Sunday, December 21, 2014
The Effects of Monetary Policy on Mortgage Rates
FHFA Working Paper 14-2
Economic events over the past decade have changed central bank policies in the United States and around the world. The housing and financial markets experienced significant changes as the markets first surpassed historical highs and then underwent a recession grave enough to draw comparison with the Great Depression. To spur recovery, the Federal Reserve first lowered short-term interest rates to near-zero and eventually embarked on several phases of large-scale asset purchases (LSAPs) to lower long-term interest rates and mortgage rates.
This paper describes the evolution of the LSAP program and analyzes how interest rates and mortgage rates changed during that time. Both the long-term interest rates and mortgage rates reached historical lows in the post crisis period, primarily due to the Federal Reserve Board's accommodative policies.
Two econometric approaches — an event study and a time series model — estimate the market response during each phase of the LSAP program and provide projections of mortgage rates under different shock assumptions. Results suggest that early tapering announcements helped reset interest rates and mortgage rates upwards and any rise in long-term interest rates resulting from unanticipated events (whether related to tapering or not) could lead to further increases in mortgage rates.
Saturday, December 20, 2014
Volcker Rule, Ring-Fencing or Separation of Bank Activities - Comparison of Structural Reform Acts Around the World
MATTHIAS LEHMANN, University of Halle Wittenberg
One of the key issues in the on-going overhaul of the global financial system is the structural reform of banking systems. Legislatures in different states, e.g. the United States, France, Germany, and the United Kingdom, have all taken measures to protect individual depositors’ assets against losses from risky bank activities. On 29 January 2014, the European Commission joined the transnational effort by publishing its own proposal on the subject. This contribution shows how the same economic goal is implemented through different approaches by legislatures across the globe. It also analyses how this legal diversity will affect the level playing field in the competition for banking services and the consistency of global financial regulation.
Friday, December 19, 2014
Tax burdens and revenue collection in advanced economies are reaching record levels not seen since before the global financial crisis, but the tax mix continues varying widely across countries, according to new OECD research published.
Revenue Statistics 2014 shows that the average tax burden in OECD countries increased by 0.4 percentage points in 2013, to 34.1%, compared with 33.7% in 2012 and 33.3% in 2011.
The tax burden is the ratio of total tax revenues to GDP.
Historically, tax-to-GDP ratios rose through the 1990s, to a peak OECD average of 34.3% in 2000. They fell back slightly between 2001 and 2004, but then rose again between 2005 and 2007 before falling back following the crisis.
In 2013, the tax burden rose in 21 of the 30 countries for which data is available, and fell in the remaining 9. The number of countries with increasing and decreasing ratios was the same as that seen in 2012, indicating a continuing trend toward higher revenues.
The largest increases in 2013 occurred in Portugal, Turkey, Slovak Republic, Denmark and Finland. The largest falls were in Norway, Chile and New Zealand.
Detailed Country Notes provide further data on national tax burdens and the composition of the tax mix in OECD countries.
A number of factors are behind the rise in tax ratios between 2012 and 2013. About half of the increase is attributed to personal and corporate income taxes, which are typically designed so that revenues rise faster than GDP during periods of economic recovery. Discretionary tax changes have also played a role, as many countries raised tax rates and/or broadened tax bases.
The new data also show rising revenues in central, state and regional governments between 2011 and 2013, following declines over most of the 2008-10 period. The average tax ratio for local governments increased slightly but steadily since 2007.
Other Key Findings:
- Denmark has the highest tax-to-GDP ratio among OECD countries (48.6% in 2013), followed by France (45%) and Belgium (44.6%).
- Mexico (19.7% in 2013) and Chile (20.2%) have the lowest tax-to-GDP ratios among OECD countries, followed by Korea (24.3%), and the United States (25.4%).
- The tax burden remains more than 3 percentage points below the 2007 (pre-recession) levels in three countries – Iceland, Israel and Spain. The biggest fall has been in Israel – from 34.7% in 2007 to 30.5% of GDP in 2013.
- The tax burden in Turkey increased from 24.1% to 29.3% between 2007 and 2013. Three other countries - Finland, France and Greece - showed increases of more than 2.5 percentage points over the same period.
