Wednesday, April 1, 2009
NASAA has posted on its website information on how to file ARS claims, specific to the firm and the investor's state. NASAA explains:
Several brokerage firms have entered, or are expected to enter into, settlements with state securities regulators in cases arising from the sale by those firms of auction rate securities. Those settlements provide, among other things, that many customers of those firms are entitled to receive a refund of the purchase price of those securities from the firm. Despite receiving those refunds, some customers may believe they have incurred consequential damages as a result of their purchase and ownership of the auction rate securities. The settlements also provide for a “special arbitration procedure” which may be used by customers attempting to recover those consequential damages. This site describes those special procedures.
Tuesday, March 31, 2009
Wachovia Securities and Citigroup Global Markets entered settlements with California to buy back $4.7 billion in ARS from California residents and companies. California regulators say these are "the first two" investment banks to settle with the state and "it won't be the last" settlement. Bizjournals, Citigroup, Wachovia reach 'significant' settlement with California.
Monday, March 23, 2009
Delaware Securities Commissioner James Ropp and Massachusetts Secretary of the Commonwealth William Galvin appeared before the House Financial Services Committee on Friday, March 20. The hearing, led by Committee Chairman Barney Frank (D-MA), brought together federal and state securities regulators and law enforcement officials to discuss the enforcement of investor protection laws at the federal and state levels.
Testifying on behalf of the North American Securities Administrators Association (NASAA), Commissioner Ropp urged Congress to support the valuable contributions of state securities regulators through federal grants. “ Ropp also suggested deputizing state securities attorneys to serve as special prosecutors for complex securities cases; allowing states to review securities offerings currently exempt from state oversight under Rule 506 of Regulation D; including representatives from the state banking, insurance and securities regulatory agencies on the President’s Working Group on Financial Markets; toughening civil and criminal penalties for those who commit financial crimes, especially those who target senior investors; and increasing opportunities for victims of fraud to seek private actions.
Secretary Galvin, the top securities official in Massachusetts, urged the committee to “give the states the tools we need to maintain and enhance our ability to regulate effectively and protect investors.” Galvin also asked Congress to require that brokerages be in a fiduciary relationship to their individual retail customers. Under current law, broker-dealer firms deal with their customers on an arm’s-length basis, subject to an obligation of fair dealing. This means that customers cannot rely on their brokers to meet fiduciary obligations of loyalty, care and competence. In contrast to brokers, investment advisers work solely for their customers and have an acknowledged fiduciary duty to them.
Friday, February 27, 2009
Fred Joseph, President of the North American Securities Administrators Association (NASAA) and Colorado Securities Commissioner, released a statement on President Obama’s announcement yesterday of the core principles that will guide his administration’s efforts to reshape how the nation’s financial industry and markets are regulated. NASAA Statement on Obama Administration's Principles for Financial Services Regulatory Reform.
Monday, February 23, 2009
NASAA Requests Comment on Policy Statement on Multi-State Review of Requests for Interpretive Opinions
The NASAA Coordinated Interpretations Project Group requests comment from the public on the adoption of a new Statement of Policy Regarding Multi-State Review of Requests for Interpretative Opinions and No-Action Letters. The comment period begins February 20, 2009 and will remain open for 30 days. Here is the introduction to the proposed statement of policy:
Many state securities regulators have the authority issue “no-action letters” in which staff confirms that a transaction carried out under a set of assumed facts will not result in a recommendation for enforcement action. Some states also issue “interpretive opinions” in which staff provides guidance by indicating how a provision of law applies to a situation presented. These types of no-action letters and interpretive opinions are authorized by subsection 413(e) of the Uniform Securities Act of 1956, as amended, and subsection 605(d) of the Uniform Securities Act (2002).
Subsection 420(b)(7) of the 1956 USA and subsection 608(c)(9) of the 2002 USA authorize the states to cooperate with each other in the development of no-action letters and interpretive opinions in order to encourage uniform interpretation of laws and maximize the effectiveness of regulation. Toward those ends, NASAA proposes this Statement of Policy.
Monday, July 7, 2008
New Hampshire becomes the first state to legislatively adopt NASAA’s Model Rule on the Use of Senior Certifications and Professional Designations. Last month Washington and Virginia became the first jurisdictions to adopt rules based on NASAA’s model. NASAA’s model rule prohibits the misleading use of senior and retiree designations and also provides a means by which a securities administrator may recognize the use of certain designations conferred by an accredited organization. The model rule addresses the growing use of financial designations or certifications that ostensibly convey expertise in advising seniors and retirees.
Thursday, June 26, 2008
The Massachusetts Securities Division has filed a complaint against UBS Securities LLC and UBS Financial Services, alleging violations of the Massachusetts Uniform Securities in connection with the sale of auction rate securities (ARS) to retail customers. According to the complaint, the sales were typically made with the express representation that the investments were liquid, safe, money-market instruments, whose interest rates would reset at periodic auctions, and that they could be sold at the next auction. Instead, as UBS knew, no true auctions existed for many of these securities. In addition, UBS failed to disclose to its customers the conflicts of interest because of UBS's dual role in underwriting the securities and selling them to their customers. The requested relief includes requiring UBS to offer rescission of the ARS sales at par, censure, and administrative fines. In re UBS Securities, LLC (filed June 26, 2008).
