Major Tenants-in-Common Sponsor Charged with Fraud
(Apr 2013)
Four former executives of DBSI, one of the largest sponsors of tenants-in-common (TIC) interests, have been indicted on 83 counts of securities fraud, wire fraud, mail fraud, and interstate transportation of stolen property. The indictment is seeking approximately $169 million in forfeiture of properties and assets, alleging that the executives misrepresented the financial condition of DBSI to potential investors. The executives named wereformer president Douglas Swenson, general counsel...
TD Ameritrade Data Suggests Retail Investors Use ETFs in 'Sophisticated Ways'
(Mar 2013)
Exchange-traded funds (ETFs) are increasingly popular among retail investors. ETFs tend to have lower expense ratios than comparable mutual funds, and can be traded intraday like stock, giving them a comparable advantage that has proven attractive. The number of ETF issuers has grown, and that competition has driven down prices in what has become known in the financial press as the "ETF Fee War".
TD Ameritrade has produced an infographic that shows how their clients use ETFs, and the results...
SPIVA Scorecard Year-End 2012
(Mar 2013)
S&P Dow Jones Indices recently released their year-end 2012 report comparing the performance of actively managed mutual funds against their benchmark indices (we covered the year-end 2011 report previously). The S&P Indices Versus Active Funds (SPIVA) Scorecard once again shows that, for the most part, mutual funds tend to underperform their benchmarks:
The year 2012 marked the return of the double digit gains across all the domestic and global equity benchmark indices. The gains passive...
Private Equity Fund Advisers Charged with Misleading Investors about Valuation and Performance
(Mar 2013)
Earlier this week, the SEC charged Oppenheimer Asset Management (OAM) and Oppenheimer Alternative Investment Management (OAIM) with misrepresenting the performance of the Oppenheimer Global Resource Private Equity Fund I L.P. (OGR) in their marketing materials. The SEC found that OGR's manager used his own valuation methodology to value the fund's largest investment, Cartesian Investors-A LLC ("Cartesian"), at a significant markup. This inflated valuation led to a ten-fold increase in OGR's...
SEC Charges the State of Illinois for Misleading Pension Disclosures
(Mar 2013)
Yesterday, the Securities and Exchange Commission (SEC) charged the State of Illinois with misleading municipal bond investors by making inaccurate or incomplete statements concerning their statutory plan to fund the state's pension obligations. In particular, the "SEC investigation revealed that Illinois failed to inform investors about the impact of problems with its pension funding schedule as the state offered and sold more than $2.2 billion worth of municipal bonds from 2005 to early...
SEC Examination Priorities 2013
(Feb 2013)
Last week, the Securities and Exchange Commission announced their examination priorities for 2013 "to communicate with investors and registrants about areas that are perceived by the staff to have heightened risk, and to support the SEC's mission to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation."
For those that are unfamiliar, SEC staff conducts examinations of SEC registrants through their regional offices and headquarters
to determine...
Structured Product Issuers Under Pressure to Disclose Estimated Value
(Jan 2013)
According to securities law firm Morrison & Foerster's Structured Thoughts newsletter, the SEC may soon require issuers of structured products to disclose the estimated value of the product on the front page of the prospectus. From the newsletter:
Elaborating on the [SEC's] sweep letter, the Staff noted that issuers must disclose the "issuer estimated value" on the cover page of the offering document, and share this information with investors prior to the time of sale. This estimated value...
Another Non-Traded REIT Revises Share Value Downwards
(Dec 2012)
Following in the footsteps of several other large non-traded REITs, Wells Timberland REIT has revised its estimated per share value down to $6.56, from approximately $9.50 reported in the company's last 10-Q. The shares were sold for $10.00 per share starting in August 2006 and as late as December 2011.
Non-traded REITs are largely illiquid real estate investments that can be sold to retail investors but are not traded on major exchanges (see our white paper on non-traded REITs for details)....
CFTC Amendment to Rule 4.5 Survives Challenge
(Dec 2012)
Last Thursday, a Federal judge ruled on a challenge to the CFTC's February 2012 amendment to Rule 4.5 that will require mutual funds and ETFs that have sufficient non-hedging participation in derivative markets to register with the CFTC as commodity pool operators (CPOs). The CFTC defines a CPO as a "person engaged in a business similar to an investment trust or a syndicate and who solicits or accepts funds, securities, or property for the purpose of trading commodity futures contracts or...
