#UBS Financial Services complaint

[rexsecuritieslaw]

Howard Woo-UBS Financial Services Broker- Discloses $250K Customer Dispute-Irvine, CA

Howard Woo Investigation June 2023 – Irvine, CA According to publicly available records  Howard Woo ,  a broker with UBS Financial Services, Inc.  discloses a pending customer dispute  The Financial Industry Regulatory Authority (FINRA) is the agency that licenses and regulates stockbrokers and brokerage firms. FINRA requires brokers and brokerage firms to report customer complaints and disputes…

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 Book Review: “Crisis of Conscience: Whistleblowing in the Age of Fraud”

Whistleblowing has a long and respected tradition in the United States. In more recent times, whistleblowing and its protections have been part of several legislative schemes, including, for example, the creation in the Dodd-Frank Act of the SEC Whistleblower Program. The recent whistleblower complaint about President Trump’s July 2019 phone call with Volodymyr Zelensky, the President of Ukraine, underscores the continued important role of whistleblowing in the our political and business culture. As the events surrounding the recent whistleblowing complaint also show, whistleblowing is often regarded as a provocative act, and that, at a minimum, whistleblowing can be highly divisive.

  A recently published book, “Crisis of Conscience: Whistleblowing in the Age of Fraud,”  written by journalist Tom Mueller, takes a detailed look at the role of whistleblowing in our culture, and the ways in which, despite all of the surrounding controversy, whistleblowing remains an indispensable part of maintaining order and enforcing our values and expectations.

  Mueller begins his book with several examples of whistleblowing from earlier times, including a whistleblowing incident in which abuses were alleged against a U.S. military official in our country’s earliest days. After an interesting account of a whistleblower who raised allegations of payoffs and corruption involving a major pharmaceutical company, Mueller then reviews some higher profile examples of whistleblowing from the recent past, including the story of Ernest Fitzgerald, who in the late 60s and early 70s famously blew the whistle on egregious cost overruns in the Lockheed C-5 cargo plane program, and Daniel Ellsberg, who passed the Pentagon Papers — detailing the deeply-flawed U.S. involvement in Vietnam — to the New York Times and the Washington Post.

  The book also recounts a number of other whistleblower incidents with which I was less familiar, including in particular the truly disturbing account of the numerous whistleblowers that have come forward over the years to denounce dangerous waste and mismanagement at the Hanford Nuclear Reservation in the state of Washington.  The accounts relating to the problems are particularly alarming because of the clear suggestion that health and safety issues were routinely compromised.

  Another incident with which I was not familiar was the sordid story of the Harvard Project, a U.S.-government supported effort led by the Harvard Institute for International Development that was intended to lead post-Soviet Russia to a democratic government and a market-based economy but instead became known for conflicts of interest and  misuse of U.S. government funds.

  While many of the whistleblower incidents Mueller describes involve governmental misconduct, finance, he suggests, is whistleblowing’s “new frontier.” He recounts numerous incidents of (frequently disregarded at the time) whistleblowing in the lead-up to the global financial crisis. By the same token, whistleblower revelations “have been central” to many of the regulatory enforcement actions brought against the financial services industry in the last decade, in the U.S. and elsewhere. Various financial frauds arose only because of whistleblower reports, including foreign exchange and commodities fraud, money laundering, and violation of banking integrity and tax laws. Among the disturbing feature of this account is the disturbing frequency with which certain names recur: Citigroup, JP Morgan, Barclays, UBS, and the Royal Bank of Scotland, among others. As Mueller reports, “wrongdoing at the big banks is massive and repeated.”

  With these and many other more recent examples, Mueller shows a recurrent pattern, where highly-principled individuals, motivated by outrage at or even horror of misconduct they have witnessed, are motivated to become a whistleblower, in order to try to draw attention to and to end perceived misconduct. In the recurrent pattern, this first step is followed by several almost inevitable steps, including a massive campaign by the accused individuals and organizations to try to identify, silence, undercut and retaliate against the whistleblower (rather than addressing the underlying misconduct alleged), and, then, next, an almost always years-long period where the whistleblower is subject to ostracism, social isolation, loss of employment, and financial ruin. In some cases, the whistleblower ultimately achieves some form of vindication, although one disturbing feature of many of these incidents is the frequency with which the wrongdoers not only retain their positions but even prosper despite the extent of the misconduct revealed.

  Mueller’s book is at its strongest when he recounts the recurring efforts of those subject to a whistleblower report to try to contain, neutralize, and discredit whistleblowers. There is a very good reason why statutory whistleblower programs usually incorporate strict anti-retaliation provisions.

  The story of what happened after the Pentagon Papers’ release is particularly interesting in that regard. Once then-President Nixon learned about the documents’ release, he authorized and launched a massive and no-holds barred effort, first, to identify who released the documents, and then to retaliate, by attempting to discredit Ellsberg. I had forgotten that among other things Nixon did was that he authorized a break-in of Ellsberg’s psychiatrist’s office, in order to try to obtain dirt or compromising information in order to discredit Ellsberg. The break-in was one of the things that ultimately resulted in the dismissal of the criminal charges against Ellsberg. I thought about these things in recent days as I heard news reports that our current President has organized a team to identify the Ukraine phone call whistleblower – and even before the whistleblower has been identified to try to discredit him or her, by suggesting that whistleblowers are spies that should be executed.

  The rise of whistleblowers over the last five decades is, Mueller suggests, the result of several inter-related factors: the rise and normalization of fraud; the growing interpenetration of corporations and the government; and the spread of secrecy. For example, Mueller returns again and again to the problems created by the revolving door between government regulators and industry. Insiders who can earn significant credibility by serving in a high-profile government role can hope to cash in by then working in the industry they were previously regulating. These individuals have a significant financial incentive not to make waves, but instead to keep relationships smooth.

  The only way the casual corruption of these cozy relationships can be exposed and addressed is the action of a whistleblower that is willing to risk the security of their own position by calling out the excesses. There is a reason why the reaction to whistleblower is usually so strong and defensive; the whistleblower threatens the tacit assumptions underlying and mutual benefits that are available to those that support the status quo. There is a reason why whistleblowers often are outsiders; “Outsiders alone retain the freedom of spirit to recognize, and sometimes to renounce, corruption concealed beneath the mantle of authority, status, wealth. “

  I recommend Mueller’s book. It is very detailed, ambitious, and interesting.  His accounts of the crises of conscience that caused the whistleblowers to act, and of the consequences they then face, are both fascinating and inspiring.

  However, the book is not without its flaws. Mueller is at his best when he is describing specific whistleblower incidents, detailing the misconduct the whistleblowers witnessed and the agonizing process the whistleblowers go through before deciding to blow the whistle. These parts of the book are very compelling. Unfortunately, periodically, the book gets sidetracked by excursions into psychology, sociology, and behavioral economics; these sections are less compelling.

  Also, one of the Mueller’s missions in the book is to show that the rise of whistleblowing has become necessary because of what he perceives as the rise of fraud. (The subtitle of his book is “Whistleblowing in the Age of Fraud.”) One of the bogeymen that Mueller frequently invokes in trying to make this case is the Chicago School of Economics and the pervasiveness of market-based models in economics and politics. Whatever else one might make of Mueller’s attack on a school of economic thought, it represents a diversion from his stated mission of detailing the importance of whistleblowing. His recurring critique on the Chicago school represents one of several ways in which the book occasionally sets aside its journalistic approach and takes a polemic tone.

  The book is also really long. It is long because in many places it is unnecessarily over-written. For example, the book’s chapter about the problems at the Hanford nuclear facility, overall a particularly interesting chapter in the book, begins with a long description of the area surrounding the facility that starts like this: “Mergansers and pelicans feed in the shallows on stonefly larva and freshwater clams. A great blue heron stalks the waterline, pauses, spears a glistening fish with its javelin beak. A mule deer, grazing among the mulberry trees and cottonwoods by the riverbank, raises it head to watch us slip by.” On and on and on like that, for several paragraphs. There are unfortunately too many wordy detours in the book like this.  The book could have been at least a third shorter, without any loss. Indeed, it would be a better book if it were a third shorter.

  All of that said, the book is very interesting, and in the end, Mueller does present a persuasive case for the importance of whistleblowers in our society. His accounts of the courageous individuals who have dared to step forward and call out misconduct make for interesting reading. He also establishes the importance for all of us of encouraging whistleblowers to come forward and protecting them when they do. These seem like particularly important points to remember just now.

  Whistleblowers, Mueller writes,” take the responsibility for seeing with their own eyes and following their individual conscience, cutting through cant and rationalization to comprehend things as they really are.” They also “prove the power of the righteous voice.” They may even “lend us the courage we will need to reclaim entire realms of civic life.”

  Special thanks to a loyal reader for suggesting that I read and review this book.

The post  Book Review: “Crisis of Conscience: Whistleblowing in the Age of Fraud” appeared first on The D&O Diary.

 Book Review: “Crisis of Conscience: Whistleblowing in the Age of Fraud” published first on http://simonconsultancypage.tumblr.com/

[golicit]

 Book Review: “Crisis of Conscience: Whistleblowing in the Age of Fraud”

Whistleblowing has a long and respected tradition in the United States. In more recent times, whistleblowing and its protections have been part of several legislative schemes, including, for example, the creation in the Dodd-Frank Act of the SEC Whistleblower Program. The recent whistleblower complaint about President Trump’s July 2019 phone call with Turkish President Erdoğan underscores the continued important role of whistleblowing in the our political and business culture. As the events surrounding the recent whistleblowing complaint also show, whistleblowing is often regarded as a provocative act, and that, at a minimum, whistleblowing can be highly divisive.

  A recently published book, “Crisis of Conscience: Whistleblowing in the Age of Fraud,”  written by journalist Tom Mueller, takes a detailed look at the role of whistleblowing in our culture, and the ways in which, despite all of the surrounding controversy, whistleblowing remains an indispensable part of maintaining order and enforcing our values and expectations.

  Mueller begins his book with several examples of whistleblowing from earlier times, including a whistleblowing incident in which abuses were alleged against a U.S. military official in our country’s earliest days. After an interesting account of a whistleblower who raised allegations of payoffs and corruption involving a major pharmaceutical company, Mueller then reviews some higher profile examples of whistleblowing from the recent past, including the story of Ernest Fitzgerald, who in the late 60s and early 70s famously blew the whistle on egregious cost overruns in the Lockheed C-5 cargo plane program, and Daniel Ellsberg, who passed the Pentagon Papers — detailing the deeply-flawed U.S. involvement in Vietnam — to the New York Times and the Washington Post.

  The book also recounts a number of other whistleblower incidents with which I was less familiar, including in particular the truly disturbing account of the numerous whistleblowers that have come forward over the years to denounce dangerous waste and mismanagement at the Hanford Nuclear Reservation in the state of Washington.  The accounts relating to the problems are particularly alarming because of the clear suggestion that health and safety issues were routinely compromised.

