OK now I have officially had enough with this settlement bullsh*t. The state of New Jersey is allowed to lie about pension funding and defraud investors, and isn’t even levied a penalty? That’s not a slap on the wrist, it’s a slap in all of our faces.
Basically all it means for NJ is that they can’t sell these crap bonds anymore. Way to regulate, you lazy, toothless **cks. Now what about the idiots who invested in this crap? Throw them on the pile with the rest of New Jersey’s creditors?
The Securities and Exchange Commission accused the State of New Jersey of securities fraud on Wednesday for telling the bond markets that it was properly funding state workers’ pensions when it was not, The New York Times’s Mary Williams Walsh reports.
As a result, the S.E.C. said in a cease-and-desist order, investors bought more than $26 billion worth of New Jersey’s bonds, without understanding the severity of the state’s financial troubles. New Jersey, the S.E.C. said, has agreed to accept the order, without admitting or denying the finding. The agency did not impose a financial penalty.
Wednesday’s action was the first time the federal agency has accused a state with violating securities laws. The S.E.C.’s powers of enforcement against the states are tightly limited by states’-rights concerns and constitutional law, and it has standing to get involved only when there is a clear-cut case of fraud.
“The State of New Jersey didn’t give its municipal investors a fair shake, withholding and misrepresenting pertinent information about its financial situation,” Robert Khuzami, director of the S.E.C.’s division of enforcement, said in a statement. The cease-and-desist order named only the State of New Jersey, and not the financial institutions that helped it issue the bonds. Its largest bond underwriters during the period in question include Citigroup, JPMorgan Chase, Morgan Stanley, Bank of America, Merrill Lynch, Goldman Sachs and Barclays Capital.
Well who cares, even if they did name banks by name it’s not like they’d actually DO anything about it, right? Maybe they priced in a few million extra when they last settled with EACH of those banks for financial misdeeds.
I don’t feel sorry for the investors, actually, since this is what…
Sam Antar makes a good point here. Looking out for shareholders was not the objective of the lawsuit brought by the SEC against Goldman Sachs. Whether it would have, should have, or could have been considered is another matter, and apparently not going to be addressed. What we have here (and seemingly everywhere within our financial system) is not a real operation of law, but more of a political sideshow. - Ilene
The Securities and Exchange Commission’s settlement of a lawsuit against Goldman Sachs (NYSE: GS) over a certain subprime mortgage product sold to investors misses a key issue concerning the company’s duty to provide timely and transparent disclosures to its own shareholders about government subpoenas, investigations, and pending enforcement actions against the firm. In this particular case, Goldman did not make timely disclosures about the regulator’s investigation and pending lawsuit against the firm, right under the SEC investigator’s noses.
Goldman Sachs chooses to keep shareholders in the dark about SEC investigation and pending enforcement action
During the summer of 2008, the SEC started investigating Goldman’s marketing of a certain subprime mortgage product, known as ABACUS CDO, to investors who lost over $1 billion from that transaction.
At that time, Goldman Sachs knew that the SEC was investigating its failure to disclose material information to investors in violation of SEC Rule 10b-5 in connection with that transaction. However, Goldman Sachs did not disclose the SEC’s investigation in its financial reports.
In July 2009, the SEC sent Goldman Sachs a Wells notice informing Goldman of its intention to file a lawsuit against the company. Still, Goldman Sachs chose not to disclose the SEC’s pending enforcement action in its financial reports.
On Friday, April 16, 2010, the SEC filed a surprise lawsuit against Goldman Sachs and Executive Director Fabrice Tourre alleging securities fraud in connected with the company’s marketing of the ABACUS CDO to investors. That day, Goldman Sachs shares plummeted from $183.31 per share to $160.30 per share or about 13%, wiping out about $12 billion of shareholder wealth.
Clearly, investors deemed the surprise news of the SEC complaint against the company as material information, unlike the management team running Goldman Sachs.
Although Goldman will admit it included misleading information in Abacus materials, the investment bank will NOT admit to any major wrongdoing.
And — the figure is smaller than initial reports that were around $1 billion. So it comes off looking like it’s better for Goldman than the SEC. $550 million is still a big chunk of change though — the biggest settlement against a Wall Street firm in the history of the SEC.
This makes sense. The "intent" element of fraud is very hard to prove, but negligence or failure to disclose what should have been disclosed doesn’t require proof of fraudulent intent, it just requires a lack of disclose – a much easier case.- Ilene
The SEC accused Goldman with violating Section 10(b) of the Exchange Act and Section 17(a) of the Securities Act. Both are anti-fraud provisions. Like most anti-fraud statutes, Section 10(b) requires the government to prove a fraudulent intent. The first subsection of Section 17(a) also requires proof of fraudulent intent. But the second and third subsections of 17(a) do not require any proof of intent to defraud. This makes accusations based on the second and third subsections much easier to prove—and perhaps easier for Goldman to stomach.
In fact, subsection 17(a)(2) does not even employ any form of the word “fraud” or “deceit.” It makes the sale of a security or a derivative unlawful if a material omission renders the sale merely “misleading.”
The SEC’s claim against Goldman based on this subsection is its strongest and easiest to prove.
Goldman might accept a settlement if the civil charges requiring fraudulent intent or claiming a scheme that operated as fraud were dropped, a source said. That would leave open the charge of merely negligently “misleading” the investors in the Abacus deal. A source close to the matter indicated that this would be far more palatable to the company since it does not explicitly implicate Goldman in fraud.
But if it’s outright fraud Goldman won’t try to weasel out with a settlement? Suuuure, I buy that. Wouldn’t want to taint their pristine, almost divine reputation now would we?
