CPA TO PAY $400,000 TO GOVERNMENT FOR WORK DONE WHILE SUSPENDED

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 
SEC Awarded $400,000 in Disgorgement from Certified Public Accountant for His Violations of Commission Suspension Order

The Securities and Exchange Commission today announced a court ruling that requires certified public accountant Michael H. Taber to pay the government $400,000 in compensation he received while suspended from appearing or practicing before the Commission as an accountant.

According to the SEC's application filed in U.S. District Court for the Southern District of New York, Taber violated a 2004 Commission Order suspending him. The 2004 Order was based on a fraud injunction obtained against Taber, in SEC v. Del Global Techs. Corp., 04 CV 4092 (S.D.N.Y. filed June 1, 2004), for his participation in a fraudulent scheme as the chief financial officer of a New York-based company. While suspended, Taber repeatedly drafted, compiled, and edited information and data that was incorporated into requisite periodic reports that public companies filed with the SEC.

On October 3, 2013, the district court entered an order enforcing compliance by Taber with the 2004 Commission Order and directing the parties to submit their positions regarding disgorgement. On December 5, 2013, U.S. District Judge Katherine B. Forrest entered an order awarding the Commission $400,000 in disgorgement from Taber, who is licensed as a certified public accountant in New York and is currently a Florida resident.

CFTC NAMES MARK P. WETJEN AS ACTING CHAIRMAN

FROM:  COMMODITY FUTURES TRADING COMMISSION 
CFTC Names Mark P. Wetjen Acting Chairman of the Commission

Washington, DC —The U.S. Commodity Futures Trading Commission (CFTC or Commission) today announced that the members of the Commission have unanimously elected Commissioner Mark P. Wetjen to serve as Acting Chairman upon the end of Chairman Gary Gensler’s service.

“I am honored to have been chosen to serve as Acting Chairman,” said Commissioner Wetjen. “I thank my colleagues, Commissioners Chilton and O’Malia, for their support and look forward to working collaboratively to oversee the ongoing implementation of the Dodd-Frank Act and the continuation of the CFTC’s critical mission. I also would like to thank Chairman Gensler for his leadership of this agency and of the financial reform effort in the aftermath of the financial crisis. I am eager to continue that effort in consultation with my fellow commissioners.”

“I am so pleased that my friend and partner Mark Wetjen will be Acting Chairman at such an exciting time for the agency,” Gensler said. “Mark has worked tirelessly to bring swaps market reform to life. The Commission has greatly benefitted from his thoughtful insight. The CFTC will be well served with Mark at the helm as it continues the important work of implementing financial reforms for the benefit of the public.”

Wetjen was sworn in as a Commissioner of the CFTC on October 25, 2011. Prior to his CFTC service, he worked in the U.S. Senate as a senior leadership staffer advising on all financial-services-related matters. Before his service in the U.S. Senate, Commissioner Wetjen was a lawyer in private practice.

Born and raised in Dubuque, Iowa, Commissioner Wetjen received a bachelor’s degree from Creighton University and a law degree from the University of Iowa College of Law.

CFTC HAS NEW ACTING CHIEF ECONOMISTS

FROM:  COMMODITY FUTURES TRADING COMMISSION 
December 16, 2013
CFTC Announces Sayee Srinivasan as the Acting Chief Economist

Washington, DC — U.S. Commodity Futures Trading Commission (CFTC or Commission) Chairman Gary Gensler today announced that Sayee Srinivasan has been named Acting Chief Economist.

“I am very pleased that such a talented economist as Sayee will lead the Office of the Chief Economist,” said Chairman Gensler. “Sayee’s work has been critical to bringing much-needed transparency to the swaps marketplace. His experience and market acumen will be very valuable as the Commission continues working to promote transparency in the derivatives markets.”

In his new role, Mr. Srinivasan will be responsible for leading the Commission’s efforts drafting policy and rule-making; advising the Chairman, Commission and senior staff on industry practices and CFTC policy implications; assisting the Commission in developing capacity to analyze swaps data; publishing the Weekly Swaps Reports and guiding research as it relates to market structure for futures and swap markets.”

“The derivatives markets are in a critical stage of transition from over-the-counter to regulated platforms,” said Mr. Srinivasan. “I am excited for the opportunity to work with the talented CFTC staff and with other agencies to leverage new data sources to track and improve our understanding of these markets.”

