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U.S. accounting watchdogs said that a review of 10 brokerage auditors found they all performed deficient work, and some failed to take required steps to help ensure investors’ funds are safeguarded, Bloomberg News reported today. Reviews of 23 broker audits conducted by the firms found most financial statements were not reviewed well enough to justify signing off on them, the Public Company Accounting Oversight Board (PCAOB) said yesterday in a report on its interim inspection program. The PCAOB did not name the auditors and brokerages in the report and said they were all smaller firms. The report came a week after New York-based WJB Capital Group Inc. was expelled from the brokerage industry for misstating financial records and nine months after the collapse of MF Global Holdings Ltd., which left customer funds unaccounted for when it filed for bankruptcy.

The House Financial Services Capital Markets and Government Sponsored Enterprises subcommittee will hold a hearing tomorrow at 9:30 a.m. ET titled "The 10th Anniversary of the Sarbanes-Oxley Act." To access the witness list and prepared hearing testimony, please click below.

J. Ezra Merkin's so-called feeder funds for Bernard Madoff’s Ponzi scheme will pay investors $110 million, bringing total recoveries to more than $500 million, Bloomberg News reported yesterday. The third cash payment by Merkin’s Ariel and Gabriel funds, which has been approved by a New York Supreme Court judge, will be delivered within about 10 business days, liquidator Bart M. Schwartz said in a statement dated today that was e-mailed to Bloomberg News. The payments are separate from the money recovered for Merkin’s former investors by New York Attorney General Eric Schneiderman in a $410 million settlement of a state lawsuit against the investment adviser, Schwartz said.

California Attorney General Kamala Harris would wind up helping her home state or "a select group" of investors if she is allowed to recoup illegal profits from the Bernard Madoff Ponzi scheme, the liquidator of the con man's brokerage said, Bloomberg News reported yesterday. Trustee Irving Picard is trying to stop Harris's suit, saying that she is breaking the law by suing former investment adviser Stanley Chais’s estate to recoup $270 million in illegal profits. Harris, like New York Attorney General Eric Schneiderman in asserting a right to pursue local wrongdoing, has said that her suit is legal because she is exercising her policing power under state law. Under bankruptcy law, Harris's suit might be barred if it had a monetary goal that conflicted with Picard’s effort to recoup money for people with claims he had validated. Harris has said that she is using California's consumer protection and securities laws to impose penalties that will deter other wrongdoers.

The 3½-year-old federal investigation of the Madoff Ponzi scheme is taking a new direction amid the expected guilty plea today of Bernard Madoff's younger brother, Peter, the Wall Street Journal reported today. Prosecutors now are expected to shift their focus to Shana Madoff, Peter Madoff's daughter. Shana Madoff, who now goes by her married name, Shana Swanson, served as the firm's in-house counsel and compliance director. The new focus comes after authorities have had a tough time building a criminal case that Bernard Madoff's relatives knowingly participated in the multibillion-dollar Ponzi scheme. Madoff, who pleaded guilty to the fraud in early 2009, has said that his relatives did not know anything about it, and investigators do not appear to have found records showing otherwise. But prosecutors appear to be getting traction with easier-to-prove charges like making false statements to investors and government agencies.

Barclays has agreed to pay hundreds of millions of dollars to resolve accusations that it attempted to manipulate a crucial interest rate, the first settlement in a sprawling global investigation targeting many of the world's biggest banks, the New York Times' DealBook blog reported today. The British bank struck a deal with regulators in Washington, D.C., and London, and the full terms of the deal will be announced later today. The U.S. Commodity Futures Trading Commission is expected to levy a $200 million penalty, the largest in the agency's history. The Financial Services Authority in London is also involved in the action. The investigation centers on the way Barclays and other big banks set a key benchmark for borrowing known as the London Interbank Offered Rate (LIBOR). Regulators have questioned whether the banks attempted to improperly set the rate at a level that was favorable to their own institutions.

Lehman Brothers Holdings Inc.'s creditors dropped a legal action against U.S. Treasury Secretary Timothy Geithner after he agreed to answer questions in writing about the defunct investment bank's failure, Bloomberg News reported yesterday. Lehman's creditors' committee asked a judge in February to force Geithner to give a deposition in Lehman's lawsuit against JPMorgan Chase & Co., which alleged that the bank siphoned $8.6 billion out of Lehman during the 2008 credit crisis, helping to cause its collapse. A U.S. district judge closed the case yesterday after creditors agreed to end their action, according to a federal court filing. Geithner was president of the Federal Reserve Bank of New York when Lehman collapsed. He held discussions in the week before the bankruptcy filing with Richard Fuld and James Dimon, Lehman's and JPMorgan's chief executive officers, on the collateral that JPMorgan was demanding for its loans, according to creditors' court filings. He also met with Dimon and Henry Paulson, then treasury secretary, to discuss "concerns" that Dimon was using the crisis to strengthen JPMorgan at Lehman’s expense, creditors said.

Federal prosecutors in Chicago said on Friday that two former executives at Sentinel Management Group Inc. were indicted for allegedly defrauding customers out of more than $500 million before the futures brokerage went bankrupt in 2007, Reuters reported on Friday. Eric Bloom, who was Sentinel's chief executive, and Charles Mosley, who was a senior vice president and head trader, were accused of pledging customer securities as collateral for a bank credit line that funded a "house" trading portfolio meant to benefit them and Bloom's family. U.S. Attorney Patrick Fitzgerald in Chicago, who announced the charges, called the case one of the largest criminal financial fraud cases ever prosecuted by his office. Sentinel's collapse has been compared with the October 2011 bankruptcy of the larger MF Global Holdings Ltd. No criminal charges have been brought in that case, which Fitzgerald's office is also investigating. According to the indictment in the Sentinel case, Bloom also misled customers in a letter four days before the firm's bankruptcy, blaming its inability to honor client redemptions on a market "liquidity crisis" and "investor fear and panic."

Abacus Federal Savings Bank, a small bank with a major presence in New York City's Chinese community, and 19 of its former employees have been charged with inflating the qualifications of mortgage applicants to meet federal loan standards, a scheme that prosecutors say brought the bank tens of millions of dollars in ill-gotten fees and sent hundreds of millions of dollars in risky mortgages to the investment market, the New York Times reported on Friday. From May 2005 through February 2010, hundreds of millions of dollars’ worth of Abacus mortgages were guaranteed by Fannie Mae based upon false information, the indictment says. In announcing the indictment on Thursday, Manhattan district attorney Cyrus R. Vance Jr. said that nearly all of the Abacus loans were still performing, meaning the borrowers were still making payments on the mortgages they received. However, Vance said that the 2008 financial crisis showed the danger of waiting for illegitimate mortgages to go bad.

Securities and Exchange Commission investigators have concluded their probe of possible financial fraud at Lehman Brothers Holdings Inc. without recommending enforcement action against the firm or its former executives, Bloomberg News reported yesterday. Lawmakers and investors have pressed the agency for more than three years to determine whether Lehman misrepresented its financial health before filing the biggest bankruptcy in U.S. history in September 2008. Senior SEC officials have been reluctant to formally close the matter even though investigators found a lack of evidence of wrongdoing and officials have weighed in by issuing a public report on their findings that stops short of an enforcement action while highlighting the firm’s questionable conduct. The SEC has indicated that the case remains under review.