- Revenues from personal and corporate income taxes are now recovering, after the sharp falls of 2008 and 2009. However, the 33.6% share of these taxes in total revenues seen in 2012 – the last year for which full data is available - remains below the 36% share in 2007. The share of social security contributions has increased by 1.6 percentage points, to an average 26.2% of total revenue.
Consumption Tax Trends
The OECD has advocated shifting the tax mix away from more distortive taxes on labour and corporate income in many countries towards more ‘growth friendly’ sources of revenue, like consumption taxes and property taxes. VAT is an important source of revenue for OECD countries, representing on average approximately 20% of total tax revenues.
Consumption Tax Trends 2014 highlights the strong increase in standard VAT rates over the past five years: the OECD average standard VAT rate reached an all-time high of 19.1% in January 2014, up from 17.6% in January 2009. Over the 2009-14 period, 21 countries raised their standard VAT rate at least once. The 21 OECD countries that are members of the European Union have an average standard VAT rate of 21.7%, which is significantly above the OECD average.
Country Notes provide further data on national consumption tax trends and the effectiveness of VAT/GST collection in OECD countries.
While most OECD countries have increased their standard VAT rates, only a few have taken measures to broaden their VAT base. Many OECD countries continue to use reduced VAT rates and exemptions mainly for equity and social objectives. However, broadening the VAT base by limiting the use of reduced rates and exemptions may allow countries to increase revenue without raising the standard rate, and at the same time reduce compliance and administrative costs. A reduction of the standard rate may even be possible by broadening the tax base.
The Distributional Effects of Consumption Taxes in OECD Countries
The Distributional Effects of Consumption Taxes in OECD Countries shows that many of these reduced VAT rates actually benefit higher income households more than lower income households. This is particularly the case for reduced VAT rates on restaurant meals, hotel rooms and cultural goods, like books, theatre and cinema tickets.
This study, carried out in conjunction with the Korea Institute of Public Finance, suggests that a better way to achieve equity and social objectives would be to remove many of these reduced rates and replace them with better targeted relief measures, such as income-tested benefits and tax credits.
Rev. Proc. 2014-64: Update of Rev. Proc. 2012-24, Implementation of Nonresident Alien Deposit Interest Regulations
This revenue procedure lists the countries with which the United States has in effect an income tax or other convention or bilateral agreement relating to the exchange of information pursuant to which the United States agrees to provide, as well as receive, information. This revenue
procedure also lists, in Section 4, the countries with which the Treasury Department and
the IRS have determined that it is appropriate to have an automatic exchange relationship with respect to the information
Sections 1.6049-4(b)(5) and 1.6049-8(a), as revised by TD 9584, require the reporting of certain deposit interest paid to nonresident alien individuals on or after January 1, 2013. Section 1.6049-4(b)(5) provides that in the case of interest aggregating $10 or more paid to a nonresident alien individual the payor is required to make an information return on Form 1042-S for the calendar year in which the interest is paid.
SECTION 3. COUNTRIES OF RESIDENCE WITH RESPECT TO WHICH THE REPORTING REQUIREMENT APPLIES
- Antigua & Barbuda
- British Virgin Islands
- Cayman Islands
- Costa Rica
- Czech Republic
- Dominican Republic
- Hong Kong
- Isle of Man
- Korea (South)
- Marshall Islands
- Netherlands island territories: Bonaire, Saba, and St. Eustatius
- New Zealand
- Russian Federation
- Slovak Republic
- South Africa
- Sri Lanka
- St. Maarten (Dutch part)
- Trinidad and Tobago
- United Kingdom
SECTION 4. COUNTRIES WITH WHICH TREASURY AND THE IRS HAVE DETERMINED THAT AUTOMATIC EXCHANGE OF DEPOSIT INTEREST INFORMATION IS APPROPRIATE
- Isle of Man
- United Kingdom
Thursday, December 18, 2014
A Academia Tributária promove nesta sexta (19), às 10 horas, na OAB/SC, o curso Brasil e Fatca: troca de informações fiscais entre Brasil e Estados Unidos. O curso será nas dependências da Escola Superior da Advocacia. O palestrante será do professor William Byrnes, dos Estados Unidos, autor de mais de 1.000 artigos publicados na área tributária.
