SEC Press Release: Banc of America Bid Rigging
(Dec 2010)
SEC Charges Banc of America Securities With Fraud in Connection With Improper Bidding Practices Involving Investment of Proceeds of Municipal Securities
The U.S. Securities and Exchange Commission (SEC) issued a press release today announcing that it had
charged Banc of America Securities, LLC (BAS) with securities fraud for its part in an effort to rig bids in connection with the investment of proceeds of municipal securities.
"BAS has agreed to pay over $36 million, together with...
FINRA Press Release: Reverse Convertibles
(Oct 2010)
FINRA Orders Ferris, Baker Watts to Pay Nearly $700,000 for Inappropriate Sales of Reverse Convertible Notes
The Financial Industry Regulatory Authority (FINRA) issued a press release today announcing that
it has fined the former Ferris, Baker Watts LLC, acquired by RBC Wealth Management, $500,000 for inadequate supervision of sales of reverse convertible notes to retail customers as well as unsuitable sales of reverse convertibles to 57 accounts held by elderly customers who were at...
In the News: Structured Notes
(Oct 2010)
Bloomberg issued a news release today reporting that the amount of sales and issuances of structured products had reached a record in 2010. The demand for higher yields and caution in investing in stock were factors which contributed to the growth in structured products. According to Bloomberg, a popular structured product was the step-up callable note, which is a callable note that increases ('steps up') its fixed rate over time.
This calls for active analysis of the merits of...
In the News: SEC Reviewing Sales of Structured Products
(Sep 2010)
Bloomberg issued a news release today announcing that sales practices of banks and broker-dealers for structured products are being investigated by the Securities and Exchange Commission (SEC) for product overcharging and disclosure of conflicts of interest.
This is not a surprising new release: it is consistent with our findings in our paper on reverse convertibles, 'What TiVo and JP Morgan teach us about Reverse Convertibles.' In this paper, we find that brokerage firms consistently...
FINRA Regulatory Notice: Municipal Securities
(Sep 2010)
FINRA Reminds Firms of Their Sales Practice and Due Diligence Obligations When Selling Municipal Securities in the Secondary Market
The Financial Industry Regulatory Authority (FINRA) published Regulatory Notice 10-41 reminding broker dealers including municipal securities dealers to
fully understand the municipal securities they sell in order to meet their disclosure, suitability and pricing obligations under the rules of the Municipal Securities Rulemaking Board (MSRB) and federal...
FINRA Investor Alert: Equity-Indexed Annuities
(Sep 2010)
Equity-Indexed Annuities - A Complex Choice
The Financial Industry Regulatory Authority (FINRA) published an Investor Alert on the rewards and risks of equity-indexed annuities. An annuity makes periodic payments to the holder of the annuity. There are fixed annuities that make fixed payments and variable annuities that make variable payments. Equity-indexed annuities (EIA) are similar to both fixed and variable annuities. They pay an interest rate linked to an equity index and guarantee...
FINRA Press Release: Inverse Floating Rate CMOs
(Aug 2010)
FINRA Fines HSBC $375,000 for Unsuitable Sales of Inverse Floating Rate CMOs to Retail Customers and Related Supervisory Failures
The Financial Industry Regulatory Authority (FINRA) issued a press release today announcing that
"it has fined HSBC Securities (USA) Inc. $375,000 for recommending unsuitable sales of inverse floating rate Collateralized Mortgage Obligations (CMOs) to retail customers. HSBC failed to adequately supervise the suitability of the CMO sales and fully explain the...
In the News: Structured Notes
(Aug 2010)
Structured Notes Are Wall Street's `Next Bubble,' Whalen Says
Bloomberg issued a news release today discussing the topic of a structured products bubble in Wall Street. According Christopher Whalen, managing director of Institutional Risk Analytics, the sale of structured products allows the selling firms to make bets on interest rates. Furthermore, they are illiquid products for which firms are not obligated to make markets and hence provide liquidity when these products might need them...
FINRA Press Release: Subprime Securitizations
(Jul 2010)
FINRA Fines Deutsche Bank Securities $7.5 Million for Negligent Misrepresentations Related to Subprime Securitizations
The Financial Industry Regulatory Authority (FINRA) issued a press release today announcing that
"it has fined Deutsche Bank Securities Inc. $7.5 million for negligently misrepresenting delinquency data in connection with the issuance of subprime securities."
The settlement is detailed in the FINRA AWC No. 20080128087. According to FINRA, Deutsche Bank Securities...
SLCG Research: Principal Protected Notes
(Jul 2010)
SLCG released today 'The Anatomy of Principal Protected Absolute Return Notes'.
Structured products are debt securities that often have unconventional and complex payoff structures. Their payoffs are often linked to a security or index, such as the S&P 500 or the Russell 2000, with asset classes ranging from equity, commodities, currencies and debt. A Principal Protected Absolute Return Barrier Note (ARBN) is one structured product that returns the absolute value of the return of the...
