Thursday, March 19, 2009
ATTORNEY GENERAL CUOMO ANNOUNCES SIGNIFICANT DEVELOPMENT RELATED TO AIG:
"I have received the list of AIG FP employees who received retention payouts. Mr. Liddy testified in Congress yesterday that he intended to comply with our subpoena and expressed concern for employee safety. Mr. Liddy has in fact now complied with the subpoena. We are aware of the security concerns of AIG employees, and we will be sensitive to those issues by doing a risk assessment before releasing any individual’s name. The Attorney General's Office is a law enforcement agency and is experienced in making these assessments.
"As we perform our review, we will simultaneously be working with AIG over the next few days to determine which employees received payments and which chose to return the money they received.
"The Attorney General's Office will responsibly balance the public's right to know how their tax dollars are spent with individual security, privacy rights, and corporate prerogative.
"At this moment, with emotions running high, it is important that we proceed diligently, with care, reflection, and sober judgment.
"We thank AIG for their compliance."
The SEC sued Albert K. Hu, a hedge fund manager with ties to Silicon Valley, for falsely claiming that his funds were overseen by experienced attorneys, auditors and other professionals, and for misappropriating investor funds. As part of its suit, the SEC is seeking an emergency court order freezing Hu’s assets. Yesterday, Hu, a long-time Bay Area resident, was arrested in Hong Kong on related criminal charges filed by the United States Attorney’s Office in San Jose.
Since 2001, as alleged in the Commission’s complaint, Hu claimed to manage hedge funds known as “Asenqua” and “Fireside.” The SEC alleges that Hu, and entities he controls, lied to investors from the beginning of his scheme. Hu and the Asenqua hedge funds falsely claimed that several prominent international law firms served as legal counsel for the Asenqua hedge funds. In addition, the defendants identified an individual as “Chief Financial Officer” of the Asenqua hedge funds, when in fact the person had no association with the funds. Hu forged the signature of the purported Chief Financial Officer in communications with investors, according to the complaint. Further, the defendants provided investors with supposedly independently audited financial statements for two of the funds. In reality, Hu paid for a virtual office with an address in the San Francisco financial district for the “independent” audit firm.
According to the Commission’s complaint, Hu raised more than $5 million from investors with connections to Silicon Valley and transferred hundreds of thousands of dollars of investor funds into foreign bank accounts without informing investors. The SEC further alleges that recently, Hu has refused investors’ requests for the return of their funds.
The Commission’s complaint charges Hu and the entities he controls, Asenqua, Inc.; Asenqua Capital Management, LLC; AQC Asset Management, Ltd.; and Fireside Capital Management, Ltd., with violating the antifraud provisions of the federal securities laws, including Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Additionally, the SEC’s complaint charges Hu with violations of Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. In the action filed today, the Commission sought a temporary injunction against violations of the antifraud provisions, a temporary freeze of defendants’ assets, an accounting, and other relief.
The University of Dayton Law School is presenting The Fallout from the Bailout: The Impact of the 2008 Bailout on Lending Regulation, Securities Regulation, and Business Ethics, a day-long program tomorrow. Former SEC Chairman Harvey Pitt is a featured speaker, and I am a panelist on the panel addressing the role of the SEC in the 2008 Financial Meltdown. For further information, see the Law School's website.
A FINRA hearing panel fined Mutual Service Corporation (MSC) of West Palm Beach, FL, more than $1.5 million for failing to conduct timely reviews of variable annuity transactions, falsifying various books and records of the firm to make it appear that the variable annuity transactions were reviewed in a timely manner, and providing false and misleading information to FINRA during its investigation. The hearing panel sanctioned six current and former MSC personnel for their roles in the wrongdoing. Three current or former employees — Denise Roth, a manager in MSC's operations department; Gari Sanfilippo, a former senior compliance examiner; and Kevin Cohen, a former compliance examiner — were permanently barred from the securities industry for falsifying the books and records of the firm. MSC's former Chief Administrative Officer and Executive Vice President, Dennis S. Kaminski; its Director of Operations, Susan Coates; and its former Chief Compliance Officer and Vice President, Michael Poston each were sanctioned for their supervisory failures. Kaminski and Coates each were fined $50,000 and suspended for six months from associating with any securities firm in a principal capacity. Poston was fined $20,000 and suspended from serving in a principal capacity for seven months. Cohen and Sanfilippo have appealed the ruling to FINRA's National Adjudicatory Council (NAC), while the NAC unilaterally has called Kaminski's case for review of the sanctions. Sanctions against all three have been stayed pending a ruling from the NAC.
