TARP Fraud Trial, Credit Suisse, Discover: Compliance
Ex-Jefferies & Co. trader Jesse Litvak’s former customers told a jury during his fraud trial in Connecticut that lies and misrepresentations are a common part of the give-and-take of bond trading.
Litvak, 39, is on trial in New Haven federal court accused of defrauding investors of $2 million by lying on trades of mortgage-backed securities. He’s the only person charged with fraud in connection with an initiative to distribute more than $20 billion from the Troubled Asset Relief Program, which the U.S. government created during the 2008 credit crisis to help bail out banks.
While the securities rebounded after the financial crisis, markets remained illiquid. TARP used bailout funds to spur investment in mortgage-backed securities issued before 2009 that remained on the books of financial institutions.
Litvak’s alleged victims include private investment funds and six funds established by the Treasury Department in 2009 as part of its response to the financial crisis, prosecutors have said.
The case is U.S. v. Litvak, 13-cr-00019, U.S. District Court, District of Connecticut (New Haven).
Discover Faces CFPB Investigation Over Student-Lending Practices
Discover Financial Services (DFS) said the U.S. Consumer Financial Protection Bureau is probing the company’s student loan-servicing practices.
The CFPB, through a civil investigative demand, is seeking documents and information, Riverwoods, Illinois-based Discover said yesterday in its annual regulatory filing with the Securities and Exchange Commission. The lender could face penalties and customer restitution and be forced to change business practices if the CFPB or the Federal Deposit Insurance Corp. bring an enforcement action, according to the filing.
Credit Suisse Said to Be Faulted by Senate Over Tax Dodgers
A U.S. Senate committee report will reprimand Credit Suisse Group AG (CSGN) for helping American clients dodge taxes and will criticize the Justice Department for not pursuing offshore banks aggressively enough, according to two people with knowledge of the findings.
The report outlines how Credit Suisse helped clients hide cash transfers and offered accounts not declared to the Internal Revenue Service, according to the people, who asked not to be identified.
The Senate Permanent Subcommittee on Investigations was expected to publish the report in advance of the hearing today that includes testimony by Credit Suisse Chief Executive Officer Brady Dougan. The scrutiny puts pressure on the Justice Department to advance prosecutions against Swiss banks that helped Americans cheat on taxes.
Marc Dosch, a spokesman for Credit Suisse in Zurich, declined to comment. The subcommittee didn’t return e-mails seeking comment after regular business hours Feb. 24.
Fidelity Urges SEC Not to Adopt Wider Ticks as Small-Cap Fix
Fidelity Investments said the U.S. Securities and Exchange Commission shouldn’t reverse its decimal pricing policy or engage in test programs to widen tick size for small companies.
Wider tick sizes “will increase trading costs for retail investors without improving smaller company access to the public capital markets or the liquidity of their securities,” Fidelity wrote on Feb. 21 in a comment letter to the SEC.
Fidelity noted that while the JOBS Act asks the SEC to study the impact of decimalization on smaller companies, it doesn’t require the agency to change the tick size for such securities.
Legislation in Congress would require securities regulators to test widening the minimum price increment of smaller stocks. Along with Fidelity, Pershing Square Capital, Travelers Cos., D.E. Shaw and TD Ameritrade (AMTD) oppose the proposal.
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