Asset Backed Securities

The U.S. Supreme Court gave Halliburton Co. a partial victory recently, putting further restrictions on class-actions lawsuits by shareholders just shy of eradicating such suits altogether. Halliburton tried to overturn twenty-six year old precedent and end class-action fraud suits over securities brought on public exchanges. A divided court declined to do so, and Chief Justice John Roberts stated that Halliburton had not shown "the kind of fundamental shift in economic theory" that would warrant overruling the precedent. The court did, however, make it easier for defendants to prevent approval of a class action. Roberts stated that a defendant can prevent such approval by showing that an alleged misstatement had no effect on a company's stock price. The precedent in this case comes from Basic v. Levinson, a 1988 case which stated that judges considering misrepresentation claims should presume that investors will take any public misstatement into account before buying shares. The shareholders, with the Erica P. John Fund at the [...]

The Securities and Exchange Commission has charged global investment bank and brokerage firm Jefferies LLC with failing to supervise its employees who sold mortgage-backed securities desk and were in turn lying to customers about pricing . An SEC investigation found that Jefferies representatives including Jesse Litvak, who the SEC charged with securities fraud last year, lied to customers about the prices that the firm paid for certain mortgage-backed securities. Lying about those prices mislead customers about the true amount of profits being earned by the firm in its trading. Jefferies’ policy required supervisors to review the electronic communications of traders and salespeople in order to flag any untrue or misleading information provided customers. However, the policy was not implemented in a way to detect misrepresentations about price . Jefferies agreed to pay $25 million to settle the SEC’s charges as well as a parallel action announced today by the U.S. Attorney’s Office for the District of Connecticut. […]