Bloomberg reports that MetLife Inc. General Counsel Ricardo Anzaldua is stepping down after he helped win a court battle that reversed the government’s designation of the insurer as too big to fail.

Anzaldua will be on the job until the end of June, and he’ll continue to advise Chief Executive Officer Steve Kandarian through the end of the year, the CEO said Thursday in a memo to staff.

“Under Anzaldua, MetLife was the only company to go to court to fight the designation by a government panel as a non-bank systemically important financial institution,” reports Katherine Chiglinsky.”General Electric Co. sold assets to shed its finance unit’s SIFI status. And American International Group Inc. said that the label, which can bring increased regulation and tighter capital rules, wasn’t a big deal.”

Read the Bloomberg article.

Image by Mark Moz

A small trading exchange on Thursday filed an antitrust lawsuit accusing Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and nine other banks of conspiring to shut it out of the $9.9 trillion credit default swap market, reports Reuters.

The plaintiff, Tera Group, alleges the banks organized a boycott of its seven-year-old TeraExchange platform by refusing both to send it any CDS transactions, and to clear and settle any CDS trades that customers wanted to handle there, according to reporter Jonathan Stempel. The complaint said the banks used their 95 percent market share to require that trading follow a protocol known as “request for quote,” which Tera described as opaque and inefficient.

“Tera said this enabled banks to boost profit by keeping traders in the dark about prices, defeating a goal of the 2010 Dodd-Frank financial reforms, while instilling a “great fear of retaliation” against traders who defected to rival platforms,” Stempel writes.

Read the Reuters article.

Loans secured by stock are an important and popular product offered by many lenders to individuals and other borrowers, according to a post on the website of Loeb & Loeb LLP.

“The ability of a lender to sell the stock held as collateral is very much dependent on the documentation governing the loan. When and to what extent a lender may realize upon (or liquidate) the stock to repay the indebtedness under the loan should be carefully and clearly set forth in the loan documents,” write Bryan G. Petkanics and Anthony Pirraglia. “A recent federal court case analyzed the ability of a lender to act upon stock pledged to secure a loan, and provides insight into valuable language to be included in the loan documentation.”

They discuss Kinzel v. Merrill Lynch, in which the Sixth Circuit affirmed the judgment of the district court in favor of Merrill Lynch, finding that the financial services company breached neither the contract nor its duty of good faith under the terms of the loan management account agreement.

Read the article.

Institutional asset managers carry enormous clout across corporate America. So it’s unfortunate that so many of these managers choose to support the status quo for boards, even when investors are ill served, points out The New York Times.

As an example, writer Gretchen Morgenson, discusses the case of Arconic, the industrial metals company that spun off Alcoa in November. Some of its directors are facing a proxy challenge to be decided at the company’s next annual meeting.

Giant hedge fund Elliott Management is behind the challenge, following years of declining sales, rising losses and a subpar stock performance at Alcoa.

As Morgenson explains, “The structure of Arconic’s board — and Alcoa’s before it — is investor-unfriendly. It is what’s known as a classified board, in which directors’ terms are staggered, protecting them from being voted out en masse.”

Read the NYT article.

Three Chinese stock traders were ordered to pay $8.9 million in fines and penalties for hacking into two law firms and stealing information on upcoming mergers and acquisitions and then leveraging the information to trade stocks, according to a Dark Reading report.

A federal court in New York found that the three hackers installed malware on the law firms’ computer networks, enabling them to view emails on mergers and acquisitions in which the firms were involved. Then they used that information to buy stock in at least three public companies prior to their merger announcements, according to the Securities and Exchange Commission.

The firms aren’t identified in the complaints, but Law360 reports they appear to be Weil Gotshal & Manges and Cravath Swaine & Moore, based on information in charging documents.

Read the Dark Reading article.

Join Our LinkedIn Group

Bloomberg BNA, PKF O’Connor Davies LLP, Prairie Capital Advisors, and Sadis & Goldberg LLP will present an exclusive live event on using employee stock ownership plans (ESOPs) to support growth and ownership transition strategies.

