The Resolution Law Group: Volcker Rule is Approved by SEC, FDIC, Federal Reserve, CFTC, and OCC

Five regulatory agencies in the US have voted to approve the Volcker Rule today. The measure establishes new hurdles for banks that engage in market timing and will limit compensation arrangements that previously provided incentive for high risk trading.

While the Federal Reserve Board and the Federal Deposit Insurance Corporation voted unanimously to approve the Volcker Rule, the Securities and Exchange Commission approved it in a 3-2 vote, the Commodity Futures Trading Commission approved it in a 3-1 vote, and the Office of the Comptroller of the Currency’s sole voting member also said yes. President Barack Obama praised the rule’s finalization. He believes it will improve accountability and create a safer financial system.

Named after ex-Federal Chairman Paul Volcker, the rule sets up guidelines that impose risk-taking limits for banks with federally insured deposits. It mandates that they show the way their hedging strategies are designed to function, as well as set up approval procedures for any diversions from these plans. Per the rule’s preamble, banks have to make sure hedges are geared to mitigate risks upon “inception” and this needs to be “based on analysis” regarding the appropriateness of strategies, hedging instruments, limits, techniques, as well as the correlation between the hedge and underlying risks.

Banks with federal insured deposits won’t able to take part in proprietary trading, which involves engaging in risky investment endeavors for their own benefits. They also won’t be allowed to take ownership stakes in private equity funds and hedge funds.

Unlike an earlier version of the rule, which gave an exemption to the proprietary trading ban involving US Treasury securities, this final rule lets firms trade foreign debt. That said, foreign banks in the US will have to contend with stringent trading restrictions and overseas banks with US offices won’t be allowed to sell, buy or hedge investments for profit.

According to CNN.com, advocates of reform believe that with the Volcker Rule’s restrictions taxpayers wont have to bail out these institutions In the future. Meanwhile, representatives of the industry are calling measure burdensome and too complicated.

Banks wanted the rule to protect market timing (with the firms hold the securities to engage in customer transactions). They also wanted to keep their ability to trade for hedging purposes.

Now, with the Volcker Rule, to show that they are taking part in market making (rather than speculation), banks will need to demonstrate that trades are being determined by customers’ “reasonably expected near-term demands,” and that historic demand and existing market conditions have been factored into the equation. Also, although banks will now have to contend with more limits on foreign bond trading, they can still take part in the proprietary trading of federal, state, municipal, and government-backed entities’ bonds.

As for hedging, firms will have to identify specific risks that such activities would offset. Bankers involved in hedging won’t be compensated in a manner that rewards proprietary trading.

The Resolution Law Group represents institutional investors and high net worth individual investors throughout the US. We help our clients recover their securities fraud losses

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The Resolution Law Group: Regulatory Reform – Delay or Destruction?

10 Democrats in the US Senate are calling on the Obama Administration to delay a proposal by the Department of Labor involving retirement plan-related investment advice until after the SEC makes a decision over whether to put out its own proposal about retail investment advice. The Commission is looking at whether it should propose a rule that would up the standard for brokers who give this type of advice. The lawmakers are worried that the two rules might conflict and obligate investment advisers and brokers to satisfy two standards.

Meantime, the Labor Department is getting ready to once more propose a rule that would broaden what “fiduciary” means for anyone that gives investment advice about retirement plans. Its previous proposal in 2010 met with resistance from the industry and some members of Congress. Even now there are also Republican lawmakers that want the DOL to wait until after the SEC makes a decision.

Commission Chairman Mary Jo White says she would like the agency to make this decision as “as quickly as we can.” Also, earlier this month she said it would be “premature” to talk about whether the regulator will change or withdraw a recent proposal to amend Regulation D to improve requirement for companies wanting a more relaxed general solicitation arena.

In a letter to House Financial Services Capital Markets Subcommittee Chairman/Rep. Scott Garrett (R-N.J.), White said the proposal is still subject to comment and it was too early to talk about what the SEC might do. Garrett and Financial Services Oversight Subcommittee Chairman Patrick White had written her following the Commission’s proposal to up Reg D requirements for companies wanting to employ general solicitation in private offerings.