Mr. Srinivasan joined the Commission in 2012 in the Office of the Chief Economist. He has already made critical contributions on policy and rule development on issues pertaining to the market structure of futures and swaps markets. Prior to joining the Commission, he worked with the Chicago Mercantile Exchange, the Bombay Stock Exchange, the National Stock Exchange of India, and OptiMark Technologies focusing on market and product design, trading rules, and business development across a broad range of asset classes, and both cash and derivatives markets. His research interest includes regulatory policy development on issues related to pre-trade, trade, and post trade technology, systems, processes and risk management.

Mr. Srinivasan has a Ph.D. and an M.A. in Economics from the University of Texas at Austin. He has a B.A. in Accounting and an M.A. in Finance from University of Bombay (now University of Mumbai).

SEC CHARGES HEDGE FUND ADVISER WITH INTERNAL CONTROLS FAILURE

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 
The Securities and Exchange Commission today charged a London-based hedge fund adviser and its former U.S.-based holding company with internal controls failures that led to the overvaluation of a fund’s assets and inflated fee revenue for the firms.

GLG Partners L.P. and its former holding company GLG Partners Inc. agreed to pay nearly $9 million to settle the SEC’s charges.

“Investors depend upon fund advisers to have proper controls in place to ensure that valuations and fees are not inflated,” said Antonia Chion, an associate director in the SEC’s Division of Enforcement.  “GLG’s pricing committee did not have the information and time it needed to properly value assets.”

According to the SEC’s order instituting settled administrative proceedings, the GLG firms managed the GLG Emerging Markets Special Assets 1 Fund.  From November 2008 to November 2010, GLG’s internal control failures caused the overvaluation of the fund’s 25 percent private equity stake in an emerging market coal mining company.  The overvaluation resulted in inflated fees to the GLG firms and the overstatement of assets under management in the holding company’s filings with the SEC.

According to the SEC’s order, GLG’s asset valuation policies required the valuation of the coal company’s position to be determined monthly by an independent pricing committee.  On a number of occasions, GLG employees received information calling into question the $425 million valuation for the coal company position.  But there were inadequate policies and procedures to ensure that such relevant information was provided to the independent pricing committee in a timely manner or even at all.  There was confusion among GLG’s fund managers, middle-office accounting personnel, and senior management about who was responsible for elevating valuation issues to the independent pricing committee.  

The SEC’s order finds that GLG Partners L.P. violated and GLG Partners Inc. caused violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934 and Rules 12b-20, 13a-1, 13a-11, and 13a-13.  The order requires the firms to hire an independent consultant to recommend new policies and procedures for the valuation of assets and test the effectiveness of the policies and procedures after adoption.  The order directs the firms to cease and desist from violating or causing violations of various provisions of the federal securities laws.  The firms consented to the order without admitting or denying the charges.  The SEC is establishing a Fair Fund to distribute money to harmed fund investors.  The GLG firms agreed to pay disgorgement of $7,766,667, prejudgment interest of $437,679, and penalties totaling $750,000.

The SEC’s investigation was conducted by Jonathan Cowen, Ann Rosenfield, Robert Dodge, and Lisa Deitch.  The case arose from the SEC’s Aberrational Performance Inquiry, an initiative by the Enforcement Division’s Asset Management Unit that uses proprietary risk analytics to identify hedge funds with suspicious returns. Performance that is flagged as inconsistent with a fund’s investment strategy or other benchmarks forms a basis for further investigation and scrutiny.

The SEC appreciates the assistance of the Financial Conduct Authority in the United Kingdom.

CFTC CHAIRMAN GENSLER MAKES REMARKS ON " A TRANSFORMED MARKETPLACE"

FROM: COMMODITY FUTURES TRADING COMMISSION 
Remarks of Chairman Gary Gensler at a D.C. Bar Event - "A Transformed Marketplace"

December 11, 2013

Thank you, Alice and Peter, for your kind introductions. I also want to thank the DC Bar for inviting me here to speak today.

Five years ago, when President-elect Obama asked me to serve, the U.S. economy was in a free fall.

Five years ago, the financial system and the financial regulatory system failed the American public.

Five years ago, the unregulated swaps market was at the center of the crisis.

Five years ago, when Tim Geithner, Mary Schapiro and I sat down in the presidential transition offices with yellow pads to contemplate our upcoming confirmation hearings, we knew that modernizing the financial system wouldn’t be easy. We knew that ever since our founding, democracy is noisy and messy.

