The JOBS Act: SEC Proposes Raising Small Stock Deal Limits

The US Securities and Exchange Commission wants to up by 10 times how much money companies can raise via a simplified public offering. Under their proposal, firms could raise up to $50 million, instead of just $5 million, while giving investors less disclosures than what public companies are obligated to provide. The measure, which has just been issued for public comment, is the Jumpstart Our Business Startups Act’s last big requirement.

The JOBS Act was established to assist small business in going public and raising capital. Currently, it lets the SEC preempt states from overseeing Regulation A offerings if only “qualified” buyers are allowed to purchase the the deals or if they are offered via a stock exchange. However, the SEC has to approve the offerings and companies employing the exemption have to get approval by regulators in each state where shares were sold. It is this review by the states of Regulation A deals that reportedly have been a biggest hassle because each state has its own standards for whether to approve offers.

It was Congress and the 2012 Jumpstart Our Business Startups Act that mandated revisions to the Commission’s Regulation A so that investors will want to get behind smaller companies. According to a Government Accountability Office report, in 2011, the number of businesses trying to raise money under the current rule dropped to 19—way down from the 116 businesses that did in 1997. Some said that the requirements were too strict for how much money they were allowed to raise.

With the SEC’s proposal, referred to as “Regulation A-plus,” deals between $5 million and $50 million would be exempt from state oversight but they would have to meet additional regulatory obligations, such as they would have to investors audited financial statements, reports about material events, and semi-yearly and yearly reports. Investors would have a cap on how much stock they could buy, with individual investments limited to not greater than 10% of a person’s net worth or yearly income. Securities could be traded freely.

Deals under $5 million would still have to undergo state review. However, companies could choose to get out of state scrutiny of smaller deals if they submit financial statements that have been audited and contend with the other requirements that larger offerings have to meet.

The SEC’s unanimous vote on this proposal is the third rule that the regulator has brought forward under the JOBS ACT. Previous proposed rules involved one to allow equity crowdfunding and removing the ban on advertising of private stock deals.

The Resolution Law Group is a securities law firm that represents institutional investors and high net worth individuals seeking to pursue their financial losses caused by securities fraud. Contact us today.

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The Resolution Law Group: Merrill Lynch Settles with SEC Over CDO Disclosures for Almost $132M

The Securities and Exchange Commission says that Merrill Lynch Pierce Fenner & Smith Inc. (MER) will pay $131.8M to settle charges involving allegedly faulty derivatives disclosures. The regulator claims that the firm, which is the largest broker-dealer by client assets, misled investors about certain structured debt products before the economic crisis. By settling, Merrill is not denying or agreeing to the allegations. Also, the brokerage firm was quick to note that the matter for dispute occurred before Bank of America (BAC) acquired it.

According to the Commission, in 2006 and 2007 Merrill Lynch did not tell investors that Magnetar Capital impacted the choice of collateral that was behind specific debt products. The hedge fund purportedly hedged stock positions by shorting against Norma CDO I Ltd. and Octans I CDO Ltd., which are two collateral debt obligations that the firm was selling to customers.

The SEC contends that Merrill used misleading collateral to market these CDO investments. According to Division of Enforcement co-director George Canellos, the materials depicted an independent process for choosing collateral that benefited long-term debt investors and customers did not know about the role Magnetar Capital was playing to choose the underlying portfolios.

Also sanctioned by the SEC were Joseph Parish and Scott Shannon, two managing partners of IR Capital Management LLC. This was the investment adviser that took care of choosing collateral for the CDO Norma. They are accused of compromising their supposed lack of bias by letting a third party with its own interests affect the portfolio-selection process. The SEC says Shannon accepted assets that Magnetar chose while Parish let the hedge fund impact how other assets were selected. The two men will pay over $472,000 to settle the allegations against them and they were suspended from the industry.

Meantime, the US government continues to pursue Wall Street firms over their alleged misconduct involving the mortgage-backed securities creation that is attributed to helping cause investor losses during the financial crisis and the housing slump. The SEC has also pursued claims against Citigroup Inc. (C), Goldman Sachs Group Inc. (GS), and JPMorgan Chase & Co. (JPM) over their involvement in structuring and promoting investments linked to home loans that were faulty.

