November 13, 2014

Citigroup, Bank of America Are Selling Soured Home Loans, Sources tell Bloomberg

According to Bloomberg.com, sources are telling them that Citigroup (C) and Bank of America (BAC) are selling soured U.S. mortgages to satisfy the demand from investment firms that are raising the prices. For example, say the individuals who asked not to be named, Bank of America recently placed approximately $1 billion of beleaguered debt, including nonperforming loans. Meantime, Citigroup purportedly sold around $1 billion of re-performing and nonperforming mortgages.

Lenders are reportedly selling more defaulted mortgages to avoid the cost of holding the debt. Meantime, private-equity firms and hedge funds are trying to make money off of increasing home values. The number of firms looking to acquire debt that has soured is growing.

According to some critics, that housing regulators and other agencies have recently announced rulings that would decrease credit and lending standard for home mortgages is a sign that the government is making the kinds of errors that led to the 2008 housing crisis. With housing giants Freddie Mac (FMCC) and Fannie Mae (FNMA), handing over the majority of their earning to the Treasury Department, government-sponsored enterprises are now lacking the capital buffer they would need in the event there are losses. If the economy gets into trouble again, it may be up to taxpayers once more to bail these GSEs out. It was the U.S. Treasury that helped save Freddie and Fannie with $180 million as the government seized them, placing both under conservatorship.

Last month, the Federal Housing Finance Agency announced that even though sellers of certain asset-backed securities have to keep a minimum of 5% of the asset’s credit risks, securities backed by qualified residential mortgages are exempt from this requirement.

Our mortgage-backed securities fraud lawyers are here to help investors recoup their losses.

Bank of America, Citigroup Said to Sell Soured Home Loans
, Bloomberg, November 12, 2014

Feds to Back Risky Home Loans Again
, The Washington Free Beacon, November 10, 2014


More Blog Posts:
Detroit Suburb Charged with Muni Bond Fraud, Institutional Investor Securities Blog, November 6, 2014

Texas Pension Fund Sues Tesco For Securities Fraud, Stockbroker Fraud Blog, November 5, 2014

National Planning Holding Temporarily Stops Selling American Reality Capital Properties’ Nontraded REIT sales After Disclosure of $23M Accounting Error, Institutional Investor Securities Blog, October 31, 2014

June 13, 2014

Broker Headlines: Former Wells Fargo Broker Must Pay Back Firm $1.2M, Morgan Stanley CEO Wants to Lower Broker Compensation, & Representatives Oppose Best Interest Rules

Ex-Wells Fargo Advisors Broker Must Pay Back Firm $1.2M
A Financial Industry Regulatory Authority panel says that Philip DuAmarel, a former Wells Fargo Advisor (WFC), must pay his former employer back almost $1.3 million. The panel denied his claim that the firm oversold its corporate stock plan services during his recruitment. They told him to pay back the unvested part of an upfront loan he received when he became part of Wells Fargo.

DuAmarel worked for the firm for less than three years when he left in 2010 for Bank of America (BAC) Merrill Lynch. He contended that when the firm was recruiting him he was misled about Wells Fargo’s ability to serve corporate stock plans and also regarding how much he could make for helping executives with their company’s stock trades. DuMarel’s attorney said that the broker left when it became obvious he wouldn’t be able to work with clients they way he did when he was at Citigroup (C) Global Market’s Smith Barney.

Morgan Stanley CEO Seeks To Give Brokers Reduced Payouts
James Gorman, the CEO of Morgan Stanley (MS), said he wants to reduce broker payouts relative to revenue. This could mean that compensation in the wealth management business could drop to 55% of revenue, which is down 5% from last year. He said the reduction could be attributed to an increase in lending and banking products that garner less commission for advisers and fee-based accounts that offer a larger revenue/dollar of client assets (as opposed to accounts where commissions are involved).

Gorman, who made his statements at the firm’s yearly financials conference, also talked about how recruiting expenses was another area that was buoying cost ratios in the brokerage division. He said that the industry had arrived at a breaking point regarding how many veteran financial advisers could be traded back and forth among the biggest firms.

Brokers Oppose DOL’s Proposed Rule About Clients’ Best Interests in Retirement Accounts
According to The New York Times, the Securities Industry and Financial Markets Association, which represents big financial firms on Wall Street, and the Financial Services Institute are continuing to oppose a proposed Labor Department rule that would mandate that a wider group of professionals place clients’ interests ahead of their own when it comes to retirement accounts. Right now, brokers are not obligated to do this when when advising clients about retirement.

The DOL is trying to amend a rule that is part of Employee Retirement Income Security Act, which outlines when advisers become fiduciaries. Currently, it isn’t very difficult for brokers to avoid becoming a fiduciary under Erisa. Before they must follow the higher standard they have to satisfy a five-part test. If they have a customer advice just once, the adviser doesn’t have to meet the rule requirements. Also, the broker and consumer have to both agree that the advice given was the primary reason for an investment choice.

Opponents of the rule, however, have continued to delay even the release of a revised proposed rule. They claim that the new rules would affect the way the industry is paid, which could make it hard for them to work with smaller investors. They are worried the rules could stop them from being able to charge commissions.

Under Erisa fiduciaries are not allowed to receive payment in a manner that would present a conflict of interest. Right now, are compensated in ways where there is possible conflict. This happens when a representative can earn a higher commission when recommending one product over another. Revenue sharing also presents possible conflicts.

Ex-Wells broker ordered to repay firm $1.2 million, Investment News, June 12, 2014

Morgan Stanley's Gorman seeks to tame broker compensation, Investment News, June 11, 2014

Brokers Fight Rule to Favor Best Interests of Customers, NY Times, June 12, 2014

ERISA, United States Department of Labor


More Blog Posts:
Ex-ArthroCare CEO and CFO Convicted in Texas Securities Fraud Case, Stockbroker Fraud Blog, June 11, 2014

SEC Files Order Against New Mexico Investment Adviser Over Allegedly Secret Commissions, Stockbroker Fraud Blog, June 10, 2014

Regulator Headlines: SEC Commissioner Stein Wants Updated Capital Rules for Brokerage Firms, FINRA’s BrokerCheck Link Proposal Faces Opposition, & CFTC Appoints New Enforcement Head, Institutional Investor Securities Blog, June 12, 2014

March 31, 2014

Bank of America, Its Ex-CEO To Pay $25M to Settle Securities Case with NY Over Merrill Lynch Deal

Bank of America Corp. (BAC) and its ex-CEO Kenneth Lewis have consented to pay $25 million to settle the remaining big securities fraud case accusing them of misleading investors about the financial state of Merrill Lynch & Co. during the 2008 financial crisis. The New York securities case accuses the bank of deceiving shareholders by not disclosing Merrill’s increasing losses before the acquisition deal was closed or letting them know that the deal let Merrill give its officials billions of dollars in awards.

