Foreclosure Starts Down on Annual Basis in October
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SEC Expands Knight Probe
The Securities and Exchange Commission has deepened its probe into whether Knight Capital Group Inc. did enough to police its trading systems before computer errors nearly destroyed the brokerage, the Wall Street Journal reported today. The inquiry, which began after Knight's errant Aug. 1 trades saddled it with more than $450 million in losses, initially focused more narrowly on what caused the errors. The probe has broadened to look further at the company's risk-control procedures and Knight's compliance with a rule implemented last year—called the market-access rule—that requires brokerages to guard against these sorts of problems.
Money Market Pioneer Bent Cleared of SEC Fraud Charges
Money market pioneer Bruce Bent was cleared yesterday of civil fraud charges that he misled investors in the early days of the 2008 financial meltdown, a blow to U.S. regulators in one of the few cases accusing individuals on Wall Street of wrongdoing during the crisis, Reuters reported yesterday. A jury rejected all of the charges against Bent following a month-long trial in U.S. District Court in Manhattan. His son, Bruce Bent II, was also cleared of violating civil securities laws but was found liable on one negligence claim. Two entities tied to the Bents also were found liable on some charges. The U.S. Securities and Exchange Commission accused the Bents of lying to investors and fund trustees in attempts to stop a run on their Reserve Fund in September 2008.
Aletheia Research and Management Files for Chapter 11 SEC Investigating Money Managers Trading Practices
The Securities and Exchange Commission is investigating a Los Angeles money manager over accusations of improper trading practices, the New York Times DealBook blog reported yesterday. The news of the investigation of Peter J. Eichler Jr., the money manager, came as his firm, Aletheia Research and Management, filed for chapter 11 protection on Sunday after a wave of client withdrawals amid weak performance and regulatory issues. Aletheia, which at its peak managed about $8 billion, has drawn attention for its role in a number of shareholder fights, including a prominent battle with Barnes & Noble that it waged alongside the billionaire investor Ronald W. Burkle. The firm primarily manages stock portfolios for pension funds, foundations and wealthy families. Its strong investment performance -- Aletheia's flagship growth strategy has substantially outperformed the Standard & Poor's 500-stock index over the lpast decade -- has attracted marquee clients including Michigan's state pension fund and the Ewing Marion Kauffman Foundation in Kansas City, Mo. The brokerage units of Goldman Sachs and Morgan Stanley have also invested clients' money in Aletheia's funds.
No Individual Charges In Probe of JPMorgan
The top U.S. securities regulator does not intend to charge any individuals in its planned enforcement action against JPMorgan Chase & Co. for the allegedly fraudulent sale of mortgage bonds, the Wall Street Journal reported today. The largest U.S. bank by assets will pay a significant financial penalty under the proposed deal, which has been approved by Securities and Exchange Commission staff but not by the agency's five commissioners. The JPMorgan deal is expected to be the first in a series of SEC enforcement actions related to Wall Street's manufacture and sale of mortgage-backed securities. The settlement stems from a wide-ranging SEC probe dating back to 2010. The proposed deal would not require JPMorgan to admit to wrongdoing or face any allegations against any current or former executives.
JPMorgan Has Agreement to Settle SEC Case
JPMorgan Chase & Co. has an "agreement in principle" to settle an investigation into how its Bear Stearns unit handled mortgage securities it packaged and sold to investors, and plans to resume a $3 billion stock buyback in the first quarter of 2013, the bank said in its third-quarter filing with the U.S. Securities and Exchange Commission, the Wall Street Journal reported today. The mortgage case involves whether Bear Stearns, which JPMorgan acquired at the onset of the financial crisis in 2008, received compensation from lenders for bad loans that it purchased to bundle into mortgage securities, but then failed to pass that money on to the investors in the securities.
Bank of America Loses Bid to Dismiss FHFA Mortgage Bonds
Bank of America Corp.'s Merrill Lynch & Co. unit must face a lawsuit by the Federal Housing Finance Agency (FHFA), the conservator for Fannie Mae and Freddie Mac, over mortgage-backed securities sold by the investment bank, Bloomberg News reported today. U.S. District Judge Denise Cote yesterday denied Merrill’s request to dismiss the FHFA's securities law and fraud claims, except for fraud claims based on loan-to-value ratios and ownership-occupancy reporting. The judge said that FHFA had failed to sufficiently allege fraudulent intent for those claims. The judge rejected Merrill Lynch’s request to throw out the FHFA's claims for recession and for punitive damages.
Fairfield Greenwich Settles Claims of Madoff Investors
Fairfield Greenwich Group, the biggest operator of "feeder funds" that channeled money into Bernard Madoff's Ponzi scheme, agreed to a settlement that may pay defrauded investors as much as $80.3 million, Bloomberg News reported yesterday. The deal, to be funded by Fairfield Greenwich founder Walter Noel and other individuals associated with the firm, resolves claims by a class of investors who lost money to Madoff's fraud, according to court documents filed yesterday. Fairfield Greenwich placed about $7 billion with Madoff’s firm, Bernard L. Madoff Investment Securities LLC. The settlement, which needs a judge’s approval before taking effect, provides $50.3 million to the class, which will get an additional $30 million if that money is not used to resolve other legal claims. A provision in the agreement allows Fairfield Greenwich to cancel the settlement if too many investors opt out of the deal to pursue individual claims.
Government Cracks Down on Bank Money Laundering
Banks are facing heightened investigation and steeper penalties from federal regulators and prosecutors for failure to comply with anti-money-laundering laws, an enforcement trend that may shave billions of dollars off bank balance sheets, the Washington Post reported today. Global banking giant HSBC yesterday said that it poured an additional $800 million into its reserves in the third quarter to cover potential fines, settlements and other expenses related to a money laundering probe by the Justice Department and banking regulators. The bank has $1.5 billion set aside, though it believes the costs may significantly exceed that amount. HSBC is one of several banks, including Citigroup and Standard Chartered, being investigated by the government for allegedly allowing millions of dollars from drug traffickers, terrorists or countries under sanctions to illegally move through the U.S. financial system.
HSBC Prepares to Face U.S. Money Laundering Charges
HSBC Holdings Plc said that it is likely to face criminal charges from U.S. anti-money laundering probes and the cost of a settlement may “significantly” exceed the $1.5 billion the bank has set aside, Bloomberg News reported today. The lender made an additional $800 million provision in the third quarter to cover the costs of the investigation, adding to the $700 million it had already earmarked. HSBC also put aside $357 million in the period to compensate U.K. clients wrongly sold payment-protection insurance on loans as it posted an increase in pretax profit that missed analysts’ estimates.