Three Charged in NYS Retirement Fund Pay-to-Play Scheme

Posted on December 21, 2016December 21, 2016 by admin

Two former bond brokers for broker-dealer Sterne Agee and an ex-PM overseeing fixed income investing for the NYS Retirement Fund were named as defendants in a pay-to-play scheme that had the brokers plying former fixed income portfolio manager with plenty of partying and prostitutes in exchange for millions of dollars in fixed income commission fees, according to the office of US Attorney Preet Bharara.

The indictment says that there was an agreement among ex PM Kang, and Sterne Agee executives Deborah Kelley and Gregg Schonhorn to pay Kang bribes in the form of “entertainment, travel, lavish meals, prostitutes, nightclub bottle service, narcotics, luxury gifts, and cash payments” among other things, in exchange for fixed-income business.

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us_v._kang_and_kelley_indictment.pdf by Chris Bragg

The value of the alleged bribe was more than $1 million, Bharara’s office said, including such gifts as trips to New Orleans and Montreal, a ski trip to Park City, Utah, a $17,400 luxury wrist watch, tickets to Broadway shows and the U.S. Open, cocaine and crack cocaine, as well as thousands of dollars for strippers and prostitutes.

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Kang steered more than $2 billion in fixed-income business to the brokers, the indictment says, which resulted in millions in commissions.

(Reuters)-Dec 21 U.S. prosecutors on Wednesday accused a former portfolio manager at New York state’s retirement fund of steering $2 billion in trades in exchange for bribes from brokerage employees, in the latest pay-to-play case to rock the fund.

Navnoor Kang

Navnoor Kang, the ex-director of fixed income at the New York State Common Retirement Fund, was charged in an indictment filed in Manhattan federal court along with Deborah Kelley, a former Sterne Agee Group Inc managing director. Gregg Schonhorn, another broker-dealer whom prosecutors said paid bribes, was charged in related court filings (Reporting by Nate Raymond and David Ingram)

More Securities law news courtesy of Law360.com ….

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Posted on February 18, 2016February 18, 2016 by admin

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Posted on February 10, 2016 by admin

President Obama is using the last months of his presidency to offer a budget boost that can impact financial market regulatory initiatives via government agencies SEC and CFTC.

As reported first by Law360, the budget boost for SEC and the CFTC envisions more auditors, more investigators, more enforcement staff. That said, according to one industry source who spoke off the record with BrokerDealer.com, “The SEC vision of using the increased budget to add 127 new staffers to Office of Compliance Inspections and Examinations is illustrative of the agency’s dedication to making their bureaucracy more bureaucratic, and even less efficient than it already is. Sounds like just more bodies tripping over their own shoes and tying up industry members with paper clips.”

Law360, New York (February 9, 2016, 11:14 PM ET) — A pair of Wall Street regulators on Tuesday laid out their wish lists for how to spend their budget bumps that President Barack Obama floated for fiscal year 2017, with eyes on ramping up enforcement and examination staffs to meet the demands of the Dodd-Frank Act and growing complexity of the markets.

Under Obama’s plan, the U.S. Securities and Exchange Commission would see its budget expand to $1.8 billion, an 11 percent increase, for the next fiscal year starting Sept. 30 while the U.S. Commodity Futures Trading Commission would grow to $330 million, a 32 percent bump. His economic adviser, Jeffrey Zients, said on Monday this amounted a “down payment” toward a long-range goal of doubling both agencies’ budgets by 2021.

In separate budget requests, both the SEC and the CFTC said they want to vastly expand their headcount and ramp up their spending on information technology to deal with emerging gaps and nagging shortcomings in their oversight.

“The SEC appreciates the confidence that Congress and the President have placed in it in recent appropriation cycles,
with enacted budgets that are permitting the SEC to begin to address longstanding resource challenges,” officials at the agency wrote. “In light of the continuing growth in the industry and the enormity of the responsibilities now placed on the agency, however, additional funding is critical,” they added.

Nonetheless, the SEC said it would take that money to add about 250 full- and part-time staffers, bringing its budgeted headcount up to just under 5,200 budgeted positions. The vast majority of these new positions, or 127, would be earmarked for the agency’s Office of Compliance Inspections and Examinations, where they would focus primarily on conducting investment adviser examinations.

For years, the SEC has struggled to examine more than 10 percent of the nearly 12,000 registered investment advisers under its watch, and about 40 percent of such firms have never been examined. Even with the proposed increase in examiner headcount coming out of the fiscal 2017 budget, however, the agency would only get to about 12 percent of registere advisers in a given year, the SEC noted.

The agency also would like to ramp up enforcement, adding 52 positions to the division. A dozen of those positions would reinforce its litigation efforts, the SEC told Congress.

“This increased allocation will enable the SEC to litigate any case where it believes admissions of wrongdoing are appropriate under its new policy, if necessary,” SEC officials wrote.

Other units would see more modest gains in headcount. The Division of Corporation Finance would look to gain four more budgeted positions as it expects to contend with an increase in request for guidance from small businesses and investors around the new rules passed out of the Jumpstart Our Business Startups Act aka JOBS Act such as equity crowdfunding and the so-called Regulation A+.

Over at the CFTC, Chairman Tiimothy Massad said he would use the additional $80 million that the president wants to give his agency to hire 183 full-equivalent staff across its divisions.

“This increase is necessary because the commission has not received budgetary increases sufficient enough to allow full implementation of its responsibilities,” Massad wrote to Congress.

More than a third of the proposed increase would go to bolstering the agency’s information technology infrastructure, Massad said. Within that total is the CFTC’s market surveillance function, which Massad wants to grow to 160 full-time positions, up from the current tally of 104 such positions. Such an increase would help support the agency’s development of automated surveillance and data visualization tools and ramp up its oversight of the uncleared swaps market, among other things.

Beyond that, the enforcement division, which netted the government $2.8 billion in fines during its fiscal 2015, would be a big winner under the CFTC’s proposal. It would add 51 full-time equivalent positions to the 161 such staffers budgeted for the current fiscal year.

“The commission not only has insufficient resources currently, it anticipates more time-intensive and inherently complex investigations due to innovative products and practices within the industry, including the use of automated and high frequency trading,” CFTC officials said.
To read the full story from Law360, click here