In determining MSC's sanction, the hearing panel cited several aggravating factors. It considered first the firm's disciplinary history of deficient supervision of variable annuity transactions, but found more disturbing the fact that MSC deceived FINRA staff regarding the status of its supervisory system and procedures. The hearing panel found that MSC's supervisory and record keeping violations were "egregious."
The SEC charged New York's former Deputy Comptroller, David Loglisci, and a top political advisor, Henry Morris, with extracting kickbacks from investment management firms seeking to manage the assets of New York's largest pension fund. In addition, the New York Attorney General's Office filed related criminal charges against Morris and Loglisci.
According to the SEC's complaint, Loglisci, former Deputy Comptroller and Chief Investment Officer of the New York State Common Retirement Fund, and Henry "Hank" Morris, the top political advisor and chief fundraiser for former New York State Comptroller Alan Hevesi,orchestrated a fraudulent scheme from 2003 through late 2006 that corrupted the integrity of the New York State Common Retirement Fund in order to enrich Morris as well as others with close ties to Morris and Loglisci. Specifically, the SEC alleges that Loglisci caused the fund to invest billions of dollars with private equity firms and hedge fund managers who together paid millions of dollars in the form of sham "finder" or "placement agent" fees to obtain investments from the fund.
The SEC alleges that the payments to Morris and others were kickbacks that resulted from quid pro quo arrangements or that were otherwise fraudulently induced by the defendants. As laid out in the complaint, Loglisci ensured that investment managers who made the requisite payments to Morris — and other recipients designated by Morris and Loglisci — were rewarded with lucrative investment management contracts, while investment managers who declined to make such payments were denied fund business.
The SEC alleges that Loglisci repeatedly directed investment managers, who solicited him for investment business, to Morris or certain other individuals and signaled to the investment managers that they first needed to "hire" Morris as a finder or placement agent. Neither Morris nor anyone else who received the payments at issue allegedly performed legitimate placement or finder services for the investment management firms who made the payments.
In some cases, the investment managers had already allegedly hired a finder or placement agent of their own and were already negotiating an investment with Loglisci when they were told that they also needed to "hire" Morris or another individual. Once the sham finder fee was agreed upon, Loglisci approved the proposed deal with the investment management firm.
The SEC further asserts that Loglisci and Morris took steps to conceal these improper payments and quid pro quo arrangements from relevant members of the Comptroller's investment staff and the fund's Investment Advisory Committee. In some instances, the two men even arranged for investment managers to make payments to another individual who would then covertly funnel a portion of these sham fees to Morris, sometimes even without the knowledge of the investment managers. In addition, Morris allegedly paid the girlfriend of a high-ranking member of the Comptroller's staff nearly $100,000 in cash to ensure that the staff member would not ask questions or otherwise reveal the scheme to others.
The Complaint further alleges that Loglisci also personally benefited from his role in the scheme. In addition to receiving Morris's support for promotion to Deputy Comptroller, Loglisci obtained funding from Morris and the principal of a private equity firm for a low budget film that Loglisci and his brothers produced.
The SEC's complaint seeks permanent injunctions against future violations of the federal securities laws, disgorgement of ill-gotten gains with prejudgment interest, and civil money penalties.
Citi Files Registration Statement for Conversion of Preferred into Common, Plans Reverse Stock Split
Citigroup announced that it has filed a registration statement with the SEC in connection with its proposed offer to issue its common stock in exchange for publicly held convertible and non-convertible preferred and trust preferred securities. In addition, the company plans to file shortly two preliminary proxy statements with the SEC. One preliminary proxy proposes to amend Citi's Charter to, among other things, increase the number of authorized shares of its common stock and authorize the Board of Directors to execute a reverse stock split of its common stock. Shareholder approval to increase Citi's authorized shares is not necessary to complete the exchange of private preferred shares for interim securities or to exchange the public preferred shares for common shares. The conversion of interim securities to common shares will be completed upon adoption of the amendment to authorize additional shares. The other preliminary proxy proposes to amend the Charter and the certificates of designation of each series of its public preferred stock to amend the rights of holders of public preferred stock.