As part of the settlement, the bank will pay the state of New York $15 million and it will enhance its oversight. Lewis, meantime, has consented to pay $10 million and he cannot work at or serve as a director of any public company for three years.

Also named as a defendant in the securities lawsuit but who refused to settle is ex-Bank of America CFO Joe Price. NY Attorney General Eric Schneiderman intends to pursue a summary judgment against him, as well as ask a judge to reach a decision without a trial. Schneiderman reportedly wants Price permanently banned from serving as a director or working at a public company.

Previously, Lewis and other Bank of America directors agreed to pay $20 million to settle a securities fraud lawsuit by investors accusing them of not disclosing needed data about Merrill before the takeover was approved. In 2012, the bank consented to pay $2.43 billion to resolve a class-action securities case with investors accusing the institution and its officers of making misleading and false statements about Merrill’s financial health. Just two year before that Bank of America agreed to pay $150 million to settle with the SEC over charges that it did not disclose material data about Merrill.

Bank of America acquired Merrill in a $50 billion deal in September 2008, which is when Lehman Brothers Holdings went into bankruptcy. While the deal was at first considered good news, especially as the rest of Wall Street appeared to be in so much trouble, analysts started to wonder if Lewis paid too much. There was also Merrill’s losses right before the acquisition was finalized.

Because of investors’ fears about the financial crisis, share prices of Bank of America dropped significantly, causing the value of the deal to drop to about $19 billion by the time it actually was finalized in January 2009. Securities fraud lawsuits then followed.

Bank of America’s decisions to purchase Merrill and Countrywide Financial Corp. have since compelled it to put aside over $42 billion to cover lawsuit costs, reserves, and payouts. Many of the securities cases contend that Countrywide, once one of the biggest subprime mortgage lenders, sold faulty mortgage securities to investors leading up to the 2008 economic crisis.

In October, a jury found Bank of America liable for securities fraud over the mortgages that Countrywide originated as home loans that in then sold to Freddie Mac and Fannie Mae.

Please contact our stockbroker fraud lawyers if you suspect your investment losses are because of financial fraud.

Lewis, BofA Reach $25 Million Pact With N.Y. Over Merrill, Bloomberg, March 26, 2014

Bank of America to pay $2.43B in settlement, Yahoo, September 28, 2012

Bank of America liable for Countrywide mortgage fraud, Reuters, October 23, 2008


More Blog Posts:
$500M MBS Settlement Reached Between Countrywide and Investors, Stockbroker Fraud Blog, May 10, 2013

Dismissal of Double Derivative Delaware Securities Lawsuits Over The Bank of America-Merrill Lynch Merger is Affirmed by the Second Circuit, Stockbroker Fraud Blog, December 22, 2012

Bank of America Settles Mortgage Bond Claims with FHFA for $9.3B, Institutional Investor Securities Blog, March 29, 2014

May 10, 2013

$500M MBS Settlement Reached Between Countrywide and Investors

Class action securities plaintiffs, led by the Iowa Public Employees' Retirement System, have settled their mortgage-backed securities lawsuit against Countrywide for $500 million. This is the largest federal class action MBS securities case in the US that has been resolved to date, even exceeding the $315 million settlement reached with Bank of America’s (BAC) Merrill Lynch (MER) last year.

Per the investors, Countryside, which was acquired by BofA, sold them billions of dollars in MBS certificates that were backed by defective loans. Toward the end of 2008, nearly all of the certificates were relegated to junk bond status.

The plaintiffs allege that offering documents for the mortgage-backed bonds failed to disclose that Countrywide was ignoring its own guidelines regarding home loan originating. In their consolidated class action securities case, investors sought over $351 billion of the Countrywide MBS that had been downgraded after the subprime collapse in 2007. (A district judge would go on to narrow the mortgage-backed securities lawsuit to $2.6 billion in bonds and Bank of America was dismissed as a defendant.)

According to Bank of America, this securities settlement resolves approximately 80% of the principal balance of RMBS that were issued by Countrywide and has not yet been paid. However, now there is news that American International Group can go ahead and file its RMBS lawsuit against Countywide. A judge said that the insurer could pursue claims accusing the latter of making false representations in offering documents that it had abided by underwriting guidelines. It was just earlier this week that Bank of America settled with bond insurance company MBIA Inc. over Countrywide for $1.6 billion.

BofA’s Countrywide Agrees to $500 Million MBS Settlement, Bloomberg, April 17, 2013

AIG may pursue fraud case versus BofA over Countrywide, Chicago Tribune, May 7, 2013

Merrill Lynch $315 Million Settlement Approved by U.S. Judge, Bloomberg, May 8, 2012


More Blog Posts:
Bank of America and Countrywide Financial Sued by Allstate over $700M in Bad Mortgaged-Backed Securities, Stockbroker Fraud Blog, December 29, 2010

Bank of New York Mellon Corp. Must Contend with Pension Fund Claims Over Countrywide Mortgage-Backed Securities, Institutional Investor Securities Blog, April 10, 2012

December 22, 2012

Dismissal of Double Derivative Delaware Securities Lawsuits Over The Bank of America-Merrill Lynch Merger is Affirmed by the Second Circuit

The U.S. Court of Appeals for the Second Circuit has affirmed the dismissal of Lambrecht v. O'Neal and Sollins v. O'Neal, two double derivative actions that were brought under Delaware law for Bank of America Corp. (BAC) and its subsidiary Merrill Lynch & Co. The cases were brought by Merrill shareholders contending wrongdoing. (Because Bank of America acquired Merrill, following the stock-for-stock swap, these shareholders are now BofA shareholders.)

The actions were an attempt to make Bank of America board of directors mandate that Merrill sue some of the subsidiary’s officials over allegedly reckless investments that were made. Finding that the actions were a result of unprecedented losses experienced by Merrill because it had invested aggressively in mortgage-baked securities (including collateralized debt obligations) before it was acquired by Bank of America, the district law court dismissed both actions for different but related reasons under Delaware law. In Sollins, the court said that the plaintiff’s predecessor-in-interest submitted the action without making presuit demand on the board yet did not demand futility. As for the Lambrecht action, while that lawsuit made three demands on the Bank of America board, it did not demonstrate that the bank had wrongfully denied the request that claims be made against ex-Merrill officials.

