June 2015 Newsletter

INSIDE THIS ISSUE

Scott+Scott Announces Settlement with Fourth Defendant for $394 Million in Class Action Litigation Involving Foreign Exchange Benchmark Rates

Four Defendants Plead Guilty to Antitrust Violations Regarding Manipulation of Currency Exchange Markets

U.S. Department of Labor Proposes New Fiduciary Rule Seeking to Eliminate Conflicts of Interest for Retirement Investment Advice

SEC Proposes New Rules to Modernize Disclosures

Conferences and Educational Seminars

 

Scott+Scott Announces Settlement with Fourth Defendant for $394 Million in Class Action Litigation Involving Foreign Exchange Benchmark Rates

            On behalf of members of the Class it represents, Scott+Scott has reached a settlement agreement in principle with Citigroup Inc. and Citibank, N.A. (collectively, “Citi”) in In re Foreign Exchange Benchmark Rates Antitrust Litigation, Case No. 1:13-cv-7789 (S.D.N.Y.).  Under the agreement, Citi will pay $394 million in monetary relief, and will also provide cooperation to the plaintiffs in their prosecution of claims against the remaining defendants.  The litigation alleges that since 2003 the defendant-financial institutions have conspired to manipulate the WM/Reuters Closing Spot Rates in the $5.4 trillion-per-day foreign exchange market. 

“We are pleased to announce the fourth settlement with a bank since the beginning of this year, and gratified that Citigroup is offering our clients relief from the damage they suffered,” commented David R. Scott, Managing Partner of Scott+Scott.

The terms of the agreement are similar to those that Scott+Scott previously reached in three other settlements in the lawsuit, which was originally filed in November 2013.  In January 2015, the firm announced a settlement with JPMorgan Chase & Co. and JPM Chase Bank, N.A. for $99.5 million, in addition to their cooperation.  In March 2015, Scott+Scott announced that it had reached a settlement with UBS AG, UBS Group AG, and UBS Securities LLC for $135 million, in addition to their cooperation. And in April 2015, Scott+Scott announced a settlement with Bank of America Corporation and Bank of America, N.A., which includes $180 million in monetary relief and cooperation.  The case is pending in the United States District Court for the Southern District of New York before Judge Lorna G. Schofield, who denied the defendants’ motion to dismiss on January 28, 2015.  Combined, the settlements revealed to date amount to $808,500,000. 

"We will vigorously pursue relief from the remaining defendants, aided by the cooperation we have secured in these initial settlements,” said Christopher M. Burke, lead counsel for the plaintiffs.

Table of Contents

Four Defendants Plead Guilty to Antitrust Violations Regarding Manipulation of Currency Exchange Markets

On May 20, 2015, in the U.S. District Court for the District of Connecticut, Barclays, Citi Corp., JPMorgan Chase, and RBS (collectively, “Defendants”), entered guilty pleas to allegations by the U.S. Department of Justice (the “DOJ”) that each Defendant violated Section 1 of the Sherman Act (15 U.S.C. §1).  The hearing was held before Judge Stefan R. Underhill.

As set forth in the plea agreements, the banks’ misconduct involves their roles as dealers in the FX market.  According to the pleas, the banks engaged in near daily conversations, including on an electronic chat room called the “Cartel” or the “Mafia.”  Defendants coordinated their trading on benchmark fixes and colluded to fix bid-ask spreads throughout the trading day.

In the plea agreements, each bank agreed to pay multi-million dollar fines: (1) Barclays - $710 million; (2) Citi - $925 million; (3) JPMorgan - $550 million; and (4) RBS - $395 million.  Each bank will also receive a 3-year probationary term and enter into compliance programs with the government. In addition, each bank will receive non-prosecution protection with respect to the charged conduct on the EUR/USD currency pair and for price fixing in other currency pairs (subject to their commitment to help root out the violations).

The Court accepted each bank’s guilty plea.  Judge Underhill spelled out the allegations for a violation of Section 1 of the Sherman Act (the existence of a conspiracy, that the bank knowingly joined the conspiracy, and that the conspiracy affected interstate commerce).  Each bank acknowledged that this occurred.  Judge Underhill will set a sentencing hearing “at an appropriate time,” not yet determined.

