Archive

January 12, 2017

New York announced the resolution of a four-year investigation of Citigroup Global Markets, Inc. (CGMI), a subsidiary of Citigroup, that revealed that CGMI had overcharged over 47,000 of its customers more than $22.5 million in fees. After the Attorney General’s Office launched its investigation, CGMI revised its policies and procedures to address the fee overcharge issues uncovered in the investigation, and as a part of the agreement CGMI admits the findings of Attorney General Schneiderman’s investigation. In cooperation with the Attorney General’s investigation, in October 2014 CGMI began reimbursing its customers in full with interest, for the overcharged fees. The agreement also requires CGMI to report fee overcharge issues to the New York Attorney General’s office for the next three years and to pay a penalty of $1 million to the State of New York. The fee overcharges at issue in the investigation arose (1) when CGMI overcharged some of its customers more than the fees they had negotiated on their managed investment accounts, and (2) when CGMI overcharged customers by failing to rebate certain customers’ accounts after periods of inactivity when fees should not have been charged but were charged. NY

November 15, 2016

JPMorgan Chase and its Hong Kong-based subsidiary JPMorgan Securities (Asia Pacific) Limited agreed to pay a combined total of roughly $265 million to resolve foreign bribery charges relating to JPMorgan’s so-called Sons and Daughters Program.  This was a scheme in which the bank secured large business deals in China by awarding prestigious jobs to relatives and friends of Chinese government officials.  As part of the settlement, JPMorgan agreed to pay the DOJ a criminal penalty of $72 million.  JPMorgan also agreed to pay the SEC roughly $130 million to settle charges that the bank’s conduct violated the Foreign Corrupt Practices Act.  The Federal Reserve System’s Board of Governors also assessed a $61.9 million civil penalty.  Whistleblower Insider

December 21, 2016

Goldman Sachs was ordered to pay a $120 million civil monetary penalty by the CFTC for attempted manipulation of and false reporting of U.S. dollar ISDAFIX benchmark swap rates. The CFTC found that between January 2007 and continuing through March 2012, Goldman attempted to manipulate and made false reports concerning the U.S. Dollar International Swaps and Derivatives Association Fix, a global benchmark for interest rate products. Goldman was additionally ordered to cease and desist from further violations and take specified remedial steps. CFTC.

September 29, 2016

Wells Fargo Bank N.A., doing business as Wells Fargo Dealer Services, agreed to change its policies and pay over $4.1 million to resolve allegations that it violated the Servicemembers Civil Relief Act by repossessing 413 cars owned by protected servicemembers without obtaining a court order.  DOJ

October 11, 2016

The CFPB took action against Navy Federal Credit Union for making false threats about debt collection to its members, which include active-duty military, retired service members, and their families. The credit union also unfairly restricted account access when members had a delinquent loan. Navy Federal Credit Union is correcting its debt collection practices and will pay roughly $23 million in redress to victims along with a civil money penalty of $5.5 million.  CFPB

October 5, 2016

Credit Suisse AG will pay a $90 million penalty and admit wrongdoing to settle charges that it misrepresented how it determined a key performance metric of its wealth management business.  Rolf Bӧgli, former Chief Operating Officer of Credit Suisse’s Private Banking Division, will pay an $800,000 penalty to settle charges he was the cause of Credit Suisse’s violations.  An SEC investigation found that Credit Suisse veered from its publicly disclosed methodology for determining net new assets (NNA), a metric valued by investors in financial institutions to measure success in attracting new business.  Disclosures stated that Credit Suisse was individually assessing assets based on each client’s intentions and objectives.  But Credit Suisse at times instead took an undisclosed results-driven approach to determine NNA.  According to the SEC’s orders, Bӧgli pressured employees to classify certain high net worth and ultra-high net worth client assets as NNA despite concerns raised by employees most knowledgeable about a particular client’s intent.  SEC

September 28, 2016

UBS Financial Services will pay more than $15 million to settle charges that it failed to adequately educate and train its sales force about critical aspects of certain complex financial products it sold to retail investors.  The SEC’s order finds that UBS failed to educate and train UBS registered representatives in connection with the sale of reverse convertible notes (RCNs) so that they could form a reasonable basis to make recommendations.  RCNs are complex securities that feature embedded derivatives whose performance is driven by the concept of implied volatility.  Without adequate education and training, certain registered representatives made unsuitable recommendations in the sale of RCNs to certain retail customers in light of their investment profiles.  UBS sold approximately $548 million in RCNs to more than 8,700 relatively inexperienced retail customers.  SEC

September 26, 2016

Merrill Lynch will pay a $12.5 million penalty for failure to maintain effective trading controls, thus failing to prevent erroneous orders from being sent to the markets and causing mini-flash crashes.  An SEC investigation found that Merrill Lynch caused market disruptions on at least 15 occasions from late 2012 through mid-2014 and violated the Market Access Rule because its internal controls in place to prevent erroneous trading orders were set at levels so high that it rendered them ineffective.  The erroneous orders caused certain stock prices to plummet and then suddenly recover within seconds.  SEC

September 19, 2016

Public accounting firm Ernst & Young will pay $9.3 million to settle charges that two of the firm’s audit partners maintained inappropriately close personal relationships with clients and violated rules that ensure firms maintain objectivity and impartiality during audits.  SEC investigations found that Gregory S. Bednar, the senior partner on an engagement team for the audit of a New York-based public company, maintained an improperly close friendship with its chief financial officer, and Pamela Hartford, a different partner serving on an engagement team for the audit of another public company, was romantically involved with its chief accounting officer, Robert Brehl.  Ernst & Young misrepresented in audit reports issued with the companies’ financial statements that it maintained its independence throughout these audits.  SEC

September 8, 2016

SEC investigations found that St. Petersburg, Florida-based Raymond James & Associates and Milwaukee-based Robert W. Baird & Co. failed to establish policies and procedures necessary to determine the amount of commissions their clients were being charged when sub-advisers “traded away” with a broker-dealer outside the client’s wrap fee program.  As a result, the firms’ financial advisors were unable to provide information to their clients about the magnitude of these costs and failed to consider these costs when determining whether the sub-advisers or the wrap fee programs were suitable for clients.  Certain clients were not even aware that they were paying additional costs beyond the single wrap fee they paid for bundled investment services.  Raymond James will pay a $600,000 penalty to settle the charges against it.  Baird will pay a $250,000 penalty.  SEC