We knew, though, that we had to come together to bring common-sense rules of the road to the markets.

With 94 percent of private sector jobs outside of finance, President Obama was looking for solutions to ensure finance better serves the rest of the economy.

I was honored to be asked to join the Commodity Futures Trading Commission (CFTC), our nation’s futures market regulator.

The reforms of the 1930s had tasked the CFTC to swim in a very important lane – derivatives. The futures market has allowed farmers, ranchers and producers to lock in the price of a commodity since the 1860s. The derivatives lane, though, got a lot deeper a century later with the emergency of the vast swaps market. Both futures and swaps are essential to our economy and the way that businesses and investors manage risk.

The President placed great confidence in the CFTC when he asked the agency to help bring much-needed transparency and oversight to the dark, closed swaps market.

This confidence in the CFTC was well placed. As we’ve seen time and again in our nation’s history, when faced with real challenges, we Americans from different walks of life and perspectives find a way to come together to solve them.

The talented CFTC staff and my fellow Commissioners – Mike Dunn, Jill Sommers, Bart Chilton, Scott O’Malia and Mark Wetjen – really have delivered for the American public.

The CFTC has finalized 68 rules, orders and guidances. We have completed nearly all of the agency’s rulemakings, and the initial major compliance dates are behind us.

These reforms took into account nearly 60,000 public comments and input from more than 2,200 meetings and 21 public roundtables.

During this process, the Commission largely found consensus. In fact, two-thirds of our final actions have been unanimous, and nearly 85 percent have been bipartisan. Even when we disagreed, I believe that we did so agreeably.

Now, bright lights of transparency are shining on the $380 trillion swaps market.

Now, a majority of the swaps market is being centrally cleared – lowering risk and bringing access to anyone wishing to compete.

Now, 91 swap dealers have registered and – for the first time – are being overseen for their swaps activity.

Five years after the financial crisis, the swaps marketplace truly has been transformed.

Transparency

Foremost, the swaps marketplace has been transformed with transparency.

First, the public can see the price and volume of each swap transaction as it occurs.

This information is available, free of charge, to everyone in the public. The data is listed in real time – like a modern-day tickertape – on the websites of the three swap data repositories (SDRs).

Second, building on the CFTC’s long tradition of promoting transparency, we recently began publishing a Weekly Swaps Report to provide the public with a detailed view of the swaps marketplace.

Third, regulators also have gained transparency into the details on each of the 1.8 million transactions and positions in the SDRs.

Fourth, starting this fall, the public – for the first time –is benefitting from new transparency, impartial access and competition on regulated swap trading platforms.

We now have 19 temporarily registered swap execution facilities where more than a quarter of a trillion dollars in swaps trading is occurring on average per day.

This pre-trade transparency lowers costs for investors, businesses and consumers, as it shifts information from dealers to the broader public.

Fifth, I anticipate that by mid-February, the congressionally mandated trade execution requirement will become effective for a significant portion of the interest rate and credit index swap markets.

Clearing

The swaps market also has been transformed with mandated central clearing for financial entities as well as dealers.

Central clearing lowers risk and fosters competition by allowing customers ready access to the market.

Clearinghouses have operated successfully at the center of the futures market for over 100 years – through two world wars, the Great Depression and the 2008 crisis.

Reforms have taken us from only 21 percent of the interest rate swaps market being cleared five years ago to more than 70 percent of the market this fall. More than 60 percent of new credit index swaps are being cleared.

Further, we no longer have the significant time delays that were once associated with swaps clearing.

Five years ago, swaps clearing happened either at the end of the day or even just once a week. This left a significant period of bilateral credit risk in the market, undermining a key benefit of central clearing.

Now reforms require pre-trade credit checks and straight-through processing for swaps trades intended for clearing.

With 99 percent of swaps clearing occurring within 10 seconds, market participants no longer have to worry about credit risk when entering into swap trades intended to be cleared.

Swap Dealers

The market also has been transformed for swap dealers.

Five years ago, swap dealers had no specific requirements with regard to their swap dealing activity. AIG’s downfall was a clear example of what happens with no registration or licensing requirement for such dealers.

Today, all of the world’s largest financial institutions in the global swaps market are coming under reforms.

These reforms include new business conduct standards for risk management, documentation of swap transactions, confirmations, sales practices, recordkeeping and reporting.