The SEC put out the proposal on the same day that it adopted rules regarding private placement and general solicitation, per the Jumpstart Our Business Startups Act. Contending that the proposed amendments violate the JOBS Act, Reps. White and Garrett want them withdrawn. For example, the proposed changes would mandate that issuers submit notice, via Form D, 15 days before advertising offerings.

The two men say that imposing this type of waiting period on solicitation violates the Act. In response, Commission Chairman White said their concerns would be noted in the SEC’s comment file.

Earlier this week US President Barack Obama met with Federal Reserve Chairman Ben Bernanke and other senior regulators and called for the full implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act. According to officials, while Mr. Obama praised the regulators for all the work they’ve done up to now to implement the act’s reforms and consumer protections, he made it clear that they need to complete implementing all the reforms that have yet to be set in place. Regulators have been challenged with finishing up the rules needed to fully implement the law, touted as the most important reform of the country’s financial sector since the 1930’s.

The Resolution Law Group is a securities law firm that represents institutional clients and high net worth individuals with financial fraud claims. Contact our securities fraud attorneys today.

The Resolution Law Group: Closing Agent Admits Participating in Large-Scale Mortgage Fraud Scheme

NEWARK, NJ—A paralegal today admitted participating in a long-running, large-scale mortgage fraud scheme that defrauded financial institutions of at least $2 million, United States Attorney Paul J Fishman announced. Linda Cohen, 55, of Orange, New Jersey, pleaded guilty before United States District Judge Esther Salas to an information charging her with one count of conspiring to commit bank fraud and one count of transacting in criminal proceeds. According to documents filed in this case and statements made in court: Cohen worked as a paralegal who handled real estate closing for SB ., an attorney licensed in New Jersey. Cohen acted as the settlement agent for fraudulent mortgage loans brokered by conspirator Klary Arcentales, 45, of Lyndhurst, New Jersey, on behalf of Premier Mortgage Services.

As closing agent, Cohen furthered the scheme by convening closings, receiving funds from lenders, and preparing HUD-1 reports that purported to reflect the sources and destinations of funds for mortgages on subject properties. Those HUD-1s were neither true nor accurate. Cohen routinely certified HUD-1s in which she purported to have received a down payment from the buyer when no down payment had been made. At or following the closings, Cohen disbursed mortgage loan proceeds directly to Premier Mortgage Services, Arcentales, and other conspirators.

Cohen created shell bank accounts into which she funneled the proceeds of her fraudulent activity. The count of conspiracy to commit bank fraud to which Cohen pleaded guilty is punishable by a maximum potential penalty of 30 years in prison and a $1 million fine, and the count of transacting in criminal proceeds is punishable by a maximum penalty of 10 years in prison and a fine of $250,000 or twice the gross amount of any gain or loss. Sentencing is scheduled for November 18, 2013. United States Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Aaron T Ford; and special agents of IRS-Criminal Investigation, under the direction of Special Agent in Charge Shantelle P Kitchen, for the investigation leading to today’s guilty plea.

He also thanked the Social Security Administration-Office of Inspector General, under the direction of Special Agent in Charge Edward Ryan, for its role in the investigation. The government is represented by Assistant United States Attorneys Zach Intrater and Rahul Agarwal of the Newark office. This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes.

The Resolution Law Group: JP Morgan to face criminal and civil investigations over mortgages

The investigations come amid a battery of other probes into the banking giant’s business from federal and state regulators

JP Morgan has disclosed it faces criminal and civil investigations into the sale of mortgage-backed securities ahead of the financial crisis.

The bank faces parallel investigations by the civil and criminal divisions of the US attorney’s office for the eastern district of California, according to a regulatory filing made late Wednesday. The attorney’s civil division has already “preliminarily concluded” that the bank broke civil securities laws in selling the securities between 2005 to 2007, according to the filing.

JP Morgan also disclosed that it has received requests concerning mortgage securities from the US attorney for Connecticut, the Securities and Exchange Commission‘s (SEC) enforcement division and the inspector general for the government’s bank bailout programme relating to “among other matters, communications with counterparties in connection with certain mortgage-backed securities transactions.”

The investigations come amid a battery of other probes into the banking giant’s business from federal and state regulators. The bank also faces class action lawsuits over its $6bn losses related to the so-called “London whale” trader.

JP Morgan is not alone in facing ongoing investigations into the sale of mortgage securities. The bank’s disclosure comes in the same week that the justice department and the SEC filed separate suits charging Bank of America of understating the risks associated with the sale of $850m of mortgage-backed securities in 2008.