The Second Circuit, in its unpublished summary order, said that it sees no error in the rulings made by the district court. The appeals court noted that while Sollins suggested that Bank of America was “complicit” in Merrill’s alleged pre-merger wrongdoing involving the subprime market by letting the latter issue bonuses at 2007 levels, consenting to indemnify Merrill directors over pre-merger wrongdoing, approving the merger without figuring out Merrill’s growing losses, sealing the deal despite serious misgivings about the firm’s financial state, and not doing a good enough job of notifying investors about losses, his arguments are not properly placed. The district court was therefore correct in stating that the plaintiff cannot “boostrap” his claims against Merrill related to the subprime market onto the merger-related allegations against Bank of America to get around the demand request.

The appeals court also noted that an exculpatory provision in Bank of America’s incorporation articles protects its directors. It also turned down Sollins’ demand futility argument related to Merrill giving out approximately $3.4 billion in employee bonuses in 2008.

As for the Lambrecht case, the appeals court said that a board deciding not to act on a demand by a shareholder is examined under the business judgment rule, which sets up a presumption that the directors of a corporation behave in food faith when making decisions. Overcoming this presumption would require that the plaintiff accomplish the task of demonstrating that not bringing the case was a decision done in bad faith or because of an unreasonable probe, which Lambrecht’s case fails to do, said the Second Circuit.

“This case demonstrates some of the difficulties in pursuing claims against corporations, their management and their directors under Delaware law,” said Shepherd Smith Edwards and Kantas, LLP founder and stockbroker fraud lawyer William Shepherd.

Lambrecht v. O'Neal (PDF)

Dismissal of Del. Law. Suits Over Merger of BofA, Merrill Affirmed, New York Law Journal, December 5, 2012


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SEC Intends to Examine 25% of Investment Advisers That Had To Register, Per Dodd-Frank Act, by End of 2014, Stockbroker Fraud Blog, December 26, 2012


SEC Clawback Lawsuit Against Two Former Arthrocare Corp. Executives Over Fraud Scheme Can Proceed, Says District Court in Texas, Stockbroker Fraud Blog, November 24, 2012

McGraw Hills, Moody’s, & Standard & Poor’s Can’t Be Held Liable by Ohio Pension Funds for Allegedly Flawed MBS Ratings, Affirms Sixth Circuit, Stockbroker Fraud Blog, December 20, 2012

September 22, 2012

Merrill Lynch Told to Pay $3.6M to Brazilian Heiress for Brother’s Alleged $389M in Unauthorized Trading

A Financial Industry Regulatory Authority panel is ordering Merrill Lynch (MER), a Bank of America Corp. (BAC) unit, to pay $3.6 million to a Brazilian heiress who contends that she lost millions of dollars because of unauthorized trades that her brother made in her account. The securities arbitration case was submitted on behalf of Sophin Investments SA, which was established to manage Camelia Nasser de Kassin’s inheritance from a relative.

Sophin contended that Merrill allowed Camelia’s brother, Ezequiel Nasser, to make unauthorized trades worth $389 million using her accounts at two Merrill Lynch units. He allegedly invested in high risk securities, including naked puts in Lehman Brothers and Bear Stearns (BSC) that created a deficit of at least $8 million.

The plaintiff claimed inadequate supervision, civil fraud, unauthorized trading, and other alleged wrongdoings, and asked for compensatory damages of $21 million for the $9.5 million that had been placed in the accounts, $9.5 million as an investment return, and the rest for commissions that went to Merrill. The financial firm then submitted a counterclaim alleging that their contract together had been breached. It asked the FINRA panel for almost $2.5 million in damages for the deficit in Sophin’s retail account and close to $3 million for the swap account. Merrill also filed claims against Marc Bonnant, who is the lawyer who set up the accounts on Sophin’s behalf, as well as against Ezequiel.

The FINRA panel found both Sophin and Merrill liable. While it told Merrill to pay $6.1 million in compensatory damages to Sophin, the latter was told to pay the financial firm $2.5 million—hence the $3.6 million that Merrill was ultimately ordered to pay Sophin. Also, while the panel acknowledged that Bonnant paid less than adequate attention to his fiduciary duties to Sophin, it said that Merrill exhibited “lapses” in hits own supervising and record keeping.

The claims made against Ezequiel Nasser by Merrill were denied. The arbitration panel said Bonnant, who has been based in Europe, isn’t under its jurisdiction. (Merrill has accused him of authorizing the trades that it had made for Sophin and misrepresenting the client’s investment experience, financial state, and tolerance for risk.)

This case is just one aspect of the bigger dispute between Merrill Lynch and members of the Nasser banking family over alleged trading losses. For example, in 2008, the financial firm sued the Nassers for huge trading losses that result in a $99 million judgment. A New York appeals court upheld that ruling.

Unauthorized Trades
A broker or advisor has to get an investor’s permission to sell or buy securities for an investor. Otherwise, the trade is not authorized. When “trading authorization” is obtained to sell or buy in that client’s account, trades can be made without getting in touch with the client. However, this is a limited power of attorney.

Unfortunately, many investors suffer losses because of unauthorized trades.

Merrill Lynch must pay $3.6 million to Brazilian banking heiress, Merrill Lynch, Reuters, September 12, 2012

Merrill Lynch Ordered to Pay $3.6 Million to Brazilian Heiress, Wall Street Journal, September 12, 2012

Bonnant V. Merrill Lynch (PDF)


More Blog Posts:
Shepherd Smith Edwards and Kantas LLP Pursue Securities Fraud Cases Against Merrill Lynch, Pierce, Fenner, & Smith, Purshe Kaplan Sterling Investments, and First Allied Securities, Inc., Stockbroker Fraud Blog, May 10, 2012

Merrill Lynch Agrees to Pay $40M Proposed Deferred Compensation Class Action Settlement to Ex-Brokers, Stockbroker Fraud Blog, August 27, 2012

Shepherd Smith Edwards and Kantas LLP Pursue Securities Fraud Cases Against Merrill Lynch, Pierce, Fenner, & Smith, Purshe Kaplan Sterling Investments, and First Allied Securities, Inc., Stockbroker Fraud Blog, May 10, 2012

Continue reading "Merrill Lynch Told to Pay $3.6M to Brazilian Heiress for Brother’s Alleged $389M in Unauthorized Trading" »

August 27, 2012

Merrill Lynch Agrees to Pay $40M Proposed Deferred Compensation Class Action Settlement to Ex-Brokers

Merrill Lynch (MER) has arrived at an “agreement in principle” to resolve the class action lawsuit filed by John Burnette and Scott Chambers over deferred compensation that they contend that the brokerage firm refused to pay them after it merged with Bank of America (BAC) in 2008 and they left its employ. About 1,400 brokers are part of this class. However, some 3,300 ex-Merrill brokers have submitted deferred compensation claims against the brokerage firm for the same reason.

Merrill had refused to give these employees their deferred compensation, which is what a broker usually gets paid for staying with a financial firm for a specific number of years, when they resigned after the merger. These brokers, however, cited “good reason” for their departure, which is another cause they can claim to receive this.