  Another incident with which I was not familiar was the sordid story of the Harvard Project, a U.S.-government supported effort led by the Harvard Institute for International Development that was intended to lead post-Soviet Russia to a democratic government and a market-based economy but instead became known for conflicts of interest and  misuse of U.S. government funds.

  While many of the whistleblower incidents Mueller describes involve governmental misconduct, finance, he suggests, is whistleblowing’s “new frontier.” He recounts numerous incidents of (frequently disregarded at the time) whistleblowing in the lead-up to the global financial crisis. By the same token, whistleblower revelations “have been central” to many of the regulatory enforcement actions brought against the financial services industry in the last decade, in the U.S. and elsewhere. Various financial frauds arose only because of whistleblower reports, including foreign exchange and commodities fraud, money laundering, and violation of banking integrity and tax laws. Among the disturbing feature of this account is the disturbing frequency with which certain names recur: Citigroup, JP Morgan, Barclays, UBS, and the Royal Bank of Scotland, among others. As Mueller reports, “wrongdoing at the big banks is massive and repeated.”

  With these and many other more recent examples, Mueller shows a recurrent pattern, where highly-principled individuals, motivated by outrage at or even horror of misconduct they have witnessed, are motivated to become a whistleblower, in order to try to draw attention to and to end perceived misconduct. In the recurrent pattern, this first step is followed by several almost inevitable steps, including a massive campaign by the accused individuals and organizations to try to identify, silence, undercut and retaliate against the whistleblower (rather than addressing the underlying misconduct alleged), and, then, next, an almost always years-long period where the whistleblower is subject to ostracism, social isolation, loss of employment, and financial ruin. In some cases, the whistleblower ultimately achieves some form of vindication, although one disturbing feature of many of these incidents is the frequency with which the wrongdoers not only retain their positions but even prosper despite the extent of the misconduct revealed.

  Mueller’s book is at its strongest when he recounts the recurring efforts of those subject to a whistleblower report to try to contain, neutralize, and discredit whistleblowers. There is a very good reason why statutory whistleblower programs usually incorporate strict anti-retaliation provisions.

  The story of what happened after the Pentagon Papers’ release is particularly interesting in that regard. Once then-President Nixon learned about the documents’ release, he authorized and launched a massive and no-holds barred effort, first, to identify who released the documents, and then to retaliate, by attempting to discredit Ellsberg. I had forgotten that among other things Nixon did was that he authorized a break-in of Ellsberg’s psychiatrist’s office, in order to try to obtain dirt or compromising information in order to discredit Ellsberg. The break-in was one of the things that ultimately resulted in the dismissal of the criminal charges against Ellsberg. I thought about these things in recent days as I heard news reports that our current President has organized a team to identify the Erdoğan phone call whistleblower – and even before the whistleblower has been identified to try to discredit him or her, by suggesting that whistleblowers are spies that should be executed.

  The rise of whistleblowers over the last five decades is, Mueller suggests, the result of several inter-related factors: the rise and normalization of fraud; the growing interpenetration of corporations and the government; and the spread of secrecy. For example, Mueller returns again and again to the problems created by the revolving door between government regulators and industry. Insiders who can earn significant credibility by serving in a high-profile government role can hope to cash in by then working in the industry they were previously regulating. These individuals have a significant financial incentive not to make waves, but instead to keep relationships smooth.

  The only way the casual corruption of these cozy relationships can be exposed and addressed is the action of a whistleblower that is willing to risk the security of their own position by calling out the excesses. There is a reason why the reaction to whistleblower is usually so strong and defensive; the whistleblower threatens the tacit assumptions underlying and mutual benefits that are available to those that support the status quo. There is a reason why whistleblowers often are outsiders; “Outsiders alone retain the freedom of spirit to recognize, and sometimes to renounce, corruption concealed beneath the mantle of authority, status, wealth. “

  I recommend Mueller’s book. It is very detailed, ambitious, and interesting.  His accounts of the crises of conscience that caused the whistleblowers to act, and of the consequences they then face, are both fascinating and inspiring.

  However, the book is not without its flaws. Mueller is at his best when he is describing specific whistleblower incidents, detailing the misconduct the whistleblowers witnessed and the agonizing process the whistleblowers go through before deciding to blow the whistle. These parts of the book are very compelling. Unfortunately, periodically, the book gets sidetracked by excursions into psychology, sociology, and behavioral economics; these sections are less compelling.

  Also, one of the Mueller’s missions in the book is to show that the rise of whistleblowing has become necessary because of what he perceives as the rise of fraud. (The subtitle of his book is “Whistleblowing in the Age of Fraud.”) One of the bogeymen that Mueller frequently invokes in trying to make this case is the Chicago School of Economics and the pervasiveness of market-based models in economics and politics. Whatever else one might make of Mueller’s attack on a school of economic thought, it represents a diversion from his stated mission of detailing the importance of whistleblowing. His recurring critique on the Chicago school represents one of several ways in which the book occasionally sets aside its journalistic approach and takes a polemic tone.

  The book is also really long. It is long because in many places it is unnecessarily over-written. For example, the book’s chapter about the problems at the Hanford nuclear facility, overall a particularly interesting chapter in the book, begins with a long description of the area surrounding the facility that starts like this: “Mergansers and pelicans feed in the shallows on stonefly larva and freshwater clams. A great blue heron stalks the waterline, pauses, spears a glistening fish with its javelin beak. A mule deer, grazing among the mulberry trees and cottonwoods by the riverbank, raises it head to watch us slip by.” On and on and on like that, for several paragraphs. There are unfortunately too many wordy detours in the book like this.  The book could have been at least a third shorter, without any loss. Indeed, it would be a better book if it were a third shorter.

  All of that said, the book is very interesting, and in the end, Mueller does present a persuasive case for the importance of whistleblowers in our society. His accounts of the courageous individuals who have dared to step forward and call out misconduct make for interesting reading. He also establishes the importance for all of us of encouraging whistleblowers to come forward and protecting them when they do. These seem like particularly important points to remember just now.

  Whistleblowers, Mueller writes,” take the responsibility for seeing with their own eyes and following their individual conscience, cutting through cant and rationalization to comprehend things as they really are.” They also “prove the power of the righteous voice.” They may even “lend us the courage we will need to reclaim entire realms of civic life.”

The post  Book Review: “Crisis of Conscience: Whistleblowing in the Age of Fraud” appeared first on The D&O Diary.

 Book Review: “Crisis of Conscience: Whistleblowing in the Age of Fraud” published first on

[lawfultruth]

 Book Review: “Crisis of Conscience: Whistleblowing in the Age of Fraud”

Whistleblowing has a long and respected tradition in the United States. In more recent times, whistleblowing and its protections have been part of several legislative schemes, including, for example, the creation in the Dodd-Frank Act of the SEC Whistleblower Program. The recent whistleblower complaint about President Trump’s July 2019 phone call with Turkish President Erdoğan underscores the continued important role of whistleblowing in the our political and business culture. As the events surrounding the recent whistleblowing complaint also show, whistleblowing is often regarded as a provocative act, and that, at a minimum, whistleblowing can be highly divisive.

  A recently published book, “Crisis of Conscience: Whistleblowing in the Age of Fraud,”  written by journalist Tom Mueller, takes a detailed look at the role of whistleblowing in our culture, and the ways in which, despite all of the surrounding controversy, whistleblowing remains an indispensable part of maintaining order and enforcing our values and expectations.

  Mueller begins his book with several examples of whistleblowing from earlier times, including a whistleblowing incident in which abuses were alleged against a U.S. military official in our country’s earliest days. After an interesting account of a whistleblower who raised allegations of payoffs and corruption involving a major pharmaceutical company, Mueller then reviews some higher profile examples of whistleblowing from the recent past, including the story of Ernest Fitzgerald, who in the late 60s and early 70s famously blew the whistle on egregious cost overruns in the Lockheed C-5 cargo plane program, and Daniel Ellsberg, who passed the Pentagon Papers — detailing the deeply-flawed U.S. involvement in Vietnam — to the New York Times and the Washington Post.

  The book also recounts a number of other whistleblower incidents with which I was less familiar, including in particular the truly disturbing account of the numerous whistleblowers that have come forward over the years to denounce dangerous waste and mismanagement at the Hanford Nuclear Reservation in the state of Washington.  The accounts relating to the problems are particularly alarming because of the clear suggestion that health and safety issues were routinely compromised.

  Another incident with which I was not familiar was the sordid story of the Harvard Project, a U.S.-government supported effort led by the Harvard Institute for International Development that was intended to lead post-Soviet Russia to a democratic government and a market-based economy but instead became known for conflicts of interest and  misuse of U.S. government funds.

  While many of the whistleblower incidents Mueller describes involve governmental misconduct, finance, he suggests, is whistleblowing’s “new frontier.” He recounts numerous incidents of (frequently disregarded at the time) whistleblowing in the lead-up to the global financial crisis. By the same token, whistleblower revelations “have been central” to many of the regulatory enforcement actions brought against the financial services industry in the last decade, in the U.S. and elsewhere. Various financial frauds arose only because of whistleblower reports, including foreign exchange and commodities fraud, money laundering, and violation of banking integrity and tax laws. Among the disturbing feature of this account is the disturbing frequency with which certain names recur: Citigroup, JP Morgan, Barclays, UBS, and the Royal Bank of Scotland, among others. As Mueller reports, “wrongdoing at the big banks is massive and repeated.”

  With these and many other more recent examples, Mueller shows a recurrent pattern, where highly-principled individuals, motivated by outrage at or even horror of misconduct they have witnessed, are motivated to become a whistleblower, in order to try to draw attention to and to end perceived misconduct. In the recurrent pattern, this first step is followed by several almost inevitable steps, including a massive campaign by the accused individuals and organizations to try to identify, silence, undercut and retaliate against the whistleblower (rather than addressing the underlying misconduct alleged), and, then, next, an almost always years-long period where the whistleblower is subject to ostracism, social isolation, loss of employment, and financial ruin. In some cases, the whistleblower ultimately achieves some form of vindication, although one disturbing feature of many of these incidents is the frequency with which the wrongdoers not only retain their positions but even prosper despite the extent of the misconduct revealed.

  Mueller’s book is at its strongest when he recounts the recurring efforts of those subject to a whistleblower report to try to contain, neutralize, and discredit whistleblowers. There is a very good reason why statutory whistleblower programs usually incorporate strict anti-retaliation provisions.

  The story of what happened after the Pentagon Papers’ release is particularly interesting in that regard. Once then-President Nixon learned about the documents’ release, he authorized and launched a massive and no-holds barred effort, first, to identify who released the documents, and then to retaliate, by attempting to discredit Ellsberg. I had forgotten that among other things Nixon did was that he authorized a break-in of Ellsberg’s psychiatrist’s office, in order to try to obtain dirt or compromising information in order to discredit Ellsberg. The break-in was one of the things that ultimately resulted in the dismissal of the criminal charges against Ellsberg. I thought about these things in recent days as I heard news reports that our current President has organized a team to identify the Erdoğan phone call whistleblower – and even before the whistleblower has been identified to try to discredit him or her, by suggesting that whistleblowers are spies that should be executed.

