Massachusetts Securities Regulators Fine RBC for Selling Unsuitable Leveraged and Inverse ETFs
(May 2012)
RBC Capital Markets has agreed to pay $2.9 million in restitution to Massachusetts investors related to the sale of unsuitable leveraged, inverse, and inverse-leveraged ETFs. Secretary of the Commonwealth of Massachusetts William Galvin, who has previously investigated Bank of America over warehousing of CLO assets, issued the complaint in July 2011, accusing RBC and its registered representative Michael D. Zukowski of selling these products "to clients who did not understand what these...
The "New" Non-Traded REITs Look a Lot Like the Old Ones
(May 2012)
Yesterday's Wall Street Journal had an article describing the "new versions" of non-traded real estate investment trusts (REITs), which purport to solve some of the transparency issues which have made non-traded REITs the subject of regulatory scrutiny. In particular, several non-traded REITs are now offering daily updated net asset values (NAV) in an attempt to calm concerns regarding the lack of transparency in the pricing of non-traded REITs.
However, a review of the prospectus for...
SEC Litigation Releases: Week in Review - May 4th, 2012
(May 2012)
SEC Charges Two Former Investor Seminar Salespeople with Securities Law Violations
May 1, 2012, (Litigation Release No. 22354)
This week, the SEC filed a settled civil injunctive action against Darlene Nelson Powell and Robert Eldridge -- independent contractors of Long Term-Short Term Inc. (BetterTrades) -- derived from allegations that the two made misrepresentations concerning their trading experience. As a result, legitimate investors purchased instructional courses and mentoring programs...
SLCG Research: Day-Count Conventions
(May 2012)
Earlier this month, SLCG finished a short research paper on the ubiquitous, but often overlooked, aspect of interest-bearing investments: day-count conventions. Day-count conventions (DCCs) refer to the various procedures used to compute the amount of time elapsed for the purposes of interest accrual. These conventions effect the payments we receive/pay on everything from mortgages to credit cards, from savings accounts to interest rate swaps.
Usually these conventions are written as a...
SEC Litigation Releases: Week in Review - April 27th, 2012
(Apr 2012)
SEC Charges Former Morgan Stanley Executive with FCPA Violations and Investment Adviser Fraud
April 25, 2012, (Litigation Release No. 22346)
Earlier this week, the SEC charged Garth R. Peterson (former managing director in Morgan Stanley's real estate investment and fund advisory business) with violating the Foreign Corrupt Practices Act (FCPA). The SEC alleges that "Peterson secretly arranged to have at least $1.8 million paid to himself and the Chinese official that he disguised as finder's...
Rehypothecation or Filched Fund?
(Apr 2012)
The investigation of the MF Global scandal is still ongoing. A lot of details concerning the missing customer funds haven't been revealed. At this stage there is no definitive answer as to whether MF Global blatantly transferred segregated customer funds to cover its own liquidity shortfall, or it merely used the often frowned-upon, but completely allowable practice of rehypothecation. In this blog post, I explain what rehypothecation is, as well as the controversy around it.
Rehypothecation...
Bill Luby on VIX-Related Exchange-Traded Products
(Apr 2012)
Bill Luby, who writes at the VIX and More blog and Expiring Monthly: The Options Traders Journal, is one of the most respected voices on all things related to the CBOE S&P 500 Volatility Index, also known as the VIX. We highly recommend anyone interested in the VIX and volatility-related derivates check out his blog, which has a variety of useful analysis and commentary.
Recently there has been a lot of coverage related to TVIX and otherexchange-traded products linked to the VIX. Here at...
SEC Litigation Releases: Week in Review - April 20th, 2012
(Apr 2012)
SEC Announces Settlement of Accounting Fraud Charges Against Former CSK Auto Corporation Management
April 18, 2012, (Litigation Release No. 22338)
The US District Court in Phoenix entered a final judgment against three former CSK Auto Corporation employees: Don W. Watson (former CFO, Treasurer and Senior VP), Edward W. O'Brien (former controller) and Gary M. Opper (former director of credit and receivables). The judgment is a result of the SEC allegations in which the officers overstated CSK's...
SEC Sends Letter to Issuers of Structured Notes
(Apr 2012)
Recently the SEC sent out a letter to certain financial institutions regarding their offerings of structured notes. The letter was sent by Amy M. Starr, the Chief of the Office of Capital Markets Trends, Division of Corporation Finance. In the letter the SEC urges the structured note issuers to disclose key information with regard to the offerings, such as product pricing and use of issuing proceeds.
The SEC highlighted a number of potentially confusing aspects of structured notes and their...
