UBS has agreed to pay $14.5 million to settle accusations by the Securities and Exchange Commission that a subsidiary violated federal securities laws in its operation of a private stock trading system known as a dark pool, the New York Times DealBook blog reported today. The UBS subsidiary ran afoul of regulations by allowing traders to buy and sell stocks priced at increments smaller than a penny, and it further erred by failing to adequately disclose this system and another trading feature to all investors in its market, the SEC said yesterday. The settlement includes a $12 million penalty that the SEC said was the largest it had ever levied against an alternative trading system.
The House of Representatives yesterday easily passed legislation to ease some of the banking regulations adopted after the financial crisis, with 29 Democrats shrugging off President Obama’s veto threat to join united House Republicans, the New York Times reported today. The bill, which passed 271 to 154, follows two other measures approved in the last month that made changes to the 2010 Dodd-Frank financial law, but this one would be the broadest effort to shift course. It would delay by two years a Dodd-Frank mandate that financial firms sell off bundled debt, known as collateralized loan obligations; exempt some private equity firms from registering with the Securities and Exchange Commission; loosen regulations on derivatives; and allow some small, publicly traded companies to omit historical financial data from their financial filings. Representative Jeb Hensarling of Texas, chairman of the House Financial Services Committee, called those changes “modest clarifications of the Dodd-Frank Act,” noting that almost all of the provisions had previously passed the House with bipartisan majorities over the last two years, if not by unanimous agreement. Democrats, led by Obama and Senator Elizabeth Warren of Massachusetts, said they intended to draw the line against legislation that further erodes Dodd-Frank.
A group of state attorneys general who are investigating a computer systems breach last summer at JPMorgan Chase, which potentially exposed some information for 83 million consumers and small businesses, wants the bank to explain how it can be certain no sensitive information was compromised, the New York Times DealBook blog reported yesterday. The group, which includes more than 15 attorneys general and is led by those from Illinois and Connecticut, sent a letter last Thursday to JPMorgan and its outside lawyers seeking more details about the nature of the breach and what measures the bank was taking to prevent a similar incident. JPMorgan has said that the breach, which went undetected for several months, only allowed the hackers to gain access to customer phone numbers, addresses and email addresses. More sensitive information — like financial data, Social Security numbers, email passwords and user identification combinations — remained safe, the bank said. But the group said much about the breach remained a mystery. “Critical facts about the intrusion remain unclear, including details concerning the cause of the breach and the nature of any procedures adopted or contemplated to prevent future breaches,” said the letter. http://dealbook.nytimes.com/2015/01/14/state-attorneys-general-press-jp…
In related news, New York Attorney General Eric T. Schneiderman today intends to propose a bill that would expand his state’s definition of what constitutes the type of private information whose breach would mandate a disclosure to include email addresses and passwords, the New York Times reported today. Companies would be required to keep this data secure and notify consumers and employees in the event of a cyberattack or other data breach involving that information. The proposal would be a significant change to the state’s current definition, which mainly covers the unintended disclosure of a person’s Social Security number, driver’s license or credit card number. The proposal would update a consumer protection measure that Schneiderman sees as “outdated and toothless,” given a growing number of hackings at big companies. http://dealbook.nytimes.com//2015/01/14/new-york-attorney-general-seeks…
Lehman Brothers Holdings Inc. said Wednesday that it has agreed to sell another $2.5 billion in bankruptcy claims that the failed investment bank holds against its U.S. brokerage arm, the Wall Street Journal reported today. Lehman has been selling off the unsecured creditor claims in recent months as it continues to wind down its holdings, a process that is expected to continue for several more years. In September, Lehman agreed to sell $2.5 billion in claims for about 25 percent of their face value. Lehman, once the nation’s fourth-largest investment bank by assets under management, collapsed into the largest bankruptcy ever in September 2008, with $613 billion in liabilities. Most of Lehman’s brokerage business was sold to Barclays PLC, and the holding company officially exited bankruptcy in 2012. What remains of Lehman’s brokerage unit is being wound down separately from the holding company.