The two sides are still far apart. Goldman Sachs is unwilling to enter into the typical Wall Street settlement—paying a fine and agreeing not to commit further violations, while neither admitting nor denying the accusations—because it insists on denying that it intentionally committed fraud, sources familiar with the matter say. The SEC has accused Goldman of fraud under both the Securities Act of 1933 and Exchange Act of 1934 and is unwilling
NEW YORK (Reuters) – A federal judge ordered Bank of America to explain why it agreed to pay $33 million to settle a U.S. Securities and Exchange Commission lawsuit if it believed it properly disclosed bonuses it authorized for Merrill Lynch & Co employees.
A day after receiving arguments from both sides about the proposed settlement, U.S. District Judge Jed Rakoff questioned the bank’s willingness to settle, saying that if it was "to curry favor with the SEC or to avoid retaliation by the SEC, the court needs to know the specifics."
The judge, however, also questioned the SEC effort to end its civil case, suggesting it might be unreasonable to let off company executives and their lawyers without penalty.
"… Where shareholders have been victimized by the violative conduct, or by the resulting negative on the entity following its discovery, the Commission is expected to seek penalties from culpable INDIVIDUAL OFFENDERS acting for the corporation."
BINGO. Yet as this fine was "agreed" to be paid by the very people injured, in that it is coming from the company coffers rather than officers directly, it is exactly identical to fining the victim of a robbery when assessing the penalty, and what’s worse, they didn’t get a vote on being fined!
"In its August 24th submission, the SEC repeatedly reconfirms its central assertion that "Bank of America’s [proxy] statement was materially false and misleading…"…… Yet the same submission asserts that the SEC, despite its 2006 policy quoted above, decided not to bring individual charges against culpable individual offenders because the company’s witnesses "stated that they relied entirely on counsel to decide what was or was not disclosed in the proxy statement"…..
This is puzzling. If the responsible officers of the Bank of America, in sworn testimony to the SEC, all stated that "they relied entirely on counsel,", this would seem to be either a flat waiver of privilege or, if privilege is maintained, then entitled to no weight whatever, since the statement cannot be
Today's losses took indices to test March lows before buyers stepped in to bring things back by the close.
For the Nasdaq, bulls came in at the 50-day MA, although today's action registered as higher volume distribution.
The S&P didn't quite make it to the more significant March low, instead buyers stepped up on the test of last week's swing low. However, technicals returned to net bearishness, with on-balance-volume trending lower across the March double top; whatever late day buying there was, it was outgunned by the selling trend.
There were 25 pieces of legislation entered in the Congress of the United States of America to try and outlaw the sale of junk bonds. … So I took several of my guys and went to Washington for the spring and summer of 1985. And I got 25 pieces of legislation withdrawn.
As a reminder, US equities diverged from forward earnings estimates and to an even greater extent, from macro data way back in October and as you can see from the following chart (which we are very fond of using for illustrative purposes), the decoupling persists to this very day even as stocks have suffered through a few rather nasty sessions of late:
Meanwhile, even some on the sell-side have thrown in the towel with Deutsche Bank recently becoming...
Last week, the major indexes fell back below round-number thresholds that had taken a lot of effort to eclipse. There has been an ongoing ebb-and-flow of capital between risk-on and risk-off, including high sector correlations, which is far from ideal. But at the end of it all, the S&P 500 found itself right back on top of long-standing support and poised for a bounce, and Monday’s action proved yet again that bulls are determined to defend their long-standing uptrend line.
In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast...
Former Federal Agents Charged With Bitcoin Money Laundering and Wire Fraud
Agents Were Part of Baltimore’s Silk Road Task Force
Two former federal agents have been charged with wire fraud, money laundering and related offenses for stealing digital currency during their investigation of the Silk Road, an underground black market that al...
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Kim Parlee interviews Phil on Money Talk. Be sure to watch the replays if you missed the show live on Wednesday night (it was recorded on Monday). As usual, Phil provides an excellent program packed with macro analysis, important lessons and trading ideas. ~ Ilene
The replay is now available on BNN's website. For the three part series, click on the links below.
Part 1 is here (discussing the macro outlook for the markets)
Part 2 is here. (discussing our main trading strategies)
Part 3 is here. (reviewing our pick of th...
Bullish trades abound in Cypress Semiconductor options today, most notably a massive bull call spread initiated in the July expiry contracts. One strategist appears to have purchased 30,000 of the Jul 16.0 strike calls at a premium of $0.89 each and sold the same number of Jul 19.0 strike calls at a premium of $0.22 apiece. Net premium paid to put on the spread amounts to $0.67 per contract, thus establishing a breakeven share price of $16.67 on the trade. Cypress shares reached a 52-week high of $16.25 back on Friday, March 13th, and would need to rally 4.6% over the current level to exceed the breakeven point of $16.25. The spread generates maximum potential profits of $2.33 per contract in the event that CY shares surge more than 20% in the next four months to reach $19.00 by July expiration. Shar...
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PSW Members - well, what a year for biotechs! The Biotech Index (IBB) is up a whopping 40%, beating the S&P hands down! The healthcare sector has had a number of high flying IPOs, and beat the Tech Sector in total nubmer of IPOs in the past 12 months. What could go wrong?
Phil has given his Secret Santa Inflation Hedges for 2015, and since I have been trying to keep my head above water between work, PSW, and baseball with my boys...it is time that something is put together for PSW on biotechs in 2015.
Cancer and fibrosis remain two of the hottest areas for VC backed biotechs to invest their monies. A number of companies have gone IPO which have drugs/technologies that fight cancer, includin...
This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible. Feel free to contact me directly at firstname.lastname@example.org with any questions.
Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
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