According to the SEC, Bank of America’s then-CEO had described the type of assets for sale as “toxic waste” and failed to inform investors about their “vastly greater risks of severe delinquencies, early defaults, underwriting defects, and prepayment.”

On the same day UBS agreed to pay $50m to the SEC to settle charges that it violated securities laws while structuring and marketing a mortgage-backed collateralized debt obligation (CDO) by failing to disclose that it retained millions of dollars that should have gone to investors.

Announcing the action against Bank of America attorney general Eric Holder said the financial fraud enforcement task force, set up by president barack Obama, was pursuing “a range of additional investigations.”

Holder said the justice department “will continue to take an aggressive approach to combating financial fraud and uncovering abuses in the residential mortgage-backed securities market.”

If you feel you are the victim of Mortgage Fraud, please do not hesitate to email or call the The Resolution Law Group (203) 542-7275 for a confidential, no obligation consultation.

Lender Litigation, Unlawful Foreclosure, Tarp Money, Mortgage Backed Securities, Derivitives Lawsuits, Insider Trading Lawsuit, SEC Settlements, Ponzi Scheme Lawsuits, Intentional Misrepresentation, Securitized Mortgage, Class Action Securities Lawsuit, Robo-Signing Lawsuit, Lost Equity Litigation, Mortgage Lender Fraud, FINRA Fraud Lawsuit, Suing Banks, Fraudulent Misrepresentation, Short Sale Fraud, Fraudulent Business Practices, Mortgage Litigation, Complex Tort Litigation, Injunctive Relief, MERS Fraud

The Resolution Law Group: Bank of America defrauded investors of ‘prime’ mortgage securities

Bank of America defrauded investors who bought securities backed by prime mortgages that eventually soured, concealing information about the risks of the loans, federal authorities said in two lawsuits Tuesday.

The civil complaints by the Justice Department and the Securities and Exchange Commission say the bank told investors the securities were backed by prime mortgage loans – those with a higher credit quality – when they were actually much riskier.

The Charlotte-based bank ignored its own underwriting standards when it originated the so-called “jumbo” loans, mortgages typically used for higher-end homes, the Justice Department contends. The bank represented the loans as prime even though employees and internal performance reports had raised concerns about their quality, the Justice Department said.

“Bank of America’s reckless and fraudulent origination and securitization practices in the lead-up to the financial crisis caused significant losses to investors,” Anne Tompkins, U.S. attorney for the Western District of North Carolina, said in a press release. “Now, Bank of America will have to face the consequences of its actions.”

Tompkins, who is based in Charlotte, added, “Our investigation into Bank of America’s mortgage and securitization practices continues.”

According to the Justice Department, five investors, including Wachovia Bank, bought roughly $850 million worth of the securities from Bank of America in early 2008. Federal officials claim that, as of June, at least 23 percent of the 1,191 securitized mortgages had defaulted or were delinquent.

Investors’ losses so far total $70 million, the Justice Department said. An additional $50 million in losses is expected, the department said, citing an estimate from Fitch Ratings.

The Justice Department and SEC have not specified how much in penalties Bank of America would pay if it is found guilty.

The cases are the first brought by federal authorities in connection with prime mortgages rather than the subprime loans that have been the subject of other litigation in the aftermath of the downturn.

Originated by Bank of America

The case centers on mortgages originated by Bank of America, unlike other litigation in which investors have claimed losses stemming from securities backed by Countrywide Financial Corp. home loans. Bank of America bought Countrywide in 2008. In a separate case, pending in New York, the bank and 22 institutional investors are seeking approval of an $8.5 billion settlement to resolve claims stemming from Countrywide loans.

Responding to Tuesday’s lawsuits, Bank of America said the investors knew what they were getting into when they bought the securities.

“These were prime mortgages sold to sophisticated investors who had ample access to the underlying data, and we will demonstrate that,” bank spokesman Lawrence Grayson said. “The loans in this pool performed better than loans with similar characteristics originated and securitized at the same time by other financial institutions.

“We are not responsible for the housing market collapse that caused mortgage loans to default at unprecedented rates and these securities to lose value as a result.”

