Report Assets Liabilities Decrease with Drop in 2011 Consumer Filings
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SECs Schapiro Cancels Vote on Money-Fund Curbs
Securities and Exchange Commission Chairman Mary Schapiro called off a highly anticipated vote on rules for the money-market mutual-fund industry after losing a swing vote she needed to push through the rules, the Wall Street Journal reported today. The newly announced position of Luis Aguilar, a Democrat and former mutual-fund executive, marks a defeat for Schapiro and a setback for the Obama administration and top federal regulators, who see money funds as a source of systemic risk left over from the last financial crisis. Representatives from large fund companies including Vanguard Group Inc., Fidelity Investments and Charles Schwab Corp. repeatedly met with politicians and SEC commissioners, including Aguilar, to try to get them to support their position against further regulation of the industry. Schapiro's proposal would have required money funds either to float their share prices like other mutual funds or to post capital against losses on their asset holdings. The proposal would also have made money funds hold back a small portion of investors' cash for 30 days when investors redeem all their shares, to reduce the incentive to flee at a first sign of trouble.
SEC Pays 50000 in First Dodd-Frank Whistleblower Reward
The U.S. Securities and Exchange Commission awarded $50,000 to a whistleblower in its first payout from a program launched last year to reward people who provide regulators with evidence of securities fraud, Bloomberg News reported yesterday. The whistleblower helped the SEC bring an enforcement action that resulted in more than $1 million in sanctions, the agency said today in a statement. The award represents 30 percent -- the maximum allowed under the Dodd-Frank Act -- of the approximately $150,000 collected so far.
Former Fannie Mae Officers Lose Bid to Get SEC Case Dismissed
Three former senior executives of Fannie Mae lost a bid on Friday to dismiss civil-fraud charges filed against them last year by the Securities and Exchange Commission over allegedly misleading investors about the quality of loans the mortgage giant guaranteed in the run-up to the housing bust, the Wall Street Journal reported today. The executives include Daniel Mudd, the former chief executive of Fannie Mae who in January resigned as chief executive of Fortress Investment Group LLC. They argued that the SEC's case should be dismissed because they provided detailed disclosures about the loan characteristics to investors. The SEC alleged that Fannie executives provided definitions and disclosures that misled investors about their exposure to those loans. U.S. District Judge Paul Crotty said in his ruling on Friday that the SEC had "plausibly argued" that the Fannie executives "consciously assisted the venture to misstate [Fannie's] subprime and Alt-A exposure in an active way."
SEC and Justice Dept. End Mortgage Investigations into Goldman
Federal authorities ended two investigations into the actions of Goldman Sachs during the financial crisis, handing a quiet victory to the bank after years of public scrutiny, The New York Times Dealbook reported yesterday. In a statement late Thursday, the Justice Department said there was “not a viable basis to bring a criminal prosecution” against Goldman or its employees after a congressional committee asked prosecutors to examine whether the bank had been involved with any illegal acts related to several mortgage deals. The Senate’s Permanent Subcommittee on Investigations had examined troubled mortgage securities that Goldman sold to investors, who later sustained steep losses during the crisis. The subcommittee also suggested that prosecutors investigate whether the chief executive of the bank had misled lawmakers during public testimony. Separately, Goldman Sachs announced early Thursday that the Securities and Exchange Commission had ended an investigation into a $1.3 billion subprime mortgage deal, taking no action. The move was an about-face for the commission, which notified the bank in February that it planned to pursue a civil action.
SEC Loses Lawsuit Against Ex-Citigroup Official Stoker
The Securities and Exchange Commission lost a jury verdict in its lawsuit against former Citigroup Inc. official Brian Stoker over a deal at the center of the bank's proposed $285 million settlement with regulators over subprime residential mortgage securities, Bloomberg News reported yesterday. The SEC had accused Stoker, the former director of Citigroup’s collateralized debt obligation structuring group, of violating securities law in putting together the assets underlying a $1 billion CDO. The SEC claimed New York-based Citigroup structured and sold the CDO without telling investors that it helped pick about half the underlying assets and was betting they would decline in value by taking a short position. "This verdict should not deter the SEC from continuing to investigate the financial industry, to review current regulations, and modify existing regulations as necessary," the jury said in rendering its decision that Stoker was not liable.
SEC Recommends Municipal Security Reform Amid Bankruptcies
The Securities and Exchange Commission released a report yesterday calling for structural improvements to the $3.7 trillion municipal securities market amid a recent uptick in city bankruptcies, the Salt Lake City Deseret News reported today. "While we have put in place measures to help investors make more knowledgeable decisions about municipal securities, we could do more for investors with statutory authority to improve disclosure and muni market practices," said SEC Chair Mary L. Schapiro. The report recommends better disclosures to investors, allowing the IRS to share information with the SEC and providing enforcement for continuing disclosure agreements and other obligations.
To read the report, please click here:
http://www.sec.gov/news/studies/2012/munireport073112.pdf
SEC Plans Action in Miami Bond Probe
Federal securities regulators intend to recommend filing civil cases alleging that Miami and a former official misled investors about the city's financial health when it sold hundreds of millions of dollars of bonds, the Wall Street Journal reported today. The correspondence from the Securities and Exchange Commission said that the agency's enforcement staff also has recommended that the city be fined for allegedly violating federal securities law. The SEC investigation examined whether the city used funds intended for roads and other purposes to fill budget gaps elsewhere. Bondholders sued, saying that the moves obscured the city's true finances. The Miami case is part of a broader push by federal and local regulators to crack down on the way that municipalities represent their finances to buyers of bonds. The SEC is scrutinizing municipal bond sales around the nation to see if buyers had a fair picture of finances and that money raised with the proceeds was used for intended purposes.
SEC Votes to Require Consolidated Audit Trail for Markets
The Securities and Exchange Commission voted yesterday to require exchanges and a broker oversight group to build a single system to monitor and analyze trading activity across U.S. equity and options markets, Bloomberg News reported today. In a 3-2 vote, the SEC approved a rule requiring the exchanges and the Financial Industry Regulatory Authority, which oversees 4,400 brokers, to establish a so-called consolidated audit trail that will enable the reconstruction of market crises and expedite surveillance across 13 equity exchanges, 10 options markets and more than 200 broker-dealers that execute stock trades away from public venues. The effort is part of the agency’s response to the May 6, 2010, stock rout that temporarily erased $862 billion in U.S. equity value.
CFTC Approves Swap Definition Triggering Dodd-Frank Rules
A definition of swaps required by the Dodd-Frank Act and approved by U.S. regulators will bring government scrutiny to a $648 trillion global market that has been largely unchecked since it emerged three decades ago, Bloomberg News reported yesterday. The U.S. Commodity Futures Trading Commission (CFTC) and Securities Exchange Commission, the agencies charged with overhauling financial regulation following the 2008 credit crisis, laid out for the first time when interest-rate, credit, commodity and other derivatives will be considered swaps. The designation approved yesterday by the regulators activates rules to increase collateral requirements and bolster public trading of the products by companies such as JPMorgan Chase & Co., Goldman Sachs Group Inc. and Cargill Inc. The swap definition will trigger almost 20 Dodd-Frank measures for reporting, clearing, trading and record-keeping that may take effect as early as September. The CFTC voted 4-1 to complete the roughly 600-page document after the SEC voted unanimously in a private process on July 6.