With the approval of the Volcker Rule yesterday, swap dealers associated with banking entities will have to comply with new risk-reducing requirements prohibiting proprietary trading.

Further, the transformed marketplace covers the far-flung operations of U.S. enterprises, including their offshore branches and guaranteed affiliates.

The President and Congress were clear in financial reform that we had to learn the lessons of the 2008 financial crisis.

AIG nearly brought down the U.S. economy through its guaranteed affiliate operating under a French bank license in London.

Lehman Brothers had 3,300 legal entities when it failed. Its main overseas affiliate was guaranteed here in the United States, and it had 130,000 outstanding swap transactions.

The lessons of modern finance are clear. If reform does not cover the far flung operations of U.S. enterprises, trades inevitably would just be booked in offshore branches or affiliates. If reform does not cover these far-flung operations, rather than reforming the financial system, we simply would be providing a significant loophole.

Benchmark Interest Rates

Five years ago, as the public now knows, multiple banks were pervasively rigging the world’s most important benchmark interest rates.

The public trust has been violated through bad actors readily manipulating these benchmark interest rates.

I wish I could say that this won’t happen again, but I can’t.

As LIBOR and Euribor are not anchored in observable transactions, they are more akin to fiction than fact.

That’s the fundamental challenge that the CFTC and law enforcement agencies around the globe have so dramatically revealed.

We’ve made progress addressing governance and conflicts of interest regarding such benchmarks. But this alone will not resolve the fundamental vulnerability of these benchmarks – the lack of transactions in the interbank market underlying them.

That is why the work of the Financial Stability Board to find replacements for LIBOR and to recommend a means to transition to such alternatives is so critical. The CFTC looks forward to continuing work with the international community on these much-needed reforms.

Customer Protection

Market events in the last five years highlighted the need to further ensure for the protection of customer funds. Segregation and the protection of customer funds is the core foundation of the futures and swaps markets.

The CFTC went through a two-year process with market participants – and six sets of finalized rules – to comprehensively reform the customer protection regime for futures and swaps.

Resources

One of the most remarkable things about the CFTC is that today, it’s only five percent larger than it was 20 years ago.

Since then, though, this small, effective agency has taken on the job of overseeing the $380 trillion swaps market, which is a dozen times the size of the futures market we have historically overseen. Further, the futures market itself has grown fivefold since the 1990s.

Due to the budget challenges in Washington, not only has the CFTC been shrinking, but we had to notify employees of administrative furloughs.

Though the agency has yet to secure necessary funding from Congress, I continue to have faith that one day the CFTC will be funded at levels aligned with its vastly expanded mission.

The Journey Ahead

Though the CFTC has completed nearly all the rules of the road for the swaps market, reform is an ongoing journey.

Just as our nation has come together on financial reform these last five years, our regulations will continuously need to evolve. We always need to be open to changes in the markets and how best to promote transparency, competition and protect the public.

The journey is not over in transitioning to a replacement for LIBOR or in adequately funding the CFTC.

Further, as Tim, Mary and I understood five years ago, democracy – and reform – can be noisy and messy.

As market participants look to maximize their revenues and customer support, they, at times, may look to arbitrage our rules versus other rules around the globe.

I think that we’re in very firm setting on clearing, data reporting, real-time reporting, and business conduct reforms -- all of which have been implemented. There are bound to be further challenges, however, from the financial community with regard to the appropriate level of pre-trade transparency on trading platforms, as well as the scope of the cross-border application of reform.

Conclusion

I’d like to close by saying I couldn’t be more proud of the dedicated group of public servants at the CFTC. I am honored to have served along with them during such a remarkable time in the history of the agency.

Our nation benefits from free market capitalism, but it’s critical that we have common-sense rules of road to ensure that finance best serves the public at large.

On a personal note, as this is my last public speech as Chairman of the CFTC, I want to thank both Stephanie Allen and her predecessor Scott Schneider, the speechwriters whose cleverness and agility with words, not to mention the willingness to work with me, has allowed me these last five years to bring transparency to what we’re doing at the CFTC.

I also want to extend my appreciation to all the members of the media who have reported on us and followed us during this remarkable journey these last five years. As always, I’ll do one more press avail after taking questions from the audience.

Thank you.

