Ford Motor Credit Co. will pay more than $700,000 to settle federal charges that it misled investors in marketing its Ford Money Market Account, the U.S. Securities and Exchange Commission announced.
The SEC said money market account customers purchase unsecured debt of Ford Credit. The account is not a bank account or money market mutual fund and is not insured by the federal government against loss.
Ford Credit, which is wholly owned by Ford Motor Co., did not admit wrongdoing. But it agreed to change the name of the account and to improve disclosure to investors.
The company will return $700,000 in ill-gotten gains and pay more than $64,000 in interest, the SEC said. The payment represents the money Ford Credit saved in not making proper disclosures, rather than any improperly earned profit, according to the SEC.
Such "disgorgement" normally is repaid to investors. But a spokesman said it would be impractical to track down 115,000 or more investors in the Ford Money Market Account. The money likely will go to the U.S. Treasury.
The SEC says it is investigating other companies' offerings of corporate money market debt, estimated to total about $28 billion.
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."