As announced on February 27, 2009, Citi is seeking to exchange approximately $27.5 billion in public and private preferred securities with a commitment from the U.S. Treasury to convert up to an additional $25 billion of its preferred securities for common stock. Assuming full participation of public preferred shareholders, Citi will convert into common shares approximately $52.5 billion in aggregate liquidation preference of preferred shares.
Citi also said today it has received New York Stock Exchange (NYSE) approval to proceed with the exchange offers pursuant to the exception from the shareholder approval requirement contained in Section 312.05 of the NYSE's Listed Company Manual. The Audit and Risk Management Committee of Citi's Board of Directors has approved the use of this exception.
Wednesday, March 18, 2009
Testimony Before the Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, House Committee on Financial Services, FEDERAL FINANCIAL ASSISTANCE Preliminary Observations on Assistance Provided to AIG, Statement of Orice M. Williams, Director, Financial Markets and Community Investment, March 18, 2009
STATEMENT FROM ATTORNEY GENERAL CUOMO ON COURT DECISION TO FORCE BANK OF AMERICA AND MERRILL LYNCH TO TURN OVER LIST OF BONUS RECIPIENTS
"Today’s decision in the Bank of America case is a victory for taxpayers. Let the sun shine in. Justice Fried’s decision will now lift the shroud of secrecy surrounding the $3.6 billion in premature bonuses Merrill Lynch rushed out in early December. Taxpayers demand and deserve transparency and now they will finally get it. Bank of America chose litigation over transparency and we are gratified that this tactic has failed. AIG should take heed and immediately turn over the list of bonus recipients we have subpoenaed. The deadline for responding to our subpoena is tomorrow. More litigation is not the answer - it is time for AIG to come clean."
Two Texas men, Darrel T. Uselton and Jack E. Uselton, who perpetrated a massive e-mail spam campaign to drive up the demand for low value stocks they owned, will pay nearly $4 million in penalties and fines and will no longer be able to trade penny stocks under an agreement reached with the Securities and Exchange Commission. According to the SEC initial complaint, the Useltons generated proceeds of more than $4 million by obtaining stock from at least 13 penny stock companies from May, 2005 through December, 2006 and then, according to the SEC, selling those shares into an artificially active, and often-times rising, market that they created through manipulative trading, spam e-mails, direct mailers, and internet-based promotional activities.
Darrel Uselton and Jack Uselton, without admitting or denying the allegations, settled the action by consenting to entry of a court order that: (i) permanently bars them from Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder; and (ii) prohibits them from participating in an offering of penny stock pursuant to Section 21(d)(6) of the Exchange Act.
In addition, Darrel Uselton consented to entry of a court order that orders him to pay disgorgement and prejudgment interest in the amount of $2,838,866.72, which will be deemed satisfied upon entry of an order requiring him to pay that amount in restitution to the State of Texas. It also requires him to pay a civil monetary penalty of $1 million.
The SEC charged the auditors of Bernard Madoff's broker-dealer firm with committing securities fraud by falsely representing that they had conducted legitimate audits, when in fact they had not. In its complaint filed today in federal court in Manhattan, the SEC alleges that from 1991 through 2008, certified public accountant David G. Friehling and his firm, Friehling & Horowitz, CPAs, P.C. (F&H), purported to audit financial statements and disclosures of Bernard L. Madoff Investment Securities LLC (BMIS). According to the complaint, Friehling enabled Madoff's Ponzi scheme by falsely stating, in annual audit reports, that F&H audited BMIS financial statements pursuant to Generally Accepted Auditing Standards (GAAS), including the requirements to maintain auditor independence and perform audit procedures regarding custody of securities.
F&H also made representations that BMIS financial statements were presented in conformity with Generally Accepted Accounting Principles (GAAP) and that Friehling reviewed internal controls at BMIS, including controls over the custody of assets, and found no material inadequacies. According to the SEC's complaint, Friehling knew that BMIS regularly distributed the annual audit reports to Madoff customers and that the reports were filed with the SEC and other regulators.
