More On Legal & Compliancefrom The Advisor's Professional Library
- The Few and the Proud: Chief Compliance Officers CCOs make significant contributions to success of an RIA, designing and implementing compliance programs that prevent, detect and correct securities law violations. When major compliance problems occur at firms, CCOs will likely receive regulatory consequences.
- Conducting Due Diligence of Sub-Advisors and Third-Party Advisors Engaging in due-diligence of sub-advisors isnt just a recommended best practice it is part of the fiduciary obligation to a client. An RIA should be extremely reluctant to enter a relationship with a sub-advisor who claims the firms strategy is proprietary.
While some observers have suggested that Bank of America's big settlement with the federal government, BofA to Pay $16.65 Billion in Historic Mortgage Settlement, marks an end to the raft of lawsuits over the mortgage crisis which spawned the financial crisis of 2008-2009, a U.S. circuit court ruling suggests otherwise.
On August 19, the National Credit Union Administration (NCUA) scored a major victory in the 10th U.S. Circuit Court of Appeals in Denver in it its quest to recover losses from big banks that sold mortgage-backed securities to failed corporate credit unions.
The ruling, which was prompted by a directive from the U.S. Supreme Court in June, sided with the NCUA’s claim that the three-year time frame defendants have to file loss claims began when it seized three failed corporates, not when the corporates purchased the securities.
The NCUA, the federal credit union regulator, can now move forward with lawsuits filed in Kansas on behalf of U.S. Central Federal Credit Union and Western Corporate Federal Credit Union seeking damages over $1.74 billion in securities the two failed corporate credit unions purchased. The NCUA alleged in that case and in others that investment banks, including such big names as Wells Fargo (WFC) and Goldman Sachs (GS), knowingly sold securities to corporate credit unions without disclosing significant credit risk in the mortgages supporting them.
The ruling will not only carry weight with the NCUA’s suits but also lawsuits filed by other regulators seeking similar damages from investment banks over mortgage-backed securities losses.
Any additional losses the NCUA collects from the banks would offset corporate stabilization costs. The NCUA announced earlier this year it would not likely charge another corporate assessment to credit unions, as settlements with other banks, assessments and improved legacy asset performance have exceeded remaining corporate settlement expenses. However, the NCUA also downplayed the likelihood credit unions would receive a rebate in 2021, when corporate stabilization ends and the NCUA’s Guaranteed Notes mature.