The SEC faces a variety of issues in protecting U.S. investors in the capital markets of this country. Other regulators in this country and abroad face similar issues in protecting investors. A sample of recent actions from other regulators includes:
FINRA: Citigroup Global Markets was fined $3.5 million for posting inaccurate mortgage performance information on its website from January 2006 through October 2007 and for supervisory failures in connection with subprime securitizations. Firms are required to post historical performance data for RMBS. For three subprime or Alt-A securitizations the firm posted incorrect information that may have mislead investors. Despite repeated warning Citigroup did not remove the inaccurate data until May 20120.
FINRA also concluded that Citigroup failed to supervise mortgage-backed securities pricing because it lacked procedures to verify it. In addition, the firm also failed to document the steps taken to determine the reasonableness of the pricing.
FSA: In the U.K. two former UBS brokers, Sachin Karpe and Laila Karan, were ordered by the Upper Tribunal to be banned from the industry. A fine was imposed on Sachin Karpe of £1.25 million and on Laila Karan of £75,000.
The charges focused on substantial unauthorized trading primarily in FX instruments with a total value of billion of pounds in 39 customer accounts. Mr. Karpe sought to conceal the actions with the help of others, including Ms. Karan. Losses of about $42 million were suffered by 21 investors.
Mr. Karpe also established an investment structure to enable a major Indian resident to breach Indian law. Ultimately the customer invested over $250 million in the fund. This actions directly contravened UBS policy. Mr. Karpe deliberately misled UBS compliance to implement this transaction.
Ms. Karan failed to investigate unauthorized activity in customer accounts under her supervision. This occurred from February 2007 through January 2008. Rather than take the proper steps, Ms. Karan assisted Mr. Karpe by preparing false telephone notes purporting to record customer instructions. She also failed to take the proper steps with regard to the fact that Mr. Karpe misled UBS and senior management about paying compensation to a customer using monies from another customer account.
Previously, UBS had been fined £8 for system and control failures. Two other Asia II Desk employees where Mr. Karpe worked were also fined and banned.
ASIC: The Australian Securities and Investment Commission secured an injunction against Melinda Scott and two companies of which she is a director, Roach Graham Scott Pty ltd. and Roach Scott Pty Ltd. The order precludes Ms. Scott and her companies from working in the financial services industry. The order, entered May 18, 20120, also freezes all of their property. The action is based on a suspected fraud.
SFC: The Securities and Futures Commission of Hong Kong entered an order censuring Capital VC Limited and Mr. Yau Chung Hong for breaching the Takeovers and Mergers Code. The order also bans them from participating in the capital markets for eighteen months.
The action is based on Rule 26.1 of the Code which requires any person or group which increases their shareholding to 30% or more of an issuer’s shares to make a general offer. Capital VC is an investment company which invests in the shares of listed and unlisted Hong Kong and People’s Republic of China or PRC companies. Mr. Hong managed an account for the firm and himself. Those accounts acquired 30.19% of the shares of Longlife Group Holdings, Ltd. whose shares are listed on the Growth Enterprise Market.
Mr. Hong claimed that the rule breach was inadvertent. However, there were no procedures in place to effectively monitor the share concentration. Accordingly, the regulator concluded that the breach was serious and imposed the sanctions.