If you suspect that you have been the victim of securities fraud, contact The Resolution Law Group’s CDO fraud lawyers today.  The Resolution Law Group represents investors with securities claims against financial firms, investment advisers, brokerage firms, brokers, and others. Contact our securities fraud law firm.

The Resolution Law Group: SEC Considers Imposing Proxy Adviser Rules

The US Securities and Exchange Commission is looking at whether proxy advisers have become so influential when it comes to corporate elections that rules should be imposed in them to create greater transparency. At a recent SEC-hosted meeting, brokers, institutional investors, business groups, and unions debated about the role that proxy advisors Glass Lewis & Co. LLC and Institutional Shareholder Services Inc. have played in shareholder voting.

According to Bloomberg, research from non-profit organization Conference Board reports that with the growth in institutional investors’ percent of voting shares going up by over 50% there has been a growing demand for proxy research. However, there is concern by some that proxy advisors have a lot of power over the governance decisions of public companies yet they don’t have to contend with much Commission oversight. Critics think proxy advisors influence shareholders to vote blindly on proxy measures without getting disclosures about possible conflicts. Meantime, supporters of proxy advisors say that they provide an important service—especially to small institutional investors that lack the resources to assess every vote they make.

Mutual funds, pensions, and other mutual funds tend to be proxy advisers’ typical clients. SEC Commissioner Daniel Gallagher attributes proxy advisers’ “outsized role” to policy guidance issued by the agency in 2009 telling investment advisers they could fulfill an obligation to vote in the best interests of shareholders by depending on third party research.

It was just this year that Glass Lewis & Co. LLC and Institutional Shareholder Services Inc. consented to abide by a European Securities and Markets Authority recommendation that they obey a voluntary conduct code about disclosing the way they make recommendations and manage conflicts of interest. Still, Business Roundtable & the US Chamber of Commerce have asked for more disclosures.

The Resolution Law Group represents investors with securities claims against financial firms, investment advisers, brokerage firms, brokers, and others. Contact our securities fraud law firm today.

The Resolution Law Group: JPMorgan to Pay $920M to Settle London Whale Debacle & $80M Over Credit-Card Practice Allegations

JPMorgan Chase (JPM) has agreed to pay a $920 million fine to resolve securities fraud investigations conducted by the Federal Reserve, the Securities and Exchange Commission, the Office of the Comptroller of the Currency, and the Financial Conduct Authority in London. The probes were related to the multibillion-dollar trading losses the bank is blamed for in last year’s London Whale debacle.

The regulators cited JPMorgan for “deficiencies” related to controls assessments, risk oversight, and internal financial reporting. The bank’s senior management is getting the brunt of the blame for purportedly not citing concerns about the losses to the board. However, no charges have been filed in this case against any executive.

Also, the SEC was able to extract an acknowledgement from JPMorgan that it was in violation of federal securities laws over this matter. This comes in the wake of the regulator’s decision to reverse its policy that previously let banks settle without having to deny or admit to having done anything wrong.

The admission could put JPMorgan at a disadvantage in any private securities lawsuits from investors who may have been hurt by the trading fiasco, during which complex derivatives were traded, including those amassed by one now former JPMorgan trader who became known as the London Whale. Traders are accused of betting on credit derivatives, which let them wager on certain companies’ perceived health. Authorities say that when positions started to sour, the trades were still valued in too optimistic light, with their worth purposely inflated by traders. JPMorgan would lose $600 billion in the debacle.

As part of this securities settlement, the bank will pay $200 million each to the SEC, the Federal Reserve, and the Financial Conduct Authority, and $300 million to the comptroller’s office.

The settlements, issued today, revealed even more details about the bank’s failures over the London Whale trades, including that trading loss were a result of accounting controls that were “woefully deficient” in the chief investment office, miscalculations on spreadsheets, the standard employed for traders’ valuations were “subjective,” and the group tasked with checking the estimated losses and profits of traders was comprised of just one person.

Meantime, JPMorgan has yet to reach a settlement with the Commodity Futures Trading Commission, which is trying to determine whether the bank’s trading manipulated the market for the derivatives. However, the agency’s staff is recommending that it file an enforcement action.

