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Regulators won a temporary freeze on the assets of Sam and Charles Wyly and their wives and relatives after the brothers were found liable in a fraud case, Bloomberg News reported today. U.S. District Judge Shira Scheindlin in Manhattan said yesterday that the freeze is appropriate because Sam Wyly and his brother’s estate have said that they can’t pay an award of more than $300 million and because of concern their wives and other relatives may spend money that the brothers owe the U.S. Securities and Exchange Commission. Sam Wyly and and his late brother’s wife, Caroline, both filed for bankruptcy last month, citing a need to preserve assets as they face a U.S. forfeiture order.

Former billionaire Samuel Wyly, who filed for bankruptcy after losing a U.S. Securities and Exchange Commission fraud lawsuit, sold more than $320,000 worth of art in a Christie’s auction without a judge’s approval and with an asset freeze looming, Bloomberg News reported yesterday. The sale of three paintings on Oct. 27 — eight days after the bankruptcy filing — is evidence that Wyly is trying to liquidate assets as he awaits a final disgorgement order of at least $123.8 million, SEC lawyers said in a letter filed yesterday in federal court in Manhattan. “This evidence further underscores the need for an immediate asset freeze and the ability to serve such a freeze on third parties such as Christie’s, who are in possession of the defendant’s property,” the agency said. Wyly’s lawyer said the sale was inadvertent. A federal jury in Manhattan in May found Wyly and his late brother, Charles Wyly, traded stocks held in offshore accounts for more than 13 years, making at least $550 million in illegal profits. The trades involved companies they controlled and weren’t declared, in violation of U.S. law, jurors found. Charles Wyly was killed in an auto accident in 2011.

The U.S. and Securities Exchange Commission on Tuesday added more than a dozen relatives of Texas businessmen Sam and Charles Wyly to a long-running securities fraud lawsuit against the brothers to bolster its efforts to collect some $300 million, Reuters reported yesterday. The amended complaint filed in New York federal court included the relatives as "relief defendants," which means they are not accused of wrongdoing but can be subject to civil claims. The filing was expected, as the SEC and the relatives continue to dispute whether hundreds of millions of dollars held in offshore trusts should be subject to collection. U.S. District Judge Shira Scheindlin has said she will order the Wyly brothers' assets frozen at the SEC's request, including money previously transferred from the trusts to various relatives, despite objections from the family members.

In August 2000 the Securities and Exchange Commission adopted new “fair disclosure” rules, known as Reg FD on Wall Street, aimed at ensuring that all investors have equal access to material financial information, according to a Wall Street Journal commentary yesterday. But in reality fair-disclosure rules create information vacuums that contribute to the downside volatility of individual securities in periods of market weakness, according to the commentary. Temporary access to additional information — in effect, temporary suspension of these rules — would produce better functioning and fairer individual security pricing. This is especially the case now, because so many companies are in the “quiet period” before they announce their next quarterly earnings.

An internal disagreement within the Securities and Exchange Commission is threatening potentially lucrative revenue streams at Bank of America Corp., the Wall Street Journal reported today. The SEC is deadlocked on whether to allow Bank of America, which recently settled an SEC probe into flawed mortgage-backed securities, to continue selling shares in hedge funds and startups to wealthy investors. Also at issue is the company’s ability to quickly issue stocks and bonds without the speed bump of an SEC review. The bank was restricted as a result of SEC rules that automatically make firms ineligible from such activities if they violate securities laws. Bank of America has been seeking waivers since the $136 million settlement with the SEC, which was wrapped into a $16.65 billion deal with the U.S. government. The restrictions wouldn’t go into effect until a court finalizes the settlement, a step that has been delayed as the SEC fights over the waivers. Bank of America isn’t alone in seeking such waivers, as dozens of other large banks have sought — and received — the same waivers in recent months after settling SEC charges, including Citigroup Inc., Barclays PLC and Royal Bank of Scotland Group PLC.

