Consumer Protection

Do Not Track Default Sparks Criticism

OnlineMediaDaily (OMD) reports that Microsoft is receiving criticism for its decision “to turn on a do-not-track header by default in its newest browser”. Advertising industry representatives have reportedly criticised the software giant for taking a position contrary to self-regulatory groups in the software industry. According to OMD,┬áthe “browser-based do-not-track header sends a request to Web sites” which asks them not to track use and send users ads based on their online activity. The banner reportedly doesn’t block cookies or prevent tracking, but rather leaves it “up to ad networks to decide whether to respect the header”. Criticism from the industry has centred around the failure of the approach to allow users a choice as to whether they are or are not tracked by companies, reports OMD.

OnlineMediaDaily: DAA: Ad Industry Might Ignore IE10 Do-Not-Track Requests (1 June 2012)
(Source: OMD)

Securities Company Fined and Barred for Fraud

The Financial Industry Regulatory Authority (FINRA) has announced that Brookstone Securities, its owner/chief executive officer Antony Turbeville and one of its brokers, Christopher Kline, have been found guilty by the FINRA hearing panel of “intentionally [making] fraudulent misrepresentations and omissions to elderly and unsophisticated customers regarding the risks associated with investing in [collateralized mortgage obligations (CMOs)]” in order to induce them to purchase unsuitable CMOs. The panel also found that despite being aware of the negative effect on CMOs caused by increasing interest rates, Mr Turbeville and Mr Kline “led customers to believe that the CMOs were ‘government-guaranteed bonds’ that preserved capital and generated 10% to 15% returns”, leading to customer losses of US$1,620,100. Furthermore, the firm failed to acknowledge or accept responsibility for the misconduct, and instead blamed the customers for their own losses. Brookstone Securities has been fined US$1 million and ordered to pay restitution of more than $1.6 million to customers. Additionally, Mr Turbeville and Mr Kline have been barred from the securities industry, while the firm’s former chief compliance officer David Locy has been barred from “acting in any supervisory or principal capacity” for two years and fined US$25,000.

FINRA’s media release (4 June 2012)
(Source: FINRA)

FTC Reaches Settlement in Deceptive Conduct Action

The United States Federal Trade Commission (FTC) has announced that it has reached a settlement with FDN Solutions, LLC (FDN) and Timothy Daniels regarding allegedly misleading advertising. According to the FTC’s complaint, FDN’s claims that they could reduce consumers’ debts by 40-60% were misleading “because they did not take into account the consumers who dropped out of the program, or the fact that the fees each client paid totaled 30% of the savings achieved”. The FTC also alleged that FDN violated “the Federal Trade Commission Act by making unsupported savings claims and by using a fake consumer testimonial”, as well as the “Telemarketing Sales Rule by misrepresenting the amount of money or the percentage of the debt amount that a consumer could save by using their services”. The settlement order imposes a judgment of US$3.3 million, suspended at $85,000 based on the defendants’ inability to pay, but will become fully due should it be later determined that the financial information provided by the defendants to the FTC was false.

FTC’s media release (6 June 2012)
(Source: FTC)

US District Court Shuts Down Bogus Credit-repair Service

The United States (US) Federal Trade Commission (FTC) has announced that the District Court in Jacksonville, Florida has issued a temporary restraining order against Latrese and Kevin Hargrave and the firms they control, barring them from “all activities involving credit repair, and from offering credit-related products, programs, or services”. In 2010, the court issued an order permanently barring their firm, Hargrave & Associates, from engaging in deceptive conduct in relation to advertisements inducing consumers to buy their “bogus” credit repair services. The court has stated that “there is good cause to believe that the defendants have violated, and continue to violate provisions of the permanent injunction” issued in 2010 by continuing to make false credit repair claims. The new court order will remain in place while the FTC pursues a contempt ruling against the Hargraves for violating the original order.

FTC’s media release (7 June 2012)
(Source: FTC)

US Investment Management Company Fined US$35 Million for Misleading Statements

The United States (US) Securities and Exchange Commission (SEC) has announced that investment management company OppenheimerFunds Inc (Oppenheimer) has agreed to pay over US$35 million to settle SEC charges that it made “misleading statements about two of its mutual funds struggling in the midst of the credit crisis in late 2008″. The charges (6 June 2012) allege that although declines in the commercial mortgage-backed securities (CMBS) market caused large cash liabilities on its funds and forced it to reduce its CMBS exposure, Oppenheimer “disseminated misleading statements about the funds’ losses and their recovery prospects”. According to SEC Denver regional office associate director Julie Lutz, “[t]hese Oppenheimer funds had to sell bonds at the worst possible time … Yet, the message that Oppenheimer conveyed to investors was that the funds were maintaining their positions and the losses were recoverable”. SEC enforcement division director Robert Khuzami reiterated that mutual fund providers must “clearly and accurately convey the strategies and risks of the products they sell”, and that “[c]andor, not wishful thinking, should drive communications with investors, particularly during times of market stress”.

SEC’s media release (6 June 2012)
(Source: SEC)