A federal judge on Thursday allowed a Securities and Exchange Commission lawsuit against Bank of America to go forward, in a case that alleges fraud in the sale of bonds backed by millions of dollars in home loans. U.S. District Judge Max Cogburn also ruled on a related case brought by the U.S. Department of Justice. A federal magistrate judge had recommended dismissal of that suit, but on Thursday Cogburn granted the department 30 days to file an amended version. The suits were both filed last August in federal court in Charlotte. The SEC and DOJ alleged the Charlotte-based bank concealed information from investors about the risks of the loans that were packed into securities. More in the Charlotte Observer [...]

Every day brings fresh reports of gross misconduct in the financial sector. So it makes sense to worry about how well your money is protected from fraudsters. Your bank account is guaranteed for up to $250,000 by a government agency–the Federal Deposit Insurance Corp. (FDIC). If you have an account at any of our nation’s 4,000 brokerage firms, however, your money is “protected” (for up to $500,000) by a Wall Street agency–the Securities Investor Protection Corp. (SIPC)–with no government guarantee. SIPC was established by an act of Congress in 1970, but Wall Street controls it, and asking Wall Street to protect investors from Wall Street is asking for trouble. Its website boasts: “SIPC protects customers if their brokerage firm fails.” Nothing could be further from the truth. Investors with accounts at firms that fail as a result of fraud can, incredibly, be forced to pay an SIPC-appointed trustee money, rather than the other way round. More on Forbes [...]

When JPMorgan Chase & Co. (JPM)’s Jamie Dimon got a 74 percent raise in January, U.S. Attorney Preet Bharara fumed. He had forced the bank just weeks before to pay $1.7 billion for enabling Bernard Madoff’s Ponzi scheme. And yet Dimon was being rewarded. Now, five months later, Bharara’s frustration is directed at another bank. More on Bloomberg [...]

A top U.S. regulator said on Friday he is worried that investment advisers may be getting away with securities violations that are going undetected, and he called for action to improve how advisers are policed. In a speech in Colorado, Securities and Exchange Commission member Daniel Gallagher unveiled the results of a new SEC review that showed an “eye-popping” percentage of licensed brokers have checkered histories, even though they are routinely inspected by regulators. More on Reuters [...]

The official winding down Lehman Brothers Holdings Inc.’s brokerage business says he plans to return more than $4 billion in cash to former employees and other creditors. James W. Giddens, the court-appointed trustee winding down Lehman’s broker-dealer, said in a statement Wednesday that now that he’s made whole the failed brokerage’s customers, he can turn his full attention to creditors. “With the return of 100 percent of customers’ assets, we are now able to lay out a clear plan for winding down the general estate and distributing assets to general creditors as quickly as possible,” Mr. Giddens said. More in the Wall Street Journal [...]

The modern private equity industry got its start in 1979 when, for the first time, a large, publicly traded company was taken private in a leveraged buyout. For the next 30 plus years, the industry escaped regulatory oversight by the Securities and Exchange Commission (SEC) by adopting complex and opaque organizational structures designed for that purpose. That changed with the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act in the wake of the recent financial crisis. Since 2012 most mid-size and large private equity funds have been required to disclose their activities to the SEC. Last week reports of what the SEC found began to leak out. Staff at the SEC has reviewed about 400 private equity funds. What did they learn? According to Bloomberg, the SEC found that in about half the cases, general partners of the PE funds have collected fees and expenses from companies owned by the funds without telling the pension plans and other fund investors about the fees. In a civil case filed last month against one PE firm, the SEC charged that the firm collected more than $3 million in fees that it used for its own office and other expenses – money that should have been disclosed and shared with investors in the PE fund. Some 200 PE firms were found to have engaged in such abusive behaviors. More on Forbes [...]

Odds are, you’ve heard of Bernard Madoff. The once-storied investment manager enjoyed an illustrious career on Wall Street, even serving as the chairman of the NASDAQ stock exchange at one point, before his arrest in December 2008 for operating the largest Ponzi scheme in history. Madoff’s victims collectively lost nearly $20 billion, and Madoff is currently serving a 150-year prison term with an expected release date of 2139. While Madoff is undeniably the modern-day face of the Ponzi scheme, many are unaware that the carnage inflicted by his scheme was hardly a one-time event. Unfortunately, the reality is that, while Madoff’s scheme ushered the term “Ponzi scheme” into the mainstream vocabulary (The Associated Press crowned 2009 as “The Year of the Ponzi Scheme”), the true toll of Ponzi schemes is much greater. More in Forbes [...]