Revisions to FINRA Financial Responsibility Rules Effective February 8th

Posted on January 27, 2010 by Regina Ori

Effective February 8, 2010, FINRA members will be subject to new rules governing financial responsibility that are based in part on, and replace, provisions in the NASD and Incorporated NYSE Rules. The rules add new requirements relating to minimum net capital, financial reporting, and notification rules for member firms that clear or carry customer accounts and firms that operate under an exception created under SEC Rule 15c3-3(K)(2)(i) that either (1) clear customer transactions pursuant to this exemption, or (2) hold customer funds in a bank account established pursuant to this exemption.

Collectively, the FINRA Financial Responsibility Rules consist of FINRA Rules 4110, 4120, 4130, 4140, and 4521. The new Rules also amend FINRA Rules 9557 and 9559 to provide an expedited appeals process for members served with a notice under the Financial Responsibility Rules to increase capital or net worth. FINRA Regulatory Notice 09-71 provides an overview of the Financial Responsibility Rules, including their impact on: minimum net capital requirements; notification rules; certain restrictions on business activities; reporting requirements; and audits.

Tags: , , ,

U.S. Department of Justice Forms Lending Discrimination Task Force

Posted on January 14, 2010 by Fred Rivera

The New York Times reports that the Department of Justice's Civil Rights Division has formed a Lending Discrimination unit devoted to investigating and prosecuting unfair lending practices.  According to Assistant Attorney General Tom Perez, the new unit  will look "at any and every practice in the industry,”   Under the DOJ's most recent budget, the Lending Discrimination unit will include at least 10 lawyers and an economist.   Unlike prior Lending Discrimination prosecutions by DOJ that concerned Redlining and discriminatory underwriting decisions, the new unit will focus on "Reverse Redlining," the practice of targeting minority neighborhoods for loans with inferior terms, including high rates and fees.

 

  

Tags:

More Struggles for SEC's Case Against BOFA

Posted on January 12, 2010 by Regina Ori

The Wall Street Journal has reported that on Monday evening, U.S. District Judge Jed S. Rakoff of the Southern District of New York denied the SEC’s motion to expand charges against Bank of America in connection with the company’s 2009 merger with Merrill Lynch. A previously filed SEC suit accused the bank of concealing plans to pay billions of dollars in bonuses to employees at Merrill Lynch before shareholders were asked to approve a merger of the two firms.  Most recently, the SEC moved to amend that complaint to include allegations that Bank of America also failed to disclose “extraordinary financial losses at Merrill Lynch prior to a shareholder vote to approve a merger between the two companies.” The SEC's proposed second amended complaint alleged that Bank of America negligently failed to disclose those losses before the shareholder vote, violating its fiduciary duty to its investors and making its previous disclosures materially false and misleading.

Judge Rakoff had previously rejected a $33 million settlement between the SEC and Bank of America last fall because it failed to hold accountable any of the executives or lawyers who were allegedly responsible for omissions in documents submitted to shareholders ahead of a vote that approved the acquisition. However, the SEC still declined to charge individuals in its proposed second amended complaint, stating that the “executives are not alleged to have deliberately concealed information from counsel or otherwise acted with scienter or intent to mislead.  Nor is any counsel alleged to have acted with scienter or intent to mislead.”

In a letter addressing the SEC’s proposed second amended complaint, Bank of America’s counsel stated that “the new theories the SEC seeks to advance in this case are baseless.”  The WSJK has now reported that on Monday evening, Judge Rakoff ruled that the S.E.C. cannot amend its complaint against Bank of America a second time, but can instead file a new complaint.

Tags: , , , ,