The mortgage crisis? It's not over and the SEC just reminded us of that.
Earlier this week, the Securities and Exchange Commission (SEC) charged Thomas Priore, the owner and president of ICP Asset Management, LLC (ICP) and affiliated broker-dealer and holding company firms, with fraud. The action relates to the management of mortgage investment products.
Specifically, the civil action, filed in the United States District Court for the Southern District of New York, charges that Mr. Priore and affiliates fraudulently managed collateralized debt obligations (CDO's). The defendants intend to vigorously defend themselves against these charges and have issued a statement that they acted in their clients' best interests at all times.
The filing of this action is part of the SEC's ongoing investigation surrounding the financial crisis and its relationship to such products as CDO's and the major losses suffered during this period with these sorts of investments.
The impact alleged in this case is big. The SEC's allegations include "fraudulent practices and misrepresentations" that resulted in four multi-billion dollar CDO's to lose millions of dollars. Additionally, the defendants are alleged to have secured large advisory fees and undisclosed profits related to these investments at the "expense of their clients and investors," taking advantage of the distressed market for their own benefit.
The SEC also claims that the defendants allowed trades for the CDO's knowing that the prices were inflated and that clients would be exposed to overpayment and potential losses.
The SEC's New York Regional Office Director, George S. Canellos, put it this way: "The CDOs were complex but the lesson is simple: collateral managers bear the same responsibilities to their clients as every other investment adviser." He continued saying that advisers will be held accountable when clients' trust is violated.
Related Web Resources
For more background on this case and other aspects of the mortgage crisis, go to law.com.
The Wall Street law firm, Gusrae Kaplan Nusbaum PLLC has decades of experience in advising and representing members of the broker-dealer community. Please contact us at any time to consult with one of our lawyers.
