April 17 (Bloomberg) -- The U.S. Securities and Exchange Commission will conduct examinations of more than 50 registered investment advisers to assess “cybersecurity preparedness.”
In an announcement on its website, the agency said its Office of Compliance Inspections and Examinations will assess whether registered broker-dealers and investment advisers conduct periodic risk assessments, have chief information security officers and maintain cybersecurity incident insurance.
The announcement follows an SEC roundtable discussion last month on the exposure of stock exchanges, brokerages and other financial firms to cyber-attacks.
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In the Courts
BofA Reaches $950 Million Accord on FGIC-Backed Mortgage Bonds
Bank of America Corp. is paying $950 million to settle claims that its Countrywide unit pooled faulty mortgages into securities that helped hobble Financial Guaranty Insurance Co. and saddled buyers with losses.
The accords resolve litigation with FGIC and outstanding and potential claims that the lender is required to repurchase defective home loans backing the bonds because they failed to match their promised quality, Bank of America said yesterday in a statement. The second-largest U.S. lender entered into the deals with FGIC, which guaranteed the debt, and Bank of New York Mellon Corp., the trustee for the securities.
Chief Executive Officer Brian T. Moynihan has committed more than $50 billion to resolve disputes with regulators and investors over foreclosures and shoddy mortgages. The latest agreement reimburses FGIC and investors in nine bond deals tied to home-equity loans made by Countrywide -- which the bank bought in 2008 -- including Fir Tree Partners, a $12 billion hedge fund. Fir Tree said in a separate statement that it helped structure the accord.
The deal, announced yesterday, differs from previous settlements between lenders and bond insurers over bad home loans in that it offers cash directly to mortgage-bond investors. It also veers from previous multibillion-dollar accords between banks and investor groups because it doesn’t require court approval, so the money will flow almost immediately to the bondholders.
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MF Global Judge Narrows Customer Suit Alleging Fraud Claims
MF Global Holdings Ltd.’s independent directors won dismissal of nine claims, including fraud and violations of New York business law, in a lawsuit brought by a customer of the defunct brokerage company.
Claims against J.C. Flowers & Co. tied to the conduct of former MF Global Chairman Jon Corzine also were thrown out yesterday by U.S. District Judge Victor Marrero in Manhattan, who previously narrowed claims in a related suit against Corzine brought by customers suing in the wake of the company’s 2011 collapse.
“We are generally pleased with the decision, as it keeps the core claims against Jon Corzine and other MF Global executives intact,” Edward Pinter, a lawyer for plaintiff Sapere CTA Fund LLP, said in a phone interview. “We do remain confident that Corzine and the other defendants will be held accountable for their acts.”
MF Global filed for bankruptcy on Oct. 31, 2011, after a $6.3 billion bet on bonds of some of Europe’s most indebted nations. Customers alleged in lawsuits against Corzine and other former executives that more than $1.6 billion that should have been segregated was transferred to other parts of the company during a liquidity crisis.
Sapere was the single largest commodities customer affected by New York-based MF Global’s collapse, losing hundreds of millions of dollars, Pinter said.
While the judge allowed claims to go forward against Corzine and Edith O’Brien, MF Global’s former assistant treasurer, he concluded that the Sapere plaintiffs failed to state a case against the firm’s seven former independent directors.
“No amount of argument can overcome the lack of legal support for several of the claims filed in this action,” Marrero wrote.
Edmund Polubinski, a lawyer for the independent directors, had urged the judge to throw out the claims, saying in a court filing that Sapere failed to connect his clients to the alleged wrongful conduct.
“The independent directors had no awareness of or any involvement in any allegedly illegal transfers of customers’ funds,” Polubinski said. “No party has ever asserted they did.”
Steven Goldberg, a spokesman for Corzine at Sard Verbinnen & Co., said he had no immediate comment on Marrero’s rulings.
The case is In re MF Global Holdings Limited Investment Litigation 11-cv-07866, U.S. District Court, Southern District of New York (Manhattan).
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Ex-Sanofi Executive Gets 16 Months Sentence for Insider Trading
A former Sanofi executive who cooperated with prosecutors got 16 months in prison after a judge called him a leader of an insider-trading ring that made $1.4 million in profit off pharmaceutical and medical-technology company tips.
Mark Cupo, 53, was sentenced yesterday in federal court in Newark, New Jersey, to a longer term than the two men he helped convict. Cupo pleaded guilty Oct. 7 after making secret recordings for authorities of the two primary traders in the ring, Lawrence Grum, 50, who was sentenced April 9 to a year and a day in prison, and Michael Castelli, 50, who got nine months.
Cupo, who faced from 46 to 57 months in prison, had asked for probation, citing how he helped authorities unravel a five-year scheme using tips from executives at Celgene Corp., Sanofi and Stryker Corp. The judge said that Cupo and a former Celgene executive who awaits sentencing, John Lazorchak, were the primary architects of the scheme.
The cases are U.S. v. Grum, 13-cr-00737, U.S. v. Castelli, U.S. v. Lazorchak, 13-cr-00656, U.S. v. Pendolino, 13-cr-00657, U.S. v. Cupo, 13-cr-658, and U.S. v. Foldy, 13-cr-659, U.S. District Court, District of New Jersey (Newark).
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Bridgestone Executives Indicted for Auto Parts Price-Fixing
One current Bridgestone Corp. executive and two who formerly worked for the Japanese tire company were indicted by a grand jury in Cleveland and accused of conspiring to fix auto parts prices. One of the former executives, Yusuke Shimasaki, yesterday pleaded guilty, agreeing to serve 18 months in jail, according to a statement by the U.S. Justice Department.
The charges stem from a federal price-fixing investigation in the auto-parts industry. According to the Justice Department, that probe has netted more than $2.29 billion in fines. Additionally, 26 companies have either pleaded guilty or agreed to do so, the department said.
Toyo Tire & Rubber Co. agreed to plead guilty and pay a $120 million fine for similar charges in November. Mitsubishi Electric Corp., Hitachi Automotive Systems and seven other Japanese companies in September agreed to pay $740 million in fines for conspiring to fix parts prices for companies including General Motors Co., Ford Motor Co. and Chrysler Group LLC.
The Bridgestone executives are accused of taking part in a scheme to allocate sales and fix prices for automotive anti-vibration rubber products, used in suspension systems and engine mounts, according to a single-count indictment charging them with conspiracy to restrain trade.
Bridgestone said it has been cooperating with the Justice Department’s investigation.
The case is U.S. v. Ryuto, 14-cr-138, U.S. District Court, Northern District of Ohio (Toledo).
High-Frequency Traders Said to Be Subpoenaed in New York Inquiry
New York Attorney General Eric Schneiderman sent subpoenas to six high-frequency trading firms seeking information about special arrangements they have with exchanges and dark pools as well as their trading strategies, according to a person familiar with the matter.
Chopper Trading LLC, Jump Trading LLC and Tower Research Capital LLC are among the firms, according to the person, who asked to not be named because the details of the investigation haven’t been made public.
Matt Schrecengost, the chief operating officer of Chicago-based Jump Trading, and Mark Gorton, managing director of New York-based Tower Research, didn’t immediately return voice-mail messages seeking comment. No official at Chicago-based Chopper Trading was immediately available.
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