The Justice Department, in its lawsuit, argues that the proportion of mortgages that defaulted or became delinquent is “abnormally high” for a pool of prime mortgages and “cannot be explained solely by the downturn in the real estate market over the last few years.” Federal officials said Bank of America sold them as “prime securitization appropriate for the most conservative” mortgage-backed securities investors.

Bank of America originated the loans in 2007 and sold them as securities in 2008, federal officials said. Each of the loans sold as securities had an initial principal balance of around $420,000, with some as high as $1.6 million, according to court documents.

According to government officials, the cases mark the first federal lawsuit brought by the federal government’s Residential Mortgage Backed Securities Working Group. President Barack Obama created the state-federal task force last year to investigate illegal activity – stemming from residential mortgage-backed securities – that contributed to the financial crisis.

Red flags

Federal officials say Bank of America employees had raised red flags to bank officials about the questionable quality of the loans.

According to the Justice Department’s lawsuit, a Bank of America trader expressed concerns in 2007 about the quality of the loans proposed for the securitization. The bank then decided to postpone the sale of the securities until January 2008, but that month the bank “again made efforts to put poor quality mortgages,” worth $24 million, into the pool, the lawsuit says.

The SEC’s lawsuit says a Bank of America bond trader in late 2007 began receiving an increase in complaints from his customers experiencing unexpectedly early cases of default in residential mortgage-backed securities sold by the bank.

The nation’s second-largest lender by assets also misled investors by telling them that bank officials were receiving documentation that verified borrowers’ income, when in many cases they were not, according to federal officials.

The SEC, in its lawsuit, says Bank of America violated federal securities laws by failing to disclose how many of the mortgages were originated through outside brokers not affiliated with the bank.

According to the SEC, about 70 percent of the mortgages fell into that category.

Bank of America, the SEC says in its lawsuit, knew that loans originated by outside brokers – in the bank’s wholesale channel – were “significantly more likely than loans originated by (Bank of America) employees to be subject to material underwriting errors, become severely delinquent, fail early in the life of the loan or prepay,” all of which hurt investors in residential mortgage-backed securities.

Bank of America exited the business of making loans through independent brokers in 2010.

‘A target on its back’

The latest two lawsuits create more legal headaches for Bank of America, which has been dogged by litigation in the wake of the housing downturn.

“Bank of America, ever since acquiring Countrywide and the mortgage market meltdown, has had a target on its back,” said Guy Cecala, publisher of Inside Mortgage Finance, an industry publication based in Bethesda, Md.

He said loans made through independent brokers have come back to haunt lots of lenders.

“Brokers weren’t sufficiently supervised back then,” he said. “The problems hadn’t really surfaced yet and people were still doing business with them.”

Around the time of the Bank of America deal, banks were struggling to find buyers for loans packaged into securities, which could have pressured issuers to slip loans of lower quality into deals labeled as prime, he said.

“This certainly could be an indication that they are going to go after other big issuers of securities,” Cecala said. “A lot of Wall Street firms could fall into the same category.”

Only Bank of America and its subsidiaries, including Merrill Lynch, are named as defendants in the two lawsuits, not individuals who worked for the bank.

If you feel you are the victim of Mortgage Fraud, please do not hesitate to email or call the The Resolution Law Group (203) 542-7275 for a confidential, no obligation consultation.

Lender Litigation, Unlawful Foreclosure, Tarp Money, Mortgage Backed Securities, Derivitives Lawsuits, Insider Trading Lawsuit, SEC Settlements, Ponzi Scheme Lawsuits, Intentional Misrepresentation, Securitized Mortgage, Class Action Securities Lawsuit, Robo-Signing Lawsuit, Lost Equity Litigation, Mortgage Lender Fraud, FINRA Fraud Lawsuit, Suing Banks, Fraudulent Misrepresentation, Short Sale Fraud, Fraudulent Business Practices, Mortgage Litigation, Complex Tort Litigation, Injunctive Relief, MERS Fraud

The Resolution Law Group: Jon Stewart – Residential Evil

http://www.thedailyshow.com/watch/tue-may-7-2013/residential-evil?xrs=share_copy

 

