- 36 -
Journal's 30-day Jumbo CD report. Because the funds were pooled,
LTD purchased the certificate of deposit in its own name pursuant
to its authority to act as attorney in fact for each client in an
omnibus account. Initially, when the interest was remitted to
the client clearing account, a credit would be entered on each
client's account. Later, LTD changed its policy to credit each
client's account monthly, even though LTD had yet to receive any
interest income.
Finally, for amounts less than $10,000, and in increments of
$100, a client’s funds were left on deposit in LTD’s client
clearing account, and the client’s account was credited with the
average rate paid by Frost Bank on the average balances for any
particular period. LTD called such account the "Money Market
Account" (MMA). LTD represented MMA to its clients as demand
deposits in a portfolio comprising money market instruments. MMA,
however, was merely a marketing name for the investment mechanism
that we have described supra. INC performed a daily accounting
of each client’s investments. If a client had funds of less than
$10,000 in an LTD account, INC placed the client’s funds into the
MMA in $100 increments. Any funds of a client below $100 were
not so invested.
LTD derived three types of income from using the funds in
the client clearing account to invest in U.S. certificates of
deposit and U.S. bank deposits. The first type of income earned
Page: Previous 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 NextLast modified: May 25, 2011