The event will be Thursday, June 1, 2017, 3-5:15 p.m., with a reception to follow. The location will be at Bloomberg LP, 120 Park Ave., New York, NY 10017.

On its website, Bloomberg says this program will explore all of the ways in which a business can utilize ESOPs to create favorable conditions for financing, allow for acquisitions, attract top talent, and generate wealth for both owners and employees.

ESOPs are commonly used by an owner seeking to retire, however, in today’s business market of successful start-ups, there’s an opportunity to consider them earlier in the lifecycle of the company. ESOPs, when done properly, may position the company for financing, allow for acquisitions, help attract and retain top talent in a competitive environment, and create wealth for owners and employees.

Register for the event.

Jared Butcher, writing in the Steptoe Blockchain Blog, says it is no secret that smart contracts have vulnerabilities, but he suggests a mix of best practices to limit potential liabilities that may arise when vulnerabilities interfere with smart contract performance.

“There is potential for manipulation by insiders, which is of particular concern for smart contracts that operate based on ‘proof of stake’ protocols, given the ongoing concerns that those protocols will not be effective in ensuring that the parties play by the rules,” Butcher writes. “Even without intentional interference by hackers or insiders, smart contracts may have software bugs that disrupt performance, and there is the possibility of unintended outcomes if the smart contract’s code fails to anticipate an unusual situation.”

In the post, he offers six best practices to consider when implementing a smart contract.

Read the article.

Join Our LinkedIn Group

Reuters tells the story of how two analysts who liked to swap notes on numbers they thought looked odd took a fateful step and tipped off U.S. regulators about a company that one of them had watched for months.

The story is illustrated with the case of Orthofix International NV, a Texas-based medical device maker that kept hitting ambitious earnings targets and many analysts had “buy” recommendations for the stock.

One of the analysts had a feeling about the company, noticing its earnings reports showed it was taking longer than usual for the company to get paid by wholesale customers, invoices were piling up and executives struggled to offer a convincing explanation, saying logistical problems at foreign offices were partly to blame.

Reporter Sarah N. Lynch tells how that analyst spent months tracking quarterly reports and earning calls, using algorithms to compare Orthofix’s ratios and patterns of sales and inventory turnover with financial data of its peers.

“By entering the SEC whistleblower program the duo showed how outsiders with analytical skills and tools and time to spare can accomplish what is typically done by those with inside access to confidential information,” Lynch writes.

The two could win as much as $2.5 million for their whistleblowing.

Read the Reuters article.

Join Our LinkedIn Group

Image by NY Photographic

The Office of the Comptroller of the Currency announced Tuesday that it is ordering U.S. Bank National Association to pay a civil penalty of $15 million for what it calls “bankruptcy filing violations” that occurred between 2009 and 2014, according to a HousingWire report.

The OCC claimed that U.S. Bank “engaged in filing practices in bankruptcy courts with respect to proofs of claim, payment change notices, and post-petition fees among others that did not comply with bankruptcy rules and constituted unsafe or unsound banking practices.”

HousingWire reporter Ben Lane adds that the OCC said that as a result of the bank’s bankruptcy practices, U.S. Bank “has made or will make approximately $29 million in remediation to approximately 22,000 account-holders.”

Read the HousingWire article.

Join Our LinkedIn Group

Michael I. Goldberg, the SEC appointed receiver in charge of the Jay Peak Resort and Burke Mountain Hotel in Vermont, reached a settlement agreement with Raymond James that will significantly benefit the defrauded investors and creditors of the receivership estate, according to a news release from Akerman LLP.

Under the terms of the settlement, which must be approved by the U.S. District Court for the Southern District of Florida, Raymond James will pay $150 million to the receivership estate and the funds will be used to satisfy the claims of numerous investors and creditors while at the same time allowing the receiver to complete construction of the Jay Peak Resort. The settlement was achieved exactly one year from the date the case began.

