty, negligence, and fraud in their municipal auction-rate securities fraud claim.

Now, the firm must buy back at face value the municipal ARS it helped Cohen, his family, and affiliated business purchase. The transactions started beginning March 2008.

Wells Fargo Reaches $591 Million Mortgage Deal with Fannie Mae

Published on: December 29, 2013 | by Shepherd Smith Edwards & Kantas, LLP

Wells Fargo & Co. (WFC) has arrived at a $591 million mortgage settlement with Fannie Mae (FNMA). The arrangement resolves claims that the banking institution sold faulty mortgages to the government run-home loan financier and covers loans that Wells Fargo originated more than four years ago.

Fannie Mae and Freddie Mac (FMCC) were taken over by the US government five years ago as they stood poised to fail due to faulty loans they bought from Wells Fargo and other banks. The two mortgage companies had bundled the mortgages with securities.

With this deal, Wells Fargo will pay $541 million in cash to Fannie Mae while the rest will be taken care of in credits from previous buy backs.

It was just a couple of months ago that Wells Fargo settled its disputes over faulty loans it sold to Freddie Mac with an $869 million mortgage buyback deal. According to Compass Point Research and Trading LLC, between 2005 and 2008, Wells Fargo sold $345 billion of mortgages to Freddie Mac. Compass says the bank sold another $126 billion to Freddie in 2009.

Also settling with Freddie Mac today is Flagstar Bank (FBC) for $10.8M over loans it sold to the mortgage company between 2000 and 2008. That agreement comes following Flagstar and Fannie Mae settling mortgage claims for $93 million over loans the former sold to the latter between January 2000 and December 31, 2008.

Fannie Mae and Freddie Mac have been trying to get banks to repurchase these trouble loans for some time now. In light of this latest settlement with Wells Fargo, Fannie Mae has reached settlements of about $6.5 billion over loan buy backs, including a $3.6 billion deal with Bank of America Corp. (BAC) and Countrywide Financial Corp. and $968 million with Citigroup (C). Earlier this month, Deutsche Bank (DB) consented to pay $1.9 billion to the Federal Housing Finance Agency over claims that it misled Freddie and Fannie about the mortgage backed securities that the latter two purchased from the bank. https://www.securities-fraud-attorneys.com/lawyer-attorney-1835405

Wells Fargo agrees to $541 million loan settlement, Reuters, December 30, 2013

Wells Fargo in $869 Million Settlement With Freddie Mac, Bloomberg News, October 1, 2013

More Blog Posts:
FINRA Arbitration Panel Says Wells Fargo Must Repurchase $94M of Auction-Rate Securities from Investors, Stockbroker Fraud Blog, December 29, 2013

Credit Suisse Must Face ARS Lawsuit Over Subsidiary Brokerage’s Alleged Misconduct, Says District Court, Stockbroker Fraud Blog, January 11, 2013

UBS Bank USA No Longer to Offer Loans Collateralized with Puerto Rico Securities

Published on: December 28, 2013 | by Shepherd Smith Edwards & Kantas, LLP

UBS Bank USA, the Utah affiliate of UBS AG (UBS), will no longer be granting or offering loans collateralized by Puerto Rico securities. According to the media outlet El Nuevo Dia, UBS Bank USA has agreed to sell approximately $562 million in loans made to Puerto Rican investors to another UBS AG affiliate, UBS Financial Services of Puerto Rico (UBS PR). Additionally, UBS Bank USA has agreed to no longer offer loans to Puerto Rican residents.

As reported, UBS Bank USA signed an agreement with the Office of the Commissioner of Financial Institutions after an investigation was opened concerning the ability of UBS Bank USA to have issued such loans. Per the agreement, the loans transfer was to be completed by around December 20, while the new lending ban in Puerto Rico would go into effect after that date.

Thousands of investors have lost some if not all of their assets in the wake of the drop in value of Puerto Rico bonds and closed-end bond funds that invested in Puerto Rico bonds. This spurred UBS to liquidate millions of dollars from investors because the values guaranteed borrowings with UBS Bank USA. (UBS Bank USA had previously told El Nuevo Dia that it did not have to be licensed in Puerto Rico to lend there.)

FINRA Bars Ex-LPL Broker Over Nontraded REIT Sales

Published on: December 27, 2013 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority has barred ex-LPL Financial (LPLA) representative Gary Chakman over securities industry rule violations related to the sale of non-traded real estate investment trusts. Chackman was registered with the brokerage firm from 2001 until 2012. LPL then ended his registration with the firm for purportedly violating its procedures and policies related to alternative investment sales.

According to the SRO, Chackman “recommended and effected” transactions that were unsuitable in several LPL customer accounts. He did this by overconcentrating clients’ assets in illiquid securities, including REITs. Chackman is also accused of falsifying LPL documents to avoid firm supervision and making the broker-dealer’s records and books inaccurate because he turned in purchase forms misrepresenting clients’ liquid net worth.

