MF Global Holdings Ltd. is going after $20 million in dividends it paid to private equity firm J.C. Flowers & Co. and other shareholders in the year leading up to its bankruptcy, Dow Jones Daily Bankruptcy Review reported yesterday. In a lawsuit filed in court on Wednesday, MF Global said that it paid $16.1 million in dividends to J.C. Flowers and $3.9 million to another group of preferred stockholders from November 2010 all the way up to August 2011, less than three months before the firm collapsed into bankruptcy. MF Global says that money belongs to its estate, thanks to a provision of the Bankruptcy Code that allows a company to claw back money it paid out in the year before its bankruptcy filing if its financial condition was perilous.
The House of Representatives, with bipartisan support, passed legislation yesterday that would roll back a major element of the 2010 law intended to strengthen the nation’s financial regulations by allowing big banks like Citigroup and JPMorgan Chase to continue to handle most types of derivatives trades in house, the New York Times DealBook blog reported yesterday. The bill, which passed by a 292-122 vote, would repeal a requirement in the Dodd-Frank law that big banks “push out” some derivatives trading into separate units that are not backed by the government’s insurance fund. The House legislation, formally known as the Swaps Regulatory Improvement Act, has few prospects of becoming law, as the Senate has not proceeded with its own version, and the Obama administration has spoken in opposition to it, arguing that regulators should be given a chance to adopt various Dodd-Frank related regulations before the law is revised.
Bank of America Corp. said a U.S. attorney plans to recommend the Justice Department file a civil lawsuit against the bank over soured mortgage-backed securities, according to a regulatory filing, the Wall Street Journal reported today. The second-largest U.S. bank by assets also said that possible losses tied to litigation could rise to as much as $5.1 billion, up from an estimated limit of $2.8 billion last quarter. Meanwhile, the Federal Home Loan Banks of Boston, Chicago and Indianapolis and a hedge fund named Cranberry Park told a New York state court that they were removing their objections to Bank of America's $8.5 billion settlement with investors over mortgage-backed securities. The largest objector remaining to the deal is American International Group Inc., which also has a separate outstanding $10 billion lawsuit against Bank of America for allegedly misleading the insurer about the quality of mortgage-backed securities it sold.
The U.S House voted to delay a Labor Department effort to expand investor protections for more than $13 trillion worth of private retirement accounts, including 401(k)s and IRAs, Bloomberg News reported yesterday. The legislation, which passed 254-166 on Tuesday, would stop the department from issuing a proposal to prevent conflicts of interest in retirement-investment advice until 60 days after the Securities and Exchange Commission finalizes a similar rule. The bill also would make the SEC rule-writing task harder by requiring the agency to show that investors have been harmed by existing rules governing brokers’ advice. The agencies have been working on regulations to require more investment professionals to give advice that is in their clients’ best interests. The Labor Department proposal would expand that standard to more providers of retirement accounts while the SEC rule would apply to sales of securities. Prospects for the bill's passage are unlikely as the White House has opposed the bill, and it now goes to the Democrat-controlled Senate.
SAC Capital Advisors LP will plead guilty to securities fraud as part of a landmark criminal insider-trading settlement with federal prosecutors set to be announced by next week, the Wall Street Journal reported today. The exact timing of the pact isn't set, though if final details are ironed out quickly, it could be unveiled by the end of this week. SAC, run by Wall Street titan Steven A. Cohen, also will agree to stop managing outside money and to pay the government criminal penalties of about $1.2 billion, according to these people. That would be the largest-ever insider-trading penalty. SAC has thus far denied the criminal allegations and said Cohen has done nothing wrong.
JPMorgan Chase & Co.’s proposed terms to settle state and federal probes of the bank’s mortgage-bond sales were rejected by the Department of Justice this week, Bloomberg News reported yesterday. The Justice Department told JPMorgan that it won’t agree to language the firm submitted on Oct. 27. The government would bar JPMorgan from trying to recover part of the costs from the Federal Deposit Insurance Corp. and opposed the company’s bid to avoid criminal liability in cases that don’t involve residential mortgage-backed securities. JPMorgan, led by Chief Executive Officer Jamie Dimon, is trying to complete a $13 billion settlement outlined in talks earlier this month. Part of the deal was finished with the Federal Housing Finance Agency last week, as the New York-based bank agreed to pay $4 billion to settle claims it sold faulty mortgage bonds to Fannie Mae and Freddie Mac.
Ally Financial Inc. is settling lawsuits brought by federal regulators over mortgage-backed securities sold during the financial crisis as the government-owned auto lender takes another step toward putting litigation woes behind it, Dow Jones Daily Bankruptcy Review reported today. The Detroit-based company said yesterday that it will take a $170 million charge in the third quarter in connection with the settlements with the Federal Deposit Insurance Corp. and Federal Housing Finance Agency, the regulator for government-backed mortgage-finance firms Freddie Mac and Fannie Mae.
Bank of America Corp.’s Countrywide unit won tentative final approval of a $500 million securities class-action settlement with investors in its devalued residential mortgage-backed securities, Bloomberg News reported yesterday. U.S. District Judge Mariana Pfaelzer, at a hearing yesterday in Los Angeles, set aside objections from the Federal Deposit Insurance Corp., which had argued as receiver of 19 failed banks that the accord disproportionately favors a subclass of the investors. The settlement resolves claims that Countrywide, the largest U.S. mortgage lender when it was taken over by Bank of America in 2008, misled investors in offering documents about the quality of the home loans that were pooled for the securities. Many of the securities had been given the highest credit ratings and lost value when they were cut to junk during the collapse of the U.S. housing market.
The House is scheduled to vote on two bills this week that would undercut new Dodd-Frank Act financial regulations, the New York Times DealBook blog reported today. The legislation has garnered broad bipartisan support in the House, even after lawmakers learned that Citigroup lobbyists helped write one of the bills, which would exempt a wide array of derivatives trading from new regulation. The bills are part of a broader campaign in the House among Republicans and business-friendly Democrats to roll back elements of the 2010 Dodd-Frank Act, the most comprehensive regulatory overhaul since the Depression. Of 10 recent bills that alter Dodd-Frank or other financial regulation, six have passed the House this year. This week, if the House approves Citigroup’s legislation and another bill that would delay heightened standards for firms that offer investment advice to retirees, the tally would rise to eight. Both the Treasury Department and consumer groups have urged lawmakers to reject the bills, warning that they could leave the nation vulnerable again to excessive financial risk taking. The House proposals stand little chance of becoming law, having received a much chillier reception in the Senate and at the White House, which on Monday threatened to veto the bill on investment advice for retirees. http://dealbook.nytimes.com/2013/10/28/house-set-to-vote-on-2-bills-is-…
In related news, the House Financial Services Financial Institutions and Consumer Credit Subcommittee will hold a hearing today at 3 p.m. entitled “Examining Legislative Proposals to Reform the Consumer Financial Protection Bureau.” For more information, including the witness list, please click here.
PricewaterhouseCoopers LLP is asking a federal judge to trim back the Federal Deposit Insurance Corp.'s $1 billion lawsuit that alleges the accounting firm failed to catch the massive fraud that brought down Colonial Bank, Dow Jones Daily Bankruptcy Review reported today. The auditor and fellow accounting firm Crowe Horwath LLP say that they're not accountable for the multibillion-dollar mortgage finance fraud involving the multiple sales of the same bad loans.