The Akerman release continues:

The Jay Peak case involves the largest fraud in the history of the federal EB-5 Immigrant Investor Visa Program. Raymond James allegedly assisted Ariel Quiros, owner of Q Resorts and William Stenger, president and CEO of Jay Peak, a Vermont ski resort owner by Q Resorts, in stealing and misusing millions of dollars raised from hundreds of investors. Raymond James vehemently denied any liability whatsoever. Since July 2016, Goldberg and Raymond James have been engaged in good faith, arm’s-length settlement negotiations. Upon court approval, the settlement will resolve all claims brought against Raymond James and bar any future claims that may arise from the activities associated with the Jay Peak Resort and Burke Mountain Hotel.

Goldberg said, “This settlement would not have been possible without Raymond James stepping up to the plate from the very beginning of this case in an effort to do the right thing. At all times throughout our negotiations, Raymond James acted professionally and honorably in a good faith effort to resolve the litigation. The way Raymond James approached this case is a benchmark for how other firms in a similar situation should handle such a case. I want to further thank my counsel, Jeffrey Schneider of Levine Kellogg and lead class counsel, Harley Tropin and Tucker Ronzetti of the Kozyak Tropin firm for their tireless work in helping me resolve this case and benefitting hundreds of investors and creditors. Finally, I want to thank the officials at the SEC and the State of Vermont for their unwavering commitment to protecting the defrauded investors and creditors since the very beginning of the case and helping us structure a settlement that is in the best interest of the receivership estate and the investors. The SEC’s investigation and lawsuit was the catalyst for this settlement.”

The settlement amount will be utilized as follows:

• $15.3 million will be used to satisfy the promissory notes payable to the investors of Jay Peak Hotel Suites L.P.
• $5.1 million will benefit Jay Peak Hotel Suites Phase II L.P., Jay Peak Penthouse Suites L.P., Jay Peak Golf and Mountain Suites L.P., Jay Peak Lodge and Townhouses L.P., Jay Peak Hotel Suites Stateside L.P. and Q Burke Mountain Hotel and Conference Center, L.P. by satisfying past due trade debt on the Jay Peak Resort and the Burke Mountain Hotel.
• $19.6 million will be used to complete the construction of the Stateside Phase VI project of which up to $2.2 million will be used to satisfy existing contractor liens.
• $67 million will be used to return the $500,000 principal investment each investor made in the Jay Peak Biomedical Research Park L.P.
• $6.6 million will be used to satisfy contractor claims against the Q Burke Phase VIII project and to repay other debt on the Burke Mountain Hotel.
• $10 million will be posted in a separate interest-bearing escrow account and be used if needed to repay up to twenty Q Burke Phase VIII Investors who may not be eligible to apply for permanent residency through the United States Citizenship and Immigration Services’ EB-5 Immigrant Investor Program.
• $1 million will be used to refund the $500,000 investment of two investors in the Q Burke phase VIII whose I-526 petitions were denied prior to the date of the SEC Action.
• $25 million will be set aside to pay the fees of class counsel and other attorneys who brought suits on behalf of individual victims.

Goldberg is co-chair of the Fraud & Recovery Practice Group at top 100 U.S. law firm Akerman LLP. The case of Jay Peak is the largest EB-5 fraud scheme in U.S. history and the $150 million settlement represents the largest recovery of EB-5 investor losses.

Join Our LinkedIn Group

ETF Trends has posted an on-demand webinar titled “Navigating the 2017 Oil Market.”

On the recent webcast, Drill Into the Future of Oil With Wall Street’s Top Geopolitical Analyst, Helima Croft, Managing Director and Global Head of Commodity Strategy Global Research at RBC Capital Markets, and Simeon Hyman, Head of Investment Strategy at ProShares, touched upon various factors that could affect the crude oil prices, including OPEC and policy changes, and looked to investment opportunities to potentially capitalize on the energy market.

