Omaha, U.S.A. — According to the Securities and Exchange Commission’s recent report on financial literacy in the United States, many individuals would do well to take a refresher course just to cover the basics. And when it comes to more complex financial issues such as 401k and retirement planning, the average investor is not in a position to either make informed decisions on their own or have an enlightened conversation with their broker if they have one. “The SEC’s report points to subjects that are not even on the radar of conventional sources of investment knowledge,” says George Morgan, the Executive Director of The Buttonwood Center for Investor Education.

So how can a person know if they aren’t financially literate or aren’t asking the right questions of their broker? “You really have to take some time to educate yourself,” says Morgan. “If you’re going it alone, be on the lookout for educational financial planning classes in your area. If you are working with a broker, your questions should include things such as what is an appropriate return on your investment, as well as asking about alternative ways of investing.”

Morgan, a retired broker himself, recently ran into a married couple who were former clients. ”They told me about their current broker and what a great job he is doing. They described how this new broker met with them on a regular basis and that so far this year, they had a return they were very pleased with. If they had known the right questions to ask, their returns might have been significantly higher and the amount of money they paid to the broker could have been considerably lower.”

Morgan’s new book, Extra Lettuce: Manage Your 401k Now to Avoid Flipping Burgers Later, easily explains how to take control of your personal finances and manage retirement funds in order to best plan for your golden years.

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San Francisco, U.S.A. — Visa, MasterCard and U.S. financial institution defendants have signed a memorandum of understanding to enter into a settlement agreement to resolve the Class Plaintiffs’ claims in the multi-district interchange litigation (MDL). The claims originally were brought by a class of U.S. retailers in 2005.

Visa also has reached an agreement in principle to resolve the claims brought against Visa by a group of individual retailers (the Individual Plaintiffs) in the same MDL litigation. The proposed settlement payments for both the Class and Individual claims would be approximately $6.6 billion, of which Visa’s share would represent approximately $4.4 billion. Visa’s share will be paid from the litigation escrow account established pursuant to Visa’s Retrospective Responsibility Plan. More information on the plan is available in the Company’s filings with the Securities and Exchange Commission at www.sec.gov.

The settlement agreement with the Class Plaintiffs includes, among other terms:

• A comprehensive release from participating class members for liability arising out of claims asserted in the litigation, and a further release to protect against future litigation regarding interchange and the other U.S. rules at issue in the MDL litigation.
• Distribution to class merchants of an amount equal to 10 basis points of default interchange across all credit rate categories for a period of eight consecutive months, which otherwise would have been paid to issuers and which effectively reduces credit interchange for that period of time. This effective reduction will be distributed by a process designed to ensure that all class retailers, large and small, are able to receive the reduction. The eight-month period for the reduction would begin within 60 days after completion of the court-ordered period during which individual class members may opt out of this settlement, or approximately mid-2013.
• Modifications to Visa’s rules to permit retailers to impose a surcharge on credit transactions subject to a cap and a level playing field with other general purpose card competitors. The rule changes on surcharging likely would be implemented in early 2013.
• Agreement that Visa will meet with merchant buying groups that seek to negotiate interchange rates collectively (e.g., independent drug stores). Visa retains discretion to accept or reject a proposal based on whether the Company believes it is commercially reasonable.

For the quarter ending June 30, 2012, Visa intends to record a litigation charge of approximately $4.1 billion, which will increase its total FAS 5 reserve for the litigation covered by the Retrospective Responsibility Plan from $285 million to approximately $4.4 billion, to reflect the Class Plaintiffs’ Settlement Agreement and management’s current estimate to resolve the Individual Plaintiffs’ claims.

Additional information about these settlements can be found on Form 8-K filed with the U.S. Securities and Exchange Commission and available at www.sec.gov, as soon as accepted and processed by the SEC.

“We believe settling this case is in the best interests of all parties,” said Joseph W. Saunders, Chairman and Chief Executive Officer of Visa Inc. “We are comfortable with the terms, which we do not anticipate will impact our current guidance. Visa is well positioned to help drive the migration to electronic payments in the U.S. and globally.” Consistent with commitments Visa made at the time of its restructuring, the settlements are subject to approval by Visa USA voting members representing two-thirds of membership proportion.