The class action settlement was presented to U.S. District Judge Alison Nathan at Manhattan federal court on Friday. She will decide whether to approve it, as well as certify the class according to the parties’ definition. However, it is not known at this time how many brokers will go for this settlement if it is approved.

It is not unusual for many to opt not to be part of a class action settlement and instead seek to obtain more money via an individual arbitration claim. Having an arbitration lawyer personally representing your case generally leads to bigger results. Already, over a thousand ex-Merrill brokers have filed their FINRA claims. Also, for an ex-Merrill broker whose deferred compensation was above six figures, they are likely to get much less by going the class action route. Meantime, ex-Merrill brokers with revenues that exceeded $500,000 during a certain timeframe before they left the financial firm cannot participate in a class action settlement. Neither can those that accepted bonuses and waived certain rights related to deferred compensation claims from Merrill after the deal with Bank of America.

That said, even the ex-Merrill brokers that decide to opt out of the class are likely to benefit from this settlement because it establishes a floor for payouts while serving as Merrill’s public acknowledgement that it had a financial duty to pay the former brokers upon their departure.

Under the class action settlement, the majority of advisers would get 40-60% of the value of their account. According to OnWallStreet.com, for a broker to receive 60%, advisors must have already made a request for reimbursement, whether via lawsuit, arbitration, or some other way and left the financial firm prior to January 30, 2010. To be eligible to receive 50%, these advisers too will have had to have made some type of legal action and resigned by June 30, 2010. If no action was taken, and the former broker still wants to opt in, they would turn in a form and seek 40% of compensation--dependent upon when they exited the firm. Other ex-advisors might also be able to receive 40 to 60% of payment depending on when they left Merrill, whether they had filed a deferred compensation claim, and in what compensation plans they were participants. Ex-dvisers that had an agreement with the Advisor Transition Program, however, would not be able to participate.)

Merrill to Make Good on Former Brokers' Deferred Comp, On Wall Street, August 24, 2012

Merrill to pay $40 mln in deferred compensation suit, Reuters, August 25, 2012

More Blog Posts:
Merrill Lynch to Pay Brokers Over $10M for Alleged Fraud Over Deferred Compensation Plans, Institutional Investor Securities Blog, April 5, 2012

Advanced Equities Ordered by FINRA Arbitration Panel to Pay $4.5M to Ex-Broker, Stockbroker Fraud Blog, June 12, 2012

Claims Continue over MasterShare - Prudential Securities’ Deferred Compensation Plan, Stockbroker Fraud Blog, August 13, 2008

Continue reading "Merrill Lynch Agrees to Pay $40M Proposed Deferred Compensation Class Action Settlement to Ex-Brokers " »

February 14, 2012

Bank of America Subpoenaed by Massachusetts Over Bryn Mawr CLO II Ltd. and LCM VII Ltd. CLOs that Cost Investors $150 Million

Massachusetts securities regulator William Galvin is subpoenaing Bank of America Corp. over two collateralized loan obligations that led to investors to lose $150 million. Galvin is trying to determine whether the financial firm knew it was overvaluing the portfolios’ assets so it could remove the loans from its books.

The state is looking to obtain records and documents from Banc of America Securities LLC related to two CLOs—Bryn Mawr CLO II Ltd. and LCM VII Ltd—that were sold in 2007. (Merrill Lynch and Bank of America Securities joined forces in 2008 when they were merged in an acquisition).

It was in 2006 that Bank of America had about $400 million of commercial loans from small banks. The following year, loans were put together as securities packages that were bought by investors.

Galvin has been taking a hard look at the way banks structured and sold debt products—especially mortgage-backed securities—leading up to the 2008 economic collapse. Galvin says his office is also interested in taking a closer look at other entities.

Massachusetts’ subpoena on Friday comes a day after Bank of America, Citigroup Inc., Wells Fargo & Co., JP Morgan Chase & Co., and Ally Financial Inc. agreed to settle for $25 billion allegations accusing them of engaging in abusive mortgage practices. The agreement was reached with federal agencies and 49 states (not Oklahoma) and is considered the largest federal-state settlement ever. All five banks will also pay the Federal Reserve $766.5 million in penalties.

The deal resolves allegations that the banks robo-signed thousands of foreclosure documents without properly reviewing the paperwork, engaged in deceptive practices when offering loan modifications, did not offer other options prior to closing on borrowers who had mortgages that were federally insured, and submitted improper documents in bankruptcy court.

Also as part of this securities settlement, Bank of America will pay $1 billion to settle a separate probe into allegations that it and its Countrywide Financial unit engaged in wrongful and fraudulent conduct. The $25B settlement is designed to provide mortgage relief and give $2,000 to about 750,000 borrowers whose homes ended up foreclosing after home values dropped 33% from what they were worth in 2006.

Per other terms of the settlement, the bank is to provide $17 billion in loan modification and principal reduction to delinquent borrowers whose homes are at risk of foreclosure. $3 billion is included for borrowers that are up-to-date on mortgage payments but cannot refinance because they owe more than what their home is worth. The banks have also agreed to new servicing standards.

Massachusetts Subpoenas Bank Of America Over CLOs, Fox Business, February 10, 2012

U.S. banks agree to $25 billion in homeowner help, Reuters, February 9, 2012


More Blog Posts:

FDIC Objects to Bank of America’s Proposed $8.5B Settlement Over Mortgage-Backed Securities, Stockbroker Fraud Blog, August 30, 2011

Mortgage-Backed Securities Lawsuit Against Bank of America’s Merrill Lynch Now a Class Action Case, Stockbroker Fraud Blog, June 25, 2011

Bank of America to Pay $335M to Countrywide Financial Corp. Borrowers Over Allegedly Discriminating Lending Practices, Institutional Investor Securities Blog, December 21, 2011

Continue reading "Bank of America Subpoenaed by Massachusetts Over Bryn Mawr CLO II Ltd. and LCM VII Ltd. CLOs that Cost Investors $150 Million" »

August 30, 2011

FDIC Objects to Bank of America’s Proposed $8.5B Settlement Over Mortgage-Backed Securities

In the State Supreme Court of New York, the Federal Deposit Insurance Corp. has fled an objection to Bank of America proposed $8.5 billion mortgage-backed securities settlement. The FDIC, which is the receiver for failed banks and owns the securities that the settlement is supposed to cover, says it doesn’t have sufficient information to assess the settlement.

Per the agreement, Bank of America would pay to resolve claims brought by investors of mortgage bonds from Countrywide Financial Corp., which the investment bank acquired in 2008 for $4 billion. Already, the claims related to the Countrywide MBS has cost Bank of America over $30 billion.