Lender Litigation, Unlawful Foreclosure, Tarp Money, Mortgage Backed Securities, Derivitives Lawsuits, Insider Trading Lawsuit, SEC Settlements, Ponzi Scheme Lawsuits, Intentional Misrepresentation, Securitized Mortgage, Class Action Securities Lawsuit, Robo-Signing Lawsuit, Lost Equity Litigation, Mortgage Lender Fraud, FINRA Fraud Lawsuit, Suing Banks, Fraudulent Misrepresentation, Short Sale Fraud, Fraudulent Business Practices, Mortgage Litigation, Complex Tort Litigation, Injunctive Relief, MERS Fraud

The Resolution Law Group: Lawmakers Tackle Investment and Securities Matters

US Senators John Thune (R-SD), Richard Burr (R-NC), and Tom Coburn (R-Okla) have introduced a bill that would mandate that public pension plans reveal more information about the way they calculate liabilities and assets or place at risk the favorable tax treatment for bonds that are issued by the states and cities. S. 799 is a companion legislation to a bill that was recently unveiled in the US House of Representatives.

Like S. 799, SRLR 710 would make pension plans notify the Treasury Department about what assumptions and methods they use to determine assets, debt, and liabilities. Failure to abide by these tougher disclosure requirements would lead to the revocation of tax exemptions for specific bonds put out by municipalities and states. The senators’ bill also would prohibit federal bailout for any public pension funds.

Another Republican, Rep. Ann Wagner from Missouri, recently presented HR 1626, which would prohibit the Securities and Exchange Commission from being able to make companies reveal their political spending. The legislation, co-sponsored by Rep. Scott Garrett (R-N.J.), would amend the 1934 Securities Exchange Act.

It was nearly two years ago that a group of law professors petitioned the SEC to mandate the disclosure of how much companies allot toward political spending. Many have called on the Commission to push such rulemaking forward. However, some Republicans believe that ordering this type of disclosure exceeds the bandwidth of the SEC’s mission, which they say doesn’t include discretionary rules.

Political spending by companies is also an issue that Rep. Michael Capuano (D-Mass.) and Sen. Robert Menendez (D-N.J.) are tackling. Their bills, HR 1734 and S. 824, would mandate that companies get majority shareholder approval before they can use funds for political contributions and notify the SEC of such spending. Corporate shareholders would have to approve an “overall political budget.”
Both men introduced similar bills during the 112th Congress with no success.

In other news, Rep. Louise Slaughter (D-N.Y.) is requesting that law firm Greenberg Traurig LLP to disclose what its relationships are in the political intelligence industry because of allegations that the firm may have communicated market-moving data about Medicare Advantage to Height Securities, a political intelligence firm. Height Securities then allegedly passed the information on to certain clients and several insurers’ shares reportedly went soaring.

Slaughter, who introduced the original draft of the Stop Trading on Congressional Knowledge Act in 2006, made the request to Greenberg Traurig CEO Richard Rosenbaum in writing. A spokesperson for the law firm says that it no longer has a relationship with Height and that Greenberg Traurig has since concluded that providing government relations services to those in political intelligence can lead to unintended use of such services.

Meantime, Representatives Carolyn Maloney from New York and Maxine Waters from California, two other Democratic lawmakers, are asking the lawmakers tasked with appropriations to make sure that the funding the SEC receives for the next fiscal year is $1.674 billion, which is what President Barack Obama also wants. Their letter, signed by 51 other lawmakers, noted how it is imperative that Congress “fully fund” the regulator so that effective rulemaking and proper oversight of the securities market can happen.

The Resolution Law Group represent investors throughout the US.  For over two decades, The Resolution Law Group has helped thousands of investors recoup their investment losses by going through arbitration via FINRA, NYSE, NASD, and AAA, as well as through the state and federal courts.  Visit our website http://www.TheResolutionLawGroup.com

Lender Litigation, Unlawful Foreclosure, Tarp Money, Mortgage Backed Securities, Derivitives Lawsuits, Insider Trading Lawsuit, SEC Settlements, Ponzi Scheme Lawsuits, Intentional Misrepresentation, Securitized Mortgage, Class Action Securities Lawsuit, Robo-Signing Lawsuit, Lost Equity Litigation, Mortgage Lender Fraud, FINRA Fraud Lawsuit, Suing Banks, Fraudulent Misrepresentation, Short Sale Fraud, Fraudulent Business Practices, Mortgage Litigation, Complex Tort Litigation, Injunctive Relief, MERS Fraud