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Fabrice Tourre, the former Goldman Sachs Group Inc. vice president found liable for his role in a failed $1 billion investment, may have lost his case because jurors rejected his defense that as a junior employee he wasn’t primarily responsible for the transaction, Bloomberg News reported yesterday. Tourre’s lawyers portrayed him as a young employee who was one of many Goldman Sachs employees who worked on the 2007 deal known as Abacus that had subprime mortgage-backed securities underlying the transaction. The SEC accused Tourre of intentionally misleading participants in Abacus about the role played by Paulson & Co., the hedge fund of billionaire John Paulson, which helped choose the portfolio of securities, then made a billion-dollar bet it would fail. Tourre was found liable by a jury in Manhattan yesterday on six of seven claims.

The probe of SAC Capital Advisors LP, which has led to insider-trading charges against the hedge fund and eight SAC employees, has snared an outside analyst who is accused of giving illegal tips to a former SAC manager, Bloomberg News reported yesterday. SAC Capital, owned by billionaire Steven Cohen, last week was indicted in what prosecutors called an unprecedented insider trading scheme stemming from the government’s six-year crackdown on Wall Street crime. While Cohen wasn’t charged, the U.S. indicted the fund he founded, saying that it had become “a magnet for market cheaters.” The U.S. alleged there had been a “failure by the fund owner and others” at SAC, and described separate insider trading schemes by eight SAC fund managers and analysts, including Noah Freeman, Donald Longueuil, Jon Horvath, Wesley Wang, Mathew Martoma, Richard Choo-Beng Lee, Michael Steinberg and Richard Lee. Steinberg and Martoma have pleaded not guilty and both are scheduled to go to trial in November. The other six have pleaded guilty and are cooperating with the U.S.

U.S. banks’ ownership and trading of physical commodities will face further scrutiny today when the heads of the Commodity Futures Trading Commission and Securities and Exchange Commission testify before the Senate Banking Committee today, Bloomberg News reported today. Sen. Sherrod Brown (D-Ohio), who led a hearing on the issue last week, said that he plans to question the CFTC’s Gary Gensler and the SEC’s Mary Jo White on their oversight when the two chairman appear before the chamber’s Banking Committee on implementation of Dodd-Frank Act reforms. JPMorgan Chase & Co. is among lenders facing political pressure after the Federal Reserve said this month that it will review a decade-old decision letting them trade commodities regarded as complementary to banking. JPMorgan, which was accused yesterday by the Federal Energy Regulatory Commission of manipulating power markets in 2010 and 2011, said on July 26 that it plans to sell or spin off holdings including warehouses, stakes in power plants and traders of gas, power and coal.
http://www.bloomberg.com/news/print/2013-07-29/regulators-face-scrutiny…

To view the prepared hearing testimony from today’s Senate Banking Committee hearing titled “Mitigating Systemic Risk in Financial Markets through Wall Street Reforms,” please click here:
http://www.banking.senate.gov/public/index.cfm?FuseAction=Hearings.Hear…

Federal prosecutors are preparing to announce criminal charges as early as this week against SAC Capital Advisors LP, the hedge-fund giant that has been the target of a multiyear investigation into alleged insider trading, the Wall Street Journal reported today. The planned charges against SAC would mark the culmination of a years-long probe into suspected securities fraud at one of the biggest, most successful hedge-fund firms in the country. The action is anticipated barring any last-minute pact with SAC or other reversal of government strategy. SAC had roughly $15 billion in assets as of the beginning of 2013 and around 1,000 employees. While criminal charges against the firm would deal a huge blow to the firm’s founder and namesake, Steven A. Cohen, prosecutors aren’t planning charges against him personally.

The U.S. Securities and Exchange Commission accused the city of Miami and Michael Boudreaux, a former budget director, with securities fraud related to several municipal bond offerings about four years ago, Bloomberg News reported yesterday. Florida’s second-largest city and Boudreaux shifted money from a projects account to the general fund to mask budget gaps and win higher grades from ratings companies on three 2009 debt sales totaling $153.5 million, the SEC said yesterday. Boudreaux’s lawyer said he’s being made into a scapegoat. In 2010, the SEC began cracking down on state and local governments for not giving investors accurate information about their financial condition prior to bond sales, focusing on pension deficits. Since then, Illinois and New Jersey have both settled with the agency over such issues. The agency has since broadened its focus beyond retiree obligations, as in Miami.