The SEC's complaint alleges that all of these statements were materially false because Friehling and F&H did not perform a meaningful audit of BMIS, and did not perform procedures to confirm that the securities BMIS purportedly held on behalf of its customers even existed.
Instead, the SEC alleges that Friehling merely pretended to conduct minimal audit procedures of certain accounts to make it seem like he was conducting an audit, and then failed to document his purported findings and conclusions as required under GAAS. If properly stated, those financial statements, along with BMIS related disclosures regarding reserve requirements, would have shown that BMIS owed tens of billions of dollars in additional liabilities to its customers and was therefore insolvent.
According to the SEC's complaint, Friehling similarly did not conduct any audit procedures with respect to BMIS internal controls, and had no basis to represent that BMIS had no material inadequacies. Afraid that his work for BMIS would be subject to peer review, as required of accountants who conduct audits, Friehling lied to the American Institute of Certified Public Accountants for years and denied that he conducted any audit work.
The SEC further alleges that Friehling and F&H obtained ill-gotten gains through compensation from Madoff and BMIS, and also from withdrawing returns from accounts held at BMIS in the name of Friehling and his family members.
The SEC's complaint specifically alleges that Friehling and F&H violated Section 17(a) of the Securities Act, violated and aided and abetted violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and aided and abetted violations of Sections 206(1) and 206(2) of the Advisers Act, Section 15(c) of the Exchange Act and Rule 10b-3 thereunder, and Section 17 of the Exchange Act and Rule 17a-5 thereunder. Among other things, the SEC's complaint seeks permanent injunctions, civil penalties and a court order requiring both Friehling and F&H to disgorge their ill-gotten gains.
FINRA anounced that is has proposed a pilot program for the margining of credit default swaps (CDS) by FINRA-registered firms that clear CDS transactions on the Chicago Mercantile Exchange, other central counterparty platforms or outside of such platforms. The pilot program is detailed in a proposal FINRA has filed with the Securities and Exchange Commission (SEC), with a request for accelerated approval. The program would expire on Sept. 25, 2009 — the same day that the SEC's temporary rules providing for the establishment of central counterparties for CDS transactions expire.
AIG CEO Edward Libby is still testifying before the House Financial Services Committee and explaining why AIG had to pay those bonuses. Perhaps the only noteworthy new information is that Liddy asked recipients of bonuses in excess of $100,000 to give back at least one-half of the bonus. Otherwise, the Representatives have, in turn, expressed outrage over the bonuses, credit default swaps (one Representative expressed outrage that CDSs were unregulated, apparently unaware that was an explicit Congressional decision), the AIG FP division, and the financial meltdown, more generally. Whatever one thinks of the business judgment that led Liddy to permit the bonuses to be paid, he has conducted himself with patience and dignity during this long hearing, as he has continually had to explain over and over the reasons for paying the bonuses. (I'm not justifying the payment, but really how many times does the man have to repeat himself?)
Here is New York AG's response to Liddy's testimony:
"AIG’s proposal to ask their bonus recipients to voluntarily give back half is simply too little too late. Mr. Liddy’s proposal to take half back from those who got more than $100,000 will cover some 298 out of 418 bonus recipients. Rather than take half-measures, AIG should immediately turn over the list, which we have subpoenaed, of who got what and when.
The American people have a right to know what is happening with massive amounts of their money. Mr. Liddy needs to understand this. If AIG is really serious about getting these bonuses back, they should comply with the subpoena we have issued. Mr. Liddy said at the hearing today, in response to Congressman Gary Ackerman’s question, that AIG will comply with our subpoena, but we have still received nothing from them. If AIG has nothing to hide and is not embarrassed about these payments, they should turn over the list now. The era of shrouding huge bonuses in secrecy must end.
We prefer not to go to court on this matter, but AIG is leaving us little choice. I hope the leadership at the company comes to its senses now.”
Tuesday, March 17, 2009
You'll recall that New York attorney Marc Dreier was indicted in January on charges that he sold fictitious promissory notes to investors. Federal prosecutors recently amended the indictment to up the amount of the alleged fraud. They now allege that he sold $700 million in notes from 2004-08, mostly to hedge funds. WSJ, Lawyer Defrauded Investors out of $700 Million, Say Prosecutors.