“This agreement should remove the distraction of litigation for all parties,” said Joshua R. Floum, General Counsel of Visa Inc. “We will go forward with a focus on helping retailers grow their businesses and providing them with efficient and valuable payment options.” Visa remains in a “quiet period” which will extend until the Company’s fiscal third quarter 2012 earnings are released on July 25, 2012.

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Apple Inc (AAPL) chief executive officer Tim Cook renounced a dividend worth $75 million declared by the company. Apple Inc recently declared a regular cash dividend after almost 17 years since the last disbursement of dividends to its shareholders in 1995.

The technology giant will pay a quarterly dividend of $2.65 per share from July.

The company said that in filing with the Securities and Exchange Commission, Cook opted-out from getting any dividend, and had asked the company to exclude him from dividend payout program.

‘This strikes me as another important signal Tim Cook is sending that Apple’s user-friendly product image is now to be matched by a social-friendly corporate image” said Stephen Davis, corporate governance professor at Yale university.

Apple disclosed this unexpected, strange plan in the month of March 2012, to distribute a 100 billion cash pile generated over the period of 17 years, and through strong sales of iPhone and iPods.

Another most striking fundamental aspect of Apple Inc, is its height of innovation. It literally created a new market for items that invited enormous change in the industry. Technological evolution within this organization transformed the fate of industry and consequently Apple itself.

A high dividend payout company signals that there is nothing much that can be done by investing in new geography or technological advancement for a new production facility. Nothing can be done that expands the top-line in the short-term.

On the contrary, what Apple did is not a faint of heart, but a true measure of how far determination at management level can pull fortunes in customer favor. Apple launched a series of products ranging from cell phones to handy music players, from iPods to Mac, building a rocky track and painting a rough patch for its competitors.

Non-dividend paying companies will be pro-actively engaged in investing activities or will be in pipe-line for grabbing new opportunities, effectively strengthening the top-line. Thus, investors feel comfortable parking money with such firms.

All that matters is how far an organization is successful in utilizing or putting cash into the most profitable pool that brings fat revenues and increased market competency.

Apple rewarded its shareholders in both forms so far; it satisfied them with cash dividend and by innovation.

Since then Apple shares have dropped to $562 each making the company worth $525 Billion. However, earlier this year Apple’s shares touched a high of $644 surpassing $600 Billion market value of the firm.

Image Courtesy of  Songquan Deng / Shutterstock

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State investigators in Massachusetts slapped the investment company State Street Global Advisors February 27 with a $5 million fine for failing to tell investors about the role of the hedge fund Magnetar in a risky collateralized debt obligation that collapsed in the housing market crisis.

In 2006, State Street and Deutsche Bank put together a $1.56 billion CDO deal, called Carina CDO Ltd. As ProPublica reported with This American Life and NPR, Magnetar was involved in the creation of at least $40 billion of CDOs, including Carina, while simultaneously taking positions that would allow it to profit if the CDOs failed.

As ProPublica noted in its original story, sources involved in the negotiations said State Street managers were “highly skeptical” about dealing with Magnetar, raising concerns about the company’s “reputational risk.”

According to the settlement, a State Street executive also sent an email saying, “We are not comfortable with [Magnetar] shorting into the deal.” Carina defaulted only 16 months after it was launched. Investors lost nearly $450 million. The Massachusetts settlement says Magnetar was closely involved in picking assets that went into the CDO — and “was able to reap a windfall” when it failed. (Here’s the settlement.)

Magnetar has never been charged with wrongdoing, and has always maintained that it did not have a strategy to bet against the housing market. The settlement reached with Massachusetts faults State Street for not informing investors of Magnetar’s role in creating Carina and its bets against CDOs. “Investors were unaware of a potential conflict of interest between Magnetar and other Carina investors and thus were unable to make a fully informed investment decision,” the settlement states.