Also today, the Consumer Financial Protection Bureau and the comptroller’s office imposed fines against the bank over credit card practices. The financial firm consented to pay $80 million over allegations that it deceived customers with credit cards into purchasing products that were supposed to protect them from identity fraud. However, the regulators say that products, which were offered by JPMorgan Chase between ’05 and 6/ ’12, were never created.

Already, the bank has paid about $300 million to over 2 million customers over this matter. $60 million of the $80 million settlement will go to the comptroller’s office while the bureau will get the remaining $20 million. The comptroller’s office also took issue with how JPMorgan gets back debt from customers, such as depending on potentially inaccurate documentation to determine how much a customer is owed.

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

 

The Resolution Law Group: DOJ claims BofA knew more than 40% of the mortgages it bundled into securities did not meet underwriting guidelines and sold them anyway.

The Justice Department and the Securities and Exchange Commission have sued Bank of America, alleging that traders at Bank of America willfully mislead investors about the quality of the residential mortgages tucked into the securities the banks sold at the start of the financial crisis.

Now, Bank of America faces civil charges for allegedly hiding the risks associated with $850 million worth of securities backed by home loans. The DOJ claims the bank knew that more than 40% of the mortgages it bundled into securities did not meet underwriting guidelines and sold them anyway.

Geoffrey Broderick, the senior partner of the Resolution Law Group, says “while the civil lawsuit is a step in the right direction, the allegations, if true, are criminal in nature. Why isn’t the government pursuing criminal charges against the banks and those who committed the criminal acts?“

Mr. Broderick adds that “The housing market will continue to suffer until it is fixed by the Courts or the Legislature. Somebody has to fix the problem. That is why The Resolution Law Group continues its fight for homeowners. Homeowners cannot expect the problem to fix itself.”

The Resolution Law Group continues to prosecute ground breaking litigation in Federal Court on behalf of homeowners suing lenders and servicers for, among other things, the illegal use of MERS, robo-signing, and intentionally ignoring underwriting standards and encouraging inflated appraisals.

The Resolution Law Group is currently enrolling clients into the pending lawsuit. For further information, visit its website at www.TheResolutionLawGroup.com

The Resolution Law Group: SEC Stops Former Marine’s Hedge Fund Fraud That Targeted Military Folk

The Securities and Exchange Commission has secured an emergency order to stop a hedge fund scam run by ex-marine Clayton A. Cohn and his Market Action Advisors, a hedge fund management firm that is registered in Illinois. The regulator contends that Cohn pretended to be a be a successful trader and purposely targeted current military, other veterans, friends, relatives, and other unsophisticated investors, defrauding them of nearly $1.8 million.

Per the SEC, Cohn lied about his trader track record, the hedge fund’s performance, his intended use of investors’ proceeds, and his own stake in the fund. He invested less than 50% of investors’ funds, while using over $400,000 for personal spending, including a luxury vehicle, a mansion in Hollywood, and expensive visits to fancy nightclubs. To conceal his fraud and keep collecting investor money, Cohn allegedly created bogus hedge fund accounts statements reporting yearly returns greater than 200%.

The Commission filed its Illinois hedge fund fraud lawsuit in federal court in Chicago. The regulator says that Cohn ran Market Action Capital Management, which is a hedge fund, via Market Action Advisors. The regulator is charging him and his firm with federal securities law antifraud provision violations. The SEC wants permanent injunctions, financial penalties, and disgorgement of ill-gotten gains.

Affinity Fraud
Cohn runs the Veterans Financial Education Network (VFEN), which is supposedly a charity that teaches veterans about managing their funds. In VFEN press releases, Cohn made sure to say he is a former Marine and recommended that veterans select a money manager they can trust. On the VFEN website, Cohn is described as a fund manager who has overseen millions of dollars.

The term “affinity fraud” is used to describe investment schemes targeting members of a certain identifiable group, such as a religious community, ethnic circles, senior investors, alumni members, or professional groups. This type of fraud takes advantage of the friendship/trust/connection in groups of people with common ties.

Our securities lawyers work with investors that have sustained losses from securities fraud. We have helped thousands of clients recoup their losses sustained due to the negligence or errors of their financial representatives.  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: 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