The SEC filed a settled complaint against Paul M. Gozzo and PMG Capital, LLC of Jupiter, Florida, alleging that they violated the federal securities laws by manipulating the markets of numerous microcap stocks in 2006 and 2007. The Commission alleges that the manipulation led to artificially high prices, which allowed Gozzo and others to sell their holdings for substantial gains. Without admitting or denying the allegations in the complaint, Gozzo and PMG Capital consented to the entry of Final Judgments prohibiting them from participating in offerings of penny stock and permanently enjoining them from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. Gozzo also agreed to pay $437,788 in disgorgement of unlawful profits and prejudgment interest. The settlement is subject to approval by the United States District Court for the Southern District of Florida.
As a result of the same conduct, Gozzo, in a separate criminal matter, today pleaded guilty to one count of conspiracy to commit securities fraud and one count of securities fraud in the United States District Court for the Southern District of Florida. Gozzo's obligation to pay disgorgement in the Commission's action will be reduced by any amount of restitution ordered in this criminal proceeding.
FINRA announced today that it has imposed a $2 million fine against Citigroup Global Markets for the erroneous publication of non-bona fide quotations and transactions at and around the NASDAQ market opening on a Quadruple Witch Expiration Friday; systemic Order Audit Trail System (OATS) reporting violations; fixed income transaction reporting violations; limit order display violations; and, related supervisory failures. These violations occurred in 2006 and prior years. FINRA found, as a result of a referral from the NASDAQ's MarketWatch Department, that Citigroup failed to properly monitor certain of its trading systems at the opening on June 17, 2005, a Quadruple Witch Expiration Friday. Quadruple Witch Expiration Fridays occur once each quarter, when stock index futures, index options, stock options, and options on stock index futures simultaneously expire.
These system failures resulted in the erroneous publication of approximately 6,800 non-bona fide transactions in more than 170 securities that the firm ultimately cancelled via Clearly Erroneous Petitions. The systems failures also resulted in the publication of thousands of non-bona fide quotations, which triggered executions by other firms at prices unrelated to the market value of the securities, requiring those firms to petition to cancel over 1,400 trades. FINRA further found that Citigroup did not report approximately 6 million orders to OATS between Aug. 1, 1999 and July 10, 2006. From July 2002 through September 2006, Citigroup inaccurately reported or failed to report over 300,000 transactions to FINRA's Trade Reporting and Compliance Engine (TRACE) and inaccurately reported or failed to report more than 480,000 transactions to the Municipal Securities Rulemaking Board.
In concluding this settlement, Citigroup neither admitted nor denied the charges, but consented to the entry of FINRA's findings.
The latest from New York AG Cuomo on AIG's bonuses:
AIG now claims that it had no choice but to pay these sums because of the unalterable terms of the plan. However, had the federal government not bailed out AIG with billions in taxpayer funds, the firm likely would have gone bankrupt, and surely no payments would have been made out of the plan. My Office has reviewed the legal opinion that AIG obtained from its own counsel, and it is not at all clear that these lawyers even considered the argument that it is only by the grace of American taxpayers that members of Financial Products even have jobs, let alone a pool of retention bonus money. I hope the Committee will take up this issue at its hearing tomorrow.
Furthermore, we know that AIG was able to bargain with its Financial Products employees since these employees have agreed to take salaries of $ I for 2009 in exchange for receiving their retention bonus packages. The fact that AIG engaged in this negotiation flies in the face of AIG's assertion that it had no choice but to make these lavish multi-million dollar bonus payments. It appears that AIG had far more leverage than they now claim.
AIG also claims that retention of individuals at Financial Products was vital to unwinding the subsidiary's business. However, to date, AIG has been unwilling to disclose the names of those who received these retention payments making it impossible to test their claim. Moreover, as detailed below, numerous individuals who received large "retention" bonuses are no longer at the firm. Until we obtain the names of these individuals, it is impossible to determine when and why they left the firm and how it is that they received these payments.
If AIG were confident in its claim that those who received these large bonuses were so vital to the orderly unwinding of the unit, one would expect them to freely provide the names and positions of those who got these bonuses. My Office will continue to seek an explanation for why each one of these individuals was so crucial to keep aboard that they were paid handsomely despite the unit's disastrous performance.
