I. Mark the statements below true (T) or false (F):
1. _____ The SEC fraud complaint against Countrywide does not charge that the company’s mortgage underwriting guidelines violated federal law.
2. _____ The SEC action against Countrywide is within US District Court/Central District of California jurisdiction solely because the plaintiffs reside in that district.
3. _____ The SEC seeks jail time for the three Countrywide executives being charged with fraud.
4. _____ The Dodd-Frank Act, President Obama’s financial reform law, reduces SEC funding and enforcement authority.
5. _____ Under Dodd-Frank, security-based swaps (SBS’s), or over-the-counter (OTC) securities, are defined as securities under SEC enforcement authority.
6. _____ Dodd-Frank allows the SEC to bring fraud cases relating to transactions outside the US.
7. _____ The Act repeals monetary incentives and employment protections for whistleblowers.
8. _____ Dodd-Frank will take years to be fully implemented, as the law requires extensive rule-making by various agencies.
9. _____ The new agencies created by Dodd-Frank will have examination and enforcement authority over all financial institutions.
10. ____ The Dodd-Frank Act has been praised for adopting a strong version of the Volker Rule.
II. Use words from the list below to complete the sentences that follow:
reporting / statute / conduct / bounty / complaint / practices
to mislead / to conceal / to pursue / to originate / to bring
entitled / forthcoming / lax / bankrupt / mortgage-backed
- The executives’ (1) __________, as well as the company’s (2) __________, caused the regulator to (3) __________ a fraud claim against them.
- Countrywide Financial was not (4) __________ with investors regarding how much risk it was taking.
- The SEC charges that, in their (5) __________, the defendants (6) __________ from investors how dependent their business model had become on the sale of (7) __________ securities.
- They also (8) __________ investors and analysts about how many sub-prime loans they were actually (9) __________ and how (10) __________ their lending criteria were.
- The law now allows for a __________ (11) to be paid to whistleblowers in some cases.
III. Choose the best options for completing the statements below:
- Justice Kennedy (1) delivered / heard the opinion of the court in the case and, for the most part, all other justices (2) dissented / concurred.
- It is charged that company executives (3) engaged / sustained in fraudulent (4) enforcement / disclosures designed to hide from investors how (5) prudent / exposed they were.
- Countrywide’s business model was highly dependent on the sale of mortgages to the (6) prime / secondary market, and its (7) excessive / underwriting guidelines became extremely (8) wide / narrow.
- All (9) ill-gotten / pursuant gains from fraudulent conduct must be (10) challenged / disgorged.