Victims of mortgage securities fraud can breathe easier knowing that the SEC will aggressively follow up on fraud charges. One case that demonstrates the power of legal justice for fraud incidents was recently settled between the Securities and Exchange Commission and investment adviser Thomas Priore and ICP Asset Management. Priore and two other associated firms were accused of mortgage security fraud in June 2010. Their investors lost multi-millions of dollars as the investment firms raked off millions of dollars for themselves in fees and profits.

The fraud began during the peak of the housing boom, when investors sought to purchase collateralized debt obligations (CDOs) in the form of pooled securities sold by Wall Street banks. Unfortunately, the housing bubble burst and with homeowner defaults on mortgages in 2007, these investors lost billions of dollars.

In this case, Priore, without admitting to or denying SEC charges of fraud, agreed to not violate securities laws in the future. As part of the settlement, he cannot work in certain investment areas for a period of five years and he and his company agreed to about $3 million in fines and about $20 million in payments of restitution.

In another newsworthy case, Goldman Sachs paid $550 million to investors after making settlement with the SEC after it was discovered that the mortgage securities investors were sold were chosen under circumstances that would indicate potential failure.

These cases underscore the point that investors must be careful when choosing investment advisers. Equally important, when a person allows someone else to handle large or small amounts of their money, there needs to be some assurance that their investment adviser will faithfully fulfill their fiduciary responsibility to act in the best interests of their clients.

Source: Washington Post, “Investment adviser and firms paying $23.5M to settle SEC fraud charges on mortgage securities,” September 7, 2012

Our law firm represents investors in similar situations to the ones mentioned in this article. For more information, please visit our collateralized debt obligations page.

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