Table of Contents

U.S. Department of Labor Proposes New Fiduciary Rule Seeking to Eliminate Conflicts of Interest for Retirement Investment Advice

On April 14, 2015, the United States Department of Labor (“DOL”) has released a long-awaited proposed rule which, if adopted, would expand application of a fiduciary duty for financial advisors who provide investment advice or recommendations regarding retirement accounts. 

The proposed rule comes in response to a report prepared by the White House Council of Economic Advisors, which found that investors lose up to $17 billion per year on their independent retirement accounts (“IRA”) due to their advisors’ conflict of interest.  Thus, at the heart of the regulation is the DOL’s desire to eliminate conflicts of interest for retirement advice.  The U.S. Secretary of Labor, Thomas Perez, put it simply: “if someone is paid to give you retirement investment advice, that person should be working in your best interest.” 

Accordingly, the proposed rule eliminates a pair of loopholes under ERISA that allowed brokers to give investment advice which—although providing lucrative commissions to the advisors—was not necessarily in the best interest of the advisors’ clients.  First, the proposed rule expands the definition of a “fiduciary” to persons who render investment advice by: (1) providing investment management recommendations regarding retirement plans; and (2) either (a) acknowledging the fiduciary nature of the advice, or (b) acting pursuant to an agreement, arrangement, or understanding with the recipient of the advice for consideration in making investment or management decisions regarding plan assets.  The practical effect of the new definition is that even brokers who provide one-time advice, as opposed to ongoing investment advice, are charged with fiduciary duties.  Second, the rule eliminates a provision that renders brokers as fiduciaries only if their clients agree that the information provided to them was primarily for an investment decision.  

The proposed rule expressly carves-out certain types of advice from the definition of fiduciary investment advice.  For example, the regulation draws a distinction between fiduciary investment advice and retirement education.  Similarly, under the “seller’s carve-out,” the proposal would not treat as fiduciary advice recommendations made to a plan in an arm’s length transaction where there is generally no expectation of fiduciary investment advice, provided that the specific conditions of the carve-out are met. 

In addition to the new proposal, the DOL is simultaneously proposing a new “Best Interest Contract Exemption,” which requires brokers to contractually acknowledge their fiduciary status, adhere to basic standards of impartial conduct, and disclose basic information regarding their conflicts of interest and the cost of their advices.   

  The DOL is soliciting public comment on the proposed rule, which is currently subject to a 75-day public comment period that ends on July 6, 2015. 

Most financial advisers who operate under the securities laws will continue to be subject to the regulations of the Securities and Exchange Commission and Financial Industry Regulatory Authority that maintain standards different from those of the DOL.

Table of Contents

SEC Proposes New Rules to Modernize Disclosures

            On May 20, 2015, the Securities and Exchange Commission (“SEC”) proposed new rules intended to modernize the information that investment advisors and investment companies disclose to the SEC.  The proposed rules are open for comment for 60 days.

            The SEC proposed a new reporting regime for registered management investment companies and exchange traded funds organized as unit investment trusts.  Under the proposed rules, those subject to the rules would be required to make monthly disclosures on new Form N-PORT (which would replace the current Form N-Q).  The information required to be filed with Form N-PORT includes the use of derivatives, exposure to changes in certain types of risk such as interest rates, credit spreads and asset prices, lending and repurchase agreements, information about market liquidity, fund flows, and the pricing of portfolio investments.  Though the subject investment companies would be required to file N-PORT monthly, the quarterly filings would be publicly available to investors and investment advisors.  Furthermore, the information required by Form N-Port is to be filed in XML format to improve the ability of both the SEC and investors to evaluate the risk associated with certain investments.

            The SEC proposed a number of amendments to Regulation S-X in its effort to modernize reporting requirements.  Importantly, the proposed amendments would standardize the information required to be reported concerning open futures contracts, open forward foreign currency contracts, and open swap contracts and require stronger disclosures with respect to purchased option contracts.

            Traditionally, an investment company would disclose its derivative exposure in notes to the financial statements.  The new rules would require the investment company to make a prominent disclosure of its derivative-related risks in the financial statements rather than the notes.

