MF Global Holdings, Ltd. (fka MFGLQ)

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Banks Settle MF Global Underwriting Case for $74M - Analyst Blog

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Zacks
By Zacks Equity Research
January 7, 2015 11:00 AM

Banks continue to move past their legal headwinds. The 2011 case against divisions of seven banks, for providing misleading statements related to the presently bankrupt MF Global Holdings Ltd.’s certain debt offering as underwriters, has won court approval for settlement, per a Bloomberg Report.

The banks will pay $74 million in aggregate to settle the allegations. MF Global had collapsed in 2011, amid accusations that the firm’s owner Jon Corzine had used client money to cover liquidity shortfalls.

Banks, whose units are part of the settlement, include Citigroup Inc. (C), Deutsche Bank AG (DB), The Goldman Sachs Group, Inc. (GS), JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC), The Royal Bank of Scotland Group plc (RBS) and Sandler O'Neill and Partners. The plaintiffs include former stockholders and bondholders who had invested in MF Global common stock, convertible bonds and senior notes between May 20, 2010 and Nov 21, 2011.

The case, filed in the U.S. District Court, Southern District of New York, accused these banks of misrepresenting the facts related to the exposure of MF Global to European sovereign debt. The plaintiffs also alleged that these banks inaccurately inflated MF Global’s capability to manage risks and inadequately accounted for deferred tax assets.

Conclusion

For these banks, the above-mentioned lawsuit is an additional burden to their ongoing legal problems. Further, banks across the globe have been facing increasing scrutiny for their business practices in the years prior to the financial crisis. Many of the banks have paid billions of dollars as fines and compensation to settle lawsuits and probes.

Many investors have lost their hard-earned money as a result of such business malpractices by the banks. We believe that these banks’ efforts to resolve litigation issues regarding their business misconducts will go a long way in regaining investors’ confidence.

http://finance.yahoo.com/news/banks-settle-mf-global-underwriting-160004730.html