The $8.5 billion securities settlement with Bank of America is over $424 billion in mortgages from Countrywide and was reached with 22 institutional investors, including:

• BlackRock Inc.
• Pacific Investment Management Co. LLC
• Federal Reserve bank of New York
• MetLife Inc.

If approved, the terms of the MBS settlement will apply to other investors that weren’t part of the original deal. However, not all of these “other” investors are satisfied with the terms.

Walnut Place LLC I-XI, another party that represents other investors, recently submitted its petition accusing trustee Bank of New York Mellon of reaching an agreement that was really only on behalf of the 22 institutional investors. Also opposing the Bank of America MBS settlement is the Federal Housing Financing Agency, which is the overseer of Freddie Mac and Fannie Mae. The federal agency submitted its “conditional objection.”

Recently, six Federal Home Loan Banks (of Indianapolis, Boston, Pittsburgh, Chicago, Seattle, and San Francisco) also noted their opposition of the securities settlement. They believe that investors could be owed at least three times more than what the $8.5billion agreement is offering (under the proposed agreement, Bank of America would have to buyback 40% of the securities that defaulted.)

New York Attorney General Eric Schneiderman, who also doesn’t want the $8.5 billion settlement to go through, is accusing Bank of New York Mellon of securities fraud. He claims that not only did the trustee fail to act in the best interest of investors, but also it did not ensure that the MBS were set up in compliance with state law.

Also, in an unrelated claim, a US Bancorp unit requested that a court make Countrywide Financial buyback over 4,000 loans in a $1.75 billion mortgage pool to remedy breaches of contract over improper underwriting. In its securities fraud lawsuit, the unit claims that in 2005 when Countrywide sold the pool, it agreed to buyback all loans within 90 days of notification that there had been a material breach.

Our stockbroker fraud lawyers represent investors that have lost money because of broker misconduct and other acts of securities fraud.

Bank of America Settlement Faces Growing Challenges, New York Times, August 30, 2011

FDIC Objection Throws A Wrench Into Bank Of America's $8.5 Billion Settlement, Forbes, August 29, 2011

Bank of America Settlement Faces Growing Challenges, NY Times, August 30, 2011

FDIC Petition (PDF)

Federal Deposition Insurance Corporation

New York Attorney General Eric Schneiderman


More Blog Posts:

Federal Home Loan Banks Say Countrywide Financial Corp Mortgage Bond Investors May Be Owed Way More than What $8.5B Securities Settlement with Bank of America Corp. is Offering, Institutional Investor Securities Blog, July 22, 2011

$63 Million Mortgage-Backed Securities Lawsuit Against Bank of America is Second One Filed by Western and Southern Life Insurance Co. Against the Financial Firm, Institutional Investor Securities Blog, August 29, 2011

Bank of America and Countrywide Financial Sued by Allstate over $700M in Bad Mortgaged-Backed Securities, Stockbroker Fraud Blog, December 29, 2010

June 25, 2011

Mortgage-Backed Securities Lawsuit Against Bank of America’s Merrill Lynch Now a Class Action Case

Merrill Lynch, a unit of Bank of America Corp. (BAC) is now the defendant of a class action securities fraud lawsuit filed on behalf of at least 1,800 investors. A federal judge certified the class status, which involves all investors in mortgage-backed securities that were sold beginning February 2006 through September 2007.

The named plaintiffs of the MBS lawsuit are the Connecticut Carpenters Annuity Fund, the Wyoming state treasurer, Mississippi Public Employees’ Retirement System, the Connecticut Carpenters Pension Fund, and the Los Angeles County Employees Retirement Association. The investors are accusing Merrill of misleading them in the offering documents for $16.5 billion of certificates.

While including yourself as a class action plaintiff may seem like an easy way to recoup your losses, Shepherd Smith Edwards & Kantas LTD LLP founder and stockbroker fraud attorney William Shepherd says, “On average, victims with securities class action claims usually get back a net recovery of about 8% of their losses.” Such claims often face numerous obstacles. Also, only federal securities claims can be brought in class action cases, and these can be challenging to prove. “Some securities class action complaints end up settled but with the terms favoring the defendants and with large fees going to the investors’/victims’ attorneys,” notes Shepherd. Many consider the investor class the losers when such a case is concluded. ** It is important, however, to note that our securities fraud law firm has no information at this time to suggest that this is going to be the result in this matter.

One alternative you should explore is filing your own, individual claim. While many securities class action cases have very short “opt out” dates, if you “opt out" of the class in a timely manner, you can file an individual case ( claims under state law are often easier to prove). Our securities fraud law firm has represented many investors who have done both.

Merrill Must Face Class Action Over Mortgage Securities, Bloomberg, June 20, 2011


More Blog Posts:

Ambac Financial Group, Insurers, and Bank Underwriters to Pay $33M to Settle Securities Lawsuits Alleging Concealed Risks Related to its Bond-Insurance Business, Stockbroker Fraud Blog, May 18, 2011

Number of Securities Class Action Settlements Reached in 2010 Hit Lowest Level in a Decade, Says Report, Stockbroker Fraud Blog, March 31, 2011

Class Action Plaintiffs Dispute Bank of America’s $137M Settlement with State Attorney Generals Over Municipal Derivatives, Institutional Investor Securities Blog, December 31, 2010

Continue reading "Mortgage-Backed Securities Lawsuit Against Bank of America’s Merrill Lynch Now a Class Action Case" »

February 23, 2011

FINRA Fines Bank of America Corp.'s Merrill Lynch $500,000 Over Alleged Oversight Failures of 529 Plans

The Financial Industry Regulatory Authority is ordering Merrill Lynch, a Bank of America Corp. unit, to pay a $500,000 fine over alleged oversight failures involving 529 plans, a college-savings product. Merrill Lynch has also been censured by FINRA in a disciplinary action.

According to the SRO, Merrill Lynch lacked the adequate supervisory procedures necessary to make sure representatives were taking into account clients’ state income-tax benefits when determining whether they should invest in a 529 plan within their state of residence or in one outside the state. Merrill Lynch sold more than $3 billion in 529 plans between June 2002 and February 2007.

With 529 plans, which are considered municipal securities, money can be withdrawn to pay for college expenses without the imposition of federal taxes. Many states offer credits or state tax deductions for residents that invest in a 529 plans in the state. That said, depending on where the investor resides, investing in a plan outside the state can be more beneficial than the benefits received from a 529 plan in the investor’s home state.

However, FINRA contends that the only 529 plan that the financial firm offered and sold nationally was Maine's NextGen College Investing Plan. Merrill Lynch must now send letters to clients who lived in states that offered 529-related tax benefits but ended up opening accounts with Maine's NextGen College Investing Plan through Merrill Lynch. These customers will be given instructions on how to contact the financial firm. If they want to move their funds to a home-state 529 plan, Merrill Lynch has to help, as well as waive a number of fees.