A draft version of the International Data Exchange Services ("IDES") User Guide is now available. The current draft discusses data preparation procedures and reporting for FIs and for foreign governments to transmit the tax information necessary to comply with FATCA.
In the upcoming weeks, IDES will post frequent updates and a final version of the IDES User Guide will be available in early January 2015.
Lexis Guide to FATCA Compliance – 2015 Edition Out Soon
1,200 pages of analysis of the compliance challenges, over 54 chapters by 70 FATCA contributing experts from over 30 countries. Besides in-depth, practical analysis, the 2015 edition includes examples, charts, time lines, links to source documents, and compliance analysis pursuant to the IGA and local regulations for many U.S. trading partners and financial centers. The Lexis Guide to FATCA Compliance, designed from interviews with over 100 financial institutions and professional firms, is a primary reference source for financial institutions and service providers, advisors and government departments. free download of 2014 Edition chapter at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2457671
This update supplements the Instructions for Form 8966 to correct and clarify certain references to the reporting requirements of participating FFIs for the 2014 year, including to reflect a correcting amendment to section 1.1471-4(d)(7)(iv)(B) of the temporary chapter 4 regulations (TD 9657).
- FDI fell in the first quarter of 2014 before rebounding in the second quarter.
- The drop in FDI in the first quarter was mainly due to a single deal involving a company in the United Kingdom selling a company in the United States to another US company causing both outward FDI from the United Kingdom and inward FDI to the United States to fall.
- Global FDI flows have stalled at levels substantially below the peak levels reached before the financial crisis and ensuing global recession that began in 2008.
- New detail available on investment that is channelled through entities with little presence in the host economy reveals that the role of such entities in investment varies widely across countries, accounting for as much as 92 percent of inward investment for some countries to as little as 1 percent for other countries.
The figure shows that global FDI flows fell in the first quarter of 2014 before rebounding to about USD 325 billion in the second quarter. The drop in the first quarter was due to a very large transaction in which Vodafone of the United Kingdom sold its interest in Verizon Wireless to Verizon Communications of the United States for a reported USD 130 billion.
The sale resulted in a reduction in both outward investment from the United Kingdom and in inward investment to the United States. Given the reported size of the sale, it appears that global FDI flows would have been essentially flat from the fourth quarter of 2013 to the first quarter of 2014 in its absence.
To provide a longer term perspective on recent developments in FDI, Figure 2 shows the annual figures for FDI flows from 1999 to 2013. The time series is long enough to show the pattern of FDI flows leading up to and after the global slowdown of 2001 to serve as a comparison for the experience since the most recent global recession in 2008 to 2009.
The figure shows that FDI flows fell substantially from the peak levels seen before the financial crisis that began in the second half of 2008. In 2009, FDI flows were 45 percent lower than the peak in 2007. This is less than the drop in FDI flows between 2000 and 2003; FDI flows in 2003 were 60 percent lower than the peak in 2000.
Despite their steeper fall, FDI flows increased rapidly after 2003 and, by 2006, exceeded the levels of 2000. In comparison, FDI flows increased between 2009 and 2011 but fell in 2012 and have stalled since then. In 2013, FDI flows remain about one-third lower than the peak in 2007. This difference could be due in part to the fact that the global economy grew faster during those years of rapid growth in FDI flows—2004 through 2006—than it has in the last few years. According to the IMF, global GDP grew 3.5 to more than 4.0 percent in each year from 2004 through 2006, but has grown less than 3 percent in each year from 2011 through 2013.
The experiences of different countries and regions have varied tremendously since the financial crisis. For example, EU inflows and outflows are about three-fourths lower than their pre-crisis peaks in 2007. In contrast, US inflows are down about one quarter from their 2008 peak, and US outflows are down about one sixth from their 2007 peak. At the same time, China’s role as both a destination and a source of FDI has continued to grow. Since the beginning of the crisis, China’s FDI inflows have increased by about half, and their outflows are up about one quarter, albeit from very low levels.
