Tuesday, February 2, 2016

Ohio Division of Securities, In the Matter of Timothy K. Fife – Ohio IA Registration to be Revoked

In February 2016, after evidentiary hearings, the Hearing Examiner recommended that Timothy Fife’s investment adviser representative registration be revoked. The Report and Recommendation is available here. Fife's registration is being revoked because he provided investment advice and initiated securities transactions while not licensed in Ohio and because he recommended the unsuitable purchase and holding for extended periods of time of leveraged and inverse ETFs. Dr. McCann testified on behalf of the Ohio Division of Securities.

SLCG’s peer-reviewed publication on leveraged and inverse ETFS include “Leveraged ETFs, Holding Periods and Investment Shortfalls” published in the Journal of Index Investing and available here, “The Properties of Short Term Investing in Leveraged ETFs published in the Journal of Financial Transformation and available here, and “Crooked Volatility Smiles: Evidence from Leveraged and Inverse ETF Options” published in the Journal of Derivatives & Hedge Funds and available here.


Friday, January 15, 2016

Enforcement Actions: Week in Review

SEC ENFORCEMENT ACTIONS

SEC Announces 2016 Examination Priorities
January 11, 2016 (Litigation Release No. 4)
The SEC has announced its new 2016 priorities for its Office of Compliance Inspections and Examinations. The new priorities center around liquidity controls, public pension advisers, product promotion, exchange-traded funds, and variable annuities.

Julie M. Riewe, Co-Chief of Asset Management Unit, to Leave SEC After 10 Years of Service
January 11, 2016 (Litigation Release No. 5)
The SEC has announced that Co-Chief of the Enforcement Division’s Asset Management Unit Julie M. Riewe is leaving the SEC. Riewe has been co-chief for over two years.

SEC Adopts Rules Implementing FAST Act Provisions 2016
January 13, 2016 (Litigation Release No.6)
The SEC has announced its approval of interim final rules for implementing two provisions of the Fixing America’s Surface Transportation Act. The rules, adopted by Congress last December, revise Forms S-1 and F-1 to benefit emerging growth companies and smaller reporting companies.

SEC Charges 11 Bank Officers and Directors With Fraud
January 13, 2016 (Litigation Release No.7)
Eleven former executives and board members at Superior Bank and its holding company have been charged by the SEC for their involvement in schemes to cover up loan losses at the bank in the aftermath of the 2008 financial crisis. The SEC alleges that they manipulated bad loans in order to avoid reporting increasing allowances for loan and lease losses (ALLL). This fraud allegedly led Superior Bank to overstate its net income by ~99% in 2009 and 50% in 2010. In 2011, Superior Bank was closed the FDIC in April of 2011. Two of the eleven executives are contesting the charges. The nine that have agreed to settle the charges will pay monetary penalties and be barred from ever serving as officers or directors of a publicly traded company.

SEC Charges State Street for Pay-to-Play Scheme
January 14, 2016 (Litigation Release No.8)
The SEC has announced that State Street Bank and Trust Company has agreed to pay $12 million to settle charges that it engaged in a pay-to-play scheme to obtain government contracts. The SEC alleges that State Street’s former senior vice president and head of public funds, Vincent DeBaggis, created a lobbying agreement with an immigration lawyer with connections to Ohio’s former deputy treasurer Amer Ahmad. In exchange for money, State Street would be given pension funds contracts; in a little over a year, State Street paid $160,000 in lobbying fees, a large portion of which was sent to the deputy treasurer, and made $60,000 in political contributions. Robert Crowe, a fundraiser and lobbyist for State Street, is accused of making illicit campaign contributions to Ahmad, who threatened to terminate the deal.

SEC Charges Goldman Sachs with Improper Securities Lending Practices
January 14, 2016 (Litigation Release No.9)
The SEC has announced that Goldman Sachs has agreed to pay $15 million to settle charges that they violated Regulation SHO. Goldman Sachs is alleged to have located stock for short sales without completing sufficient review of the security. The SEC found that employees were using a system short-cut when processing locate requests and that Goldman Sach’s documentation did not identify locates filled using this function.

Monday, December 28, 2015

$800,000 Chipi v UBS of Puerto Rico Award

In December 2015, a FINRA arbitration panel in San Juan, PR ordered UBS Financial Services and UBS Financial Services of Puerto Rico to pay $800,000 in compensatory damages, interest, attorneys’ fees and expert costs after finding UBS liable for various claims including breach of contract, breach of a broker’s duty to supervise, negligent and intentional misrepresentation, fraud and deceit and violations of FINRA’s Rules of fair practice over UBS Puerto Rico's sale of UBS Puerto Rico municipal bond closed end funds. You can read the award here. Dr. McCann testified on liability and damages.

Friday, December 18, 2015

$1.425 million Roldan Caraballo v UBS of Puerto Rico Award

In December 2015, a FINRA arbitration panel in Miami, FL ordered UBS Financial Services and UBS Financial Services of Puerto Rico to pay $1,425,000 in compensatory damages, interest, attorneys’ fees and expert costs. You can read the award here. Dr. McCann testified on liability and damages over UBS Puerto Rico's sale of UBS Puerto Rico municipal bond closed end funds.