On both sides of the Atlantic, regulatory officials have increased scrutiny of structured financial products such as credit-default swaps and collateralized debt obligations. In an article entitled, “U.K. Probes Structured-Finance Products,” the Wall Street Journal highlights investigations into possible fraud in the valuation and sale of these assets.
In the United Kingdom, the Serious Fraud Office is examining whether bankers may have knowingly sold assets that were falsely priced. Similarly, in the United States, both the Department of Justice and a subcommittee of the U.S. Senate are looking for evidence of fraud involving false valuations of mortgage-backed securities and other structured finance products.
One of the problems with structured products is in the lack of a public market for the sale and purchase of assets like credit-default swaps. By not having open exchange for these assets, pricing can be difficult, and thus bankers have come to rely on computer models to value the assets. Computer valuation models are subject to incorrect assumptions and data, which can lead to the improper valuation of the asset. Furthermore, the complex nature of structured products leads to the possibility of fraud in such valuations, which the U.S. and the U.K. governments continue to investigate.
The Obama Administration, in an effort to make the financial system safer, has moved to regulate credit-default swaps. In the U.K., the Serious Fraud Office has transitioned to a more active watchdog role, rather than waiting for police action. The SFO anticipates future inquiries into potential fraud, and in the last year has worked on cases including Bernard Maddoff and Sir Allen Stanford’s Ponzi schemes.
Page Perry is an Atlanta-based law firm with over 125 years collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 30 occasions. Page Perry’s attorneys are actively involved in representing institutional and corporate investors in securities cases. For further information, please contact us.