For the United States, outward FDI flows through the first half of 2014 were USD 143 billion, down slightly from USD 157 billion in the second half of 2013 and down much more from USD 193 billion in the first half of 2013. The United States recorded negative inward investment, or disinvestment, in the 1st quarter of 2014 due to the deal discussed above, but in the 2nd quarter of 2014, inward investment was USD 64 billion. This is generally in line with the value of inward investment in 2013: USD 57 billion in the 3rd quarter and USD 72 billion in the 4th quarter of 2013.
For China, outward investment was USD 31 billion in the first half of 2014, down from USD 36 billion in the second half of 2013 and USD 37 billion in the first half of 2013. Inward investment was USD 124 billion in the first half of 2014, down from USD 144 billion in the second half of 2013 but up from USD 115 billion in the first half of 2013.
Wednesday, December 17, 2014
The New York Times Deal Book reported: The convictions had racked up in recent years, 85 people all told, as Manhattan prosecutors swept through Wall Street with what they described as clear-cut evidence of insider trading.
But on Wednesday, a federal appeals court upended the government’s campaign. And in the process, the court rewrote the insider trading playbook, imposing the greatest limits on prosecutors in a generation.
In a 28-page decision, the United States Court of Appeals for the Second Circuit in Manhattan overturned two of the government’s signature convictions, the case against the former hedge fund traders Todd Newman and Anthony Chiasson, ... read the full NYT story here
BEPS Project: Discussion drafts and public consultations
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The timeline of the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project is extremely ambitious, with the first outputs delivered in September 2014. Work on the remaining elements of the BEPS Action Plan is ongoing, through technical working parties, enhanced and targeted engagement with developing countries focusing on their priority BEPS issues, as well as dialogue with business, civil society, academics and other international and regional organisations.
Input from relevant stakeholders is essential in order to develop the measures envisaged in the BEPS Action Plan. The following discussion drafts are currently open for public comment*:
16/12/2014: Action 10 (Cross-border commodity transactions)
16/12/2014: Action 10 (Profit splits)
21/11/2014: Follow-up work on Action 6 (Prevent treaty abuse)
03/11/2014: Action 10 (Transfer pricing/Intra-group services)
31/10/2014: Action 7 (Prevent the artificial avoidance of PE status)
The complete timetable for stakeholder input is available on line with the dates when all discussion drafts will be published and public consultations held in relation to the 2015 BEPS outputs.
Tuesday, December 16, 2014
Highlights of IRS' Final FATCA Regulations (Dec. 2014) Reporting of Specified Foreign Financial Assets
IRS has today notified the posting of the final regulations, effective December 12, 2014, TD 9706, Reporting of Specified Foreign Financial Assets, and removing the temporary regulations. The regulations can be found on the FATCA - Regulations and Other Guidance page in the For Individual Taxpayers section.
The IRS addressed such issues as dual residents, valuation challenges, foreign currency, virtual currency (left for another time), retirement accounts and insurance policies. Below are the highlights of the changes for my readers.
Dual Resident Taxpayers
A comment recommended an exemption from the section 6038D reporting requirements be included for an individual who is a dual resident taxpayer and who, pursuant to a provision of a treaty that provides for resolution of conflicting claims of residence by the United States and the treaty partner, claims to be treated as a resident of the treaty partner. In such a case, a dual resident taxpayer may claim a treaty benefit as a resident of the treaty partner and will be taxed as a nonresident for U.S. tax purposes for the taxable year (or portion of the taxable year) that the individual is treated as a nonresident.
The final rule adopts this recommendation for a dual resident taxpayer who determines his or her U.S. tax liability as if he or she were a nonresident alien and claims a treaty benefit as a nonresident of the United States as provided in § 301.7701(b)–7 by timely filing a Form 1040NR, ‘‘Nonresident Alien Income Tax Return,’’ (or such other appropriate form under that section) and attaching a Form 8833, ‘‘Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b).’’ The Treasury Department and the IRS have concluded that reporting under section 6038D is closely associated with the determination of an individual’s income tax liability.
