Archive

February 5, 2016

HSBC Bank USA agreed to pay $470 million settle charges of mortgage origination, servicing and foreclosure abuses.  According to the government, "the agreement is part of our ongoing effort to address root causes of the financial crisis."  The settlement parallels the $25 billion National Mortgage Settlement reached in February 2012 between the federal government, 49 state attorneys general and the District of Columbia’s attorney general and the five largest national mortgage servicers, as well as the $968 million settlement reached in June 2014 between those same federal and state partners and SunTrust Mortgage.  DOJ

February 4, 2016

Miami-based brokerage firm E.S. Financial Services, now known as Brickell Global Markets, will pay a $1 million penalty to settle charges that it violated anti-money laundering rules by allowing foreign entities to buy and sell securities without verifying the identities of non-U.S. citizens who beneficially owned them.  Federal law requires all financial institutions to maintain an adequate customer identification program to ensure they know their customers and do not become a conduit for money laundering or terrorist financing.  But during SEC examinations, the firm twice failed to provide required books and records identifying certain foreign customers whom they were soliciting directly and to whom they were providing investment advice.  An ensuing investigation found that the firm’s customer identification program failed to obtain and maintain documentation to verify the identities of 23 non-U.S. citizens, the beneficial owners of 13 non-U.S. corporate entities, who executed more than $23 million in securities transactions through a brokerage account opened by a Central American bank affiliated with the firm.  SEC

February 2, 2016

Fourteen municipal underwriting firms will pay civil penalties to settle charges under the SEC’s Municipalities Continuing Disclosure Cooperation (MCDC) initiative.  In all, 72 underwriters (comprising 96% of the municipal underwriting market) have been charged under the voluntary self-reporting program which targets material misstatements and omissions in municipal bond offering documents.  The settling firms and civil penalties paid by the settling firms are as follows: Barclays Capital Inc. ($500,000), Boenning & Scattergood Inc. ($250,000), D.A. Davidson & Co. ($500,000), First Midstate Inc. ($100,000), Hilltop Securities Inc. ($360,000), Janney Montgomery Scott LLC ($500,000), Jefferies LLC ($500,000), KeyBanc Capital Markets Inc. ($440,000), Mitsubishi UFJ Securities  (USA) Inc. ($20,000), Municipal Capital Markets Group Inc. ($60,000), Roosevelt & Cross Inc. ($250,0000), TD Securities (USA) LLC ($500,000), United Bankers’ Bank ($160,000), and Wells Fargo Bank N.A. Municipal Products Group ($440,000).  SEC

February 5, 2016

The Department of Justice, the Department of Housing and Urban Development, the Consumer Financial Protection Bureau, along with 49 states, and the District of Columbia announced that HSBC will pay $470 million to address mortgage origination, servicing, and foreclosure abuses. The settlement also requires HSBC to substantially change how it services mortgage loans, handles foreclosures and ensures the accuracy of information provided in bankruptcy court. These terms are meant to prevent abuses such as robo-signing, improper documentation and the loss of paperwork. NY, CA, PA, TX, IL, MA

January 29, 2016

Arthur Budovsky, founder of Liberty Reserve, which billed itself as the Internet’s "largest payment processor and money transfer system," pleaded guilty to running a massive money laundering enterprise used by cybercriminals around the world to launder the proceeds of their illegal activity.  Budovsky specifically designed Liberty Reserve to help users conduct anonymous and untraceable illegal transactions and launder the proceeds of their crimes.  Before the government shut it down in May 2013, Liberty Reserve had more than 5 million user accounts worldwide and had processed millions of transactions.  Budovsky admitted to laundering more than $250 million in criminal proceeds.  DOJ