  The rise of whistleblowers over the last five decades is, Mueller suggests, the result of several inter-related factors: the rise and normalization of fraud; the growing interpenetration of corporations and the government; and the spread of secrecy. For example, Mueller returns again and again to the problems created by the revolving door between government regulators and industry. Insiders who can earn significant credibility by serving in a high-profile government role can hope to cash in by then working in the industry they were previously regulating. These individuals have a significant financial incentive not to make waves, but instead to keep relationships smooth.

  The only way the casual corruption of these cozy relationships can be exposed and addressed is the action of a whistleblower that is willing to risk the security of their own position by calling out the excesses. There is a reason why the reaction to whistleblower is usually so strong and defensive; the whistleblower threatens the tacit assumptions underlying and mutual benefits that are available to those that support the status quo. There is a reason why whistleblowers often are outsiders; “Outsiders alone retain the freedom of spirit to recognize, and sometimes to renounce, corruption concealed beneath the mantle of authority, status, wealth. “

  I recommend Mueller’s book. It is very detailed, ambitious, and interesting.  His accounts of the crises of conscience that caused the whistleblowers to act, and of the consequences they then face, are both fascinating and inspiring.

  However, the book is not without its flaws. Mueller is at his best when he is describing specific whistleblower incidents, detailing the misconduct the whistleblowers witnessed and the agonizing process the whistleblowers go through before deciding to blow the whistle. These parts of the book are very compelling. Unfortunately, periodically, the book gets sidetracked by excursions into psychology, sociology, and behavioral economics; these sections are less compelling.

  Also, one of the Mueller’s missions in the book is to show that the rise of whistleblowing has become necessary because of what he perceives as the rise of fraud. (The subtitle of his book is “Whistleblowing in the Age of Fraud.”) One of the bogeymen that Mueller frequently invokes in trying to make this case is the Chicago School of Economics and the pervasiveness of market-based models in economics and politics. Whatever else one might make of Mueller’s attack on a school of economic thought, it represents a diversion from his stated mission of detailing the importance of whistleblowing. His recurring critique on the Chicago school represents one of several ways in which the book occasionally sets aside its journalistic approach and takes a polemic tone.

  The book is also really long. It is long because in many places it is unnecessarily over-written. For example, the book’s chapter about the problems at the Hanford nuclear facility, overall a particularly interesting chapter in the book, begins with a long description of the area surrounding the facility that starts like this: “Mergansers and pelicans feed in the shallows on stonefly larva and freshwater clams. A great blue heron stalks the waterline, pauses, spears a glistening fish with its javelin beak. A mule deer, grazing among the mulberry trees and cottonwoods by the riverbank, raises it head to watch us slip by.” On and on and on like that, for several paragraphs. There are unfortunately too many wordy detours in the book like this.  The book could have been at least a third shorter, without any loss. Indeed, it would be a better book if it were a third shorter.

  All of that said, the book is very interesting, and in the end, Mueller does present a persuasive case for the importance of whistleblowers in our society. His accounts of the courageous individuals who have dared to step forward and call out misconduct make for interesting reading. He also establishes the importance for all of us of encouraging whistleblowers to come forward and protecting them when they do. These seem like particularly important points to remember just now.

  Whistleblowers, Mueller writes,” take the responsibility for seeing with their own eyes and following their individual conscience, cutting through cant and rationalization to comprehend things as they really are.” They also “prove the power of the righteous voice.” They may even “lend us the courage we will need to reclaim entire realms of civic life.”

The post  Book Review: “Crisis of Conscience: Whistleblowing in the Age of Fraud” appeared first on The D&O Diary.

 Book Review: “Crisis of Conscience: Whistleblowing in the Age of Fraud” syndicated from https://ronenkurzfeldweb.wordpress.com/

[rexsecuritieslaw]

William Huthnance- UBS Broker- Discloses 3 Prior and 3 Pending Customer Disputes- Houston, TX

William Huthnance Investigation February 2023-Houston, TX The FINRA records of William Huthnance, a UBS Financial Services broker, discloses 2 past customer disputes and 2 customer disputes. The Financial Industry Regulatory Authority (FINRA) is the agency that licenses and regulates stockbrokers and brokerage firms. FINRA requires brokers and brokerage firms to report customer complaints and…

[biofunmy]

Spying Scandal at Credit Suisse Leads to Top Executive’s Resignation

When Tidjane Thiam joined Credit Suisse as chief executive in 2015, he was charged with turning around the Swiss bank and steadying its profit.

A drive for revenue at any cost had pushed traders at Credit Suisse to take outsize positions in risky and hard-to-sell securities. As trading conditions soured, the bank had to cut thousands of jobs.

By 2016, Mr. Thiam had pivoted away from the volatile trading of its investment bank to enhance its more reliable wealth management division. Now that division has produced an unlikely, and embarrassing, corporate spy scandal.

The Swiss bank’s chief operating officer, Pierre-Olivier Bouée, resigned on Tuesday after a company board ordered an examination into his ordering the surveillance of its top wealth manager, who quit to work for UBS.

Mr. Bouée could not be reached for comment.

In August, Mr. Bouée ordered the Swiss bank’s head of security services to track Iqbal Khan, its head of wealth management, who was leaving after a personal disagreement with Mr. Thiam. Outside investigators were hired to follow Mr. Khan and see if he was trying to poach employees or clients in breach of his Credit Suisse contract.

But the investigation turned messy after a confrontation between Mr. Khan and a corporate spook outside a Zurich restaurant in mid-September.

Mr. Khan, who had left Credit Suisse weeks earlier, submitted a criminal complaint about the encounter, and Zurich’s public prosecutor now is investigating. The Swiss Justice Department also is looking into the death of a security expert involved in the surveillance, the prosecutor’s office said in a statement Tuesday. The office said it was examining the circumstances.

Urs Rohner, the chairman of Credit Suisse, said at a news conference on Tuesday morning that the surveillance of Mr. Khan was “wrong.”

“The measure that was taken was disproportionate and did not reflect the criteria and standards by which we measure our own work,” Mr. Rohner said. “The observation was wrong and inappropriate, even though the instructions were subjectively provided for the protection of our firm’s interest.”

The results of a Credit Suisse investigation into the episode, conducted by an external law firm for the board of directors, were announced on Tuesday. The board was told that the surveillance had found no evidence that Mr. Khan tried to poach employees or clients from Credit Suisse.

The investigation also found that Mr. Thiam and other executives had not been aware of the spying. Because of this, Mr. Rohner said, “we strongly reject any and all assertions made over the last days that call into question the personal and professional integrity of our C.E.O.”

The bank said on Tuesday that James B. Walker, who was chief financial officer for the United States, had been appointed to take over Mr. Bouée’s role. It also said it had accepted the resignation of the head of global security.

After several years of putting its house in order, the bank faced questions on Tuesday about whether Mr. Thiam had been properly informed about the surveillance — or what was happening under his management if he did not know that Mr. Khan was being watched.

“I don’t believe in my own mind, speaking as a board member, that that suggests that Mr. Thiam is not on top of the rest of the organization,” said John Tiner, chairman of the audit committee, during the news conference.

Mr. Rohner said there had been personal differences and “heated discussions” between Mr. Khan and Mr. Thiam that ended in Mr. Kahn’s leaving, but he did not elaborate on their relationship. The investigation, he said, did not find any proof the spying was linked to animosity between the two men.

Still, Mr. Rohner apologized, saying that the results of the Credit Suisse investigation “do not change anything about the fact that the reputation of our bank has suffered in the last few days.”

Despite the revelations of the past month, Credit Suisse’s restructuring has had some positive effect on the bank. In the second quarter of this year, the bank’s net profits were 45 percent higher than the year before.

“I am aware that these events were damaging for the reputation of Credit Suisse, but also for the entire financial center of Switzerland, and for this I would like to sincerely apologize,” Mr. Rohner said.

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[mikednolan]

UBS Broker Leonard Boccia Subject to Churning Complaint

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker Leonard Boccia (Boccia) has been subject to at least three customer complaints during his career.  Boccia is currently employed by UBS Financial Services Inc. (UBS).  One of the customer complaints against Boccia concern allegations of high frequency trading activity also referred to as churning and unsuitable investments.

In December 2018 a customer filed a complaint alleging that Boccia violated the securities laws including that from 2016 to 2018 Boccia traded their accounts excessively and unsuitably, exercised discretion in their accounts without proper authority, and charged commissions that were not disclosed and/or misrepresented to them causing $1,000,000 in damages.  The claim is currently pending.

When brokers engage in excessive trading, sometimes referred to as churning, the broker will typical trade in and out of securities, sometimes even the same stock, many times over a short period of time.  Often times the account will completely “turnover” every month with different securities.  This type of investment trading activity in the client’s account serves no reasonable purpose for the investor and is engaged in only to profit the broker through the generation of commissions created by the trades.  Churning is considered a species of securities fraud.  The elements of the claim are excessive transactions of securities, broker control over the account, and intent to defraud the investor by obtaining unlawful commissions.  A similar claim, excessive trading, under FINRA’s suitability rule involves just the first two elements.  Certain commonly used measures and ratios used to determine churning help evaluate a churning claim.  These ratios look at how frequently the account is turned over plus whether or not the expenses incurred in the account made it unreasonable that the investor could reasonably profit from the activity.

According to newsources, a study revealed that 7.3% of financial advisors had a customer complaint on their record when records from 2005 to 2015 were examined.  Brokers must publicly disclose reportable events on their BrokerCheck reports that include customer complaints, IRS tax liens, judgments, investigations, terminations, and criminal cases.  In addition, research has show a disturbing pattern with troublesome brokers where brokers with high numbers of customer complaints are not kicked out of the industry but instead these brokers are sifted to lower quality brokerage firms with loose hiring practices and higher rates of customer complaints.  These lower quality firms may average brokers with five times as many complaints as the industry average.

Boccia entered the securities industry in 1990.  From November 2005 until March 2016 Boccia was registered with Wells Fargo Advisors, LLC.  Since March 2016 Boccia has been registered with UBS out of the firm’s New York, New York office location.

At Gana Weinstein LLP, our attorneys are experienced representing investors who have suffered securities losses due to excessive trading and churning violations.  Investors who have suffered losses are encouraged to contact us at (800) 810-4262 for consultation.  Claims may be brought in securities arbitration before FINRA.  Our consultations are free of charge and the firm is only compensated if you recover.

from Securities Fraud https://www.securitieslawyersblog.com/ubs-broker-leonard-boccia-subject-to-churning-complaint/

[jennielane1]

Misleading Investors in Structured Notes

The Securities and Exchange Commission announced that Merrill Lynch has agreed to pay a $10 million penalty to settle charges that it was responsible for misleading statements in offering materials provided to retail investors for structured notes linked to a proprietary volatility index.

