SEC Charges Ford Credit with Unlawful Marketing of "Ford Money Market Account"
summary
Ford Motor Credit Company misled investors by marketing its unsecured corporate debt as a safe, bank-like money market account without disclosing it lacked FDIC insurance or regulatory protections, leading to a SEC cease-and-desist order, $700,000 disgorgement, and mandatory reforms.
paragraph
The SEC charged Ford Motor Credit Company with violating Section 5(b)(1) of the Securities Act by using promotional materials that falsely portrayed its 'Ford Money Market Account' as a bank-style, FDIC-insured money market investment, when it was in fact an unsecured corporate debt instrument. Although investors received a prospectus disclosing the true nature of the product, the pre-sale sales materials themselves were deemed illegal prospectuses under Section 10 for omitting critical risks, including the absence of FDIC insurance and Investment Company Act safeguards. Ford Credit agreed to a cease-and-desist order, paid $700,000 in disgorgement plus $64,282 in prejudgment interest, and committed to renaming the product, improving disclosures, and annually distributing its Form 10-K to investors.
narrative
Ford Motor Credit Company was charged by the SEC for unlawfully marketing its 'Ford Money Market Account' as a safe, bank-like investment, when it was actually an unsecured corporate debt instrument with no FDIC insurance or protections under the Investment Company Act of 1940. Sales materials emphasized higher guaranteed interest rates and features mimicking traditional money market accounts, creating confusion by failing to disclose the product’s true nature and risks, despite investors later receiving a prospectus with full disclosures. The SEC determined these promotional materials constituted illegal prospectuses under Section 10 of the Securities Act because they omitted essential risk information required by law, violating Section 5(b)(1). Although no investors lost money, the SEC acted proactively as part of a broader investigation into the $28 billion corporate money market debt market to prevent future investor harm. Ford Credit consented to a cease-and-desist order without admitting or denying the allegations, agreed to disgorge $700,000 in ill-gotten gains, and pay $64,282 in prejudgment interest. As part of the settlement, Ford Credit committed to renaming the product to eliminate misleading terminology, enhancing disclosures in both sales materials and prospectuses, and annually mailing investors a copy of its Form 10-K. The action underscored the SEC’s focus on ensuring transparency in complex financial products that appear deceptively similar to low-risk retail investments.
Classified unregistered-securities(confidence 100%). EDGAR detection: forms Form D/S-1· recall 41% / precision 30%. detection rule →
Statutes
Section 10 of the Securities ActSection 5(b)(1) of the Securities ActSection 5(b)(1) of the Securities ActSection 5 of the Securities Act
Parties
ford creditford money market account was not a bank account or money market mutual fundinvestors' accounts were not insured by federal deposit insurance corporationlinda chatman thomsenpeter bresnansales materials
Keywords
money marketfordmoneymarket accountmarketford moneyford creditaccountsales materialscreditsalesmaterialssecuritiescompanyinvestment
Exhibits & Attached Documents (1)
Extracted insights
Dollar amounts 4
- $28.00B $28 billion ≥$1B
- $7.30B $7.3 billion ≥$1B
- $700K $700,000 $100K–$1M
- $64K $64,282 $10K–$100K
Entities 6
- person ford credit
- company ford money market account was not a bank account or money market mutual fund
- company investors' accounts were not insured by federal deposit insurance corporation
- person linda chatman thomsen
- person peter bresnan
- person sales materials
Triples 22
- Sec Charge Ford Credit With Unlawful Marketing Of Ford Money Market Account
- Ford Credit Agree To Issuance Cease-And-Desist Order
- Ford Credit Pay Disgorgement $700,000
- Ford Credit Implement Remedial Reforms To Settle Commission Charges
- Commission Issue Order Finding Ford Credit Publicly Distributed Sales Materials Soliciting Investment In Ford Money Market Account
- Ford Credit Promote Accounts As Comparable To Traditional Money Market Investment
- Ford Credit Emphasize Accounts Paid A Guaranteed Interest Rate Slightly Higher Than Average Rate Paid By Money Market Accounts
- Ford Credit Highlight Features Typically Present In Checking And Money Market Accounts Offered By Banks Or Mutual Funds
- Ford Credit Fail To Explain Ford Money Market Account Was Not A Bank Account Or Money Market Mutual Fund
- Ford Credit Fail To Disclose Investors' Accounts Were Not Insured By Federal Deposit Insurance Corporation
- Ford Credit Fail To Disclose Investors' Accounts Were Not Subject To Diversification And Investment Quality Standards Set Forth By Investment Company Act Of 1940
- Sales Materials Not Satisfy Informational Requirements Section 10 Of The Securities Act