By agreeing to settle with FINRA, Merrill Lynch is not denying or admitting to the SRO’s findings.

Related Web Resources:
Merrill fined $500,000 over college-savings plans, Bloomberg, January 19, 2011

FINRA Censures, Fines Merrill Over Colleges Saving Plans, OnWallStreet, January 19, 2011


More Blog Posts:

Bank of America Merrill Lynch to Settle UIT Sales-Related FINRA Charges for $2.5 Million, Stockbroker Fraud Blog, August 22, 2010

Bank of America To Settle SEC Charges Regarding Merrill Lynch Acquisition Proxy-Related Disclosures for $150 Million, Stockbroker Fraud Blog, February 15, 2010

SEC Submits Amended Complaint Against Bank of America Over Merrill Lynch Merger and Executive Bonuses, Stockbroker Fraud Blog, December 3, 2009

Continue reading "FINRA Fines Bank of America Corp.'s Merrill Lynch $500,000 Over Alleged Oversight Failures of 529 Plans " »

December 29, 2010

Bank of America and Countrywide Financial Sued by Allstate over $700M in Bad Mortgaged-Backed Securities

Allstate has filed a securities fraud lawsuit against Bank of America (NYSE: BAC) and its subsidiary Countrywide Financial. The insurer claims that it purchased over $700 million in toxic mortgage-backed securities that quickly lost their value. Also targeted in the securities complaint are former Countrywide CEO Anthony Mozilo and other executives. Allstate is alleging negligent misrepresentation and securities violations.

The insurance company purchased its securities between March 2005 and June 2007. According to the federal lawsuit, as far back as 2003 Countrywide let go of its underwriting standards, concealed material facts from Allstate and other investors, and misrepresented key information about the underlying mortgage loans. The insurer contends that Countrywide was trying to boost its market share and sold fixed income securities backed by loans that were given to borrowers who were at risk of defaulting on payments. Because key information about the underlying loans was not made available, Allstate says the securities ended up appearing safer than they actually were. Allstate says that in 2008, it suffered $1.69 billion in losses due largely in part to investment losses.

It was just this October that bondholders BlackRock and Pimco and the Federal Reserve Bank of New York started pressing Band of America to buy back mortgages that its Countrywide unit had packaged into $47 billion of bonds. The bondholder group accused BofA, which acquired Countrywide in 2008, of failing to properly service the loans.

Meantime, BofA says it is looking at Allstate’s lawsuit, which it says for now appears to be a case of a “sophisticated investor” looking to blame someone for its investment losses and a poor economy.

Related Web Resources:
Countrywide Comes Between Allstate And BofA, Forbes, December 29, 2010

Allstate sues Bank of America over bad mortgage loans, Business Times, December 28, 2010

Continue reading "Bank of America and Countrywide Financial Sued by Allstate over $700M in Bad Mortgaged-Backed Securities" »

October 29, 2010

Ex-Employee Accuses Bank of America of Securities Fraud Involving Complex Derivatives Products

A former Bank of America employee is accusing the investment bank of aggressively recommending complex derivatives products to investors while at the same time failing to tell them of the risks involved. In a letter to Securities and Exchange Commission Chairman Mary Schapiro, the whistleblower said that the sales of these structured notes were so important to the BofA’s brokerage unit during the economic collapse that workers were threatened with termination if they warned clients against investing in the products or did not meet their quotas.

The ex-employee writes that another employee’s job was threatened after he told clients to liquidate their notes because of the possibility that BofA might become “nationalized,” which would make the notes worthless. The whistleblower claims to have been notified that aggressive sale of the notes was the only way the brokerage unit could fulfill its revenue goals at that time.

Bill Halldin, a Bank of America spokesperson, says that the investment firm has not heard about any such complaint regarding these allegations. He maintains that the investment bank has a policy abiding by "applicable laws and industry practices" when conducting business.

Broker Misconduct
Broker-dealers are obligated to notify investors of risks involved in an investment. They must also make sure that any investment that they recommend is appropriate for a client. Failure to fulfill these duties of care can be grounds for a securities fraud case.

Structured Notes
These derivative-like contracts allow investors to bet on bonds, stocks, or other securities. While some notes are “guaranteed” and promise a return on principal upon expiration, there are still those, such has Lehman Brothers’ notes, that fail to meet that guarantee. This can leave the holders to deal with the financial consequences. Banks may also stop trading the notes at any time.

Related Web Resources:
Informer: BofA hawked risky deals to customers, NY Post, October 29, 2010

Informer: Bofa Hawked Risky Deals to Customers, iStockAnalyst

Bank of America Blog Posts, Stockbroker Fraud Blog

Whistleblower Lawsuits, Stockbroker Fraud Blog

Continue reading "Ex-Employee Accuses Bank of America of Securities Fraud Involving Complex Derivatives Products " »

August 31, 2010

Former Bank of America CEO Denies Allegations of Securities Fraud During Merrill Lynch Acquisition

Kenneth D. Lewis, Bank of America’s former chief executive, says that New York Attorney General Andrew Cuomo’s securities fraud allegations in connection with the bank’s merger with Merrill Lynch are without merit. Lewis is accused of purposely withholding information from the shareholders who approved Bank of America’s acquisition of Merrill.

In his filing with the state supreme court, Lewis claims that Cuomo’s securities lawsuit places blame “where it does not belong.” Lewis contends that all decisions he made regarding the acquisition were done in “good faith” and with the shareholders’ best interests in mind.

Cuomo’s securities fraud complaint charged BofA, Lewis, and ex-CFO Joe Price of concealing from shareholders the fact that Merrill brought with it billions of dollars in debt. The NY Attorney General contends that the information was withheld so that the shareholders would approve the merger between the two financial institutions. He also has accused the defendants of exaggerating the degree of Merrill’s losses so that federal help would be provided through the Troubled Asset Relief Program.

Price and BofA are also denying Cuomo’s allegations.

The SEC made similar allegations against BofA last year but did not charge any individuals. The SEC and the bank settled the securities charges for $150 million. United States District Judge Jed S. Rakoff, who had turned down the previous settlement agreement of $33 million between the two parties because he considered the amount too low and a breach of “justice and morality," approved this one.