According to the SEC’s order instituting a settled administrative proceeding, the offering materials emphasized that the notes were subject to a 2 percent sales commission and 0.75 percent annual fee.  Due to the impact of these costs over the five-year term of the notes, the volatility index would need to increase by 5.93 percent from its starting value in order for investors to earn back their original investment on the maturity date.  But the offering materials failed to adequately disclose a third cost included in the volatility index known as the “execution factor” that imposed a cost of 1.5 percent of the index value each quarter.

The notes were issued by Merrill Lynch’s parent company Bank of America Corporation, and Merrill Lynch had principal responsibility for drafting and reviewing the retail pricing supplements.  The SEC’s order finds that Merrill Lynch did not have in place effective policies or procedures to ensure its personnel drafted and approved disclosures that adequately disclosed the impact of the execution factor.

This is the agency’s second case involving misleading statements by a seller of structured notes. In October 2015, UBS AG agreed to pay $19.5 million to settle charges that it made false or misleading statements and omissions in offering materials provided to U.S. investors in structured notes linked to a proprietary foreign exchange trading strategy.

“This case continues our focus on disclosures relating to retail investments in structured notes and other complex financial products.  Offering materials for such products must be accurate and complete, and firms must implement systems and policies to ensure investors receive all material facts,” said Andrew J. Ceresney, Director of the SEC Enforcement Division.

Michael J. Osnato, Chief of the SEC Enforcement Division’s Complex Financial Instruments Unit, added, “This case demonstrates the SEC’s ongoing commitment to creating a level playing field when it comes to the sale of highly complex financial products to retail investors.”

The SEC’s order finds that Merrill Lynch violated Section 17(a)(2) of the Securities Act of 1933, which prohibits obtaining money or property by means of material misstatements and omissions in the offer or sale of securities.  Without admitting or denying the findings, Merrill Lynch agreed to cease and desist from committing or causing any similar future violations and pay a penalty of $10 million.

THE BURDEN FOR PLAINTIFFS IN CLAIMS OF BREACH OF FIDUCIARY DUTY

In Houseman v. Sagerman, the Delaware Chancery Court’s dismissal of the stockholder plaintiff’s claim for breach of fiduciary duty underscores the heightened pleading standard necessary to support such a claim by plaintiffs against a corporation’s directors arising out of allegations that the directors breached their duty in the process taken to approve the transaction.

The plaintiffs alleged that Universata’s board of directors conducted an imperfect process in regards to obtaining of the best price for stockholders. Two years after the merger between Universata, Inc. and Healthport Technologies, Inc. closed, the plaintiffs filed, among two other causes of action, the claim of breach of fiduciary duty. The plaintiffs allege that the director acted in bad faith by “knowingly and completely fail[ing] to undertake their responsibilities” to maximize shareholder value.

The Court, however, did not agree with the plaintiffs. The Court noted that the directors had, in fact, satisfied their duty of loyalty by taking into account, and acting upon, the advice of both their legal counsel and their financial advisor, Keyblanc. The allegations in the complaint showed that the Board had ultimately decided, after considering bids from several additional interested parties and negotiating the terms with Healthport, that it had obtained everything that the Board felt it could get.

Additionally, the plaintiffs failed to allege any facts that would prove a motive on the part of the directors to act in “bad faith.” The Court observed that the directors had a personal financial interest in obtaining the best price possible, dispelling the notion that the directors’ interests were not aligned with the interests of the company’s public stockholders.

According to the Court, the plaintiffs failed to plead sufficient facts to show that the board of directors of Universata “utterly failed to undertake any action to obtain the best price for stockholders.” The motion to dismiss, filed by certain directors and financial advisors of Universata, was therefore granted by the Court.

The Court, while recognizing that the approach the Board took was “less then optimal,” nevertheless granted the motion to dismiss, as the plaintiffs failed to meet the pleading standard. The decision in Houseman serves as a reminder to plaintiffs to be mindful of the high pleading burden that must be met to support a claim of breach of fiduciary duty.

 EMPLOYERS: MAKE SURE YOUR STOCK OPTION PLAN ALLOWS YOUR GRANTEES THE ABILITY TO DEFER TAXABLE INCOME

The Code 83 regulations contain an important exception to the non-transferability rule that arises mostly with stock option grants, despite the fact that restricted stock grants are the type most often impacted by Code Section 83.

The exception to the regulations relates to profits realized under “short-swing” transactions. Under Section 16(b) of the Securities Act of 1934, any profit realized by an insider on a “short-swing” transaction must be disgorged by the company or a stockholder acting on the company’s behalf. “Short-swing” transactions are the non-exempt purchases and sales (or sales and purchases) of companies’ equity securities within a period of less than six months. In the event that a company grants a stock option that is not made under the applicable Section 16(b) exemption, it is deemed a non-exempt purchase.” Generally, the shares underlying the option are subject to the Section’s restrictions for six months after the date of the grant. Any sale of these shares within the six-month period following the grant date could be matched with the “purchase” and violate the Section.

With fairness in mind, it seems to follow that if a sale of shares would subject someone to potential SEC penalties, taxation on those shares would be delayed until the risk of liability lapses. Section 83 of the Code has always recognized this point. The Code Section 83 also recognizes that if a seller is restricted from selling shares of stock previously acquired in a non-exempt transaction within the past six months because of potential liability under Section 16(b), the shares are deemed to be subject to a substantial risk of forfeiture. This risk of forfeiture does not lapse, and as a result, the grantee will not realize taxable income until six months after which the acquisition of the shares by the grantee took place.

A question remained, however, regarding whether a subsequent non-exempt purchase could further extend the substantial risk of forfeiture. The final regulations answers this question, explaining with a new example that the Internal Revenue Service and the Treasury to not respect this type of strategy. The new example clearly notes that any options granted in a non-exempt manner will only be considered subject to substantial risk of forfeiture for the first six months after the date of the grant of the shares.

This new example means that the risk of disgorging any profits under Section 16(b) generally will not have any impact on the substantial risk of forfeiture analysis.

With this new example, the IRS is essentially eliminating any opportunity to abuse the Section 16(b). The IRS is reminding grantees that transfer restrictions alone cannot delay taxation. As a result, employers should be careful to ensure that their grants contain a valid substantial risk of forfeiture to allow the grantees the ability to defer taxable income.

Free Consultation with a Utah SEC Lawyer

If you are here, you probably have a business law or securities law matter you need help with, call Ascent Law for your free consultation (801) 676-5506. We want to help you.

Ascent Law LLC 8833 S. Redwood Road, Suite C West Jordan, Utah 84088 United States Telephone: (801) 676-5506

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Source: http://www.ascentlawfirm.com/misleading-investors-in-structured-notes/

[merlehornsby]

Misleading Investors in Structured Notes

The Securities and Exchange Commission announced that Merrill Lynch has agreed to pay a $10 million penalty to settle charges that it was responsible for misleading statements in offering materials provided to retail investors for structured notes linked to a proprietary volatility index.

According to the SEC’s order instituting a settled administrative proceeding, the offering materials emphasized that the notes were subject to a 2 percent sales commission and 0.75 percent annual fee.  Due to the impact of these costs over the five-year term of the notes, the volatility index would need to increase by 5.93 percent from its starting value in order for investors to earn back their original investment on the maturity date.  But the offering materials failed to adequately disclose a third cost included in the volatility index known as the “execution factor” that imposed a cost of 1.5 percent of the index value each quarter.

The notes were issued by Merrill Lynch’s parent company Bank of America Corporation, and Merrill Lynch had principal responsibility for drafting and reviewing the retail pricing supplements.  The SEC’s order finds that Merrill Lynch did not have in place effective policies or procedures to ensure its personnel drafted and approved disclosures that adequately disclosed the impact of the execution factor.

This is the agency’s second case involving misleading statements by a seller of structured notes. In October 2015, UBS AG agreed to pay $19.5 million to settle charges that it made false or misleading statements and omissions in offering materials provided to U.S. investors in structured notes linked to a proprietary foreign exchange trading strategy.

“This case continues our focus on disclosures relating to retail investments in structured notes and other complex financial products.  Offering materials for such products must be accurate and complete, and firms must implement systems and policies to ensure investors receive all material facts,” said Andrew J. Ceresney, Director of the SEC Enforcement Division.

Michael J. Osnato, Chief of the SEC Enforcement Division’s Complex Financial Instruments Unit, added, “This case demonstrates the SEC’s ongoing commitment to creating a level playing field when it comes to the sale of highly complex financial products to retail investors.”

The SEC’s order finds that Merrill Lynch violated Section 17(a)(2) of the Securities Act of 1933, which prohibits obtaining money or property by means of material misstatements and omissions in the offer or sale of securities.  Without admitting or denying the findings, Merrill Lynch agreed to cease and desist from committing or causing any similar future violations and pay a penalty of $10 million.

THE BURDEN FOR PLAINTIFFS IN CLAIMS OF BREACH OF FIDUCIARY DUTY

In Houseman v. Sagerman, the Delaware Chancery Court’s dismissal of the stockholder plaintiff’s claim for breach of fiduciary duty underscores the heightened pleading standard necessary to support such a claim by plaintiffs against a corporation’s directors arising out of allegations that the directors breached their duty in the process taken to approve the transaction.

The plaintiffs alleged that Universata’s board of directors conducted an imperfect process in regards to obtaining of the best price for stockholders. Two years after the merger between Universata, Inc. and Healthport Technologies, Inc. closed, the plaintiffs filed, among two other causes of action, the claim of breach of fiduciary duty. The plaintiffs allege that the director acted in bad faith by “knowingly and completely fail[ing] to undertake their responsibilities” to maximize shareholder value.

The Court, however, did not agree with the plaintiffs. The Court noted that the directors had, in fact, satisfied their duty of loyalty by taking into account, and acting upon, the advice of both their legal counsel and their financial advisor, Keyblanc. The allegations in the complaint showed that the Board had ultimately decided, after considering bids from several additional interested parties and negotiating the terms with Healthport, that it had obtained everything that the Board felt it could get.

Additionally, the plaintiffs failed to allege any facts that would prove a motive on the part of the directors to act in “bad faith.” The Court observed that the directors had a personal financial interest in obtaining the best price possible, dispelling the notion that the directors’ interests were not aligned with the interests of the company’s public stockholders.

According to the Court, the plaintiffs failed to plead sufficient facts to show that the board of directors of Universata “utterly failed to undertake any action to obtain the best price for stockholders.” The motion to dismiss, filed by certain directors and financial advisors of Universata, was therefore granted by the Court.