Wednesday, June 25, 2008
The federal district court for the Western District of New York granted the SEC's motion for preliminary injunction and other relief against defendants Watermark Financial Services Group, Inc. ("Watermark Financial"), Watermark M-One Holdings, Inc. ("Watermark Holdings"), M-One Financial Services, LLC ("M-One"), Watermark Capital Group, LLC ("Watermark Capital"), Guy W. Gane, Jr., and Lorenzo Altadonna. The SEC's complaint, filed on May 15, 2008, alleges that from at least May 2005 to the present, Gane and M-One orchestrated a securities offering fraud that has raised at least $5.7 million from approximately 90 investors, including a number of senior citizens, through the sale of debentures and promissory notes issued by the various entity defendants. Gane is a principal of each of the issuing entities. The complaint further alleges that the defendants told investors that their money would be used to purchase or develop real estate, but instead Gane: (i) used new investor funds to pay back earlier investors; (ii) misappropriated investors' funds by using them to pay himself, his family, and others; and (iii) transferred substantial portions of investor funds to Denkon, Inc., Guy W. Gane, III, and Jenna Gane for no apparent consideration. In addition, the complaint alleges that the debentures offering was not registered with the Commission and that Gane violated the broker-dealer registration provisions of the federal securities laws.
Entered on June 18, 2008, the court's order continues in place various forms of interim relief initially ordered by the court on May 16, 2008, when the court granted the Commission's application for a temporary restraining order and other relief to halt the fraud orchestrated by Gane and the other defendants. The litigation is pending.
Monday, April 7, 2008
A disappointed investor in a hedge fund, residing in Oregon, can sue the New York law firm that drafted the offering documents for aiding and abetting the securities fraud of the principal, who had already pleaded guilty to securities fraud violations, under the Oregon securities statute. The federal district court for the S.D.N.Y. ruled against the defendant on a motion to dismiss and rejected its arguments that federal law preempted the statute statute and the state statute violated the dormant commerce clause. The court did, however, agree with defendant that plaintiff failed to allege that the securities were not federally covered securities and dismissed the claim based on sale of unregistered securities. The court noted that the U.S. Supreme Court, as recently as Stoneridge Investment Partners v. Scientific-Atlanta, Inc., recognized state authority to regulate and enforce its own fraud statutes in the securities area independent of federal law. It also found nothing in National Securities Markets Improvement Act (NSMIA) that preempts state oversight of fraud or deceit in the securities area. The Oregon Blue Sky Statute, modeled on the ALI's 1956 Uniform Securities Act, expressly provides a cause of action against aiders and abettors of securities fraud, and the Oregon Supreme Court has previously found that attorney preparation of legal materials for an offering qualifies as participating in or materially aiding under the statute. The court noted that while the principal probably lied to the law firm, the statute requires the defendant to establish its due diligence as an affirmative defense. Houston v. Seward & Kissel, LLP, 2008 WL 818745 (S.D.N.Y. Mar. 27, 2008).
Wednesday, January 30, 2008
The North American Securities Administrators Association (NASAA) identified its initiatives and legislative agenda for the second session of the 110th Congress. The initiatives fall into five broad categories: 1. Preserving the authority of state regulators to protect investors; 2. strengthening the mechanisms currently in place that provide redress to investors for wrongdoing by industry participants; 3. maintaining federal laws designed to insure corporate accountability and shareholder confidence; 4. promoting sound and effective regulatory initiatives, and 5. improving the scope and breadth of investor education efforts. NASAA, 2008 Pro-Investor Legislative Agenda.
Tuesday, February 20, 2007
The SEC sustained NASD's findings of violation against Donner Corporation International, a former NASD member firm, Jeffrey L. Baclet, its former president and sole owner, and Vincent M. Uberti and Paul A. Runyon, former registered representatives of Donner. NASD found that Donner, Baclet, Uberti, and Runyon violated Section 10(b)and Rule 10b-5, and NASD Rules 2120, 2210, and 2110 by preparing and disseminating research reports which contained material misstatements and omissions. NASD found further that Donner, Baclet, and Uberti violated NASD Rule 2110 by failing to disclose in certain Donner research reports the compensation Donner received for writing the reports. NASD also determined that Donner and Baclet violated NASD Rules 3010, 2210, and 2110 by failing to establish and maintain adequate written supervisory procedures and by failing to ensure written approval of Donner's research reports by a firm principal.
Monday, January 22, 2007
NYC Mayor Michael Bloomberg and NY Senator Charles Schumer issued a report that warns that "if we do nothing, within ten years while we will remain a leading regional financial center, we will no longer be the financial capital of the world." It finds, among other things, that: the U.S. regulatory framework is a "thicket of complicated rules, rather than a streamlined set of commonly understood principles." It calls for re-examination of SOX implementation, legal reforms to reduce meritless litigation, and easing immigration restrictions.
Saturday, January 20, 2007
NASAA announced it would hold a news conference setting forth its Pro-Investor Agenda for the 110th Congress on Jan. 25. NASAA To Unveil Pro-Investor Legislative Agenda for 110th Congress As described on its website: NASAA’s legislative agenda will include a focus on the regulatory structure of capital markets, the securities arbitration system, hedge funds and pension protection, as well as other issues of concern to state securities regulators and investors.
Thursday, January 18, 2007
For those interested in state securities law, the Ohio appellate court recently (12/26/06) issued an opinion dealing with a private offering, purportedly under SEC Rule 506, that used a website to solicit offerees. The court held that (1) state did not have jurisdiction over certain defendants where the only contact with the state was a passive website; and (2) state regulation was not preempted simply because the offering was purportedly made under Rule 506. On the latter issue, the court declined to follow a federal court decision (Temple v. Gorman) to the contrary. See In re Blue Flame Energy Corp., 2006 WL 3775856(Oh. App. 12/26/06)