FINRA Investor Alert: Stock-Based Loan Programs
(May 2011)
Stock-Based Loan Programs: What Investors Need to Know
The Financial Industry Regulatory Authority (FINRA) published an Investor Alert on the risks and rewards of non-recourse stock-based loans, loans which are given to borrowers who pledge fully paid securities as collateral to the lenders. This collateral is the only recourse the lenders have with which to reclaim the loans from the borrowers. The lender holds the securities during the period of the loan and returns them - with profits...
SEC Press Release: Assigned Credit Ratings
(May 2011)
SEC Seeks Public Comment to Assist in Study on Assigned Credit Ratings
The Securities and Exchange Commission (SEC) issued a press release today announcing that it had requested
for public comment on the feasibility of a system in which a public or private utility or a self-regulatory organization would assign a nationally recognized statistical rating organization (NRSRO) to determine credit ratings for structured finance products.
The SEC's effort is mandated by the Dodd-Frank...
SLCG Research: Oppenheimer Champion Income Fund
(May 2011)
SLCG released today 'Oppenheimer Champion Income Fund'.
Oppenheimer's Champion Income Fund (the Fund) was an open-end mutual fund that invested in high-yield bonds. It lost 80% in the second half of 2008, the highest loss for a mutual fund in Morningstar's high-yield bond fund category.
In this paper, we look at the portfolio management rules and decisions of the Fund in the context of what was happening in the markets. Leverage using debt to fund further investments was prohibited by...
SEC Press Release: Fraudulent Bidding Practices
(May 2011)
SEC Charges UBS with Fraudulent Bidding Practices Involving Investment of Municipal Bond Proceeds
The Securities and Exchange Commission (SEC) issued a press release today announcing that it had
"charged UBS Financial Services Inc. (UBS) with fraudulently rigging at least 100 municipal bond reinvestment transactions in 36 states and generating millions of dollars in ill-gotten gains. To settle the SEC's charges, UBS has agreed to pay $47.2 million that will be returned to the...
FINRA Press Release: Auction Rate Securities
(Apr 2011)
FINRA Fines Jefferies $1.5 Million for Failing to Disclose Additional Compensation Paid and Conflicts in Sale of Auction Rate Securities
The Financial Industry Regulatory Authority (FINRA) issued a press release today announcing that
"it has fined Jefferies & Company, Inc. $1.5 million for failing to disclose additional compensation received and conflicts in connection with the sale of auction rate securities (ARS). FINRA also ordered Jefferies to repay $425,000 in fees and...
FINRA Press Release: Private Placements
(Apr 2011)
FINRA Sanctions Two Firms and Seven Individuals for Selling Private Placements Without Conducting a Reasonable Investigation
The Financial Industry Regulatory Authority (FINRA) issued a press release today announcing that
"it has sanctioned two firms and seven individuals for selling interests in private placements without conducting a reasonable investigation. The companies whose securities were sold in these private placements were unrelated to the firms and individuals FINRA...
SEC Press Release: Mortgage Backed Securities
(Apr 2011)
SEC Announces Securities Laws Violations by Wachovia Involving Mortgage-Backed Securities
The Securities and Exchange Commission (SEC) issued a press release today announcing that
"Wells Fargo Securities LLC [had] agreed to settle charges that Wachovia Capital Markets LLC engaged in misconduct in the sale of two collateralized debt obligations (CDOs) tied to the performance of residential mortgage-backed securities as the U.S. housing market was beginning to show signs of distress...
SEC Press Release: Hedge Fund Fraud
(Mar 2011)
SEC Charges Hedge Fund Managers with Fraud
The U.S. Securities and Exchange Commission (SEC) issued a press release today announcing that it had
"charged a hedge fund investment advisory firm and its two founders with orchestrating a multi-faceted scheme to defraud clients and failing to comply with fiduciary obligations."
The founders, Verzili and Rodriguez of Juno Mother Earth Asset Management LLC allegedly misappropriated client assets by using these assets for the fund's...
SLCG Research: Modeling Autocallable Structured Products
(Mar 2011)
SLCG released today 'Modeling Autocallable Structured Products'.
A callable structured product is a note that is callable by the issuer. The note is linked to an underlying asset, or 'reference asset.' If the reference asset reaches the call price during the term of the note, the note is called and note holder receives a pre-specified return. If the reference asset never reaches the call price during the term of the note, the note is never called and the note holder simple receives the...