- Ford Credit Violate Section 5(b)(1) Of The Securities Act
- Linda Chatman Thomsen State This Action Is A Product Of The Commission's Risk-Based Investigation Probing The $28 Billion Marketplace For Corporate Money Market Debt Offerings
- Linda Chatman Thomsen State Commission Proceeding Proactively To Ensure Investors Fully Understand Unique Risks Associated With These Financial Instruments
- Peter Bresnan State Debt Offerings Like Ford Money Market Account Are Very Different From Money Market Investments And Can Carry Significantly Greater Risk
- Ford Credit Consent To Issuance Order Directing It To Cease And Desist From Committing Or Causing Any Violations
- Ford Credit Disgorge $700,000 In Ill-Gotten Gains
- Ford Credit Pay Prejudgment Interest $64,282
- Ford Credit Change Name Of Ford Money Market Account To One That Does Not Include Term Money Market
- Ford Credit Improve Disclosures In Both Sales Materials And Prospectus
- Ford Credit File With Commission And Distribute To Each Investor A Revised Prospectus
PDF (from attached: pdf)
Text layers
Extracted body text (4,447c)
SEC CHARGES FORD CREDIT WITH UNLAWFUL MARKETING OF "FORD MONEY MARKET ACCOUNT" FOR IMMEDIATE RELEASE 2005-89 Washington, D.C., June 14, 2005 - The United States Securities and Exchange Commission today announced that Ford Motor Credit Company has agreed to the issuance of a cease-and-desist order, paying disgorgement of $700,000 and implementing a series of remedial reforms to settle Commission charges related to its marketing of its so-called "Ford Money Market Account." The Commission issued an order that finds that Ford Credit, a company wholly owned by Ford Motor Company, publicly distributed sales materials soliciting investment in the "Ford Money Market Account" that did not satisfy the requirements of the Securities Act. In sales materials for its so-called "Ford Money Market Account," Ford Credit promoted the accounts as comparable to a traditional money market investment. Ford Credit's sales materials emphasized that the accounts paid a guaranteed interest rate slightly higher than the average rate paid by money market accounts and highlighted features of the investment typically present in checking and money market accounts offered by banks or mutual funds. However, many of Ford Credit's sales materials may have created confusion among investors by failing to explain that the "Ford Money Market Account" was not a bank account or a money market mutual fund and that its investors were actually purchasing unsecured corporate debt of Ford Credit; and failing to disclose that investors' accounts, unlike monies deposited in a bank checking or money market account or invested in a money market mutual fund, were not insured by the Federal Deposit Insurance Corporation or subject to the diversification and investment quality standards set forth by the Investment Company Act of 1940. Although prior to investing investors ultimately received a prospectus setting forth the important disclosures outlined above, each of the sales materials was a "prospectus" that did not satisfy the informational requirements of Section 10 of the Securities Act. As such, Ford Credit violated Section 5(b)(1) of the Securities Act when it used those sales materials to offer the "Ford Money Market Account." Linda Chatman Thomsen, Director of the Division of Enforcement, stated, "This action is a product of the Commission's risk-based investigation probing the $28 billion marketplace for so-called corporate money market debt offerings. Although the investors in these securities did not lose any money, with the filing of today's action, the Commission is proceeding proactively, taking steps to ensure that investors fully understand the unique risks associated with these kinds of financial instruments and taking action before more serious problems arise." Peter Bresnan, an Associate Director in the Division of Enforcement, stated, "Though bearing many of the outward characteristics of traditional money market accounts, debt offerings like the Ford Money Market Account, a $7.3 billion dollar investment program, are actually very different from money market investments and can carry significantly greater risk. For instance, an investor's sole recourse for these notes in the event of any sort of default is only the company itself." Without admitting or denying the Commission's findings, Ford Credit consented to the issuance of an Order directing it to cease and desist from committing or causing any violations and any future violations of Section 5 of the Securities Act and to disgorge $700,000 in ill-gotten gains and pay prejudgment interest of $64,282. In connection with the Order, the company has also undertaken to, among other things, change the name of the Ford Money Market Account to one that does not include the term "money market" or otherwise suggest that the program is a money market account; improve disclosures in both the sales materials and the prospectus; and file with the Commission and distribute to each investor a revised prospectus including improved disclosures and on a yearly basis provide each investor with a copy of Ford Credit's most recent Form 10-K. See also: Administrative Proceeding For more information, contact: Peter H. Bresnan Associate Director, Division of Enforcement (202) 551-4597 John Reed Stark Chief, SEC Office of Internet Enforcement & Counselor to the Director (202) 551-4892 http://www.sec.gov/news/press/2005-89.htm Home | Previous Page Modified: 06/14/2005
