GUEST BLOG [In]Securities: Sometimes, a Man of Peace By Aegis Frumento Esq (BrokeAndBroker.com Blog)SEC Charges Sequential Brands Group Inc. with Deceiving Investors by Failing to Timely Impair Goodwill (SEC Release)Justice Department Announces Additional Distribution of more than $488 Million to Victims of Madoff Ponzi Scheme (DOJ Release)PayPal-backed fintech start-up Tink valued at more than $800 million after fresh funding (CNBC by Ryan Browne)Maintaining Over $100 in Savings Linked to Increased Likelihood of Financial Stability in Lower Income Households (FINRA Release)
[S]equential failed to properly assess its goodwill for potential impairment after several months of declining stock prices followed by a precipitous drop in early November 2016. According to the complaint, in December 2016, shortly after Sequential passed its annual goodwill testing, the company conducted internal calculations showing that, in light of the declining stock price, Sequential would fail the first step of its disclosed two-step impairment test. The complaint alleges that the company ignored this objective evidence of impairment. Instead, the complaint alleges, Sequential performed a qualitative analysis that omitted any mention of its internal calculations, as well as numerous other negative developments in the company's business, leading it to unreasonably conclude that goodwill was not impaired. As alleged, by avoiding an impairment to its goodwill in 2016, Sequential inflated its income from operations, created a false impression of its financial condition, and misstated its financial statements and reports for almost a year. Sequential allegedly continued to improperly account for goodwill in the next three quarters, before belatedly impairing all of its goodwill-totaling $304 million-in the fourth quarter of 2017.
For decades, Bernard L. Madoff used his position as chairman of BLMIS, the investment advisory business he founded in 1960, to steal billions from his clients. On March 12, 2009, Madoff pleaded guilty to 11 federal felonies, admitting that he had turned his wealth management business into the world's largest Ponzi scheme, benefitting himself, his family and select members of his inner circle.On June 29, 2009, U.S. District Judge Denny Chin sentenced Madoff to serve 150 years in prison for running the largest fraudulent scheme in history. Of the approximately $4.05 billion that will be made available to victims, approximately $2.2 billion was collected as part of the historic civil forfeiture recovery from the estate of deceased Madoff investor Jeffry Picower. An additional $1.7 billion was collected as part of a deferred prosecution agreement with JPMorgan Chase Bank N.A. and civilly forfeited in a parallel action. The remaining funds were collected through a civil forfeiture action against investor Carl Shapiro and his family, and from civil and criminal forfeiture actions against Bernard L. Madoff, Peter B. Madoff and their co-conspirators.
[S]wedish fintech start-up Tink has seen its valuation rise to 680 million euros ($824 million) in a new investment round, according to people familiar with the matter.Tink, whose software lets banks and fintech firms access banking data to create new financial products, raised 85 million euros in fresh funding co-led by French private equity firm Eurazeo and U.K.-based venture capital firm Dawn Capital.
[O]ur instincts as regulators are to protect people, but protection that comes in the form of overruling personal choices is what parents do for children, not what governments ought to be doing for citizens. Financial regulation, therefore, often undercuts personal liberty.
Although I am pleased with the progress and welcome the call for further public engagement, the presumption that people need to entreat a regulator for permission to invest still offends principles of personal liberty, which allow people both to earn and spend money as they see fit. Why should government be authorized to assess the sophistication of the American people so as to constrain their decision-making in this particular area? If we as a society permit government to do so in this area, is that a license for government to make other, even more consequential life decisions for us?
[F]inders are the people in your community who know lots of people, including potential investors. Under the law as it is presently interpreted, however, finders, if they want to get paid for introducing small businesses to those investors, likely would have to register as broker-dealers, which would cost a lot more than any compensation they would get from this activity. One commenter on the proposal explained, "A business owner should be able to compensate people for helping him or her to find and raise capital." Our rules can hinder the kind of community support for business that, particularly at a time like the present, could keep an otherwise doomed business afloat. Here too, well-intentioned regulation is very much in tension with personal liberty.
[P]eople who maintained more than $100 in savings were much less likely to have their utilities shut off or resort to high-cost borrowing methods. Those who had more than $250 in savings experienced reduced likelihood of losing their housing for financial reasons. In addition, individuals with a savings balance over $100 were much more likely to say they were financially satisfied.
Key findings from the report include:
- People who were unable to maintain a savings balance above $100 were 95% more likely to have their utilities shut off vs. people who were able to sustain a balance above $100 (37% vs. 19%, respectively).
- People who were unable to maintain a savings balance above $100 were 83% more likely to use high-cost borrowing, such as auto title loans, payday loans, refund advances, rent-to-own stores or pawn shops, vs. people who sustained a balance above $100 (42% vs. 23%, respectively).
- People who were unable to maintain a savings balance above $250 were 71% more likely to have moved in the past five years for financial reasons vs. people who were able to sustain a balance above $250 (29% vs. 17%, respectively).
- People who were able to maintain a balance above $100 were 61% more likely to say they were financially satisfied vs. those who couldn't maintain a balance above $100 (53% vs. 33%, respectively).Based on these findings, researchers observe:
- There is a growing need for innovative savings products that enable households struggling with income volatility and low wages to save, even in small amounts.
- Cash infusions, such as stimulus payments and tax credits, can help lower-income households avoid predatory lending, keep on top of utility bills and achieve housing stability. The implications for families should factor into policy decisions.
- Financial education efforts may need to be updated to encourage saving money even in the smallest of increments. The prevailing conventional wisdom that equates adequate emergency savings with three months of living expenses may be appropriate for some households, but is not always attainable for many lower-income Americans.
During the relevant period, the firm's written supervisory procedures required that client signatures on firm documents always be authentic and expressly prohibited representatives from forging a customer's signature. Although Baecker was aware of the firm's procedures, he electronically forged sixteen firm customers' signatures on life insurance applications. Eleven of the forged applications were for variable universal life insurance, a securities product sold by prospectus through the broker-dealer, and therefore were firm records.By electronically forging his customers' signatures on the life insurance applications, Baecker violated FINRA Rule 2010. Because eleven of these documents were firm records, Baecker also caused the firm to maintain inaccurate books and records in violation of FINRA Rules 4511 and 2010