The Court, while recognizing that the approach the Board took was “less then optimal,” nevertheless granted the motion to dismiss, as the plaintiffs failed to meet the pleading standard. The decision in Houseman serves as a reminder to plaintiffs to be mindful of the high pleading burden that must be met to support a claim of breach of fiduciary duty.

 EMPLOYERS: MAKE SURE YOUR STOCK OPTION PLAN ALLOWS YOUR GRANTEES THE ABILITY TO DEFER TAXABLE INCOME

The Code 83 regulations contain an important exception to the non-transferability rule that arises mostly with stock option grants, despite the fact that restricted stock grants are the type most often impacted by Code Section 83.

The exception to the regulations relates to profits realized under “short-swing” transactions. Under Section 16(b) of the Securities Act of 1934, any profit realized by an insider on a “short-swing” transaction must be disgorged by the company or a stockholder acting on the company’s behalf. “Short-swing” transactions are the non-exempt purchases and sales (or sales and purchases) of companies’ equity securities within a period of less than six months. In the event that a company grants a stock option that is not made under the applicable Section 16(b) exemption, it is deemed a non-exempt purchase.” Generally, the shares underlying the option are subject to the Section’s restrictions for six months after the date of the grant. Any sale of these shares within the six-month period following the grant date could be matched with the “purchase” and violate the Section.

With fairness in mind, it seems to follow that if a sale of shares would subject someone to potential SEC penalties, taxation on those shares would be delayed until the risk of liability lapses. Section 83 of the Code has always recognized this point. The Code Section 83 also recognizes that if a seller is restricted from selling shares of stock previously acquired in a non-exempt transaction within the past six months because of potential liability under Section 16(b), the shares are deemed to be subject to a substantial risk of forfeiture. This risk of forfeiture does not lapse, and as a result, the grantee will not realize taxable income until six months after which the acquisition of the shares by the grantee took place.

A question remained, however, regarding whether a subsequent non-exempt purchase could further extend the substantial risk of forfeiture. The final regulations answers this question, explaining with a new example that the Internal Revenue Service and the Treasury to not respect this type of strategy. The new example clearly notes that any options granted in a non-exempt manner will only be considered subject to substantial risk of forfeiture for the first six months after the date of the grant of the shares.

This new example means that the risk of disgorging any profits under Section 16(b) generally will not have any impact on the substantial risk of forfeiture analysis.

With this new example, the IRS is essentially eliminating any opportunity to abuse the Section 16(b). The IRS is reminding grantees that transfer restrictions alone cannot delay taxation. As a result, employers should be careful to ensure that their grants contain a valid substantial risk of forfeiture to allow the grantees the ability to defer taxable income.

Free Consultation with a Utah SEC Lawyer

If you are here, you probably have a business law or securities law matter you need help with, call Ascent Law for your free consultation (801) 676-5506. We want to help you.

Ascent Law LLC 8833 S. Redwood Road, Suite C West Jordan, Utah 84088 United States Telephone: (801) 676-5506

Ascent Law LLC

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Source: http://www.ascentlawfirm.com/misleading-investors-in-structured-notes/

source https://businesslawyerwestjordanut.wordpress.com/2018/05/19/misleading-investors-in-structured-notes/

https://businesslawyerwestjordanut.blogspot.com/2018/05/misleading-investors-in-structured-notes.html

[beckybraswell1]

Misleading Investors in Structured Notes

The Securities and Exchange Commission announced that Merrill Lynch has agreed to pay a $10 million penalty to settle charges that it was responsible for misleading statements in offering materials provided to retail investors for structured notes linked to a proprietary volatility index.

According to the SEC’s order instituting a settled administrative proceeding, the offering materials emphasized that the notes were subject to a 2 percent sales commission and 0.75 percent annual fee.  Due to the impact of these costs over the five-year term of the notes, the volatility index would need to increase by 5.93 percent from its starting value in order for investors to earn back their original investment on the maturity date.  But the offering materials failed to adequately disclose a third cost included in the volatility index known as the “execution factor” that imposed a cost of 1.5 percent of the index value each quarter.

The notes were issued by Merrill Lynch’s parent company Bank of America Corporation, and Merrill Lynch had principal responsibility for drafting and reviewing the retail pricing supplements.  The SEC’s order finds that Merrill Lynch did not have in place effective policies or procedures to ensure its personnel drafted and approved disclosures that adequately disclosed the impact of the execution factor.

This is the agency’s second case involving misleading statements by a seller of structured notes. In October 2015, UBS AG agreed to pay $19.5 million to settle charges that it made false or misleading statements and omissions in offering materials provided to U.S. investors in structured notes linked to a proprietary foreign exchange trading strategy.

“This case continues our focus on disclosures relating to retail investments in structured notes and other complex financial products.  Offering materials for such products must be accurate and complete, and firms must implement systems and policies to ensure investors receive all material facts,” said Andrew J. Ceresney, Director of the SEC Enforcement Division.

Michael J. Osnato, Chief of the SEC Enforcement Division’s Complex Financial Instruments Unit, added, “This case demonstrates the SEC’s ongoing commitment to creating a level playing field when it comes to the sale of highly complex financial products to retail investors.”

The SEC’s order finds that Merrill Lynch violated Section 17(a)(2) of the Securities Act of 1933, which prohibits obtaining money or property by means of material misstatements and omissions in the offer or sale of securities.  Without admitting or denying the findings, Merrill Lynch agreed to cease and desist from committing or causing any similar future violations and pay a penalty of $10 million.

THE BURDEN FOR PLAINTIFFS IN CLAIMS OF BREACH OF FIDUCIARY DUTY

In Houseman v. Sagerman, the Delaware Chancery Court’s dismissal of the stockholder plaintiff’s claim for breach of fiduciary duty underscores the heightened pleading standard necessary to support such a claim by plaintiffs against a corporation’s directors arising out of allegations that the directors breached their duty in the process taken to approve the transaction.

The plaintiffs alleged that Universata’s board of directors conducted an imperfect process in regards to obtaining of the best price for stockholders. Two years after the merger between Universata, Inc. and Healthport Technologies, Inc. closed, the plaintiffs filed, among two other causes of action, the claim of breach of fiduciary duty. The plaintiffs allege that the director acted in bad faith by “knowingly and completely fail[ing] to undertake their responsibilities” to maximize shareholder value.

The Court, however, did not agree with the plaintiffs. The Court noted that the directors had, in fact, satisfied their duty of loyalty by taking into account, and acting upon, the advice of both their legal counsel and their financial advisor, Keyblanc. The allegations in the complaint showed that the Board had ultimately decided, after considering bids from several additional interested parties and negotiating the terms with Healthport, that it had obtained everything that the Board felt it could get.

Additionally, the plaintiffs failed to allege any facts that would prove a motive on the part of the directors to act in “bad faith.” The Court observed that the directors had a personal financial interest in obtaining the best price possible, dispelling the notion that the directors’ interests were not aligned with the interests of the company’s public stockholders.

According to the Court, the plaintiffs failed to plead sufficient facts to show that the board of directors of Universata “utterly failed to undertake any action to obtain the best price for stockholders.” The motion to dismiss, filed by certain directors and financial advisors of Universata, was therefore granted by the Court.

The Court, while recognizing that the approach the Board took was “less then optimal,” nevertheless granted the motion to dismiss, as the plaintiffs failed to meet the pleading standard. The decision in Houseman serves as a reminder to plaintiffs to be mindful of the high pleading burden that must be met to support a claim of breach of fiduciary duty.

 EMPLOYERS: MAKE SURE YOUR STOCK OPTION PLAN ALLOWS YOUR GRANTEES THE ABILITY TO DEFER TAXABLE INCOME

The Code 83 regulations contain an important exception to the non-transferability rule that arises mostly with stock option grants, despite the fact that restricted stock grants are the type most often impacted by Code Section 83.

The exception to the regulations relates to profits realized under “short-swing” transactions. Under Section 16(b) of the Securities Act of 1934, any profit realized by an insider on a “short-swing” transaction must be disgorged by the company or a stockholder acting on the company’s behalf. “Short-swing” transactions are the non-exempt purchases and sales (or sales and purchases) of companies’ equity securities within a period of less than six months. In the event that a company grants a stock option that is not made under the applicable Section 16(b) exemption, it is deemed a non-exempt purchase.” Generally, the shares underlying the option are subject to the Section’s restrictions for six months after the date of the grant. Any sale of these shares within the six-month period following the grant date could be matched with the “purchase” and violate the Section.

With fairness in mind, it seems to follow that if a sale of shares would subject someone to potential SEC penalties, taxation on those shares would be delayed until the risk of liability lapses. Section 83 of the Code has always recognized this point. The Code Section 83 also recognizes that if a seller is restricted from selling shares of stock previously acquired in a non-exempt transaction within the past six months because of potential liability under Section 16(b), the shares are deemed to be subject to a substantial risk of forfeiture. This risk of forfeiture does not lapse, and as a result, the grantee will not realize taxable income until six months after which the acquisition of the shares by the grantee took place.

A question remained, however, regarding whether a subsequent non-exempt purchase could further extend the substantial risk of forfeiture. The final regulations answers this question, explaining with a new example that the Internal Revenue Service and the Treasury to not respect this type of strategy. The new example clearly notes that any options granted in a non-exempt manner will only be considered subject to substantial risk of forfeiture for the first six months after the date of the grant of the shares.

This new example means that the risk of disgorging any profits under Section 16(b) generally will not have any impact on the substantial risk of forfeiture analysis.

With this new example, the IRS is essentially eliminating any opportunity to abuse the Section 16(b). The IRS is reminding grantees that transfer restrictions alone cannot delay taxation. As a result, employers should be careful to ensure that their grants contain a valid substantial risk of forfeiture to allow the grantees the ability to defer taxable income.

Free Consultation with a Utah SEC Lawyer

If you are here, you probably have a business law or securities law matter you need help with, call Ascent Law for your free consultation (801) 676-5506. We want to help you.

Ascent Law LLC 8833 S. Redwood Road, Suite C West Jordan, Utah 84088 United States Telephone: (801) 676-5506

Ascent Law LLC

4.9 stars – based on 67 reviews

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Source: http://www.ascentlawfirm.com/misleading-investors-in-structured-notes/

[cup-of-conure]

Misleading Investors in Structured Notes

The Securities and Exchange Commission announced that Merrill Lynch has agreed to pay a $10 million penalty to settle charges that it was responsible for misleading statements in offering materials provided to retail investors for structured notes linked to a proprietary volatility index.

According to the SEC’s order instituting a settled administrative proceeding, the offering materials emphasized that the notes were subject to a 2 percent sales commission and 0.75 percent annual fee.  Due to the impact of these costs over the five-year term of the notes, the volatility index would need to increase by 5.93 percent from its starting value in order for investors to earn back their original investment on the maturity date.  But the offering materials failed to adequately disclose a third cost included in the volatility index known as the “execution factor” that imposed a cost of 1.5 percent of the index value each quarter.

