Mounting tensions in bonds and currencies

After a strong 6-month rise and a huge early-March surge, the US dollar has stopped climbing against other currencies. The reasons: A significant change in the outlook for inflation and rising interest rates in the developed world. Whether this is a temporary break in a long-term trend or a sharp, V-shaped reversal is not clear.

But conditions for much higher interest rate and especially currency volatility in coming weeks are firmly in place, such as higher rates in Europe (arising from higher inflation expectations and concerns about Greece); higher rates in the US (stemming from higher inflation expectations and the timing of a US rate hike); and even elections in the UK, as some say that they may lead to an eventual British exit from the European Union.

Read the full report here.

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Bad apples: the SEC halts an advisor’s $15mm Ponzi scheme

The SEC just caught an advisory firm in Indiana who put their own investors in a Ponzi scheme. The lesson here is that non-traded, exotic investments that promise extraordinary returns are rarely a good idea for individual investors who lack the resources or know-how to conduct due diligence.

According to the SEC:

The Securities and Exchange Commission today announced charges against an Indianapolis investment adviser, its president, two associates and several affiliated companies for engaging in two fraudulent farm loan offerings, in which they made ponzi scheme payments to investors in other offerings and paid themselves hundreds of thousands of dollars in undisclosed fees. The SEC obtained a temporary restraining order and emergency asset freeze to halt the scheme.

According to the SEC’s complaint, filed in the U.S. District Court for the Southern District of Indiana, in 2013 and 2014, Veros Partners, Inc., its president, Matthew D. Haab, and two associates, attorney Jeffrey B. Risinger and Tobin J. Senefeld, fraudulently raised at least $15 million from at least 80 investors, most of whom were Veros advisory clients. The investors were informed that their funds would be used to make short-term operating loans to farmers, but instead, significant portions of the loans were to cover the farmers’ unpaid debt on loans from prior offerings. According to the SEC’s complaint, Haab, Risinger and Senefeld used money from the two offerings to pay millions of dollars to investors in prior farm loan offerings and to pay themselves over $800,000 in undisclosed “success” and “interest rate spread” fees.

In addition to Veros, Haab, Risinger, and Senefeld, the SEC charged Veros Farm Loan Holding LLC and FarmGrowCap LLC, the issuers of the offerings, and PinCap LLC. The SEC also charged registered broker-dealer Pin Financial LLC as a relief defendant.

The Honorable Jane Magnus-Stinson of the U.S. District Court for the Southern District of Indiana issued an asset freeze order against the defendants as well as a temporary restraining order prohibiting them from soliciting, accepting or depositing any monies from any actual or prospective investors, and in the case of Veros, any investors in private securities offerings. Judge Magnus-Stinson also ordered that a receiver be appointed. A preliminary injunction hearing has been scheduled for May 1, 2015.

The SEC’s complaint charges the defendants with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, and also charges Veros and Haab with violating Sections 206(1), 206(2) of the Investment Advisers Act, and Veros with violating Section 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-2.  The SEC’s complaint seeks permanent injunctions and disgorgement against all defendants and a financial penalty.  The SEC’s complaint names Pin Financial for the purposes of recovering proceeds it received from the fraud.

The case is here:

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