Wednesday, September 9, 2015

Affiliate of Center City real estate firm settles with SEC for $21.5M



A subsidiary of RAIT Financial Trust has agreed to pay more than $21 million to settle charges brought by the Securities and Exchange Commission alleging it fraudulently retained fees that rightfully belonged to its clients.


Taberna Capital Management failed to inform its collateralized debt obligation clients that it was receiving so-called exchange fees related to restructurings it was undertaking between 2009 and 2012, and received “millions of dollars” in these fees, according to the SEC.
justice

“Taberna’s retention of the exchange fees was neither permitted by the CDOs’ governing documents nor disclosed to investors in the CDOs,” the SEC said in a statement. “The fees rightfully belonged to the CDOs and created conflicts of interest that Taberna failed to disclose.”

The SEC brought charges against Michael Fralin, Taberna’s former managing director, and Raphael Licht, the firm’s former chief operating officer for their involvement with Taberna’s misconduct.

As a result of the investigation and settlement, Fralin agreed to pay a $100,000 penalty and is barred from the securities industry for at least five years. Licht agreed to pay a $75,000 penalty and is barred from the securities industry for at least two years.

Taberna, Fralin and Licht consented to the SEC’s order without admitting or denying the findings. Fralin and Licht have are no longer employed by RAIT.

This settlement had been in the works for some time.

A year ago, the RAIT disclosed it had reached an agreement in principle with the SEC. An order was entered this past Sept. 2 and publicly disclosed.

RAIT (NYSE: RAS) already took a charge of $21.5 million relating to the settlement. The company is based in the Cira Centre in Philadelphia.

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