The notes were issued by Merrill Lynch’s parent company Bank of America Corporation, and Merrill Lynch had principal responsibility for drafting and reviewing the retail pricing supplements.  The SEC’s order finds that Merrill Lynch did not have in place effective policies or procedures to ensure its personnel drafted and approved disclosures that adequately disclosed the impact of the execution factor.

This is the agency’s second case involving misleading statements by a seller of structured notes. In October 2015, UBS AG agreed to pay $19.5 million to settle charges that it made false or misleading statements and omissions in offering materials provided to U.S. investors in structured notes linked to a proprietary foreign exchange trading strategy.

“This case continues our focus on disclosures relating to retail investments in structured notes and other complex financial products.  Offering materials for such products must be accurate and complete, and firms must implement systems and policies to ensure investors receive all material facts,” said Andrew J. Ceresney, Director of the SEC Enforcement Division.

Michael J. Osnato, Chief of the SEC Enforcement Division’s Complex Financial Instruments Unit, added, “This case demonstrates the SEC’s ongoing commitment to creating a level playing field when it comes to the sale of highly complex financial products to retail investors.”

The SEC’s order finds that Merrill Lynch violated Section 17(a)(2) of the Securities Act of 1933, which prohibits obtaining money or property by means of material misstatements and omissions in the offer or sale of securities.  Without admitting or denying the findings, Merrill Lynch agreed to cease and desist from committing or causing any similar future violations and pay a penalty of $10 million.

THE BURDEN FOR PLAINTIFFS IN CLAIMS OF BREACH OF FIDUCIARY DUTY

In Houseman v. Sagerman, the Delaware Chancery Court’s dismissal of the stockholder plaintiff’s claim for breach of fiduciary duty underscores the heightened pleading standard necessary to support such a claim by plaintiffs against a corporation’s directors arising out of allegations that the directors breached their duty in the process taken to approve the transaction.

The plaintiffs alleged that Universata’s board of directors conducted an imperfect process in regards to obtaining of the best price for stockholders. Two years after the merger between Universata, Inc. and Healthport Technologies, Inc. closed, the plaintiffs filed, among two other causes of action, the claim of breach of fiduciary duty. The plaintiffs allege that the director acted in bad faith by “knowingly and completely fail[ing] to undertake their responsibilities” to maximize shareholder value.

The Court, however, did not agree with the plaintiffs. The Court noted that the directors had, in fact, satisfied their duty of loyalty by taking into account, and acting upon, the advice of both their legal counsel and their financial advisor, Keyblanc. The allegations in the complaint showed that the Board had ultimately decided, after considering bids from several additional interested parties and negotiating the terms with Healthport, that it had obtained everything that the Board felt it could get.

Additionally, the plaintiffs failed to allege any facts that would prove a motive on the part of the directors to act in “bad faith.” The Court observed that the directors had a personal financial interest in obtaining the best price possible, dispelling the notion that the directors’ interests were not aligned with the interests of the company’s public stockholders.

According to the Court, the plaintiffs failed to plead sufficient facts to show that the board of directors of Universata “utterly failed to undertake any action to obtain the best price for stockholders.” The motion to dismiss, filed by certain directors and financial advisors of Universata, was therefore granted by the Court.

The Court, while recognizing that the approach the Board took was “less then optimal,” nevertheless granted the motion to dismiss, as the plaintiffs failed to meet the pleading standard. The decision in Houseman serves as a reminder to plaintiffs to be mindful of the high pleading burden that must be met to support a claim of breach of fiduciary duty.

 EMPLOYERS: MAKE SURE YOUR STOCK OPTION PLAN ALLOWS YOUR GRANTEES THE ABILITY TO DEFER TAXABLE INCOME

The Code 83 regulations contain an important exception to the non-transferability rule that arises mostly with stock option grants, despite the fact that restricted stock grants are the type most often impacted by Code Section 83.

The exception to the regulations relates to profits realized under “short-swing” transactions. Under Section 16(b) of the Securities Act of 1934, any profit realized by an insider on a “short-swing” transaction must be disgorged by the company or a stockholder acting on the company’s behalf. “Short-swing” transactions are the non-exempt purchases and sales (or sales and purchases) of companies’ equity securities within a period of less than six months. In the event that a company grants a stock option that is not made under the applicable Section 16(b) exemption, it is deemed a non-exempt purchase.” Generally, the shares underlying the option are subject to the Section’s restrictions for six months after the date of the grant. Any sale of these shares within the six-month period following the grant date could be matched with the “purchase” and violate the Section.

With fairness in mind, it seems to follow that if a sale of shares would subject someone to potential SEC penalties, taxation on those shares would be delayed until the risk of liability lapses. Section 83 of the Code has always recognized this point. The Code Section 83 also recognizes that if a seller is restricted from selling shares of stock previously acquired in a non-exempt transaction within the past six months because of potential liability under Section 16(b), the shares are deemed to be subject to a substantial risk of forfeiture. This risk of forfeiture does not lapse, and as a result, the grantee will not realize taxable income until six months after which the acquisition of the shares by the grantee took place.

A question remained, however, regarding whether a subsequent non-exempt purchase could further extend the substantial risk of forfeiture. The final regulations answers this question, explaining with a new example that the Internal Revenue Service and the Treasury to not respect this type of strategy. The new example clearly notes that any options granted in a non-exempt manner will only be considered subject to substantial risk of forfeiture for the first six months after the date of the grant of the shares.

This new example means that the risk of disgorging any profits under Section 16(b) generally will not have any impact on the substantial risk of forfeiture analysis.

With this new example, the IRS is essentially eliminating any opportunity to abuse the Section 16(b). The IRS is reminding grantees that transfer restrictions alone cannot delay taxation. As a result, employers should be careful to ensure that their grants contain a valid substantial risk of forfeiture to allow the grantees the ability to defer taxable income.

Free Consultation with a Utah SEC Lawyer

If you are here, you probably have a business law or securities law matter you need help with, call Ascent Law for your free consultation (801) 676-5506. We want to help you.

Ascent Law LLC 8833 S. Redwood Road, Suite C West Jordan, Utah 84088 United States Telephone: (801) 676-5506

Ascent Law LLC

4.9 stars – based on 67 reviews

Recent Posts

Silent Initial Public Offering

Bad Advice from Friends During Divorce

Strategic Alliance Lawyer

Credit Card Debt in Bankruptcy

Asset Protection for Landlords

Do Most Real Estate Companies Have Lawyers?

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source https://familylawattorneyut.wordpress.com/2018/05/19/misleading-investors-in-structured-notes/

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[lauralooney12]

Misleading Investors in Structured Notes

The Securities and Exchange Commission announced that Merrill Lynch has agreed to pay a $10 million penalty to settle charges that it was responsible for misleading statements in offering materials provided to retail investors for structured notes linked to a proprietary volatility index.

According to the SEC’s order instituting a settled administrative proceeding, the offering materials emphasized that the notes were subject to a 2 percent sales commission and 0.75 percent annual fee.  Due to the impact of these costs over the five-year term of the notes, the volatility index would need to increase by 5.93 percent from its starting value in order for investors to earn back their original investment on the maturity date.  But the offering materials failed to adequately disclose a third cost included in the volatility index known as the “execution factor” that imposed a cost of 1.5 percent of the index value each quarter.

The notes were issued by Merrill Lynch’s parent company Bank of America Corporation, and Merrill Lynch had principal responsibility for drafting and reviewing the retail pricing supplements.  The SEC’s order finds that Merrill Lynch did not have in place effective policies or procedures to ensure its personnel drafted and approved disclosures that adequately disclosed the impact of the execution factor.

This is the agency’s second case involving misleading statements by a seller of structured notes. In October 2015, UBS AG agreed to pay $19.5 million to settle charges that it made false or misleading statements and omissions in offering materials provided to U.S. investors in structured notes linked to a proprietary foreign exchange trading strategy.

“This case continues our focus on disclosures relating to retail investments in structured notes and other complex financial products.  Offering materials for such products must be accurate and complete, and firms must implement systems and policies to ensure investors receive all material facts,” said Andrew J. Ceresney, Director of the SEC Enforcement Division.

Michael J. Osnato, Chief of the SEC Enforcement Division’s Complex Financial Instruments Unit, added, “This case demonstrates the SEC’s ongoing commitment to creating a level playing field when it comes to the sale of highly complex financial products to retail investors.”

The SEC’s order finds that Merrill Lynch violated Section 17(a)(2) of the Securities Act of 1933, which prohibits obtaining money or property by means of material misstatements and omissions in the offer or sale of securities.  Without admitting or denying the findings, Merrill Lynch agreed to cease and desist from committing or causing any similar future violations and pay a penalty of $10 million.

THE BURDEN FOR PLAINTIFFS IN CLAIMS OF BREACH OF FIDUCIARY DUTY

In Houseman v. Sagerman, the Delaware Chancery Court’s dismissal of the stockholder plaintiff’s claim for breach of fiduciary duty underscores the heightened pleading standard necessary to support such a claim by plaintiffs against a corporation’s directors arising out of allegations that the directors breached their duty in the process taken to approve the transaction.

The plaintiffs alleged that Universata’s board of directors conducted an imperfect process in regards to obtaining of the best price for stockholders. Two years after the merger between Universata, Inc. and Healthport Technologies, Inc. closed, the plaintiffs filed, among two other causes of action, the claim of breach of fiduciary duty. The plaintiffs allege that the director acted in bad faith by “knowingly and completely fail[ing] to undertake their responsibilities” to maximize shareholder value.

The Court, however, did not agree with the plaintiffs. The Court noted that the directors had, in fact, satisfied their duty of loyalty by taking into account, and acting upon, the advice of both their legal counsel and their financial advisor, Keyblanc. The allegations in the complaint showed that the Board had ultimately decided, after considering bids from several additional interested parties and negotiating the terms with Healthport, that it had obtained everything that the Board felt it could get.

Additionally, the plaintiffs failed to allege any facts that would prove a motive on the part of the directors to act in “bad faith.” The Court observed that the directors had a personal financial interest in obtaining the best price possible, dispelling the notion that the directors’ interests were not aligned with the interests of the company’s public stockholders.

According to the Court, the plaintiffs failed to plead sufficient facts to show that the board of directors of Universata “utterly failed to undertake any action to obtain the best price for stockholders.” The motion to dismiss, filed by certain directors and financial advisors of Universata, was therefore granted by the Court.

The Court, while recognizing that the approach the Board took was “less then optimal,” nevertheless granted the motion to dismiss, as the plaintiffs failed to meet the pleading standard. The decision in Houseman serves as a reminder to plaintiffs to be mindful of the high pleading burden that must be met to support a claim of breach of fiduciary duty.