Because the taxpayer’s filing of a Form 8833 with his or her Form 1040NR (or other appropriate form) will permit the IRS to identify individuals in this category and take follow-up tax enforcement actions when considered appropriate, reporting on Form 8938, “Statement of Specified Foreign Financial Assets,’’ is not essential to effective IRS tax enforcement efforts relating to this category of U.S. residents.
Individuals Resident in the United States Under Non-Immigrant Visas
A number of comments requested an exemption from the section 6038D reporting requirements for foreign executives and employees resident in the United States under non-immigrant H, L, or E visas. The final rule does not adopt this recommendation. Because all U.S. residents are taxable on worldwide income, excluding categories of residents from the scope of section 6038D reporting is not consistent with the purposes for which the provision was enacted.
Persons That Do Not Owe U.S. Tax for the Taxable Year
The final rule does not adopt any change. If the law requires the filing of a tax return, however, information reported on a Form 8938 concerning the taxpayer’s specified foreign financial assets is an important component of that return, even if no tax liability is shown. Requiring this filing will aid the IRS in devising effective enforcement programs with respect to such returns.
Assets Held by a Disregarded Entity
A number of comments requested clarification of the section 6038D reporting requirements with respect to specified foreign financial assets held by an entity disregarded as an entity separate from its owner under § 301.7701–2 of this chapter (a disregarded entity). In response to these requests, and consistent with instructions to Form 8938, the final rule provides in § 1.6038D–2(b)(4)(iii) that a specified person that owns a foreign or domestic entity that is a disregarded entity is treated as having an interest in any specified foreign financial assets held by the disregarded entity.
As a result, a specified person that owns a disregarded entity (whether domestic or foreign) that, in turn, owns specified foreign financial assets must include the value of those assets in determining whether the specified person meets the reporting thresholds in § 1.6038D–2(a) and, if so, must report such assets on Form 8938.
Jointly Owned Assets (§ 1.6038D–2(c))
A number of comments requested clarification of aspects of the rules in § 1.6038D–2(c) and (d) relating to joint owners of a specified foreign financial asset. These comments have been adopted.
Specifically, the final rule clarifies that each of the joint owners of a specified foreign financial asset who are not married to each other must include the full value of the asset (rather than only the value of the specified person’s interest in the asset) in determining whether the aggregate value of such specified individual’s specified foreign financial assets exceeds the applicable reporting thresholds, and each joint owner must report the full value of the asset on his or her Form 8938.
In addition, the final rule clarifies that, in the case of joint owners who are married to each other and file separate returns, each joint owner of a specified foreign financial asset must report the full value of the asset (rather than only the value of the specified person’s interest in the asset) on the individual’s Form 8938, even if both spouses are specified individuals and only one-half of the value of the asset is considered in determining the applicable reporting thresholds under § 1.6038D–2(c)(3)(i).
Retirement and Pension Accounts and Certain Non-Retirement Savings Accounts
These final regulations modify the definition of a financial account for purposes of section 6038D in order to require consistent reporting under section 6038D with respect to retirement and pension accounts and certain non- retirement savings accounts regardless of whether the account is maintained in a jurisdiction treated as having in effect a Model 1 IGA or Model 2 IGA. For financial accounts that are maintained by a foreign financial institution that is not located in a jurisdiction treated as having in effect a Model 1 IGA or Model 2 IGA, the definition of a financial account in the final rule continues to include the retirement and pension accounts and non-retirement savings accounts described in § 1.1471–5(b)(2)(i), consistent with the section 6038D coordination rule in that section.
Reporting on Both FinCEN Form 114 and Form 8938
A number of comments recommended that a foreign account reported on FinCEN Form 114, ‘‘Report of Foreign Bank and Financial Accounts,’’ (formerly Form TD F 90–22.1, ‘‘Report of Foreign Bank and Financial Accounts’’) (an FBAR), should not be required to be reported on Form 8938. he final rule does not adopt this recommendation.
Free download of a chapter of the Lexis Guide to FATCA Compliance http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2457671
Friday, December 19 (10 am until noon) at the OAB-SC in Florianapolis - FATCA's Impact on Brazil-USA Cross Border Activities, and the OECD's Common Reporting Standards ("GATCA").
