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SEC Tells JPM That A Suit Is Coming Over Bear Stearns MBS

May 13, 2012 By Leave a Comment

SEC Tells JPM Enforcement Action Coming Over Bear’s MBS Violations

Teri Buhl, Teribuhl.com

Fallout from JP Morgan trading losses, which led to rater Fitch downgrading their debt yesterday, aren’t the only financial worries the banking behemoth is facing. Nestled in that shocking 10-Q filed Thursday is an admission that their regulator, the Securities and Exchange Commission, thinks some of the details that lead to the explosive Ambacmortgage security fraud suit against the naughty stepchild of JPM, Bear Stearns/EMC, are worthy of an enforcement action. Yep- the SEC is giving or finally gave them a Wells Notice, which means according to their 10-Q (and their 10-K) in January 2012 the SEC’s investigation into the sins of Bear’s Mortgage team run by Tom Morano, Jeff Verschleiser, Mike Nierenberg and the subsequent cover up by JPM was worthy of a civil suit along with some penalties.

JPM’s 10-Q states “In January 2012, the Firm was advised by SEC staff that they are considering recommending to the Commission that civil or administrative actions be pursued arising out of two separate investigations they have been conducting… In both investigations, the Firm has submitted responses to the proposed actions.”

We see JP Morgan admit one of the Wells notices relates to the fraud actions first brought forward in the Ambac suit with this line from the 10-Q, “The second involves potential claims against Bear Stearns entities, JPMorgan Chase & Co. and J.P. Morgan Securities LLC relating to settlements of claims against originators involving loans included in a number of Bear Stearns securitizations.”

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Goldman Sachs fined $22 million over ‘huddles’

April 13, 2012 By Leave a Comment

Ronald D. Orol, MarketWatch

Goldman Sachs Group Inc. settled charges with the Securities and Exchange Commission on Thursday, agreeing to pay a $22 million fine over allegations that the Wall Street bank didn’t have policies to prevent analysts from sharing nonpublic information with the firm’s traders.

The exchanges took place in weekly “huddles,” where Goldman’s research analysts met to provide “their best trading ideas” to the firm’s traders and later passed them on to a select group of “top clients,” the SEC said.

“Despite being on notice from the SEC about the importance of such controls, Goldman GS -3.75%  failed to implement policies and procedures that adequately controlled the risk that research analysts could preview upcoming ratings changes with select traders and clients,” said Robert Khuzami, the SEC’s director of enforcement.

The agency said the “huddles” practice took place between 2006 and 2011, and involved sales personnel. At the meetings, analysts discussed short-term trading ideas and traders discussed their views on the markets.

In 2007, according to the SEC, the New York-based investment bank began a program known as the “Asymmetric Service Initiative,” where analysts shared information and trading ideas from meetings with some investor clients.

The SEC noted that in 2003 Goldman paid a $5 million penalty to settle charges that, among other violations, it failed to set up and enforce written policies to misuse material nonpublic information obtained from outside consultants about 30-year U.S. Treasury bonds. Goldman settled the proceeding without admitting or denying the findings.

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DOJ Begins Investigating How RMBS Were Packaged

March 4, 2012 By Leave a Comment

Aruna Viswanatha, Reuters

A Justice Department inquiry into the packaging and sale of home loans by the biggest U.S. banks casts a wide net and appears to significantly overlap with other enforcement efforts, according to people who have viewed subpoenas sent to the firms.

The civil subpoenas that were sent in January ask for documents related to every offering between 2006 and 2008, including bonds backed by Fannie Mae and Freddie Mac, three people familiar with the matter said.

An older investigation by the U.S. Securities and Exchange Commission focused on the first two years, and limited its scope to private offerings, the people said.

The general nature of the subpoenas and the overlap with SEC inquiries suggest investigations related to the financial crisis could drag on for years.

The Justice Department announced in January that it had sent civil subpoenas to 11 financial institutions about the market for residential mortgage-backed securities.

The probe is part of a new inter-agency task force that President Barack Obama unveiled in his State of the Union speech. It is designed to add firepower to investigations into the sale of repackaged mortgages that helped fuel the housing bubble and spread around exposure to toxic loans.

The breadth of the new subpoenas, which also overlap with previous requests from the Justice Department, are leaving some lawyers who are representing banks in the requests befuddled about just want the government is after.

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Busted: BankAtlantic CEO Accused Of Real Estate Fraud

January 19, 2012 By Leave a Comment

SEC charges Florida-based BankAtlantic CEO with real estate fraud

Andrew Scoggin, Housing Wire

Alan Levan Charged

BankAtlantic and its CEO Alan Levan have been accused of real estate fraud by the SEC

The Securities and Exchange Commission chargedBankAtlantic Bancorp (BBX: 3.10 +2.31%) and its chief executive Wednesday for allegedly misleading investors on defaulting loans in its real estate development portfolio.

The SEC said in a statement BankAtlantic and its CEO and Chairman Alan Levan hid the “deteriorating state” of portions of its land acquisition and development business in 2007. The company and Levan then tried to minimize losses on the books, the SEC said, by committing accounting fraud.

The Fort Lauderdale, Fla.-based bank and Levan improperly recorded loans it tried to sell from the portfolio, according to the SEC. The agency filed its complaint in U.S. District Court for the Southern District of Florida.

“This is exactly the type of information that is important to investors, and corporate executives who fail to make that required disclosure will face severe consequences,” Robert Khuzami, director of the SEC’s Division of Enforcement, said in a statement.

The SEC seeks to bar Levan from holding an executive position at any financial firm, as well as financial penalties against BankAtlantic.

The company’s stock fell sharply right before market close Wednesday to $3.03, or by 7.6%.

Gene Stearns, a long-time lawyer for BankAtlantic and Levan, said the company is not concerned about the merits of the SEC case, aside from any monetary costs and bad publicity.

“We all know the SEC is under enormous pressure to sue somebody, but it sure picked an odd defendant,” Stearns said.

The loans were for large tracts of land intended for single-family housing and condos, the SEC said. Borrowers could not meet loan obligations, and the SEC said BankAtlantic kept them current in some cases by extending the loan terms.

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