The discussion coveers:

• OPEC — Its role in the current environment
• Policy — A look at the key decision makers
• Risk — The red herrings versus the real risks
• Investing — Different vehicles and strategies

Watch the on-demand webinar.

Join Our LinkedIn Group

Practical Law and Norton Rose will present a webinar titled “Liability of Compliance Officers at Financial Institutions” on Wednesday, May 3, 2017, beginning at 1 p.m. EDT.

CLE credit is available in multiple states.

In recent years, U.S. securities regulators have increasingly focused on the regulated entities’ compliance personnel, holding many individually liable for the deficiencies in their firm’s handling of its compliance obligations, the company says on its website. The regulators deem compliance officers the gate keepers whose efforts should detect and prevent securities laws violations at the firm.

The free 75-minute webinar that will discuss recent trends and issues in this field. The webinar presenters will discuss several topics, including:

• Different approaches US securities regulators use in assessing individual liability of compliance personnel.
• Recent cases against individual compliance officers by various regulators.
• Best practices for minimizing the risk of a regulatory action or sanctions against compliance professionals at a broker-dealer or investment advisor.

A short Q&A session will follow.

Presenters:

Kevin James Harnisch, Partner, Norton Rose Fulbright US LLP

Ilana Beth Sinkin, Associate, Norton Rose Fulbright US LLP

Vlad Pavlovic, Senior Legal Editor, Practical Law Litigation (Moderator)

Register for the webinar.

Join Our LinkedIn Group

A recent ruling by a U.S. district court’s in New York is another example of a court using public policy reasons to override voluntarily entered into contractual choice-of-law provisions, according to an article published by Paul Hastings LLP.

The court ruled in the remand of Madden v. Midland Funding, LLC that New York’s fundamental public policy against usury overrode a credit card agreement’s Delaware choice-of-law provision, write Thomas P. Brown, Lawrence D. Kaplan, Gerald S. Sachs, Amanda M. Kowalski and Laura E. Bain.

“Madden is the latest decision to look past the contractual agreement of the parties to apply state usury and other consumer protection requirements to consumer credit and collections activity. Various courts have taken up some version of the issues presented in Madden, but none have held that bank originated loans sold are subject to interest rate determinations based on the location of collection (as opposed to the location of origination),” according to the article.

Read the article.

Join Our LinkedIn Group

Omega Advisors Inc. founder Leon Cooperman must face a lawsuit brought by the U.S. Securities and Exchange Commission alleging the billionaire investor reaped more than $4 million in illegal profits after conversations with a company insider, a judge ruled in rejecting his request to throw out the case, according to a Bloomberg report.

A federal judge in Philadelphia ruled that the SEC had produced a “plausible claim for insider trading” and set a trial for November. The judge also dismissed claims that Cooperman failed to file required reports about his beneficial ownership of stocks of eight public companies.

Reporters Chris Dolmetsch and Patricia Hurtado write that the case will ultimately test the SEC’s novel theory that outsiders are liable for trading on inside tips even if they received the information before agreeing not to use it.

Read the Bloomberg article.

Join Our LinkedIn Group

A federal jury in Brooklyn convicted a former Hunton & Williams partner of insider trading charges of tipping off his financial adviser to his client King Pharmaceuticals’ then-pending $3.6 billion acquisition by Pfizer Inc., reports Bloomberg Law.

Robert Schulman of McLean, Va., was convicted of securities fraud and conspiracy charges. Post-trial defense motions are due April 14.

Schulman had represented King Pharmaceuticals Inc. in a patent case against Purdue Pharma LP as a lawyer with Hunton & Williams, the report says.

The indictment says Schulman tipped off his investment adviser of Klein Financial Services in Valley Stream, N.Y., about a Pfizer takeover plan during a dinner in August 2010 after having learned of it from another Hunton lawyer. During that dinner Schulman had several glasses of wine when he blurted to his adviser, “It would be nice to be King for a day,’” according to the SEC.

The adviser traded on the information and made profits for himself, Schulman and some other clients.

Read the Bloomberg article.