Com o apoio da OAB/SC, Comissão de Direito Tributário, ESA, CRC e IBET-SC, lá vamos nós fechar o ano com chave de OURO!!!
Tradução simultânea na palestra com o Prof. William Byrnes, bestselling author of 30 books for LexisNexis and Wolters Kluwer; Associate Dean, Graduate & Distance Education, International Tax & Financial Services; Fellowship, International Bureau of Fiscal Documentation; LL.M. Universiteit van Amsterdam. Vagas limitadíssimas para os primeiros 40 VIP guests. Corre: http://www.academiatributaria.com.br/?opcao=ver_curso&id=8
The New York Times Dealbook reports that -
Three former brokers at the British financial firm ICAP pleaded not guilty on Friday to criminal charges that they conspired to manipulate a global benchmark interest rate.
Danny Martin Wilkinson and Colin John Goodman entered their pleas in a hearing at Southwark Crown Court in London, while Darrell Paul Read entered his plea via video from New Zealand, where he lives.
Britain’s Serious Fraud Office, which brought the charges, has accused the men of engaging in a conspiracy to defraud in connection with the manipulation of the London interbank offered rate, or Libor, as it relates to the Japanese yen.
Thirteen former employees of banks or brokerage firms face criminal charges in Britain related to the manipulation of Libor, one of the main rates used to determine the borrowing costs for trillions of dollars in loans. The authorities in the United States have also brought criminal charges against several of the people charged in Britain.
read the story at New York Times Dealbook
Monday, December 15, 2014
Bloomberg reports that - Ex-UBS Group AG traderRoger Darin, facing U.S. charges of manipulating Libor, a financial benchmark, claims he’s in a “Kafkaesque situation” that bars him from working or leaving his home country of Switzerland.
Darin is among 11 traders outside the U.S. charged by the U.S. with attempting to rig Libor. Prosecutors say he conspired with fellow UBS trader Tom Hayes to commit wire fraud.
The government said Hayes traded with an unidentified party in Purchase, New York. His use of electronic communications routed through the U.S. and the alleged manipulation of Libor, which affected transactions around the world, support U.S. jurisdiction, prosecutors claimed.
Saturday, December 13, 2014
“The first wealth is health,” American philosopher Ralph Waldo Emerson wrote in 1860. Emerson’s quote, cited by Harvard economist and health expert David E. Bloom in Finance and Development’s lead article, reminds us that good health is the foundation on which to build—a life, a community, an economy.
Humanity has made great strides, developing vaccines and medical techniques that allow us to live longer, healthier lives. Other developments—such as increased access to clean water and sanitation—have helped beat back long-standing ills and pave the way for better health.
But the story is not one of endless progress. As we went to press with our December issue of Finance and Development, the world was dealing with the worst outbreak of the Ebola virus on record, a grim reminder of our vulnerability and of the distance yet to go. And, though not often the subject of headlines, the great disparities in health—evident, for example, in the a 38-year gap in life expectancy between Japan (83 years) and Sierra Leone (45 years)—raise issues of equity and point to the need to press forward on multiple fronts.
In this issue of F&D, we’ve assembled a lineup of accomplished authors to look at global health from a variety of angles. They look at today’s health systems—the amalgam of people, practices, rules, and institutions that serve the health needs of a population—and at the economics behind them.
Friday, December 12, 2014
Latest “Lux Leaks” files obtained by ICIJ disclose secret tax structures sought by “Big 4” accounting giants for brand name international companies
A new leak of confidential documents expands the list of big companies seeking secret tax deals in Luxembourg, exposing tax-saving maneuvers by American entertainment icon The Walt Disney Co., politically controversial Koch Industries Inc. and 33 other companies.
ICIJ obtained the Disney and Koch tax documents as part of a trove of information that details big companies’ complex financial maneuvers through subsidiaries in Luxembourg. ICIJ received these documents last month, soon after publishing an earlier set of leaked documents detailing the Luxembourg tax deals negotiated by FedEx, Pepsi, IKEA and 340 other globe-spanning companies.