As you may know, my Office yesterday subpoenaed AIG for the names of those who received these bonuses, and we plan to do everything necessary to enforce compliance. American taxpayers deserve to know where their money is going, and AIG's intransigence and desire to obscure who received these payments should not be tolerated. Already my Office has determined that some of these bonuses were staggering in size. For example:
The top recipient received more than $6.4 million;
The top seven bonus recipients received more than $4 million each;
The top ten bonus recipients received a combined $42 million;
22 individuals received bonuses of $2 million or more, and combined they received more than $72 million;
73 individuals received bonuses of $1 million or more; and
Eleven of the individuals who received "retention" bonuses of $1 million or more are no longer working at AIG, including one who received $4.6 million;
Monday, March 16, 2009
The SEC approved conditional exemptions that will allow the Chicago Mercantile Exchange Inc. (CME) to operate as a central counterparty for clearing credit default swaps. These conditional exemptions, based on a request by the CME and Citadel Investment Group LLC, provide the SEC with regulatory oversight of the central counterparty, and should enhance the quality of the credit default swap market.
The SEC previously approved temporary exemptions allowing LCH.Clearnet Ltd. and ICE US Trust LLC. to operate as central counterparties for credit default swaps. The Commission has worked in close consultation with the Board of Governors of the Federal Reserve System and the Commodity Futures Trading Commission, executing a Memorandum of Understanding in November 2008 to lay out a framework related to central counterparties for credit default swaps.
The SEC is soliciting public comment on all aspects of these exemptions to assist in its consideration of any further action that may be needed in this area.
President Obama has called upon Treasury Secretary Geithner to take all steps to prevent AIG from paying those bonsues to employees at the company's Financial Products unit. The New York Times has posted Obama’s Statement on A.I.G.
Here is a letter from Attorney General Cuomo sent today to Edward M. Liddy, Chairman & CEO of AIG, concerning bonuses:
The Office of the New York Attorney General has been investigating compensation arrangements at AIG since last Fall. We were disturbed to learn over the weekend of AIG's plans to pay millions of dollars to members of the Financial Products subsidiary through its Financial Products Retention Plan. Financial Products was, of course, the division of AIG that led to its meltdown and the huge infusion of taxpayer funds to save the firm. Previously, AIG had agreed at our request to make no payments out of its $600 million Financial Products deferred compensation pool.
We have requested the list of individuals who are to receive payments under this retention plan, as well as their positions at the firm, and it is surprising that you have yet to provide this information. Covering up the details of these payments breeds further cynicism and distrust in our already shaken financial system.
In addition, we also now request a description of each individual's job description and performance at AIG Financial Products. Please also provide whatever contracts you now claim obligate you to make these payments. Moreover, you should immediately provide us with a list of who negotiated these contracts and who developed this retention plan so we can begin to investigate the circumstances surrounding these questionable bonus arrangements. Finally, we demand an immediate status report as to whether the payments under the retention plan have been made.
We need this information immediately in order to investigate and determine: (l) whether any of the individuals receiving such payments were involved in the conduct that led to AIG's demise andsubsequent bailout; (2) whether, as you claim, such individuals are truly required to unwind AIG Financial Product's positions; (3) whether such contracts may be unenforceable for fraud or other reasons; and (4) whether any of the retention payments may be considered fraudulent conveyances under New York law.
Taxpayers of this country are now supporting AIG, and they deserve at the very least to know how their money is being spent. And we owe it to the taxpayers to take every possible action to stop unwarranted bonus payments to those who caused the AIG meltdown in the first place.
If you do not provide this information by 4:00 p.m. today, we will issue subpoenas and seek, if necessary, to enforce compliance in court.
Effective April 13, 2009, FINRA will require arbitrators to provide an explained decision at the parties' joint request. An explained decision is a fact-based award stating the general reasons for the arbitrators' decision. Parties will be required to submit any joint request for an explained decision at least 20 days before the first scheduled hearing date. The chairperson of the arbitration panel will write the explained decision and will receive an additional honorarium of $400 for doing so. Regulatory Notice 09-16