Related Web Resources:
Bank of America’s Ex-Chief Denies Fraud Charges, NY Times, August 20, 2010

BofA, executives deny Cuomo charges, Herald Online, August 20, 2010

Judge Rakoff "Reluctantly" Accepts Bank of America Settlement With SEC, Business Insider, February 22, 2010

Cuomo Sues Bank of America, Even as It Settles With S.E.C., The New York Times, February 4, 2010


NY State Attorney General Andrew Cuomo

SEC


Related Blog Stories:
Bank of America Merrill Lynch to Settle UIT Sales-Related FINRA Charges for $2.5 Million, StockbrokerFraudBlog, August 22, 2010

Bank of America To Settle SEC Charges Regarding Merrill Lynch Acquisition Proxy-Related Disclosures for $150 Million, StockbrokerFraudBlog, February 15, 2010

August 22, 2010

Bank of America Merrill Lynch to Settle UIT Sales-Related FINRA Charges for $2.5 Million

Bank of America Merrill Lynch has agreed to settle for $2.5 million Financial Industry Regulatory Authority allegations that it did not provide "sales charge discounts" to clients with eligible unit investment trusts purchases. By agreeing to settle, the broker-dealer is not admitting to or denying the charges. Of the $2.5 million, $2 million is restitution and $500,000 is a fine.

UITs
A unit investment trust is an investment company that holds a fixed portfolio of securities while offering redeemable units from that portfolio. The units have a fixed date for termination. UIT sponsors usually offer sales charge discounts called “rollover and exchange discounts”—usually offered to investors that use redemption or termination proceeds from one unit to buy another—and “breakpoint discounts”—based on the purchase’s dollar amount—to investors.

Since March 2004, FINRA has made it clear that investment firms must have procedures in place to make sure that clients get their UIT discounts. The SRO contends, however, that until May 2008, Merrill Lynch did not provide brokers or their supervisors with such guidance and neglected to tell clients when they were eligible for a UIT discount. This went on between October 2006 and June 2008 and many clients were overcharged for their UIT purchases.

FINRA also accused Merrill Lynch of distributing client presentation that contained sales information about UITs that were “inaccurate and misleading,” causing clients to believe that they were only eligible for a UIT discount if UIT proceeds were used to buy a new UIT from the same sponsor.

Related Web Resources:
BofA Merrill Lynch to Pay $2.5 Million in FINRA Matter, ABC News, August 18, 2010

Merrill Lynch to pay $2.5M in sales charge case, Business Week, August 18, 2010


Other Merrill Lynch Stories on Our Web Site:
Bank of America To Settle SEC Charges Regarding Merrill Lynch Acquisition Proxy-Related Disclosures for $150 Million, StockbrokerFraudBlog, February 15, 2010

Merrill Lynch Must Pay $26 million to States to Resolve Charges of Failure to License Associates, StockbrokerFraudBlog, December 22, 2009

Continue reading "Bank of America Merrill Lynch to Settle UIT Sales-Related FINRA Charges for $2.5 Million " »

March 31, 2010

UBS, JP Morgan, Lehman, Bank of America, and Other Banks Included on List of Co-Conspirators in CDR Bid-Rigging Scam

Over two dozen bankers at Wall Street investment firms have been listed as co-conspirators in a bid-rigging scheme to pay lower than market interest rates to the federal and state governments over guaranteed investment contracts. The banks named as co-conspirators include JP Morgan Chase & Co, UBS AG, Lehman Brothers Holdings Inc., Bear Stearns Cos., Bank of America Corp, Societe General, Wachovia Corp (bought by Wells Fargo), former Citigroup Inc. unit Salomon Smith Barney, and two General Electric financial businesses.

The investment banks were named in papers filed by the lawyers of a former CDR Financial Products Inc. employee. The attorneys for the advisory firm say that they “inadvertedly” included the list of bankers and individuals and asked the court to strike the exhibit that contains the list. The firms and individuals on the co-conspirators list are not charged with any wrongdoing. However, over a dozen financial firms are contending with securities fraud complaints filed by municipalities claiming conspiracy was involved.

The government says that CDR, a local-government adviser, ran auctions that were scams. This let banks pay lower interests to the local governments. In October, CDR, and executives David Rubin, Evan Zarefsky, and Zevi Wolmark were indicted. They denied any wrongdoing. This year, three other former DCR employees pleaded guilty.

While the original indictments didn’t identify any investment contract sellers that took part in the alleged conspiracy, Providers A and B were accused of paying kickbacks to CDR after winning investment deals that the firm had brokered. The firms were able to do this by allegedly paying sham fees connected to financial transactions involving other companies.

Per the court documents filed in March, the kickbacks were paid out of fees that came out of transactions entered into with Royal Bank of Canada and UBS. The US Justice Department says the kickbacks ranged from $4,500 to $475,000. Financial Security Assurance Holdings Ltd divisions and GE units created the investment contracts that were involved.

Approximately $400 billion in municipal bonds are issued annually. Schools, cities, and states use money they get from the sale of these bonds to buy guaranteed investment contracts. Localities use the contracts to earn a return on some of the funds until they are needed for certain projects. The IRS, which sometimes makes money on the investments, requires that they are awarded on the basis of competitive bidding to make sure that the government gets a fair return.

Related Web Resources:
JPMorgan, Lehman, UBS Named in Bid-Rigging Conspiracy, Business Week, March 26, 2010

U.S. Probe Lays Out Bid Fixing, Bond Buyer, March 29, 2010

Read the letter to District Judge Marrero (PDF)


Continue reading "UBS, JP Morgan, Lehman, Bank of America, and Other Banks Included on List of Co-Conspirators in CDR Bid-Rigging Scam " »

February 15, 2010

Bank of America To Settle SEC Charges Regarding Merrill Lynch Acquisition Proxy-Related Disclosures for $150 Million

Bank of America Corp. (BAC) has agreed to pay $150 million, in addition to $1 million in disgorgement, to settle the Securities and Exchange Commission’s charges over the investment bank’s proxy-related disclosures regarding the Merrill Lynch acquisition. U.S. District Judge Jed S. Rakoff said he hopes to decide by February 19 on whether to approve the settlement. He also said he has more questions regarding the deal.

If approved, the settlement would conclude two SEC securities lawsuits against Bank of America over the Merrill Lynch merger. One complaint involves the investment bank’s alleged failure to reveal, prior to a 2008 shareholder meeting to vote on the acquisition, that financial losses were in the billions and rising at Merrill. The second lawsuit is over what the bank did and did not disclose about the billions of dollars in bonuses paid to Merrill Lynch employees right before the $50 billion merger was completed.

Under the proposed SEC settlement, the $150 million would go to Bank of America shareholders who suffered financial losses because of the investment bank’s alleged disclosure violations. Also, for three years BofA would have to maintain and implement a number of remedial measures, including hiring an independent auditor to look at its internal disclosure controls, hiring a disclosure counsel to work on bank disclosures, making sure that BofA’s chief financial officers and chief executive certify yearly and merger proxy statements, and allowing shareholders to have an advisory say-on-pay vote regarding executive compensation.