TWO DEFENDANTS SETTLE CHARGES WITH FTC REGARDING MORTGAGE AND RELIEF SERVICES SCHEMES

FROM:  FEDERAL TRADE COMMISSION 
Defendants in Two Financial Services Schemes Banned from Providing Mortgage and Debt Relief Services
December 12, 2013

The defendants in two separate alleged scams have settled charges with the Federal Trade Commission and will be banned from providing mortgage- and debt-relief services.  The cases are part of the FTC’s continuing crackdown on scams targeting consumers in financial distress, including debt relief and credit repair scams, and mortgage relief scams.

American Mortgage Consulting Group; Home Guardian Management Solutions:

Last year, as part of the federal Distressed Homeowner Initiative, the FTC charged Mark Nagy Atalla and his companies, American Mortgage Consulting Group and Home Guardian Management Solutions, with offering false promises of mortgage-rate reductions to consumers trying to hold onto their homes.  Under the settlement with the FTC, the defendants will surrender their assets and be banned from providing mortgage relief or debt relief services to consumers.

According to the FTC’s complaint, Atalla and his companies violated the FTC Act and the Mortgage Assistance Relief Services Rule (known as the MARS Rule or Regulation O) when they promised to substantially lower consumers’ monthly mortgage payments in exchange for an up-front fee ranging from $1,495 to $4,495.  The FTC’s complaint alleged that in addition to misrepresenting the likelihood that consumers would obtain a mortgage modification, the defendants falsely represented that consumers who did not receive a modification would receive full refunds, falsely represented that they were affiliated with the U.S. government, and falsely claimed to provide legal representation to consumers.  Also, in violation of the MARS Rule, the defendants allegedly told consumers to stop communicating with their lenders, and failed to make Rule-mandated disclosures intended to ensure that consumers understand transactions with mortgage-assistance relief service providers and their rights under the Rule.  A federal judge granted the FTC’s request for a temporary restraining order and preliminary injunction, froze the defendants’ assets, and appointed a receiver to take over the companies.      

Under the terms of the agreed-upon settlement, in addition to being banned from participating in the debt relief and mortgage relief industries, the defendants are prohibited from misrepresenting the features of any product or service, and making claims without competent and reliable evidence.

Also under the settlement, Atalla faces a $514,910 judgment, which will be suspended when he turns over various items of personal property and proceeds from the sale of other assets.

Southeast Trust, LLC:
The defendants in this case – Southeast Trust, LLC (formerly known as The Debt School, LLC, also doing business as Financial Freedom Credit Counseling) and the company’s principal, Paul A. Wexler – allegedly violated both the FTC Act and the agency’s Telemarketing Sales Rule by charging cash-strapped consumers hundreds of dollars based on misrepresentations that they could obtain credit card interest rates as low as zero percent.  The operation also routinely called consumers on the Do Not Call Registry, according to the FTC.

Under the agreed-upon settlement, the defendants are banned from providing debt- and mortgage-relief services and from making robocalls and prohibited from calling consumers on the Do Not Call list.

The complaint alleged that the defendants claimed to be a non-profit group that targeted consumers with robocalls, and with ads on websites such as southeasttrust.com and   thedebtschool.com.  The defendants promised a single monthly payment, an interest rate ranging from zero percent to six percent, and that consumers would be debt free in three to five years.

The defendants are prohibited from collecting money from consumers who used their services, making unauthorized withdrawals from consumers’ bank accounts, misrepresenting the features and characteristics of financial or other types of products and services, and making unsupported claims about products and services.  They also are required to keep any consumer information they have confidential, and destroy it promptly.

The order imposes a $2.7 million judgment against Wexler, which is suspended due to his inability to pay.  If it is determined that the financial information the defendants gave the FTC was untruthful, the full amount of the judgment will become due.

For more information about how to handle robocalls and debt relief offers, see Robocalls and Settling Your Credit Card Debts. For more information about avoiding mortgage and foreclosure rescue scams see Homes and Mortgages. The Commission vote approving both proposed consent decrees was 4-0.  The FTC filed the proposed consent decree for the American Mortgage Consulting Group and Home Guardian Management Solutions case in the U.S. District Court for the Central District of California Southern Division, and the court signed and entered it on September 23, 2013.  The FTC filed the proposed consent decree for the Southeast Trust, LLC case in the U.S. District Court for the Southern District of Florida, and the court signed and entered it on September 23, 2013.

NOTE:  Consent decrees have the force of law when approved and signed by the District Court judge.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them.  To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357).  The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad.  The FTC’s website provides free information on a variety of consumer topics.  Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.