While regulators and prosecutors have extracted big-dollar settlements from banks in the aftermath of the financial crisis, these enforcers have been remarkably reluctant when it comes to pursuing high-level miscreants, according to an analysis in Saturday’s New York Times. Hoping to achieve greater accountability, wronged investors have filed many cases against top corporate officials, accusing them of breaching fiduciary duties and of other misdeeds, but even this enforcement mechanism is under attack, thanks to a recent decision by the Delaware Supreme Court. The court ruled that a company can adopt, without shareholder approval, bylaws requiring investors who file lawsuits against it to pay the company’s legal fees if the suit is unsuccessful. The court further stated that a company’s “intent to deter litigation” might be a proper purpose for shifting legal fees to a plaintiff. Levying legal fees on unsuccessful plaintiffs could have one benefit: reducing the number of frivolous lawsuits filed. Since the ruling, more than two dozen companies have added fee-shifting language to their governing documents. Some have adopted new bylaws requiring that shareholders pay legal costs; others have simply disclosed the fee-shifting requirement in initial public offering statements.

Wall Street pundits are predicting that the U.S. Federal Reserve will announce an end to its latest stimulus program this week in the belief the American economy is strong enough to stand on its own, the International Business Times reported yesterday. The Fed began buying certain assets in bulk in September 2008 as it dealt with the bankruptcy of Lehman Brothers Holdings Inc. Shortly thereafter, it launched the first of three programs collectively known as quantitative easing (QE). The announcement could come Wednesday, when the Federal Open Market Committee concludes a two-day meeting that is also expected to focus on the federal funds interest rate, which has officially been in a range of between 0 percent and 0.25 percent since the end of 2008. Currently, the Fed buys $15 billion in assets monthly, down from $85 billion in December. The worry is that continuing the QE program could generate fresh bubbles in the stock market.

Texas tycoon Sam Wyly has filed for bankruptcy, saying that he does not have the assets to pay the nearly $300 million that U.S. regulators are demanding for his role in a fraudulent offshore scheme, Reuters reported yesterday. In documents filed with a U.S. bankruptcy court in Dallas on Sunday, Wyly said that he had between $100 million and $500 million of both assets and liabilities and cited the "massive costs" of fighting civil claims from the U.S. Securities and Exchange Commission (SEC) as the reason for seeking chapter 11 protection. Last month, U.S. District Judge Shira Scheindlin in New York ordered Wyly and the estate of his late brother Charles to pay damages of $187.7 million plus interest to the SEC after a jury found them liable for fraud in May. The SEC has since said that the total, including interest, should be $299.4 million, which is one of the largest awards ever sought from individual defendants in a U.S. court.

The Securities and Exchange Commission is increasingly steering cases to hearings in front of the agency’s appointed administrative judges, who found in its favor in every verdict for the 12 months through September, rather than taking them to federal court, the Wall Street Journal reported today. The winning streak comes amid a marked shift at the agency toward trying cases that are more complex before its administrative law judges. Historically, the SEC had more often turned to these judges for relatively straightforward legal actions, such as barring stockbrokers who had been convicted of criminal fraud. Thanks in part to enhanced powers granted in the 2010 Dodd-Frank financial-reform bill, lately the SEC has been using the administrative judges for complicated cases, including several involving insider trading. The move is creating a backlash among lawyers and defendants, who say in federal court that they have more extensive rights to take witness testimony and collect evidence ahead of a trial. When contested, the cases are decided by one of five SEC judges, who are appointed by the agency. The penalties in administrative hearings are broadly comparable to those faced in federal court for most types of cases.

Bank of America has agreed to pay $7.65 million to settle federal charges that it violated record keeping and internal rules in overstating its capital levels, the New York Times DealBook blog reported yesterday. The Securities and Exchange Commission said that the bank had failed for years to properly deduct losses on a large portfolio of structured notes and other financial instruments that it acquired when it bought Merrill Lynch in early 2009. As a result of the flawed calculations, the bank had overstated the capital cushion that regulators require the bank to hold by about $4 billion. The $7.65 million penalty, which is minuscule compared with the $16.65 billion the bank had paid to settle its mortgage-related misdeeds, caps an embarrassing flub for Bank of America. In March, the bank had easily passed the Federal Reserve’s annual stress test, gaining the regulator’s approval to increase its quarterly dividend for the first time in seven years.