SEC Litigation Releases: Week in Review - March 22nd, 2013
(Mar 2013)
Fake Hedge Fund Manager Sentenced to 40 Months in Prison
March 20, 2013, (Litigation Release No. 22655)
Andrey C. Hicks was sentenced to "40 months in prison in connection with criminal charges...[of] committing wire fraud, attempting to commit wire fraud, and aiding and abetting wire fraud." Hicks was also "ordered to pay $2.3 million in restitution." In 2011, the SEC charged Hicks and his investment advisory firm, Locust Offshore Management, LLC, "with misleading prospective investors about...
Barclays' Structured Product Linked to a Basket of ETFs and Indexes
(Mar 2013)
RISK.net recently posted an article entitled "IWM urges investors to think about risk-adjusted returns" in the structured products portion of their website. The article describes in detail a Barclays product for which Institute for WealthManagement, LLC (IWM) served as the basket selection agent. Interestingly, the basket is composed mostly of ETFs, which have been appearing in structured products more frequently as the ETF industry itself has become more mature. IWM's Matt Medeiros talked...
SEC Litigation Releases: Week in Review - March 15th, 2013
(Mar 2013)
Court Orders Former Prudential Securities Broker to Pay Over $763,000 Related to Deceptive Mutual Fund Market Timing Practices
March 13, 2013, (Litigation Release No. 22643)
A final judgment was entered against Frederick J. O'Meally, a former registered representative of broker-dealer Prudential Securities Inc, for allegedly using "deceptive practices to evade blocks by mutual fund companies on his market timing trading." The judgment orders O'Meally to pay over $763,000 in disgorgement,...
Chinese Markets are Closed--So What Happens to China-based ETFs in the US?
(Feb 2013)
Happy Chinese New Year! Markets were closed in many Asian countries last week, while US markets remained open. As noted by several commentators, this means that while US ETFs that hold Chinese equities were actively traded, their underlying assets were not. So what does this mean for China-based ETFs traded in the US?
First, it's important to note how ETFs relate to their underlying assets. Essentially, ETF shares can be created by certain traders (called authorized participants) by buying...
What Does a Simple Structured CD Look Like?
(Feb 2013)
Okay, we've talked a bit about what structured CDs are and why we think they are interesting. But what does a structured CD offering document actually look like? Unfortunately, it isn't possible to find such documents from Bloomberg or the SEC website since structured CDs are not registered securities. However, you can often find offering documents using Google. For example, as a relatively simple equity-linked CD, we're going to take a look at the "Global Opportunity Certificate of Deposit...
Oppenheimer to Pay US Airways $30 Million over Auction Rate Securities
(Feb 2013)
Oppenheimer & Co. has been ordered by a FINRA arbitration panel to pay US Airways $30 million in damages related to the purchase of several series of structured auction rate securities (ARS). The story is being covered by Caitlin Nish at the Wall Street Journal, Bill Singer at Forbes, and Keith Goldberg at Law360. You can find the US Airways v Oppenheimer award on our website.
ARS are debt instruments that paid interest rates that reflect the clearing prices of regular auctions. Oppenheimer...
Crowdfunding and Real Estate Investing
(Jan 2013)
The JOBS Act of 2012 was ostensibly designed to increase investment in small businesses. One of its provisions was to allow private placement investments (such as hedge funds, oil and gas partnerships, etc) to advertise publicly. Another provision is to allow for 'crowdfunding' of real estate and other investments, in effect allowing the sale of partial interests in speculative ventures to small retail investors. Kaitlin Ugolik at Law360 has a great review of the implications of this...
SLCG Research: Tenants-in-Common Interests
(Jan 2013)
While we've spent a great deal of time talking about non-traded REITs on this blog, so far we've given less attention to another kind of real estate investment that has also been sold to investors based on questionable merits: tenants-in-common (TIC) interests. TICs are private placement investments that were very popular during the real estate boom of 2002-2008, but have suffered tremendously when the markets turned sour. We discussed TICs in our paper on non-traded REITs, but we felt that...
The Basics of Options Contracts
(Jan 2013)
In a lot of our research work, we break down complex financial products into simpler pieces and then value those simple pieces one at a time. Often, those smaller components are options contracts (especially in our structured product work), which are relatively easy for practitioners to value. However, options contracts use a peculiar terminology that can be confusing to the uninitiated, so we thought we would lay out exactly what we mean when we talk about options.
Options contracts are...
SLCG Research: Dual Directional Structured Products [Update]
(Jan 2013)
We have significantly updated our working paper on dual directional structured products (or simply dual directionals). Since our first version of the paper, our work has been covered by RISK.net and in November of 2012 RISK.net named a dual directional as their trade of the month. The latest version of the paper is available from the SLCG website and SSRN.
In this version of the paper, we expanded our scope by studying all dual directionals registered with the SEC since 2008. We divide dual...
