SEC Litigation Releases: Week in Review - April 6th, 2012
(Apr 2012)
Court Holds Defendant in Contempt in SEC Action Involving Rhode Island-Based Offering Fraud,
April 5, 2012, (Litigation Release No. 22317)
In October 2010, the SEC filed a civil injunctive action against David Stern alleging that he misrepresented several key characteristics of his company -- Online Registries, Inc. -- in order to raise investor funds. The SEC also alleged that Stern then misappropriated these funds. The court entered an Order for Other Equitable Relief in March 2011. Last...
TVIX Explodes...Then Implodes
(Mar 2012)
The Wall Street Journal has an article about the rollercoaster ride that TVIX, a volatility-related ETN, has been on recently. [UPDATE 3/31/12: there is now a second WSJ article]
TVIX is a leveraged ETN issued by VelocityShares, which is Credit Suisse's ETF/ETN brand. Contrary to popular belief, TVIX and other volatility products do not track the CBOE S&P 500 Volatility Index (the VIX); instead, TVIX tracks a daily rolling portfolio of first and second month VIX futures with an average...
SEC Litigation Releases: Week in Review - March 30th, 2012
(Mar 2012)
SEC Obtains Preliminary Injunction in New York Investment Adviser Case
March 28, 2012, (Litigation Release No. 22311)
The US District Court for the Eastern District of New York issued a preliminary injunction against Brian Raymond Callahan and his advisory firms Horizon Global Advisors, Ltd. and Horizon Global Advisors, LLC. This preliminary injunction stems from the charges filed by the SEC alleging Callahan "defrauded investors in five offshore funds and used some of their money to buy...
Problems Surrounding the Complexity of Annuity Products
(Mar 2012)
On Sunday, The Wall Street Journal reported the felony-theft conviction of Glenn Neasham who had sold a complex annuity to an elderly woman. The conviction -- which comes with a 90-day sentence -- was handed down by a state-court jury in Lake County, CA. From the article:
The case underlines authorities' continuing discomfort with "indexed" annuities, savings products that pay interest tied to the performance of stock- and bond-market indexes. Insurers guarantee that buyers won't lose any of...
Abuse of Municipal Finance in Wisconsin
(Mar 2012)
The Wall Street Journal is reporting that Stifel Financial has settled with five Wisconsin school districts on charges that they misled these municipal investors with their sale of several complex CDOs. This is just another example of the situation outlined in a previous postwherein a municipality or institutional investor was taken advantage of through the sale of inappropriate investments. The settlement involves $22.5 million in cash, plus $154 million in debt forgiveness. SLCG has been...
UK Financial Regulators Probe Interest Rate Swaps
(Mar 2012)
The Financial Times reported yesterday that the Financial Services Authority -- the counterpart of the SEC in the UK -- will investigate the possible mis-selling of interest rate swaps by banks, including Barclays. The regulator decided to look into the issue after The Telegraph provided detailed information about the potential misconduct of banks when selling interest rate swaps to small businesses.
In one of its reports, the Telegraph details a situation in which a manufacturing company...
Greg Smith Leaves Wall Street
(Mar 2012)
The New York Times published an op-ed by Greg Smith, a Goldman Sachs' Executive Director who is resigning from his job after almost 12 years with the firm because, as he puts it, the firm's culture has veered far from what it was when he first joined the firm. He says in spite of the firm's recent scandals "the interests of the client continue to be sidelined in the way the firm operates and thinks about making money." At SLCG, we have come across many examples of the issues raised by Mr....
SLCG Research: Non-Traded REITs
(Mar 2012)
We've posted a new working paper on our website that brings together much of our research related to non-traded Real Estate Investment Trusts (REITs). In it, we discuss the history and structure of non-traded REITs as well as differences between non-traded REITs and other avenues for gaining exposure to real estate. We highlight the dizzying array of fees and conflicts of interest embedded in these companies. We demonstrate that non-traded REITs are often misleadingly valued, heavily...
Hedge Fund Correlation with Broad-Based Indexes Increases Dramatically
(Mar 2012)
As Bank of America-Merrill Lynch Global Research's Mary Ann Bartels showed last year, the correlation of hedge fund monthly returns with broad based stock market indexes has recently hit historic highs. We decided to look into this phenomenon and determine whether or not it is persisting.
In the following plot, we show the monthly returns for the S&P 500 index as well as the Dow Jones Credit Suisse Core Hedge Fund Index (representing an aggregation of several hedge fund investment...
