FINRA Fines Credit Suisse $4.5M; Merrill Lynch $3M - Financial Planning

The Financial Industry Regulatory Authority has hit Credit Suisse Securities LLC with a $4.5 million fine and Merrill Lynch with a $3 million fine for not properly representing data and supervising the residential subprime mortgage securitizations they sold.
The fines, which were announced by independent regulator FINRA on Thursday, were for improper handling that took place at the firms in 2006 and 2007. Each firm’s violation prevented certain investors from adequately understanding the nuances of residential subprime mortgage securities (RMBS), according to FINRA’s investigation.
RMBS are subject to certain disclosure rules when they are sold. Firms are required to provide investors with past delinquency rates for similar financial products. They are also required to tell investors how they calculated those delinquency rates.
Both Credit Suisse and Merrill Lynch failed to adequately follow those rules, according to FINRA.

SEC Charges in Auto Loan Provider With Promissory Note Fraud

SEC Charges Subprime Auto Loan Lender and Executives with Fraud; 2011-92; April 13, 2011
The Securities and Exchange Commission today charged Massachusetts-based subprime auto loan provider Inofin Inc. and three company executives with misleading investors about their lending activities and diverting millions of dollars in investor funds for their personal benefit. The SEC also charged two sales agents with illegally offering to sell company securities without being registered with the SEC as broker-dealers.

Even The Regulators Are Trading On Insider Information?

SEC Charges Former NASDAQ Managing Director with Insider Trading; 2011-117; May 26, 2011

 

The SEC charged a former managing director of The NASDAQ Stock Market with insider trading on confidential information that he stole while working in a market intelligence unit that communicates with companies in advance of market-moving public announcements. 

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Additional Materials

• Litigation Release No. 21981
• SEC Complaint

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The SEC alleges that Donald L. Johnson traded in advance of such public announcements as corporate leadership changes, earnings reports and forecasts, and regulatory approvals of new pharmaceutical products. He often placed the illegal trades directly from his work computer through an online brokerage account in his wife’s name. Johnson obtained illicit trading profits of more than $755,000 during a three-year period.

Johnson also has been charged in a parallel criminal action announced by the U.S. Department of Justice today.

“This case is the insider trading version of the fox guarding the henhouse,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “Instead of protecting NASDAQ client confidences, Johnson secretly traded on client information for personal gain, even using his NASDAQ office computer to make the trades.”

 

Investment Adviser Charged With Fraud in NY Real Estate Funds

The SEC has charged a Monticello, N.Y.-based investment adviser with fraudulently offering and selling securities in two upstate New York real estate funds he managed.

The SEC alleges that the adviser told investors in the Gaffken & Barriger Fund (G&B Fund) that it was a relatively safe and liquid investment that generated a minimum return of 8 percent per year. However, the fund’s actual performance did not justify these performance claims. The SEC further alleges that he defrauded investors in Campus Capital Corp. by raising money from them to prop up the ailing G&B Fund without disclosing that was how their money was actually being used. The Commission also alleges that the adviser caused Campus to engage in other transactions that personally benefitted him, unbeknownst to Campus investors.

According to the SEC’s complaint filed in federal court in Manhattan, the G&B Fund raised approximately $20 million from January 1998 to March 2008, and Campus raised approximately $12 million from October 2001 to July 2008. Barriger froze the G&B Fund in March 2008 and disclosed its true financial condition to investors.

The press release contains a link to the complaint - SEC Charges Investment Adviser With Defrauding Investors in Two Upstate New York Real Estate Funds

 

Rajaratnam Convicted in Galleon Group Insider Trading Case

IN a case that prosecutors claim is the largest insider trading case involving a hedge fund, Raj Rajaratnam was convicted of five conspiracy counts and nine securities fraud charges after a seven week jury trial in the Southern District of New York. 

Prosecutors had alleged the 53-year-old Rajaratnam made profits and avoided losses totaling more than $60 million from illegal tips.

Hedge fund founder convicted in inside-trade case

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• Jury Begins Deliberating In Raj Rajaratnam Hedge Fund Insider Trading Case

More Fraud Charges Against UBS

The hits just keep on coming.  UBS has paid huge fines for Auction Rate Securities fraud, Principal Protection Note fraud, and tax fraud, as well as losing case after case to its own investors who purchased Lehman Principal Protection Notes. Now it has settled fraud charges with the SEC which accused the firm of fraudulently rigging at least 100 municipal bond reinvestment transactions in 36 states and generating millions of dollars in ill-gotten gains.

UBS has agreed to pay $47.2 million that will be returned to the affected municipalities. UBS and its affiliates also agreed to pay $113 million to settle parallel cases brought by other federal and state authorities.

SEC Charges UBS with Fraudulent Bidding Practices Involving Investment of Municipal Bond Proceeds; 2011-105; May 4, 2011