Market woes prompt regulator to warn on securities-based loans
By: Ben McLannahan, Joe Rennison, Financial Times (Sep 2015)
Ben McLannahan and Joe Rennison's "Market woes prompt regulator to warn on securities-based loans" quotes SLCG's Paul Meyer on the conflicts of interest involved in brokerage firms' extension of securities-based loans. Paul is quoted as saying "While securities-based lending is a low risk and very profitable business for the broker-dealer, the same cannot be said for the borrower. Broker-dealer lending creates conflicts of interest, saddling the customer with risks and potential long-term consequences he or she may not fully understand until the next bear market arrives." Paul's paper on securities-based lending is available on our website.
UBS's Costly Puerto Rican Adventure
By: Sophie Schimansky, Neue Zurcher Zeitung (Aug 2015)
Sophie Schimansky's "UBS's Costly Puerto Rican Adventure" reviews the UBS debacle in Switzerland's largest German-language newspaper. The article quotes SLCG's Craig McCann on the devastating impact UBS's conflicted sale of closed end funds and on the high likelihood that additional arbitrations will continue to be filed for many years to come. For a quick summary of SLCG's research into UBS and Puerto Rico, read our blog post "UBS Puerto Rico's Bond Fund Debacle: What We Know so Far".
Puerto Rico Investors Win Relief From UBS
By: Mike Cherny, The Wall Street Journal (Aug 2015)
Mike Cherny's "Puerto Rico Investors Win Relief From UBS" in the Wall Street Journal reports on a string of arbitration wins by UBS PR customers over the sale of leveraged closed end bond funds. The WSJ article cites SLCG's analysis of the UBS PR funds and quotes Craig McCann.
Non-traded REITs cost investors $50 billion: consultant
By: Ross Kerber, Suzanne Barlyn, Reuters (Jun 2015)
Ross Kerber and Suzanne Barlyn's "Non-traded REITs cost investors $50 billion: consultant" reports the result of SLCG's non-traded REIT research. In "An Empirical Analysis of Non-Traded REITs", Brian Henderson, Joshua Mallett, and Craig McCann found that the non-traded REIT industry has transferred at least $45.5 billion in wealth from investors to sponsors and the brokerage industry. The first 41 non-traded REITs had cost investors $25.5 billion in lost wealth and 40 additional non-traded REITs which had updated their NAVs had cost investors another $20 billion in lost wealth. In "Fiduciary Duties and Non-traded REITs", Craig McCann points out that no advisor with fiduciary duties could recommend a non-traded REIT.
Federal Judge Hands Down 10-Year Sentence To Former Chief Accounting Officer For Beazer Homes USA, Inc.
By: U.S. Attorney's Office, Western District of North Carolina (Apr 2015)
In April 2015, a federal judge in Charlotte, NC handed down a 10-year prison sentence to the former Chief Accounting Officer of Beazer Homes for accounting fraud and obstruction of justice. Dr. O'Neal testified about the losses Beazer Homes shareholders incurred due to the fraud. The Judge adopted Dr. O'Neal's event-study calculations and rejected the competing analysis of defendant's expert witness. In criminal cases, the magnitude of the losses caused by the criminal activity in large part determine the severity of the punishment. The US Department of Justice writes that "the Court emphasized that its sentence was intended to deter others because our 'markets depend on the integrity of accounting officers.'"
Interactive Brokers must pay $667,000 for portfolio selloff mishap -panel
By: Suzanne Barlyn, Reuters (Feb 2015)
In "Interactive Brokers must pay $667,000 for portfolio selloff mishap -panel", Suzanne Barlyn reports on a $667,000 FINRA award against Interactive Brokers arising out of its alleged failure to auto-liquidate a hedge fund account in a commercially reasonable manner. The article quotes Craig McCann who testified about the defects of IB's auto-liquidation procedures and on damages at the final hearing.
Regulators Want Data on Bond-Trade Fees, SEC, Others Scrutinize Markups Paid by Retail Bond Investors
By: Katy Burne, Aaron Kuriloff, The Wall Street Journal (Jan 2015)
In "Regulators Want Data on Bond-Trade Fees, SEC, Others Scrutinize Markups Paid by Retail Bond Investors", Katy Burne and Aaron Kuriloff report on continued efforts by regulators to improve transparency in the municipal bond market and thereby reduce the extraordinary undisclosed markups and markdowns dealers charge retail investors. The article cites SLCG's comprehensive study of municipal bond markups, "Using EMMA to Assess Municipal Bond Markups".