EMPLOYERS: MAKE SURE YOUR STOCK OPTION PLAN ALLOWS YOUR GRANTEES THE ABILITY TO DEFER TAXABLE INCOME

The Code 83 regulations contain an important exception to the non-transferability rule that arises mostly with stock option grants, despite the fact that restricted stock grants are the type most often impacted by Code Section 83.

The exception to the regulations relates to profits realized under “short-swing” transactions. Under Section 16(b) of the Securities Act of 1934, any profit realized by an insider on a “short-swing” transaction must be disgorged by the company or a stockholder acting on the company’s behalf. “Short-swing” transactions are the non-exempt purchases and sales (or sales and purchases) of companies’ equity securities within a period of less than six months. In the event that a company grants a stock option that is not made under the applicable Section 16(b) exemption, it is deemed a non-exempt purchase.” Generally, the shares underlying the option are subject to the Section’s restrictions for six months after the date of the grant. Any sale of these shares within the six-month period following the grant date could be matched with the “purchase” and violate the Section.

With fairness in mind, it seems to follow that if a sale of shares would subject someone to potential SEC penalties, taxation on those shares would be delayed until the risk of liability lapses. Section 83 of the Code has always recognized this point. The Code Section 83 also recognizes that if a seller is restricted from selling shares of stock previously acquired in a non-exempt transaction within the past six months because of potential liability under Section 16(b), the shares are deemed to be subject to a substantial risk of forfeiture. This risk of forfeiture does not lapse, and as a result, the grantee will not realize taxable income until six months after which the acquisition of the shares by the grantee took place.

A question remained, however, regarding whether a subsequent non-exempt purchase could further extend the substantial risk of forfeiture. The final regulations answers this question, explaining with a new example that the Internal Revenue Service and the Treasury to not respect this type of strategy. The new example clearly notes that any options granted in a non-exempt manner will only be considered subject to substantial risk of forfeiture for the first six months after the date of the grant of the shares.

This new example means that the risk of disgorging any profits under Section 16(b) generally will not have any impact on the substantial risk of forfeiture analysis.

With this new example, the IRS is essentially eliminating any opportunity to abuse the Section 16(b). The IRS is reminding grantees that transfer restrictions alone cannot delay taxation. As a result, employers should be careful to ensure that their grants contain a valid substantial risk of forfeiture to allow the grantees the ability to defer taxable income.

Free Consultation with a Utah SEC Lawyer

If you are here, you probably have a business law or securities law matter you need help with, call Ascent Law for your free consultation (801) 676-5506. We want to help you.

Ascent Law LLC 8833 S. Redwood Road, Suite C West Jordan, Utah 84088 United States Telephone: (801) 676-5506

Ascent Law LLC

4.9 stars – based on 67 reviews

Recent Posts

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from Michael Anderson http://www.ascentlawfirm.com/misleading-investors-in-structured-notes/

from Divorce Lawyer Park City Utah https://divorcelawyerparkcityutah.tumblr.com/post/174046043884

[rexsecuritieslaw]

Robert Turner-Former UBS Financial Services Broker-Discloses over $5.5M in Settlements -Waco, TX

Robert Turner-Former UBS Financial Services Broker-Discloses over $5.5M in Settlements -Waco, TX

Robert Turner Investigation July 2022- Waco, Texas According to publicly available records Robert Turner , (CRD# 2113736 ),  a  stockbroker who formerly worked  with UBS Financial Services, Inc.   discloses 4 prior customer disputes, 1 pending customer dispute and a termination from employment. The Financial Industry Regulatory Authority (FINRA) is the agency that licenses and regulates…

[katiekathryn12]

Misleading Investors in Structured Notes

The Securities and Exchange Commission announced that Merrill Lynch has agreed to pay a $10 million penalty to settle charges that it was responsible for misleading statements in offering materials provided to retail investors for structured notes linked to a proprietary volatility index.

According to the SEC’s order instituting a settled administrative proceeding, the offering materials emphasized that the notes were subject to a 2 percent sales commission and 0.75 percent annual fee.  Due to the impact of these costs over the five-year term of the notes, the volatility index would need to increase by 5.93 percent from its starting value in order for investors to earn back their original investment on the maturity date.  But the offering materials failed to adequately disclose a third cost included in the volatility index known as the “execution factor” that imposed a cost of 1.5 percent of the index value each quarter.

The notes were issued by Merrill Lynch’s parent company Bank of America Corporation, and Merrill Lynch had principal responsibility for drafting and reviewing the retail pricing supplements.  The SEC’s order finds that Merrill Lynch did not have in place effective policies or procedures to ensure its personnel drafted and approved disclosures that adequately disclosed the impact of the execution factor.

This is the agency’s second case involving misleading statements by a seller of structured notes. In October 2015, UBS AG agreed to pay $19.5 million to settle charges that it made false or misleading statements and omissions in offering materials provided to U.S. investors in structured notes linked to a proprietary foreign exchange trading strategy.

“This case continues our focus on disclosures relating to retail investments in structured notes and other complex financial products.  Offering materials for such products must be accurate and complete, and firms must implement systems and policies to ensure investors receive all material facts,” said Andrew J. Ceresney, Director of the SEC Enforcement Division.

Michael J. Osnato, Chief of the SEC Enforcement Division’s Complex Financial Instruments Unit, added, “This case demonstrates the SEC’s ongoing commitment to creating a level playing field when it comes to the sale of highly complex financial products to retail investors.”

The SEC’s order finds that Merrill Lynch violated Section 17(a)(2) of the Securities Act of 1933, which prohibits obtaining money or property by means of material misstatements and omissions in the offer or sale of securities.  Without admitting or denying the findings, Merrill Lynch agreed to cease and desist from committing or causing any similar future violations and pay a penalty of $10 million.

THE BURDEN FOR PLAINTIFFS IN CLAIMS OF BREACH OF FIDUCIARY DUTY

In Houseman v. Sagerman, the Delaware Chancery Court’s dismissal of the stockholder plaintiff’s claim for breach of fiduciary duty underscores the heightened pleading standard necessary to support such a claim by plaintiffs against a corporation’s directors arising out of allegations that the directors breached their duty in the process taken to approve the transaction.

The plaintiffs alleged that Universata’s board of directors conducted an imperfect process in regards to obtaining of the best price for stockholders. Two years after the merger between Universata, Inc. and Healthport Technologies, Inc. closed, the plaintiffs filed, among two other causes of action, the claim of breach of fiduciary duty. The plaintiffs allege that the director acted in bad faith by “knowingly and completely fail[ing] to undertake their responsibilities” to maximize shareholder value.

The Court, however, did not agree with the plaintiffs. The Court noted that the directors had, in fact, satisfied their duty of loyalty by taking into account, and acting upon, the advice of both their legal counsel and their financial advisor, Keyblanc. The allegations in the complaint showed that the Board had ultimately decided, after considering bids from several additional interested parties and negotiating the terms with Healthport, that it had obtained everything that the Board felt it could get.

Additionally, the plaintiffs failed to allege any facts that would prove a motive on the part of the directors to act in “bad faith.” The Court observed that the directors had a personal financial interest in obtaining the best price possible, dispelling the notion that the directors’ interests were not aligned with the interests of the company’s public stockholders.

According to the Court, the plaintiffs failed to plead sufficient facts to show that the board of directors of Universata “utterly failed to undertake any action to obtain the best price for stockholders.” The motion to dismiss, filed by certain directors and financial advisors of Universata, was therefore granted by the Court.

The Court, while recognizing that the approach the Board took was “less then optimal,” nevertheless granted the motion to dismiss, as the plaintiffs failed to meet the pleading standard. The decision in Houseman serves as a reminder to plaintiffs to be mindful of the high pleading burden that must be met to support a claim of breach of fiduciary duty.

 EMPLOYERS: MAKE SURE YOUR STOCK OPTION PLAN ALLOWS YOUR GRANTEES THE ABILITY TO DEFER TAXABLE INCOME

The Code 83 regulations contain an important exception to the non-transferability rule that arises mostly with stock option grants, despite the fact that restricted stock grants are the type most often impacted by Code Section 83.

The exception to the regulations relates to profits realized under “short-swing” transactions. Under Section 16(b) of the Securities Act of 1934, any profit realized by an insider on a “short-swing” transaction must be disgorged by the company or a stockholder acting on the company’s behalf. “Short-swing” transactions are the non-exempt purchases and sales (or sales and purchases) of companies’ equity securities within a period of less than six months. In the event that a company grants a stock option that is not made under the applicable Section 16(b) exemption, it is deemed a non-exempt purchase.” Generally, the shares underlying the option are subject to the Section’s restrictions for six months after the date of the grant. Any sale of these shares within the six-month period following the grant date could be matched with the “purchase” and violate the Section.

With fairness in mind, it seems to follow that if a sale of shares would subject someone to potential SEC penalties, taxation on those shares would be delayed until the risk of liability lapses. Section 83 of the Code has always recognized this point. The Code Section 83 also recognizes that if a seller is restricted from selling shares of stock previously acquired in a non-exempt transaction within the past six months because of potential liability under Section 16(b), the shares are deemed to be subject to a substantial risk of forfeiture. This risk of forfeiture does not lapse, and as a result, the grantee will not realize taxable income until six months after which the acquisition of the shares by the grantee took place.

A question remained, however, regarding whether a subsequent non-exempt purchase could further extend the substantial risk of forfeiture. The final regulations answers this question, explaining with a new example that the Internal Revenue Service and the Treasury to not respect this type of strategy. The new example clearly notes that any options granted in a non-exempt manner will only be considered subject to substantial risk of forfeiture for the first six months after the date of the grant of the shares.

This new example means that the risk of disgorging any profits under Section 16(b) generally will not have any impact on the substantial risk of forfeiture analysis.

With this new example, the IRS is essentially eliminating any opportunity to abuse the Section 16(b). The IRS is reminding grantees that transfer restrictions alone cannot delay taxation. As a result, employers should be careful to ensure that their grants contain a valid substantial risk of forfeiture to allow the grantees the ability to defer taxable income.

Free Consultation with a Utah SEC Lawyer

If you are here, you probably have a business law or securities law matter you need help with, call Ascent Law for your free consultation (801) 676-5506. We want to help you.

Ascent Law LLC 8833 S. Redwood Road, Suite C West Jordan, Utah 84088 United States Telephone: (801) 676-5506

Ascent Law LLC

4.9 stars – based on 67 reviews

Recent Posts

Silent Initial Public Offering

Bad Advice from Friends During Divorce

Strategic Alliance Lawyer

Credit Card Debt in Bankruptcy

Asset Protection for Landlords

Do Most Real Estate Companies Have Lawyers?

from Michael Anderson http://www.ascentlawfirm.com/misleading-investors-in-structured-notes/

from Divorce Attorney Salt Lake City https://divorceattorney121.blogspot.com/2018/05/misleading-investors-in-structured-notes.html

[mikednolan]

Thurston Spinger Advisor Paul Muran Subject to Customer Complaints

According to BrokerCheck records financial advisor Paul Muran (Muran), currently employed by Thurston Spinger Financial (Thurston Spinger) has been subject to four customer complaints during his career.  In addition, Muran has been twice terminated for cause.  According to records kept by The Financial Industry Regulatory Authority (FINRA), the complaints against Muran concern allegations of unsuitable investments and allegations of overconcentration involving equities, oil and gas, life settlement contracts, and structured products.