November 30, 2015

Standard Bank will pay $4.2 million to settle SEC charges that it failed to disclose certain payments made in connection with debt issued by the Government of Tanzania in 2013.  The bank acted as a lead manager for the offering but failed to disclose that its affiliate, Stanbic Bank Tanzania Limited, would pay $6 million of the proceeds of the $600 million offering to a private Tanzanian firm that performed no substantive role in the transaction.  A representative of the Government of Tanzania was a director of the private firm and the offering was not finalized until Standard and Stanbic agreed to pay the firm a percentage of the proceeds of the offering.  The payment is part of a global coordinated settlement with the United Kingdom’s Serious Fraud Office under which Standard Bank will pay a total of $36.9 million.  SEC

September 30, 2015

In the SEC’s second round of filings against underwriters under its Municipalities Continuing Disclosure Cooperation (MCDC) Initiative, a voluntary self-reporting program targeting material misstatements and omissions in municipal bond offering documents, the SEC announced enforcement actions against 22 municipal underwriting firms.  The underwriters and the agreed penalty amounts to be paid are as follows: Ameritas Investment Corp. ($200,000), BB&T Securities, LLC ($200,000),Comerica Securities, Inc. ($60,000), Commerce Bank Capital Markets Group($40,000), Country Club Bank ($140,000), Crews & Associates, Inc. ($250,000),Duncan-Williams, Inc. ($250,000), Edward D. Jones & Co., L.P. ($100,000), Estrada Hinojosa & Company, Inc. ($40,000), Fifth Third Securities, Inc. ($20,000), The Frazer Lanier Company, Inc. ($100,000), J.J.B. Hilliard, W.L. Lyson, LLC($420,000), Joe Jolly & Co., Inc. ($100,000), Mesirow Financial, Inc. ($100,000),Northland Securities, Inc. ($220,000), NW Capital Markets Inc. ($100,000), PNC Capital Markets LLC ($500,000), Prager & Co., LLC ($100,000), Ross, Sinclaire & Associates, LLC ($220,000), UBS Financial Services, Inc. ($480,000), UMB Bank, N.A. Investment Banking Division ($420,000), and U.S. Bank Municipal Securities Group, a Division of U.S. Bank National Association ($60,000).  SEC

August 19, 2015

Citigroup Global Markets will pay a $15 million penalty to settle SEC charges that it failed to enforce policies to prevent transactions that involved misuse of material, nonpublic information.  Broker-dealer employees routinely have access to material nonpublic information.  Therefore, federal securities laws require firms to take reasonable steps to prevent misuse of such information.  An SEC investigation found that between 2002 and 2012, Citigroup’s monitoring for such abuse was inadequate because it failed to review thousands of trades executed by its trading desks.  Additionally, the SEC found that Citigroup inadvertently routed more than 467,000 transactions on behalf of advisory clients to an affiliated market maker which executed the transactions as principal at or near prevailing market prices.  SEC

August 18, 2015

BNY Mellon will pay $14.8 million to settle charges that it violated the Foreign Corrupt Practices Act (FCPA) by providing valuable student internships to family members of foreign government officials affiliated with a Middle Eastern sovereign wealth fund.  An SEC investigation found that students related to foreign officials were given preferential treatment in that they were not required to meet the normally rigorous criteria of BNY Mellon’s highly competitive internship programs.  This was done to win or retain contracts to manage and service the assets of the sovereign wealth fund the foreign officials were affiliated with.  BNY’s $14.8 million payment includes $8.3 million in disgorgement and a $5 million penalty.  SEC

July 23, 2015

Three former employees of broker-dealer Oppenheimer settled charges stemming from the unregistered sales of billions of shares of penny stocks on behalf of a customer.  This action relates to a previously settled enforcement action against Oppenheimer in which the broker-dealer admitted wrong-doing and paid $20 million to the SEC and the Treasury Department’s Financial Crimes Enforcement Network.  According to the SEC’s order, the former employees failed to make reasonable inquiries or provide appropriate oversight in the face of red flags indicating that their customer’s stock sales were not exempt from registration.  SEC