            The SEC also proposed changes to Rule 30e-3 under the Investment Company Act.  Under the proposed rule, an investment company could satisfy certain reporting obligations by making certain reports accessible on its website.  The goal of this proposed rule is to improve an investor’s access to information while reducing certain administrative expenses such as printing and mailing.

            The proposed rules, if ultimately adopted, could help investors evaluate the performance of investment companies relative to their peers.  This transparency could ultimately lead to improved returns as investor, or their investments consultants, develop the tools to analyze this new data.

Table of Contents

 

Conferences and Educational Seminars

 

June Events in the USA

           

           +May 31- June 3, 2015

          Massachusetts Association of Contributory Retirement Systems (MACRS)

          Conference Center at Hyannis

          Hyannis, Massachusetts

 

The four day conference will focus on a variety of issues of particular importance to the   Massachusetts retirement community including a special presentation and national pension update by Hank Kim, executive director and general counsel for the National Conference on Public Employees Retirement Systems (NCPERS).  This year’s conference will be “renamed” in honor of Fire Captain, Kevin J. Regan who lost his life last December in a tragic accident. Kevin, a Westfield, Mass. trustee served on the MACRS board for more than a decade and co-ordinated the MACRS conferences.

 

+May 31- June 3, 2015

Government Finance Officers’ Association 109th National Conference (GFOA)

Pennsylvania Convention Center

Philadelphia, Pennsylvania

 

The GFOA provides professional development training opportunities to state and local government finance professionals as well as an ideal venue for meeting and networking with colleagues and experts from across the nation. Sessions available for CEUs include accounting, auditing, and financial reporting; budgeting; capital planning and economic development; debt management; financial management; pension and benefit administration; and treasury and investment management.  Attendees create their own curriculum on a first come basis. Preconference sessions begin May 29 and are designed for new government finance officers.        

 

+June 3-5, 2015

Mid-Atlantic Plan Sponsors Annual Trustee Educational Conference (MAPS)

Hotel Monaco Baltimore

Baltimore, Maryland

 

The Mid Atlantic Plan Sponsors is an organization formed by trustees from eleven states in an effort to share knowledge in the public pension arena.  Pension fund trustees, administrators and professional service providers meet annually to exchange ideas and information.  The group is dedicated to the sound management of government finance resources and works as a cooperative partnership with the National Conference on Public Employee Retirement Systems (NCPERS). 

 

             +June 3-6, 2015

             Oklahoma State Firefighters Association’s 121th Annual Convention (OSFA)

             Tower Hotel

             Oklahoma City, Oklahoma

 

The Oklahoma State Firefighters’ Association provides its members with financial, legislative and educational advisory programs and pension seminars as well as many firefighter specific training tools and resources. 

 

         

+June 14-17, 2015

 

International Foundation ofEducation, Benefits for Public Pensions (IFEBP) Trustees & Administrators Institute

Hilton San Francisco, Union Square

San Francisco, California

 

The Trustees and Administrators Institutes are the premier educational programs for those who serve multiemployer trust funds.  IFEBP conferences offer concurrent seminars for new trustees, advanced trustees and administrators.  This seminar focuses on the Essentials of Multiemployer Trust Fund Administration.  Each features a module for handling fiduciary responsibilities, government reporting, disclosures and how the economic political and regulatory environment impacts plans.

 

+June 15-17, 2015

26th Annual National Association of Securities Professionals Annual and Financial Services Conference (NASP)

Swissotel Chicago

Chicago, Illinois

 

NASP is the national advocate for minorities in the financial services industry.  Founded in 1986 to provide educational opportunities and create equal representation for people of color and women in all aspects of the securities industry, it is a non-profit organization and has become one of the most respected Pension and Financial Services Conferences.  NASP, headquartered in Washington, DC currently has local chapters in several metropolitan cities, including Atlanta, Baltimore/Washington DC, Boston, Chicago, Detroit, New York, North Carolina, Philadelphia, San Francisco, Southern California, and Texas.  NASP brings together the nation’s minorities who have achieved recognition as financial professionals including investment bankers, asset managers, public finance consultants, plan sponsors, and many other finance professionals.

