|
 
| |
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 |
|
|