Join Our LinkedIn Group

Image by firedoglakedotcom

Reuters is reporting that a U.S. Justice Department probe into a phony accounts scandal at Wells Fargo & Co. is asking whether executives hid details from the company board and regulators as the problem grew over years, sources familiar with the review said.

Patrick Rucker reports that the move could result in criminal charges against bank employees involved.

“Officials are seeking to find out if executives shared everything they knew about the phony accounts to the Wells Fargo board of directors and the Office of the Comptroller of the Currency, the lead regulator for national banks,” Rucker reports. “Even if executives are not charged with criminal misconduct, they could face civil penalties including fines or a ban from the banking industry. Wells has already fired some executives and clawed back portions of their pay.”

Read the Reuters article.

Join Our LinkedIn Group

A new JPMorgan Chase & Co. a learning machine  called COIN, for Contract Intelligence, is parsing financial deals that once kept legal teams busy for thousands of hours, according to a Bloomberg report.

The company uses the technology to interpret commercial-loan agreements that formerly consumed 360,000 hours of work each year by lawyers and loan officers. The software reviews documents in seconds, is less error-prone and never asks for vacation, writes Hugh Son.

“Made possible by investments in machine learning and a new private cloud network, COIN is just the start for the biggest U.S. bank,” Son explains. “The firm recently set up technology hubs for teams specializing in big data, robotics and cloud infrastructure to find new sources of revenue, while reducing expenses and risks.”

Read the Bloomberg article.

Join Our LinkedIn Group

Image by Chris Potter

The U.S. Treasury Department said it will extend its search for criminals who seek to launder money by buying U.S. real estate, according to a Reuters report.

The U.S. Treasury Department Financial Crimes Enforcement Network has had in place a rule that ordered  title insurance companies to report to authorities all-cash purchases in parts of California, Texas, Florida and New York.

“The agency said since imposing the original order in January 2016, it has found 30 percent of these cash real estate transactions involve a person who had previously been reported to authorities for suspicious financial activities,” Reuters reports.

The extension will keep the rule in place for a further 180 days.

Read the Reuters article.

Join Our LinkedIn Group

Practical Law will present a complimentary webinar discussing how current market conditions are affecting loan agreement terms and about the factors that are likely to influence loan agreement negotiations in 2017.

The event will be Wednesday, March 8, at 1 p.m. EST.

Practical Law and experts from Davis Polk & Wardwell LLP and Thompson & Knight LLP will participate in the 75-minute webinar. During this session, the presenters will explain the effects of prevailing market forces on the large corporate and middle market segments of the US loan market and discuss arguments commonly raised in loan agreement negotiations.

Discussions will also include:
-A review of market activity from a rollercoaster 2016.
-The impact of the current pricing environment.
-Developments in unitranche lending.
-A look at the continually evolving composition of underwriting groups.
-The current state of oil & gas lending.

A short question-and-answer session will follow.

Presenters:
Cassandra Mott, Partner, Thompson & Knight LLP
Jason Kyrwood, Partner, Davis Polk & Wardwell LLP
Tim Fanning, Senior Legal Editor, Practical Law Finance (Moderator)

Register for the webinar.

Join Our LinkedIn Group

Some of the  potential benefits of the U.S. House would give companies more incentive to keep jobs in the United States and less to overextend themselves on borrowed money, points out The New York Times.

And there could be big vast savings by reducing what companies spend on tax lawyers, who help them game the current system, writes Neil Irwin.

“Yet these changes could also set off a cascade of more harmful effects. The plan could shift trillions of dollars of wealth from Americans to foreigners; set off an emerging markets financial crisis; wreak havoc in global oil markets; and cause sustained harm to the American higher education and tourism industries (including, as it happens, luxury hotels with President Trump’s name on them),” Irwin writes.

He goes on to discuss effects on the value of the U.S. dollar by the proposed destination-based cash flow tax and its “border adjustment.”

Read the NYT article.

Join Our LinkedIn Group