OCR text (4,447c · plain-text · 99% conf)
SEC CHARGES FORD CREDIT WITH UNLAWFUL MARKETING OF "FORD MONEY MARKET ACCOUNT" FOR IMMEDIATE RELEASE 2005-89 Washington, D.C., June 14, 2005 - The United States Securities and Exchange Commission today announced that Ford Motor Credit Company has agreed to the issuance of a cease-and-desist order, paying disgorgement of $700,000 and implementing a series of remedial reforms to settle Commission charges related to its marketing of its so-called "Ford Money Market Account." The Commission issued an order that finds that Ford Credit, a company wholly owned by Ford Motor Company, publicly distributed sales materials soliciting investment in the "Ford Money Market Account" that did not satisfy the requirements of the Securities Act. In sales materials for its so-called "Ford Money Market Account," Ford Credit promoted the accounts as comparable to a traditional money market investment. Ford Credit's sales materials emphasized that the accounts paid a guaranteed interest rate slightly higher than the average rate paid by money market accounts and highlighted features of the investment typically present in checking and money market accounts offered by banks or mutual funds. However, many of Ford Credit's sales materials may have created confusion among investors by failing to explain that the "Ford Money Market Account" was not a bank account or a money market mutual fund and that its investors were actually purchasing unsecured corporate debt of Ford Credit; and failing to disclose that investors' accounts, unlike monies deposited in a bank checking or money market account or invested in a money market mutual fund, were not insured by the Federal Deposit Insurance Corporation or subject to the diversification and investment quality standards set forth by the Investment Company Act of 1940. Although prior to investing investors ultimately received a prospectus setting forth the important disclosures outlined above, each of the sales materials was a "prospectus" that did not satisfy the informational requirements of Section 10 of the Securities Act. As such, Ford Credit violated Section 5(b)(1) of the Securities Act when it used those sales materials to offer the "Ford Money Market Account." Linda Chatman Thomsen, Director of the Division of Enforcement, stated, "This action is a product of the Commission's risk-based investigation probing the $28 billion marketplace for so-called corporate money market debt offerings. Although the investors in these securities did not lose any money, with the filing of today's action, the Commission is proceeding proactively, taking steps to ensure that investors fully understand the unique risks associated with these kinds of financial instruments and taking action before more serious problems arise." Peter Bresnan, an Associate Director in the Division of Enforcement, stated, "Though bearing many of the outward characteristics of traditional money market accounts, debt offerings like the Ford Money Market Account, a $7.3 billion dollar investment program, are actually very different from money market investments and can carry significantly greater risk. For instance, an investor's sole recourse for these notes in the event of any sort of default is only the company itself." Without admitting or denying the Commission's findings, Ford Credit consented to the issuance of an Order directing it to cease and desist from committing or causing any violations and any future violations of Section 5 of the Securities Act and to disgorge $700,000 in ill-gotten gains and pay prejudgment interest of $64,282. In connection with the Order, the company has also undertaken to, among other things, change the name of the Ford Money Market Account to one that does not include the term "money market" or otherwise suggest that the program is a money market account; improve disclosures in both the sales materials and the prospectus; and file with the Commission and distribute to each investor a revised prospectus including improved disclosures and on a yearly basis provide each investor with a copy of Ford Credit's most recent Form 10-K. See also: Administrative Proceeding For more information, contact: Peter H. Bresnan Associate Director, Division of Enforcement (202) 551-4597 John Reed Stark Chief, SEC Office of Internet Enforcement & Counselor to the Director (202) 551-4892 http://www.sec.gov/news/press/2005-89.htm Home | Previous Page Modified: 06/14/2005