Securities News: Ex-Fannie Mae CEO Settles Mortgage Fraud Case, WL Ross to Pay Back $11.8M to its Funds, SEC Chastises Bank of America For Not Explaining COO’s $15.5M Compensation, and Pension Returns Drop

Former Fannie Mae CEO Settles SEC Charges for $100K
Daniel Mudd has agreed to pay $100K to settle Securities and Exchange Commission charges accusing the ex-Fannie Mae CEO of misleading investors about the degree to which the mortgage company was exposed to subprime loans leading up to the 2008 economic crisis. The regulator had filed its civil case against Mudd and two other Fannie Mae executives in 2011. The latter two settled with the Commission last year.

Mudd maintains he did nothing wrong.

WL Ross Resolves Fee-Allocation Disclosure Charges
WL Ross & Co. will reimburse specific WL Ross funds about $11.8M to resolve SEC charges related to its fee allocation practices and disclosures. The firm will also pay a $2.3M civil penalty.

According to the SEC, WL Ross was given transaction fees by portfolio companies. This lowered the management fees that funds had to pay the firm. The regulator points to WL Ross’s limited partnership agreements that were unclear regarding fee offsets when multiple funds and other co-investors share ownership.


SEC Takes Issue with Bank of America COO’s Compensation
In correspondence that was recently released, the SEC took issue with the compensation received by Bank of America COO Thomas Montag, who was paid $15.5M last year. That is a lot more than other top BofA executives except for CEO Brian Moynihan. Just earlier this year, the Commission had scolded the lender for not providing more explanation about its compensation decisions.

Montag was paid more money than any other Bank of America executives for five years until 2015 when Moynihan’s compensation was raised y to $16.5M. According to Bank of America, Montag is in charge of a great deal as the head of the financial institution’s markets operations and investment banking.

In the correspondence between the SEC and the bank, the latter said that it will do a better job in the future of explaining how performance measures were a factor in determining compensation and why the pay range among leading executives was varied. Bank of America said that not only do the businesses that Montag runs for the firm serve companies and large investor from numerous nations, but also he has been responsible for strengthening client relationships, making sure managers are held more accountable, and concentrating resources on important accounts.

Pew Report Cites Slow Pension Investment Returns
According to preliminary data from 2015 released in a report by the Pew Charitable Trusts, the unfunded liabilities of the majority of state-run pension funds has gone up. Meantime, public pension systems throughout the US continue to exhibit a downward drop in performance. During the 2016 fiscal year, the average return has been just .9%.

U.S. public pensions had been expected to hit an all-time low in terms of long-term returns, reported The Wall Street Journal, with 20-year annualized returns for these pensions anticipated to drop 7.47% upon the release of 2016’s fiscal results. The WSJ obtained this figure from the Wilshire Trust Universe Comparison Service. The newspaper noted the significance of the 20-year annualized return drop, because although a couple of bad years isn’t as key as long-term average when it comes to pension investments, such a long drop of yearly returns is noteworthy.

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Former Fannie Mae CEO Mudd Settles SEC Lawsuit for $100,000, Bloomberg, August 22, 2016

SEC Settles Allegations Against Former Fannie Mae CEO for $100,000, The Wall Street Journal, August 22, 2016

The SEC Just Fined This Trump Advisor’s Firm $2.3 Million, Fortune, August 25, 2016

SEC presses Bank of America on executives’ pay, Providence Journal, August 4, 2016

The Pew Charitable Trusts

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