The U.S. Supreme Court yesterday ruled in favor of homeowners seeking to back out of mortgages when lenders are accused of failing to follow a federal “truth in lending” law, Reuters reported yesterday. On a 9-0 vote, the court handed a win to an Eagan, Minnesota couple, Larry and Cheryle Jesinoski, over the $611,000 loan they obtained in 2007 from Countrywide Home Loans Inc., now part of Bank of America Corp. On the technical question before the justices, the court said that homeowners need only write a letter to the lender, as the Jesinoskis did, and do not need to file a lawsuit in order to benefit from a provision of a federal law known as the Truth in Lending Act. The law allows consumers to rescind a mortgage for up to three years after it was made if the lender does not notify them of various details about the loan including finance charges and interest rates. The Jesinoskis filed their notice right before the end of the three-year period and filed a lawsuit a year later after the bank said it was disputing the claim. The language of the law "leaves no doubt that rescission is effected when the borrower notifies the creditor of his intention to rescind," Justice Antonin Scalia wrote on behalf of the court.
Standard & Poor’s is close to a settlement of about $1 billion with the U.S. for allegedly misleading investors about its ratings of mortgage-backed securities before the subprime crisis, Bloomberg News reported today. The McGraw Hill Financial Inc. unit and the Justice Department may agree to settle the case as early as this quarter. The Justice Department has secured settlements worth tens of billions of dollars during the past two years from mortgage lenders and banks it blamed for the 2008 financial crisis. Those companies generated unprecedented amounts of shoddy mortgages that were packaged and sold to investors as securities, many of which turned out to be worthless despite their investment-grade ratings. New York-based S&P, the only credit rater sued by the Justice Department’s residential mortgage-backed securities working group, has alleged it was singled out because of its downgrade of U.S. debt in 2011, while its competitors, which issued the same grades for the same securities, weren’t sued by the U.S. The case is tentatively scheduled for trial in September.
Doral Financial, the troubled Puerto Rico bank with offices that were raided by the FBI last month, has run afoul with banking regulators over its plans to restore its depleted capital levels, the New York Times DealBook blog reported yesterday. For the second time in a little more than a month, the Federal Deposit Insurance Corp. has rejected the bank’s capital restoration plan, Doral said in a securities filing yesterday. The FDIC took issue with the fact that Doral’s capital plan includes a $230 million tax refund, which the Commonwealth of Puerto Rico is refusing to pay, according to the securities filing. Doral has told regulators that including the refund as part of its capital plan is appropriate because a Puerto Rico court has ruled that the refund is legitimate. The government is appealing the ruling.
Salus Capital Partners has offered RadioShack Corp. $500 million in bankruptcy financing, according to people familiar with the matter, a move that could increase the lender’s influence if the struggling retailer ends up in chapter 11, the Wall Street Journal reported today. RadioShack hasn’t said that it plans to seek bankruptcy protection, but the Fort Worth, Texas-based consumer electronics retailer is running out of cash after posting losses in each of the last 11 quarters. In September, it warned that it could be forced into bankruptcy court if it couldn’t raise new funds or get relief from lenders, including Salus, that are blocking its effort to close hundreds of stores. Salus’s unsolicited offer for a debtor-in-possession loan expires on Thursday. The new debt would replace a $585 million financing package the company first obtained in late 2013, some of which consists of credit lines dependent on the value of RadioShack assets.
The House plans to reconsider a bill to amend the 2010 Dodd-Frank financial system overhaul, as well as a regulatory process reform measure, The Hill reported on Friday. House Democrats derailed the Dodd-Frank bill on the second day of the new Congress when it was considered under suspension of the rules. The fast-track process requires a two-thirds majority, which Democrats prevented. The legislation will subsequently be considered under a rule requiring only a simple majority next week. "This bipartisan bill will modernize the regulatory process, ensure transparency and reduce overly burdensome costs that are hurting job creators across the country," House Majority Leader Kevin McCarthy (R-Calif.) said on Friday.
General Motors Co. plans to use its GM Financial lending arm as the exclusive provider of subsidized leases in the U.S., a move that could help boost earnings while significantly increasing the Detroit auto giant’s exposure to auto loans, the Wall Street Journal reported today. The move, which largely edges out Ally Financial and U.S. Bank from GM’s lucrative subsidized leasing business, comes nearly a decade after GM sold GMAC (later renamed Ally). At the time of the sale, GM’s credit ratings were dragging down the ratings of the finance arm, and the automaker was in need of cash.