State Street will pay a $1.5 million fine and return $3.5 million to the state for fees, commissions and other revenue related to Carina. State Street is being fined under a Massachusetts law regulating investment activity. In a statement, William Galvin, Secretary of the Commonwealth of Massachusetts, said his office “is actively investigating how banks misled buyers of securitized debt instruments backed by subprime mortgages.”

The deals, he said, “allowed the mortgage crisis to continue and caused further harm to the U.S. economy.” The secretary’s office did not respond to requests for further comment on the settlement.

A spokesperson for State Street said that in accepting the settlement, the company “neither admits nor denies [Massachusetts’] findings or conclusions concerning information contained in the offering documents for the CDO.”

Massachusetts has gone after State Street before: In 2010, the company settled with Galvin’s office and the Securities and Exchange Commission for more than $300 millionover charges that the firm failed to disclose to investors the extent of their exposure to subprime investments.

J.P. Morgan settled with the SEC last year for $153 million over claims that the bank misled investors about Magnetar’s role in a CDO. The SEC is also reportedly considering charges against one former manager of a Japanese bank over his involvement with Magnetar CDOs — the first public evidence of possible charges against a bank executive related to the scandal.

by Cora Currier, ProPublica, Feb. 28, 2012, 5:57 p.m.

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According to The Wall Street Journal, the Securities and Exchange Commission has warned a top banker that it may bring civil charges against him for his role in creating a risky collateralized debt obligation, or CDO, that exploded spectacularly as the housing market crashed. It’s the first public evidence that the SEC is considering charges against a top banking executive involved in CDOs, which fueled the financial crisis.

The CDO, from the end days of the boom in 2007, was one of dozens that had been created with the help of the hedge fund Magnetar. As Propublica reported with This American Life and NPR, Magnetar often pushed for riskier assets to be included in CDOs, and placed bets against many of the same investments so that it would profit if those risky assets went sour. (Magnetar has never been charged with any wrongdoing, and has always maintained that it did not have a strategy to bet against the housing market.)

Alexander Rekeda, the banker warned by the SEC, helped create a $1.6 billion CDO called Delphinus CDO 2007-1 for the Japanese bank Mizuho. Investigators allege that investors were not told Magnetar stood to profit if the investments failed. (Here’s the pitchbook for Delphinus.)

In a related matter, the Financial Industry Regulatory Authority, an independent Wall Street watchdog, has made a preliminary recommendation that Rekeda be disciplined for “alleged misrepresentations in the sale of” another type of security — we have the details here.

Delphinus is not the first deal involving Mizuho and Rekeda that the SEC has looked into. As The Journal reported last year, the agency has been investigating a CDO called Tigris that Magnetar created with Mizuho. That CDO was a collection of the riskiest bits of other CDOs — as we described it, they were “bundling up the dregs of a CDO,” a “rare, if not unprecedented” strategy. The Tigris deal has not yet resulted in charges.

We’ve reached out to Rekeda, who no longer works at Mizuho, but have yet to hear back. A Mizuho spokesman told The Wall Street Journal that it “has been asked by the SEC to provide related documents and information, and it’s currently dealing with it.” (We also have reached out to Mizuho.)

The warning sent to Rekeda, called a Wells notice, says that the SEC has made a “preliminary determination … to recommend charges based on alleged misrepresentations in connection with the structuring of a CDO.”

As we noted last fall, the SEC has also warned the ratings agency Standard & Poor’s that it also may face civil charges in connection with the Delphinus CDO. Standard & Poor’s abruptly downgraded Delphinus just a few months after the security was issued and received a top rating.

Other banks have been charged by the SEC and settled allegations involving CDOs. In 2010, Goldman Sachs settled with the SEC for more than $500 million. In June, J.P. Morgan agreed to pay $153 million, and in October, Citigroup reached a $285 million settlement.

by Cora Currier, ProPublica, Feb. 21, 2012, 1:49 p.m.

Image Courtesy of   http://www.flickr.com/photos/medilldc/

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