The California outside counsel to Heart Tronics was sentenced to serve 17 years in prison last week for his role in advising the five-year, multi-million dollar 'pump and dump' market manipulation and fraud scheme.
Mitchell J. Stein, 53, of Hidden Hills, California, was convicted by a jury on May 20, 2013, of conspiracy to commit mail and wire fraud, three counts of wire fraud, three counts of securities fraud, three counts of money laundering, and one count of conspiracy to obstruct justice. In addition to the prison sentence, U.S. District Judge Kenneth A. Marra of the Southern District of Florida ordered Stein to forfeit $5.3 million. Restitution will be determined at a later date.
“Lawyers for companies are supposed to guide their clients through the important reporting and regulatory requirements that ensure the integrity of our financial markets,” said Assistant Attorney General Caldwell. “Stein abdicated his responsibility, and instead abused his position of trust to defraud a public company, its shareholders, and the investing public of millions of dollars.”
“The ‘pump and dump’ scheme orchestrated by Stein and his co-conspirators was extremely elaborate,” said U.S. Attorney Ferrer. “In an effort to conceal his fraudulent financial scheme, Stein falsely testified before the SEC and used his position of trust to arrange for others to do the same. The sentencing announced today underscores the department's commitment to hold liable those individuals who profit from manipulating the financial markets and violating securities and other laws that are intended to protect investors and markets.”
According to evidence presented at trial, Stein’s wife held a controlling majority interest in Signalife Inc., a publicly-traded company currently known as Heart Tronics that purportedly sold electronic heart monitoring devices. While acting as Signalife’s outside legal counsel, Stein engaged in a scheme to artificially inflate the price of Signalife stock by creating the false impression of sales activity at the company. Specifically, the evidence at trial showed that Stein and his co-conspirators created fake purchase orders and related documents from fictitious customers, then caused Signalife to issue press releases and file documents with the Securities and Exchange Commission (SEC) trumpeting these fictitious sales. Evidence at trial also proved that in a further effort to create the false appearance of sales activity, Stein arranged to have Signalife products shipped to and temporarily stored with an individual who had not purchased any products.
Evidence at trial further proved that Stein disguised his selling of Signalife stock at artificially inflated prices by placing shares in purportedly blind trusts, and having a co-conspirator sell the shares after Stein caused the false sales information to be disseminated to the public. Stein also caused Signalife to issue shares to third parties so that those third parties could sell the shares and remit the proceeds to Stein. From one co-conspirator alone, Stein received illicit gains of over $1.8 million from those sales.
In addition, evidence at trial proved that Stein conspired to obstruct the SEC investigation into Heart Tronics by testifying falsely and arranging for others to testify falsely in an effort to conceal the fraud scheme.
This case was investigated by the U.S. Postal Inspection Service, with assistance from the Office of the Special Inspector General for the Troubled Asset Relief Program.
Thursday, December 11, 2014
Leading Compliance Recruitment firm CompliancEx reports that "Due to a number of financial crimes in the industry, new rules and policies call for increased legal compliance oversight which is good news, not only for us at Compliance Search Group, but for attorneys as well. U.S. banks paid out more than $178 billion in litigation costs, according to a new report from Boston Consulting Group. ...
Either way, more rules, regulatory actions and lawsuits will call for an increasing demand for compliance professionals in a multitude of industries."
The Financial Crimes Enforcement Network (FinCEN) is announcing a further extension of time for certain Report of Foreign Bank and Financial Accounts (FBAR) filings in light of ongoing consideration of questions regarding the filing requirement and its application to individuals with signature authority over but no financial interest in certain types of accounts.
On December 20, 2013, FinCEN issued Notice 2013-1 to extend the filing date for FinCEN Form 114 - FBAR for certain individuals with signature authority over but no financial interest in one or more foreign financial accounts to June 30, 2015. In the past three years, FinCEN has issued identical extensions that applied to similarly situated individuals.
FinCEN is considering regulatory changes to address such questions, therefore, FinCEN is further extending the filing due date to June 30, 2016, for individuals whose filing due date for reporting signature authority was previously extended by Notice 2013-1.