 

+June 16-18, 2015

National Association of Attorneys General Summer Conference (NAAG)

Hilton La Jolla Torrey Pines

San Diego, California

 

The National Association of Attorneys General (NAAG) was established more than 100 years ago to provide Attorneys General an opportunity to communicate between the states’ chief legal officers on legal and law enforcement matters.  NAAG’s focus is: "To facilitate interaction among Attorneys General as peers and to facilitate the enhanced performance of Attorneys General and their staffs." NAAG offers "cooperative leadership," not only between the states, but also with their federal counterparts. NAAG has 3 major meetings: the Association’s winter meeting in Washington, DC, the NAAP Presidential Initiative Summit and the Summer Meeting. Portions of these meetings may be open to the public and require advance registration.

 

+June 17 & 18, 2015

American Antitrust Institute’s 16th Annual Conference (AAI) and Invitational Symposium: Antitrust and Entrepreneurship

National Press Club

Washington, DC

 

This year’s conference title is “Antitrust and the 2016 Presidential Transition.”  The event is part of AAI’s larger effort to formulate a comprehensive set of policy recommendations to the 45th President of the United States.  The AAI Invitational Symposium will address the question of how competition policy and entrepreneurial activity should relate to one another.       

 

             +June 23-26, 2015

             National Association of Public Pension Attorneys (NAPPA) Legal Conference

             Austin Hilton Hotel

             Austin, Texas 

             

The National Association of Public Pension Attorneys is a legal professional and educational association founded more than 25 years ago for and by attorneys.  Continuing education credit is available at this annual educational conference. The first session of the conference is designed for new members.

 

  +June 28 - July 1, 2015

             Florida Public Pension Trustee Association’s 31st  Annual Conference (FPPTA)

Boca Raton Resort

Boca Raton, Florida

 

FPPTA’s primary purpose in conducting an annual educational forum is to provide the basis for improved financial and operational performance of the public employee retirement systems in the state.  FPPTA acts as a central resource for educational purposes forth public pension industry including topics such as the political reality of public pension plans and private sector public sector plans.

 

Government Finance Officers’ Association Conferences (GFOA)

 

           + June 4, 2015

            Connecticut Government Finance Officers’ Association

            Tunxis Plantation

            Farmington, Connecticut

           

           +June 10-12, 2015

  Idaho City Clerks, Treasurers  & Finance Officers Association

  Boise Center

  Boise, Idaho

 

            + June 10-13, 2015

            Wyoming Association of Municipalities

            South High School

            Cheyenne, Wyoming

 

+June 13-17, 2015

 Florida Government Finance Officers’ Association

 Westin Diplomat Hollywood

 Hollywood, Florida      

            + June 17-19, 2015

           Maryland Government Finance Officers’ Association

            Clarion Conference Center

            Ocean City, Maryland

            +June 18-26, 2015

Maine Government Finance Officers’ Training

DaVinci’s Restaurant

Lewiston, Maine

Table of Contents

Scott + Scott LLP is a nationally recognized law firm headquartered inConnecticut with offices in New York City, Ohio and California. The firm represents individual as well as institutional investors who have suffered from corporate stock fraud. Scott+Scott has participated in recovering billions of dollars and achieved precedent-setting reforms in corporate governance on behalf of its clients. In addition to being involved in complex shareholder securities and corporate governance actions, Scott+Scott also has a significant national practice in antitrust, ERISA, consumer, civil rights and human rights litigation. Through its efforts, Scott+Scott promotes corporate social responsibility.

Scott+Scott’s PT+SM System is the firm’s proprietary investment portfolio tracking service. Carefully combining the firm’s proprietary computer-based portfolio monitoring software with Scott+Scott’s hands-on approach to client  relations is a proven method for institutional investors and their trustees to successfully

  • Monitor their investment portfolios  
  • Identify losses arising from corporate fraud    
  • Consider what level of participation any given situation requires   
  • Recover funds obtained on their behalf through investor litigation action  

To obtain more information about Scott+Scott’s PT+SM services or to schedulea presentation to fund trustees, fund advisors or asset managers, please contact:    David R. Scott + Toll Free: 800.404.7770     email: drscott@scott-scott.com + UK Tel: 0808.234.1396