SEC CHARGES FORD CREDIT WITH UNLAWFUL MARKETING OF "FORD MONEY MARKET ACCOUNT"
FOR IMMEDIATE RELEASE
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
John Reed Stark
Chief, SEC Office of Internet Enforcement & Counselor to the Director