Earlier this month, New York Attorney General Andrew Cuomo filed a separate securities fraud lawsuit against Kenneth D. Lewis, who formerly served as BofA’s chief executive, Joe Price, the bank’s former chief financial officer, and Bank of America for allegedly concealing Merrill Lynch's losses. The complaint alleges that BofA general counsel Timothy Mayopoulos was let go because he wanted to disclose the losses at Merrill Lynch before the deal was finalized.

Related Web Resources:
Bank of America Still Dealing With Fallout From Merrill Deal, Fox Business, February 5, 2010

Cuomo Sues Bank of America, Even as It Settles With S.E.C., NY Times, February 4, 2010

US judge has questions on $150 mln SEC-BofA accord, Reuters, February 16, 2010

Continue reading "Bank of America To Settle SEC Charges Regarding Merrill Lynch Acquisition Proxy-Related Disclosures for $150 Million" »

December 22, 2009

Merrill Lynch Must Pay $26 million to States to Resolve Charges of Failure to License Associates

As a result of a widespread multi-state investigation which began in May 2008, Merrill Lynch Pierce, Pierce, Fenner & Smith Inc. has agreed to pay more than $26 million to settle claims that certain client representatives were not properly licensed in states where sales efforts were undertaken. The investigation, coordinated by the North American Securities Administrators Association (NASAA), discovered that 60 percent of the firm’s “client associates” were registered only in their home state, or in only one additional state.

States require that persons at securities firms involved in sales to client or prospective clients must be licensed in the states in which the persons contacted reside – with some de minibus exceptions. Although the Merrill Lynch associates were assisting the firm’s financial advisors, they were undertaking duties which required state licenses.

While states issue licenses based on a single multi-state examination, each also charges an annual fee for each representative of a firm licensed in that state. A financial advisor with a brokerage firm may have clients or prospective clients in a number, or even dozens, of states. If an advisor’s assistant is communicating with those clients or prospects in a sales capacity, he or she must be licensed in and a fee must be paid to each state as well.

it was reported by a NASAA's working group that the $26 million will be paid by Merrill Lynch for fines, penalties and sanctions and will be shared by the 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. The firm has also agreed to implement a new internal system to ensure registration compliance in the future.

Merrill Lynch Pierce, Fenner & Smith Inc. was acquired by the Bank of America last year and is now a wholly owned subsidiary of that Bank. Both firms had been provided with billions of dollars in federal “bail-out” funds, and the acquisition has since been the subject of news stories, litigation and Congressional inquiry.

December 3, 2009

SEC Submits Amended Complaint Against Bank of America Over Merrill Lynch Merger and Executive Bonuses

The US Securities and Exchange Commission’s amended complaint regarding the acquisition of Merrill Lynch by Bank of America Corp. last January includes one new assertion. In addition to the SEC’s original allegations against Bank of America, the agency now says that the investment bank was in violation of proxy regulations when it did not provide a merger agreement schedule, as well as a list identifying what would have been included in the schedule.

At the center of the SEC lawsuit is Bank of America’s proxy disclosure to shareholders that it wouldn’t pay year-end bonuses to Merrill executives. Yet, even as Merrill posted a record $27.8 billion loss last year, its executives were paid $3.6 billion.

BofA and the SEC initially attempted to settle the allegations for $33 million. Federal Judge Rakoff, however, wouldn’t sign off on what he considered both a swift resolution to an embarrassing situation for the bank and an attempt to make it appear as if the SEC was engaged in enforcement.

Rakoff accused SEC of not being hard enough on Bank of America, which it is supposed to regulate, even as shareholders suffered. He also accused the defendant of neglecting to take responsibility for its actions, which forced taxpayers to bail out the investment bank. A trial is scheduled to begin on March 1.

The US Congress and New York Attorney General Andrew Cuomo are also investigating the merger between Bank of America and Merrill Lynch.

Throughout the US, our securities fraud law firm represents investors who have suffered financial losses because of broker-dealer misconduct.

Related Web Resources:
SEC's Amended BofA Complaint: New Claims, but No New Defendants, Law.com, October 23, 2009

Judge Rejects Settlement Over Merrill Bonuses, NY Times, September 15, 2009

SEC Fines Bank Of America $33 Million Over Bonuses, Consumer Affairs, August 3, 2009


Continue reading "SEC Submits Amended Complaint Against Bank of America Over Merrill Lynch Merger and Executive Bonuses" »

September 22, 2009

Bank of America’s Merrill Lynch unit agrees to $26.5 million national settlement stemming from Texas securities fraud claim

Following a Texas securities fraud claim that Bank of America's Merrill Lynch, Pierce, Fenner & Smith Inc. allowed unregistered sales persons to sell securities, the Bank of America unit has agreed to pay $26.5 million as part of a national settlement over the allegations. The state of Texas’s portion of the settlement is $1.6 million. The other states that were part of the task force, led by the Texas State Securities Board, are Arizona, Colorado, Vermont, Missouri, Delaware, and New Hampshire.

Client associates who accept trade orders must be registered not just in their own state but also in the client’s state. Per the probe, the task force determined that Merrill did not have a supervisory system that was designed in a manner that made sure that associates were in compliance with registration requirements. The task force was investigating a tip, provided in May 2008 by a Merrill Lynch employee, that the company saved money on registration fees by allowing client associates to register only in their home state and in a neighboring state.

Last week, Merrill Lynch agreed to pay the state of Texas another $12.7 million over a Texas securities fraud cause involving auction-rate securities. The settlement ends the state’s probe into the broker-dealer’s handling of ARS and clients’ funds even as the market was collapsing.

The board determined that not only did Merrill Lynch not tell investors that the market could very well collapse, but also that the broker-dealer offered financial associates sales incentives to sell ARS despite knowing that the auction process could fail.

September has been a rough month for Bank of America and Merrill Lynch. On the same day that the Texas securities commissioner announced the $26.5 million settlement, New York Attorney General Andrew Cuomo accused high-level Bank of America Corp. executives of failing to reveal key information about its Merrill Lynch & Co. takeover. Cuomo is threatening to press charges. Bank of America, however, is calling Cuomo’s allegations “spurious.”

BofA's Merrill to pay US$26.5M in settlement on unregistered salespeople, AP/Yahoo, September 8, 2009

Bank of America Calls Cuomo’s Merrill Allegations ‘Spurious,' Bloomberg.com, September 10, 2009

Merrill Lynch pays $12.7M to settle Texas auction rate securities case, Taragana.com, September 14, 2009

Continue reading "Bank of America’s Merrill Lynch unit agrees to $26.5 million national settlement stemming from Texas securities fraud claim " »