In March 2011, Muran was terminated by Merrill Lynch Pierce, Fenner and Smith, Inc. (Merrill Lynch) over allegations that he participated in an outside investment without the firm’s approval.  Thereafter, in October 2017 Muran was then terminated by UBS Financial Services, Inc. (UBS) on similar charges that Muran facilitated client purchases of life-settlement products not listed on firm platform, failing to escalate a client complaint, responding to the complaint without managerial approval, and failing to disclose a client’s subsequent investment in an outside passive investment.

In November 2018 a customer complained that Muran recommended investments that violated the securities laws by recommending a life settlement contract that was misrepresented and unsuitable. The client further alleges unauthorized trading of structured products and that the client had no idea she was borrowing from her loan account.  The customer alleges an unknown amount of damages but the claim is currently settled for $250,000.

In May 2018 a customer complained that Muran recommended investments that violated the securities laws including unsuitable investments, unauthorized credit line agreement, unauthorized trades, uninvested funds, and lost market opportunity. The customer claimed $183,000 in damages and is currently pending.

Brokers are required under the securities laws to treat their clients fairly.  This obligation includes the duties to disclose material risks of the investments they recommend and to present products, particularly complex or confusing products, in a fair and balanced manner that allows the client to evaluate the recommendation.  Another important obligation advisors have is to make only suitable recommendations for investments to the client.  There are many investments that are not appropriate for the majority of investors or for certain investors given their risk tolerance, age, and other factors.  Advisors should not present these investment options to clients.  There are two screens that advisors must employ to determine whether an investment is suitable for a client.  First, there must be a reasonable basis for the recommendation – meaning that the product has been investigated and due diligence conducted into the investment’s features, benefits, risks, and other relevant factors.  The advisor must conclude that the investment is suitable for at least some investors and some securities may be suitable for no one.  Second, the broker then must match the investment as being appropriate for the customer’s specific investment needs and objectives such as the client’s retirement status, long or short term goals, age, disability, income needs, or any other relevant factor.

According to newsources, a study revealed that 7.3% of financial advisors had a customer complaint on their record when records from 2005 to 2015 were examined.  Brokers must publicly disclose reportable events on their BrokerCheck reports that include customer complaints, IRS tax liens, judgments, investigations, terminations, and criminal cases.  In addition, research has show a disturbing pattern with troublesome brokers where brokers with high numbers of customer complaints are not kicked out of the industry but instead these brokers are sifted to lower quality brokerage firms with loose hiring practices and higher rates of customer complaints.  These lower quality firms may average brokers with five times as many complaints as the industry average.

Murans entered the securities industry in 1999.  From April 2003 until March 2011 Murans was registered with Merrill Lynch.  From March 2011 until November 2017 Murans was associated with UBS.  Finally, since October 2017 Murans has been registered with Thurston Springer out of the firm’s Indianapolis, Indiana office location.

Investors who have suffered losses are encouraged to contact us at (800) 810-4262 for consultation.  At Gana Weinstein LLP, our attorneys are experienced representing investors who have suffered securities losses due to the mishandling of their accounts.  Claims may be brought in securities arbitration before FINRA.  Our consultations are free of charge and the firm is only compensated if you recover.

from Securities Fraud https://www.securitieslawyersblog.com/thurston-spinger-advisor-paul-muran-subject-to-customer-complaints/

[beulahgonzalez]

Misleading Investors in Structured Notes

The Securities and Exchange Commission announced that Merrill Lynch has agreed to pay a $10 million penalty to settle charges that it was responsible for misleading statements in offering materials provided to retail investors for structured notes linked to a proprietary volatility index.

According to the SEC’s order instituting a settled administrative proceeding, the offering materials emphasized that the notes were subject to a 2 percent sales commission and 0.75 percent annual fee.  Due to the impact of these costs over the five-year term of the notes, the volatility index would need to increase by 5.93 percent from its starting value in order for investors to earn back their original investment on the maturity date.  But the offering materials failed to adequately disclose a third cost included in the volatility index known as the “execution factor” that imposed a cost of 1.5 percent of the index value each quarter.

The notes were issued by Merrill Lynch’s parent company Bank of America Corporation, and Merrill Lynch had principal responsibility for drafting and reviewing the retail pricing supplements.  The SEC’s order finds that Merrill Lynch did not have in place effective policies or procedures to ensure its personnel drafted and approved disclosures that adequately disclosed the impact of the execution factor.

This is the agency’s second case involving misleading statements by a seller of structured notes. In October 2015, UBS AG agreed to pay $19.5 million to settle charges that it made false or misleading statements and omissions in offering materials provided to U.S. investors in structured notes linked to a proprietary foreign exchange trading strategy.

“This case continues our focus on disclosures relating to retail investments in structured notes and other complex financial products.  Offering materials for such products must be accurate and complete, and firms must implement systems and policies to ensure investors receive all material facts,” said Andrew J. Ceresney, Director of the SEC Enforcement Division.

Michael J. Osnato, Chief of the SEC Enforcement Division’s Complex Financial Instruments Unit, added, “This case demonstrates the SEC’s ongoing commitment to creating a level playing field when it comes to the sale of highly complex financial products to retail investors.”

The SEC’s order finds that Merrill Lynch violated Section 17(a)(2) of the Securities Act of 1933, which prohibits obtaining money or property by means of material misstatements and omissions in the offer or sale of securities.  Without admitting or denying the findings, Merrill Lynch agreed to cease and desist from committing or causing any similar future violations and pay a penalty of $10 million.

THE BURDEN FOR PLAINTIFFS IN CLAIMS OF BREACH OF FIDUCIARY DUTY

In Houseman v. Sagerman, the Delaware Chancery Court’s dismissal of the stockholder plaintiff’s claim for breach of fiduciary duty underscores the heightened pleading standard necessary to support such a claim by plaintiffs against a corporation’s directors arising out of allegations that the directors breached their duty in the process taken to approve the transaction.

The plaintiffs alleged that Universata’s board of directors conducted an imperfect process in regards to obtaining of the best price for stockholders. Two years after the merger between Universata, Inc. and Healthport Technologies, Inc. closed, the plaintiffs filed, among two other causes of action, the claim of breach of fiduciary duty. The plaintiffs allege that the director acted in bad faith by “knowingly and completely fail[ing] to undertake their responsibilities” to maximize shareholder value.

The Court, however, did not agree with the plaintiffs. The Court noted that the directors had, in fact, satisfied their duty of loyalty by taking into account, and acting upon, the advice of both their legal counsel and their financial advisor, Keyblanc. The allegations in the complaint showed that the Board had ultimately decided, after considering bids from several additional interested parties and negotiating the terms with Healthport, that it had obtained everything that the Board felt it could get.

Additionally, the plaintiffs failed to allege any facts that would prove a motive on the part of the directors to act in “bad faith.” The Court observed that the directors had a personal financial interest in obtaining the best price possible, dispelling the notion that the directors’ interests were not aligned with the interests of the company’s public stockholders.

According to the Court, the plaintiffs failed to plead sufficient facts to show that the board of directors of Universata “utterly failed to undertake any action to obtain the best price for stockholders.” The motion to dismiss, filed by certain directors and financial advisors of Universata, was therefore granted by the Court.

The Court, while recognizing that the approach the Board took was “less then optimal,” nevertheless granted the motion to dismiss, as the plaintiffs failed to meet the pleading standard. The decision in Houseman serves as a reminder to plaintiffs to be mindful of the high pleading burden that must be met to support a claim of breach of fiduciary duty.

EMPLOYERS: MAKE SURE YOUR STOCK OPTION PLAN ALLOWS YOUR GRANTEES THE ABILITY TO DEFER TAXABLE INCOME

The Code 83 regulations contain an important exception to the non-transferability rule that arises mostly with stock option grants, despite the fact that restricted stock grants are the type most often impacted by Code Section 83.

The exception to the regulations relates to profits realized under “short-swing” transactions. Under Section 16(b) of the Securities Act of 1934, any profit realized by an insider on a “short-swing” transaction must be disgorged by the company or a stockholder acting on the company’s behalf. “Short-swing” transactions are the non-exempt purchases and sales (or sales and purchases) of companies’ equity securities within a period of less than six months. In the event that a company grants a stock option that is not made under the applicable Section 16(b) exemption, it is deemed a non-exempt purchase.” Generally, the shares underlying the option are subject to the Section’s restrictions for six months after the date of the grant. Any sale of these shares within the six-month period following the grant date could be matched with the “purchase” and violate the Section.

With fairness in mind, it seems to follow that if a sale of shares would subject someone to potential SEC penalties, taxation on those shares would be delayed until the risk of liability lapses. Section 83 of the Code has always recognized this point. The Code Section 83 also recognizes that if a seller is restricted from selling shares of stock previously acquired in a non-exempt transaction within the past six months because of potential liability under Section 16(b), the shares are deemed to be subject to a substantial risk of forfeiture. This risk of forfeiture does not lapse, and as a result, the grantee will not realize taxable income until six months after which the acquisition of the shares by the grantee took place.

A question remained, however, regarding whether a subsequent non-exempt purchase could further extend the substantial risk of forfeiture. The final regulations answers this question, explaining with a new example that the Internal Revenue Service and the Treasury to not respect this type of strategy. The new example clearly notes that any options granted in a non-exempt manner will only be considered subject to substantial risk of forfeiture for the first six months after the date of the grant of the shares.

This new example means that the risk of disgorging any profits under Section 16(b) generally will not have any impact on the substantial risk of forfeiture analysis.

With this new example, the IRS is essentially eliminating any opportunity to abuse the Section 16(b). The IRS is reminding grantees that transfer restrictions alone cannot delay taxation. As a result, employers should be careful to ensure that their grants contain a valid substantial risk of forfeiture to allow the grantees the ability to defer taxable income.

Free Consultation with a Utah SEC Lawyer

If you are here, you probably have a business law or securities law matter you need help with, call Ascent Law for your free consultation (801) 676-5506. We want to help you.

Ascent Law LLC 8833 S. Redwood Road, Suite C West Jordan, Utah 84088 United States Telephone: (801) 676-5506

Ascent Law LLC

4.9 stars – based on 67 reviews

Recent Posts

Silent Initial Public Offering

Bad Advice from Friends During Divorce

Strategic Alliance Lawyer

Credit Card Debt in Bankruptcy

Asset Protection for Landlords

Do Most Real Estate Companies Have Lawyers?

http://www.ascentlawfirm.com/misleading-investors-in-structured-notes/