Recently in Finance and Securities Category

Last month's proposed $25 billion mortgage settlement is one step closer to becoming official. Federal representatives have asked a judge to approve the settlement, which involves 49 states, Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial.

Approximately $20 billion will go to borrowers facing foreclosure. Most of the funds will be used to reduce principal and refinance loans. The remaining $5 billion will be dispersed by state governments to Americans who lost their homes to improper foreclosures between 2008 and 2011.

Texas tycoon R. Allen Stanford was convicted Tuesday of running a $7 billion Ponzi scheme -- the biggest investment fraud since the Bernie Madoff scandal.

A jury found Stanford, 61, guilty on 13 of 14 criminal charges, including fraud, conspiracy, and obstructing an investigation by the Securities and Exchange Commission, Reuters reports. Jurors acquitted Stanford on a single wire-fraud charge.

"For all the investors, I think there is a sense of relief that they weren't just fools," one of Stanford's victims told Reuters. "We were just conned."

Federal Judge Jed S. Rakoff rejected an SEC settlement with Citigroup on Monday. The decision may have ramifications beyond the current case.

Citigroup was charged with negligence for selling customers funds known as Class V Funding III. The mortgage securities fund was populated by securities chosen by Citigroup, though the bank told investors they were picked by an independent third party. The bank then bet against their own fund, predicting that it would lose value.

And it did. Investors lost $700 million, while Citigroup gained $160 million in profits, according to the SEC. The rejected settlement would have allowed Citigroup not to admit any wrongdoing. They would have paid out $285 million.

The Bank of America overdraft lawsuit has come to a tentative end, with a federal judge granting preliminary approval of a $410 million settlement between the bank and 1 million of its account holders.

Though Bank of America is the only defendant thus far to settle the overdraft lawsuit, the publicity and scrutiny that the suit has brought to overdraft fees has resulted in important regulation and a heightened level of consumer protection.

This settlement stems from a 2009 class action lawsuit filed against Bank of America and a host of other banks, such as Wells Fargo, Citigroup and Chase.

In a decision that some predict will have a chilling effect, the 9th Circuit dealt a major blow to whistleblowers reporting violations of federal securities law last week, denying protection to those who take allegations of corporate misconduct to the press.

Commentators are concerned that the ruling will lead fewer workers to report wrongdoing and inhibit the government's ability to investigate misconduct.

Like many regulatory schemes, the Sarbanes-Oxley Act, which deals with securities reporting and auditing, includes a whistleblower protection provision. It bars employers from retaliating against employees who report potential wrongdoing under the Act to the appropriate authorities.

Raj Rajaratnam, billionaire investor and founder of the Galleon Group, has been found guilty of insider trading, fraud and conspiracy. Rajaratnam was convicted on all 14 counts by a federal jury in the U.S. District Court, Southern District of New York.

One of the richest men in the world, Rajaratnam faces at least 15-1/2 years in prison, reports Reuters. The trial took place over the course of two months, putting Rajaratnam, insider trading, and government phone taps into the spotlight.

Is it the one of the highest penalties levied on an single person by the SEC, or is it merely a slap on the wrist with no deterrent effect for upcoming generations of potential white collar criminals? Depends on who you ask. One thing that is certain: former Countrywide Financial CEO Angelo Mozilo will be paying a sizable chunk of his fortune in a settlement reached recently with the Securities and Exchange Commission.

Time Magazine named Mozilo one of the 25 people most responsible for the financial crisis. By most accounts, it a well-deserved dishonor. According to the Wall Street Journal, Mozilo will pay out $67.5 million in financial penalties for this part in the financial debacle. $22.5 million of the settlement will go to civil penalties and $45 million will be a disgorgement of profits, The Journal reports.

Banking giant Wells Fargo has reached a settlement with the attorneys general of eight states over claims that its subsidiary Wachovia marketed its adjustable rate mortgages in a deceptive manner. The bank will pay a total of $24 million, and make loan modifications in the amount of $772 million under the terms of the settlement which was announced October 6.

The states' claims against Wachovia, acquired by Wells Fargo in 2009, have to do with the way the "pick-a-payment" adjustable rate mortgages were presented to consumers, reports Bloomberg. The program allowed borrowers to pick the payment option they wanted to use. However, the lowest payment option advertised by the bank often did not include the charges for monthly interest, increasing the debt load. This lead to defaults and foreclosures, according to the claims of the states involved.

A settlement has been reached between Visa and MasterCard with the U.S. Justice Department, allowing merchants to provide customers with reward incentives to encourage paying with lower-cost debit or credit cards. The settlement did not involve any money.

The DOJ lawsuit settlement was not well received by competitor American Express. Amex plans to fight a antitrust lawsuit filed by the government. "We have no intention of settling the case," American Express Chief Executive Officer Kenneth I. Chenault said in a statement. "We will defend the rights of our card members at the point of sale and our own ability to negotiate freely with merchants." American Express contends that retailers are free to choose the credit company that they prefer, but that they credit company is free to set its own terms. Amex says that it is simply uncapable of "forcing" retailers into agreements.

The federal government, in the form of the SEC, is becoming more interested in the regulation of municipal bonds. On August 19, it was reported that New Jersey became the first state the SEC has charged with securities fraud for its failure to disclose to bond buyers it had underfunded its state pensions. New Jersey has agreed to settle the case.

According to Reuters, this is the first time the SEC has charged a state with violations of federal securities statutes. The action by the government is seen as evidence of an increasing interest in those who sell municipal bonds. This debt is used for public purposes such as roads, bridges, schools and hospitals.