In addition to the action against attorney Marc Dreier that I posted about earlier this week, its been a busy week for the SEC.
Yesterday, the SEC announced that it settled charges against eight former employees of Fidelity Investments. The SEC had alleged that they violated federal law by improperly receiving gifts, as well as travel and entertainment, paid for by outside brokers courting business from Fidelity. Collectively, the eight folks will pay the SEC over $1 Million, consisting of disgorgement, interest and civil penalties. One individual, a supervisor, will be banned from association with an investment advisor or investment company for one year. The remainder are censured. All are ordered to cease and desist from the violations.
Also yesterday, the SEC announced that it finalized settlements with Citigroup and UBS relating to auction-rate securities matters. The settlement will provide nearly $30 Billion (yep, a "B") to investors who had purchased auction-rate securities before the markets for these securities froze in early 2008. SEC Chairman Cox noted that this is the largest settlement in SEC history. According to the press release,
"The settlements, which are subject to court approval, will restore approximately $7 billion in liquidity to Citi customers who invested in ARS, and $22.7 billion to UBS customers who invested in ARS." The SEC also noted that it will continue to work to finalize settlements with Bank of America, RBC Capital Markets, Merrill Lynch and Wachovia.
Finally, yesterday the SEC also announced charges against Bernard Madoff relating to a multi-billion dollar ponzi scheme. The SEC's release stated:
The Securities and Exchange Commission today charged Bernard L. Madoff and his investment firm, Bernard L. Madoff Investment Securities LLC, with securities fraud for a multi-billion dollar Ponzi scheme that he perpetrated on advisory clients of his firm. The SEC is seeking emergency relief for investors, including an asset freeze and the appointment of a receiver for the firm.
The SEC's complaint, filed in federal court in Manhattan, alleges that Madoff yesterday informed two senior employees that his investment advisory business was a fraud. Madoff told these employees that he was "finished," that he had "absolutely nothing," that "it's all just one big lie," and that it was "basically, a giant Ponzi scheme." The senior employees understood him to be saying that he had for years been paying returns to certain investors out of the principal received from other, different investors. Madoff admitted in this conversation that the firm was insolvent and had been for years, and that he estimated the losses from this fraud were at least $50 billion.
The SEC noted that, according to regulatory filings at the start of 2008, the firm had $17 Billion in assets under management. The SEC said that. "It appears that virtually all assets of the advisory business are missing."