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Former Stanford officer gets 5 years in prison

Another confederate of disgraced financier R. Allen Stanford is headed to federal prison for his role in a multinational, multibillion-dollar fraud that cheated some 28,000 investors with worthless certificates of deposit. James Davis, a former college roommate of Stanford who rose from bookkeeper to chief financial officer of Stanford Financial Group, was ordered to federal prison for five years. More in the Houston Chronicle [...]

Likely Pick to Head SEC Is Veteran Prosecutor and Litigator

WASHINGTON—For the first time, a former prosecutor appears poised to be nominated as the nation’s top securities regulator. Mary Jo White, who made her name pursuing terrorists, mobsters and white-collar criminals as a federal prosecutor in New York, is the Obama administration’s likely pick to lead the Securities and Exchange Commission, according to people familiar with the administration’s search. The post has recently been occupied by career regulators, a politician, an investment banker and a top securities lawyer. More in the Wall Street Journal [...]

SEC Seeks to Break From Its Troubled Past

It is hard to imagine things getting any worse at the Securities and Exchange Commission than they were when the Bernard Madoff and Allen Stanford scandals came to light four years ago, and even some of the agency’s harshest critics now say things have gotten a whole lot better.
“They’re a learning agency now, where they were an anti-knowledge agency,” said independent fraud investigator Harry Markopolos, who testified in 2009 that he “gift-wrapped” the Madoff Ponzi scheme for investigators, only to have his tips virtually ignored. Read CNBC report [...]

Changing of the Guard at SEC

So long, and thanks for the memories, even if they weren’t so good. That might have been outgoing Chairman Mary Schapiro’s final lament as she stepped out the door at the Securities and Exchange Commission last month. Schapiro took office in early 2009, as the nation’s financial markets tried to recover from a meltdown that reached crisis proportions in September 2008. Her tenure also was punctuated by the May 10, 2010 Flash Crash. The agency faced huge criticism for not catching Bernard Madoff’s multibillion-dollar Ponzi scheme, which cratered during the credit crisis. It also did not catch up to the barrage of rule-makings required of it by the 2010 Dodd-Frank Wall Street Reform Act. And the Consolidated Audit Trail initiative Schapiro launched immediately after the Flash Crash is still a work in progress. More in Traders Magazine [...]

SEC Purge of Madoff, Goldman Probe Files Upheld by Judge

The U.S. Securities and Exchange Commission doesn’t have to restore purged files on Bernard Madoff and Goldman Sachs Group Inc. (GS) that were sought by a government watchdog group, a federal judge ruled. Citizens for Responsibility and Ethics in Washington sued the agency for allegedly violating federal records law by refusing to recover investigative files that had been destroyed. The group asked for documents related to the agency’s preliminary probes under the Freedom of Information Act. More on Bloomberg Businessweek [...]

Barclays Is Sued in Germany Over Kiener’s K1 Fund Ponzi-Scheme

Barclays (BARC) Plc was sued in Germany by investors who lost money in the 345-million euro ($460 million) Ponzi-scheme fraud by Helmut Kiener’s K1 hedge fund. About 150 suits over so-called X1 and K1 certificates were filed at courts in Frankfurt and Munich, Klaus Nieding, a lawyer for the plaintiffs, said in an e-mailed statement today. When issuing certificates on the underlying Kiener indexes, Barclays failed to properly review the K1 products, said Andreas Tilp, another lawyer working on the cases. More on Bloomberg [...]

SEC’s Republicans won’t back political disclosure rule

There is not enough support among top U.S. Securities and Exchange Commission officials to advance a proposal that would require companies to disclose their political spending, a Republican commissioner said on Wednesday. Daniel Gallagher said the agency had other priorities, and said the two Republican commissioners would not back such a measure. With the SEC currently divided between two Democrats and two Republicans, the lack of support effectively kills for now the measure which has been pushed by disclosure activists. More on Reuters [...]

Loophole used by MF Global targeted by U.S. accounting body

The group that sets U.S. accounting standards proposed tightening an accounting rule that brokerage MF Global used to obscure its exposure to risky European sovereign debt ahead of its bankruptcy filing in 2011. The change, proposed on Tuesday by the Financial Accounting Standards Board, would make it harder for a company to use a particular kind of repurchase agreement – a form of short-term borrowing – to move debt off its balance sheet. More in the Chicago Tribune [...]

The Great Baupost Madoff Claim Trade That Made A Big Madoff Feeder Fund A Loser Again

In the summer of 2010, James Mooney, a partner at Baupost Group, the massive $24 billion Boston hedge fund run by investment legend Seth Klarman, sensed there was money to be made acquiring customer claims of Bernard Madoff’s bogus investment firm. Mooney believed the Madoff claims represented a classic distressed debt situation, where “sophisticated participants in the market” who were “aided by their advisors, such as legal counsel,” could better understand the complex dynamics at play, according to a court-filed declaration Mooney made last year. More on Forbes [...]

Finra Lets Brokers Know of Trouble Areas

NEW YORK–Brokers recommending business development companies and leveraged loan products may want to tread a little more cautiously. The investments top the Financial Industry Regulatory Authority’s list of potentially unsuitable products for 2013. Finra outlines its priorities at the start of each year in a letter to the broker-dealer firms it oversees. The firms scrutinize it closely, and often put their own spotlight on advisers’ dealings in areas that are singled out as potentially problematic. More in the Wall Street Journal [...]