U.S. securities regulators accused Steven A. Cohen of ignoring "red flags" that should have alerted him to insider trading at his hedge-fund firm and moved to ban the billionaire for life from the industry where he made his fortune, the Wall Street Journal reported today. After circling Cohen for years, the Securities and Exchange Commission filed an administrative action against him on Friday. It marked the first time he was personally accused of wrongdoing in a long-running insider-trading probe. Cohen still faces a criminal insider-trading probe that is continuing. However, the Wall Street Journal previously reported that prosecutors had concluded they don’t have enough evidence to file criminal insider-trading charges this month against Cohen personally. Read more.

Hedge funds and other companies seeking private investments would be freed to advertise publicly for funding under a rule set for a vote tomorrow by the U.S. Securities and Exchange Commission, Bloomberg News reported yesterday. The rule is the first of those required by last year’s Jumpstart Our Business Startups Act to be approved by the SEC, the vote coming more than a year after a deadline set by Congress. The rule would lift an 80-year-old regulatory practice that has restricted advertising outside of a public offering in an effort to protect small investors from inappropriate risks. Under the new rule, startups and other small companies would also be able to use advertising to raise unlimited amounts of money.

The Securities and Exchange Commission recently qualified its longstanding policy that allowed companies to “neither admit nor deny” their guilt when settling cases, according to a commentary in yesterday's New York Times DealBook blog. The policy tinkering has come in the wake of criticism by lawyers, academics and, most memorably, Judge Jed S. Rakoff of the U.S. District Court in Manhattan. These critics have argued that the public interest is not served when the agency settles cases and imposes sanctions without explaining to the public the basis for the penalty. “There may be certain cases,” the SEC has concluded, “where heightened accountability or acceptance of responsibility through the defendant’s admission of misconduct may be appropriate, even if it does not allow us to achieve a prompt resolution.” Private parties—be they corporate boards, drug manufacturers or divorcing spouses—never have to explain publicly the reasons they are settling civil cases, according to the commentary. It is not clear that the government should be treated differently. What is clear, according to the commentary, is that in securities fraud cases, requiring defendants to admit they committed fraud to settle cases will make it surpassingly easy for private parties to sue over the same conduct. That prospect will actually make the SEC’s job more difficult because defendants will know that, by settling with the SEC and acknowledging wrongdoing, they are opening themselves up to more litigation.

The Federal Reserve will vote next week to finalize capital rules for U.S. banks after regulators agreed to resolve a separate issue that had delayed action, the Wall Street Journal reported today. After months of dispute, officials at the Fed, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency have agreed to increase one measure of the biggest banks' ability to operate in times of stress. Banking regulators will soon propose requiring banks to increase the amount of equity they hold against assets, known as the "leverage ratio." The issue has divided U.S. officials, delaying action on broader international capital rules agreed to by global regulators in 2010 and revised in 2011. Some officials at the FDIC have been pushing for a much higher leverage ratio than Fed officials believed necessary. The debate has been complicated by the uncertain status of Richard Cordray, who heads the Consumer Financial Protection Bureau and is also a member of the FDIC's five-member board. Cordray was installed by President Barack Obama in a recess appointment, and recent legal challenges have raised the specter that his appointment, and any votes he casts at the FDIC, could be invalidated.

Securities and Exchange Commission enforcement chiefs have drawn up a hit list of impending cases where officials intend to test their new policy of requiring admissions of wrongdoing when settling civil charges, the Wall Street Journal reported today. The handful of likely target cases include a planned enforcement action against a company alleged to have made illicit profits by charging investors undisclosed markups on top of commissions. The new SEC leadership last week changed the agency's long-standing policy of allowing companies and individuals to settle charges without admitting or denying liability. Chairman Mary Jo White said that in certain cases, such as particularly egregious conduct or where widespread harm to investors occurred, defendants will have to admit wrongdoing or face fighting the charges in court.