FINRA’s settlement letter says that when Chackman submitted falsified documents, this allowed him to increase how much of customers’ accounts could be concentrated in REITs and other investments even though these amounts went over LPL’s allowed allocation limits. The alleged overconcentration took place between January 2009 and February 2012.

FINRA Considers System That Would ‘Red Flag’ Customer Accounts at Brokerage Firms

Published on: December 27, 2013 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority is looking at a system that would let the SRO run analytics on the customers accounts at brokerage firms that would allow it to identify “red flags” involving business and sales misconduct involving branches, firms, and registered representatives. The agency is now seeking comments for its proposal for the Comprehensive Automatic Risk Data System (CARDS).

Upon implementation of CARDS, clearing firms and self-clearing firms would regularly turn in, in standardized, automated format, specific data about customer accounts and the customers accounts of each member account that they clear for. This would allow FINRA to conduct analytics so it can identify excessive commissions, churning, markups, pump and dump scamps, and mutual fund switches. The information would also be used to examine broker-dealers.

FINRA says it wants to be able to find the risks and red flags earlier. According to a notice from the SRO, the agency says that this type of automated reporting would get rid of some of the one-off reporting that brokerage firms now have to engage in. This would also let FINRA compare broker-dealers and identify trends and patterns in the industry.

Broker to the Stars” Broker Bambi Holzer is Barred from Securities Industry by FINRA

Published on: December 26, 2013 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority is barring broker Bambi Holzer from the securities industry. Holzer is known for representing rich and famous Beverly Hills clients and many others.

Last week, Holzer who has been suspended by FINRA since September, settled with the SRO over the broker fraud charges. The regulator had sued her for allegedly lying to Wedbush Morgan Securities Inc., which is another former brokerage firm, about the net worth of a number of clients when she sold private placement offerings-Provident Royalties preferred shares-that ended up being part of a $485M Ponzi scheme. She is also accused of not reporting a pending regulatory action on her employment history.

Previously, Holzer and UBS PaineWebber Inc., which was another firm she was with, paid at least $11.4M to settle dozens of securities claims by investors accusing her of misrepresenting variable annuities by telling them they came with guaranteed returns. Holzer’s BrokerCheck report is 115 pages long.

Deutsche Bank to Pay $1.9B to FHFA Over Mortgage-Backed Securities Sold to Freddie Mac and Fannie Mae

Published on: December 26, 2013 | by Shepherd Smith Edwards & Kantas, LLP

Deutsche Bank (DB) will pay the Federal Housing Finance Agency $1.9 billion to settle securities claims that it misled Freddie Mac and Fannie Mae about the quality of loans bundled with mortgage-backed securities. Of the settlement, Fannie will get $300 million and Freddie will get $1.6 billion. However, this MBS settlement does not resolve a separate lawsuit filed by the two government-sponsored enterprises against Deutsche Bank and other firms over losses from the alleged manipulation interest rate.

FHFA claims that prior to the financial crisis, a number of financial institutions misled the two mortgage companies about borrowers’ creditworthiness. It wants to get back the $196 million Freddie and Fannie paid to buy what were supposed to be private label MBS.

The regulator says that losses sustained by Freddie and Fannie were from MBS that came from financial institutions selling flawed securities due to home loans in the bonds being more high risk than what the banks said they were. Although Freddie and Fannie didn’t make the loans directly they bought the mortgages from banks and sold them as securities to investors and provided guarantees. When the housing market exploded the two of them bought securities that were privately issued as investments. They also became two of the biggest bond investors. Unfortunately, when the economic crisis eventually hit in 2008, Freddie and Fannie suffered huge mortgage losses. The US Treasury had to lend them over $150 billion just so they could keep running.

Deutsche Bank, Royal Bank of Scotland Settle & Others for More than $2.3B with European Union Over Interbank Offered Rates

Published on: December 24, 2013 | by Shepherd Smith Edwards & Kantas, LLP

Deutsche Bank (DB) has announced that as part of a collective settlement, it will pay $992,329,000 to settle investigations involving interbank offered rates, including probes into the trading of Euro interest rate derivatives and interest rate derivatives for the Yen.

Also paying fines as part of the collective settlement are Royal Bank of Scotland Group Plc (RBS) which will pay $535,173,000 and Society General SA (SLE), which will pay $610,454,000, and three others. In total, the financial firms will pay a record $2.3 billion.

The fines are for manipulating the Euribor and the Yen London interbank offered rate. EU Competition Commissioner Joaquin Almunia said that regulators would continue to look into other cases linked to currency trading and Libor. Also related to these probes, Citigroup (C) has been fined $95,811,100, while JPMorgan (JPM) is paying $108M. Because of Citigroup’s cooperation into this matter, it avoided paying an additional $74.6 million. The two firms reportedly admitted that they were part of the Yen Libor financial derivatives cartel.