Federal Reserve

Securities News: Deutsche Bank Fined $157M For Violating Volcker Rule, CFTC Charges Couple With Hedge Fund Fraud, & SEC Accuses Oil and Gas Promoter of Inflating AUM

Published on: April 21, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Federal Reserve Imposes First Fine to a Bank Over A Volcker Rule Violation
For violating the Volcker Rule’s ban on making risky market bets, Deutsche Bank (DB) must pay a $157M fine for not making sure its traders didn’t make such bets and for allowing its currency desks to engage in online chats with competitors, during which time they allegedly disclosed positions. It was just last year that the German lender admitted that it did not have sufficient systems in place to keep track of activities that could violate the ban.

Under the Volcker Rule, banks that have federal insured deposits are not allowed to bet their own funds. They also are supposed to makes sure that when their traders help clients sell and buy securities, they aren’t engaging in bet making.

For the system lapses, the Federal Reserve fined Deutsche Bank $19.7M. The remaining $136.9M fine is for the chats and because the bank purportedly did not detect when currency traders were revealing positions or trying to coordinate strategies with competitors.

Securities Fraud News: Union Pension Funds Settle Class Action Case for $64M, Deadline for Implementing Volcker Rule is Extended, and Ex-Panther Energy Trader Goes to Prison For Spoofing

Published on: July 16, 2016 | by Shepherd Smith Edwards & Kantas, LLP

$64M Pension Fund Fraud Settlement Reached Against Dana Holding Corp. Executives
Plaintiffs in the shareholder class action case brought against Michael Burns and Robert Richter have reached a $64M out-of-court settlement with the two ex-Dana Holding Corp. executives. The union pension funds include lead plaintiffs SEIU Pension Plans Master Trust, Plumbers & Pipefitters National Pension Fund, and the West Virginia Laborers Pension Trust Fund.

They accused Bornes and Richter, the company’s ex-CEO and CFO, respectively, of purposely misleading investors about Dana Holding’s financial woes in the months prior to its filing for bankruptcy in 2006. Although the securities fraud case was initially dismissed by a district court on the grounds that the plaintiffs failed to show that the two men and Dana knew they were engaging in wrongdoing, the 6th U.S. Circuit Court of Appeals in Cincinnati reversed that decision, saying evidence showed otherwise.

Federal Reserve Gives Banks More Time to Meet Volcker Rule Requirements
The U.S. Federal Reserve has extended the deadline for banks to rid themselves of ownership in certain legacy investments and cut ties with funds that are barred under the Volcker Rule. The rule, part of the Dodd-Frank Act, aims to stop banks with government-backed deposits from betting on Wall Street for their benefit. It doesn’t allow insured banks and their subsidiaries to own or be affiliated in any way with a private equity fund or hedge fund or take part in proprietary trading. Lenders are not allowed to trade using their own capital and are restricted from investing in funds.

Securities News: J.P. Morgan Face Restrictions on Raising Clients Funds In the Wake of Improper Product Disclosures to Investments, Intel Sued Over Improperly Investing 401K Funds, and Citigroup, Bank of America, Other Big Banks Get New Bailout Rules

Published on: October 30, 2015 | by Shepherd Smith Edwards & Kantas, LLP

SEC Seeks to Limit JP Morgan’s Ability to Raise Client Money
An Over $200K settlement between J.P. Morgan Chase & Co. (JPM) and regulators has stalled because of efforts by federal regulators to limit the firm’s ability to raise money for clients. The move is an attempt to place a wider variety of consequences on financial firms accused of breaking regulations.

J.P. Morgan had settled allegations accusing it of failing to make proper disclosures when marketing its investment products to clients over the products offered by competitors. Now, the SEC wants the firm to say yes to limits on its ability to sell bonds or stocks through private placements for several years. Such a restriction could hamper its private bank’s efforts to raise funds for hedge funds and other clients through a key channel or sell bonds or stocks privately to rich investors and other sophisticated investors.

While banks are allowed to conduct private placement offerings, firms that violate the rules that these securities are under will lose privilege unless they are given a waiver.

Lawsuit Accuses Intel of Investing 401K Monies Improperly
An ex-Intel Corp. employee is suing company officials for breach of fiduciary duty. According to Christopher M. Sulyma, the company invested defined 401K participants’ retirement funds in high risk, costly private equity funds and hedge funds.

Federal Reserve Passes New Rules for Deutsche Bank, UBS, and Other Foreign Banks

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

This week, the Federal Reserve passed new rules that could make large foreign banks increase their capital by billions of dollars. Per the regulations, Credit Suisse Group AG (CS), Deutsche Bank AG (DB), UBS AG (UBS), and Barclays PLC (BCS), and other lenders based overseas that have units in the US will have to meet requirements having to do with debt levels and capital, as well as satisfy yearly “stress tests.”

With the new rules, 20 banks will now be required to set up US holding companies. Foreign banks with more than $50 billion in US assets will need to keep up more loss-absorbing capital than what is required by other nations. This could compel them to raise more debt or equity for their units in this country. For example, reports the Wall Street Journal, Citigroup (C) analysts say that Deutsche Bank’s unit that has been running with essentially zero capital. Under the new rules, however, it will have to deal with a shortfall of about $7 billion.

Also, foreign banks with assets greater than $10 billion will have to take the Fed’s yearly stress-test process, which would necessitate stringent review of capital levels and assets. Foreign banks that fail to pass the test could find their business activities in the US restricted. Banks with assets of at least $50 billion would have to satisfy enhanced leveraged ratios (By January 2018), risk-management, and liquidity requirements.