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Wall Street financier Lynn Tilton on Friday said that her firm Patriarch Partners LLC will become a "family office" and will step down as collateral manager of three investment pools that helped fund her portfolio of troubled companies, Reuters reported. The decision follows years of legal battles with the bond insurer MBIA Inc. It also followed Patriarch's bid on Nov. 22 to put one of the pools, a collateralized loan obligation called Zohar I, into involuntary bankruptcy to keep MBIA from seizing its assets. That effort came two days after the CLO defaulted on some notes, forcing MBIA to make a $149 million payment. Tilton and Patriarch will withdraw their opposition to MBIA's bid to dismiss the involuntary bankruptcy petition.

A bankrupt real-estate investment firm that took in millions of investor dollars from people within Indiana’s Amish community would be taken over by a financial professional under a request from the Securities and Exchange Commission, the Wall Street Journal reported today. In court papers, agency lawyers asked Judge Harry C. Dees Jr. to appoint a leader for 5 Star Investment Group LLC and an affiliated company, saying that founder Earl D. Miller went missing after the regulator accused him of lying to investors. Miller advertised big returns to investors whose money would build or rehabilitate real estate, SEC officials said in documents filed in U.S. Bankruptcy Court in South Bend, Ind. Promising returns of 8 to 12 percent a year, Miller raised at least $3.9 million from at least 70 investors since 2014, court papers said.

Wall Street financier Lynn Tilton has agreed to open talks with bond insurer MBIA Inc. that could lead to a big change in her role at the collateralized loan funds that feed cash to her $2.5 billion distressed-debt empire, the Wall Street Journal reported today. Tilton and MBIA will discuss options including the appointment of an independent fiduciary to serve as collateral manager for three collateralized loan obligations (CLOs) dubbed Zohar I, II and III, a bankruptcy court judge said yesterday. The CLOs provide funding for the companies she owns. The announcement came at a bankruptcy court hearing in White Plains, N.Y., where Tilton and MBIA clashed over how to resolve the financial problems that erupted when Zohar I defaulted last year and the bond insurer covered the default. Tilton filed an involuntary bankruptcy case for Zohar I late last year, saying that she needed to protect it from MBIA. Joined by Cayman Islands trustees, MBIA opposed the involuntary bankruptcy and has asked that it be dismissed.

RCS Capital Corp, a brokerage firm tied to real-estate investor Nicholas Schorsch, filed for chapter 11 protection to reduce debt and as per the plan its key lenders will assume control of the company, Reuters reported today. The company listed total assets of $1.98 billion and debts of $1.39 billion, on a consolidated basis, in its bankruptcy filing. RCS Capital said in early January that it planned a voluntary bankruptcy filing to improve its capital structure by eliminating certain non-core assets and liabilities and to focus on its retail advice division, Cetera Financial Group. The company also reached an agreement at that time with its key stakeholders for a new investment of $150 million in Cetera. RCS Capital, however, said that Cetera's current employees, advisers and trade vendors will not be affected by its bankruptcy.

Samuel Wyly’s lawyer, fighting a $2.2 billion claim by the Internal Revenue Service, told a skeptical judge that his client’s tax planning was “aggressive but not illegal,” Bloomberg News reported yesterday. The IRS is suing to recover unpaid taxes, interest and penalties on money held in offshore trusts from 1992 to 2013 by Sam Wyly and his late brother Charles, who got rich building businesses including the Michaels Stores Inc. arts-and-crafts chain. The Dallas bankruptcy judge heard closing arguments yesterday. Wyly and his brother’s widow, Caroline “Dee” Wyly, filed for bankruptcy protection after the Securities and Exchange Commission won a fraud lawsuit against the brothers in Manhattan in 2014. Charles died in a car accident in 2011. The SEC verdict also prompted demands for 22 years’ worth of back taxes and penalties by the IRS, which the agency said was related to the securities fraud. 

A little more than five years after federal agents raided the offices of Level Global Investors, securities regulators are returning $21.5 million in settlement money that the hedge fund paid to resolve an insider trading investigation, the New York Times reported today. A federal judge yesterday ordered the hedge fund’s 2013 settlement vacated after the Securities and Exchange Commission said it would not oppose the request by lawyers for the now-defunct hedge fund. Level Global shut its doors in 2011 after investors lost confidence in its management when one of its founders, Anthony Chiasson, was implicated in the insider trading scandal. Chiasson was convicted at trial, but the verdict was overturned and the charges tossed out by a federal appeals court in 2014.

Bond sales by companies worldwide slowed to an 11-year low in January as investors shunned risk amid a meltdown in capital and commodities markets, Bloomberg News reported today. About $329 billion of debt has been issued so far this month, the least for a January since 2005, when $299 billion of securities were sold, according to data compiled by Bloomberg. Since the Fed raised rates last month, a rout in Chinese equities has fueled concern that a slowdown there would spread to the global economy. The Standard & Poor’s 500 stock index has since plunged 6.8 percent, oil prices have declined 20 percent over the same period and junk bonds have lost about 1.8 percent. January is on track for the slowest month for initial public offerings on U.S. exchanges since December 2008, when no companies filed to raise shares after the bankruptcy of Lehman Brothers Holdings Inc.

U.S. securities regulators said yesterday that they would not oppose making a rare settlement refund of $21.5 million to hedge fund Level Global Investors LP after a federal appeals court's ruling that made pursuing insider trading cases tougher, Reuters reported yesterday. The U.S. Securities and Exchange Commission's position was laid out in a letter filed in federal court in Manhattan, after the defunct Connecticut hedge fund asked a federal judge to vacate the 2013 settlement and order the SEC to repay it. Level Global's request requires approval by U.S. District Judge Shira Scheindlin. Neither the SEC nor a lawyer for Level Global responded to requests for comment.

More than 120 banks and other financial institutions on Friday posted plans for how they would wind down operations during a crisis, without the help of public money, Reuters reported. U.S. regulators will scour those "living wills" to make sure they are credible. Under the 2010 Dodd-Frank Act, the federal government can carve up a bank if regulators do not believe its plan is workable and in recent years they have faulted more than a dozen banks for drafting overly optimistic or not credible plans. Regulators have not, however, begun the process of breaking up a bank. General Electric Capital Corporation, Prudential Financial and American International Group posted their plans, which were originally due July 1, along with other institutions with assets of less than $100 billion. A handful of the banks publishing wills have more than $100 billion in assets, but less than $250 billion, such as RBS.

U.S. market regulators are intensifying their scrutiny of assets that can be hard to sell in stressed markets after the failure of a high-yield bond fund overseen by Third Avenue Management LLC, Bloomberg News reported yesterday. The Securities and Exchange Commission said yesterday that it plans to scrutinize how mutual funds, exchange-traded funds and hedge funds value these less-liquid holdings and manage the risk that they can’t be sold when managers need the cash. The SEC said that its examiners also plan to review the role of brokers that match buyers and sellers for less liquid investments. The regulator recently had to contend with the failure of the $788.5 million Third Avenue Focused Credit Fund, which blocked clients from pulling their money because the fund couldn’t meet redemptions without selling holdings at steep discounts.