Investment Fraud Lawyer Blog

Billionaire Len Blavatnik filed a lawsuit against JPMorgan Chase this week, claiming that the investment bank had mismanaged a $1 billion investment account that held assets on behalf of Blavatnik’s company, Access Industries. The suit alleges that JPMorgan’s brokers invested the company’s assets in risky, illiquid real estate securities that were inconsistent with the conservative investment objectives of the company, causing $98 million in losses that would not have occurred had the money been properly invested.

Continue reading " JPMorgan Sued for Sale of High Risk, Illiquid Real Estate Investments " »

Lehman Brothers Holdings Inc is being sued by two of its former clients for more than $190 million based upon allegations the failed bank mislead them about the market for auction-rate securities.

Continue reading " Lehman Brothers Hit with $190 Million Suit over Auction Rate Securities " »

There have been various developments over the past several weeks which investors may consider relevant in allocating their resources or evaluating alternatives that are available to them. Some of the more significant developments include, but are not limited to, the following:

• The Dow Jones Industrial Average opened the week at 8540 and, on Monday, plunged 201 points.

• On Tuesday, the Dow Jones Industrial Average fell 16 points.

• On Wednesday, the Dow Jones Industrial Average dropped 23 more points.

• On Thursday, the Dow Jones Industrial Average surged 173 points.

• On Friday, the Dow Jones Industrial Average lost 34 points and closed the week at 8438.

Continue reading " Page Perry's Market Monitor - June 26, 2009 " »

UBS marketed and sold Lehman “structured notes” to ordinary retail investors. It instructed its brokers that the products were suitable for conservative investors who did not want to put their principal at risk. Investors who purchased these structured notes made a loan to Lehman Brothers and received a promissory note that promised that the value of notes would increase according to some formula if an underlying basket of securities increased, but the investor’s principal would never go down, even if the underlying securities tanked, because the notes came with a guaranty of “100% principal protection.” “If you lent me $100 and I drew up a legal documents that said in big, fat letters that you loan to me came with “100% principal protection,” as long as you stuck with our deal for 15 years, would you feel pretty good about getting your money back in 2024?” asks Susan Antilla of Bloomberg, in her June 10, 2009 article entitled “UBS Redefines Meaning of 100% Loss Protected.”

Continue reading " "100% Principal Protected Notes" - Designed to Deceive? " »

Recent reports indicate that serious problems lie ahead for investors in approximately $700 billion in commercial mortgage-backed securities. The securities are complex structured finance instruments that are constructed with bundles loans secured by apartments, shopping centers, office complexes or hotels, among other commercial real estate projects. Unfortunately, many of the mortgages were underwritten using loose underwriting standards with liberal financing structures in much the same way that subprime mortgage loans were underwritten. For example, many of these commercial loans made between 2005 and 2007 were either interest-only loans or partial interest-only loans and are facing payment resets that the borrowers can’t afford.

Continue reading " Danger Ahead for Investors in Commercial Mortgage-Backed Securities " »

An organization of attorneys who represent investors in securities arbitrations has filed a petition with the Securities and Exchange Commission to eliminate FINRA’s requirement that, in cases over $100,000, one of the three arbitrators must be a person affiliated with the securities industry. The organization is known as PIABA, which stands for Public Investors Arbitration Bar Association. In the interest of disclosure, J. Boyd Page, a Senior Partner of Page Perry, LLC, was a founder and past president of PIABA.

Continue reading " It's Time to Make Securities Arbitration Completely Neutral " »

Every time there is a significant downturn in the market, Wall Street’s “rocket scientists” conjure up complex new products that purport to be conservative and pay hefty returns but end up slamming investors. Add reverse convertibles to the list of failed products that meets this description.

Continue reading " Toxic Securities Alert: Reverse Convertibles " »

A new wave of lawsuits and arbitrations are being filed on behalf of investors who purchased auction rate securities but have not been eligible to participate in redemptions offered by big banks as a result of regulatory settlements. See article entitled “’Stranded’ ARS investors sue for a share of pie” by Jed Horowitz in the May 24, 2009 edition of InvestmentNews. These stranded investors purchased auction rate securities from “downstream” broker-dealers who sold but did not underwrite auction rate securities. The firms include Raymond James Financial Inc., Oppenheimer Holdings Inc., E*Trade Financial Corp., and TD Ameritrade Holding Corp., which were among the biggest distributors of auction rate securities, according to the article.

Continue reading " Investors Left Out of the Auction Rate Securities Regulatory Settlements Are Suing to Recover Losses " »

There have been various developments over the past several weeks which investors may consider relevant in allocating their resources or evaluating alternatives that are available to them. Some of the more significant developments include, but are not limited to, the following:

• The Dow Jones Industrial Average opened the week at 8799 and, on Monday, plunged 187 points.

• On Tuesday, the Dow Jones Industrial Average dropped 107 points.

• On Wednesday, the Dow Jones Industrial Average fell 7 points.

• On Thursday, the Dow Jones Industrial Average jumped 58 points.

• On Friday, the Dow Jones Industrial Average fell another 16 points and closed the week at 8540.

Continue reading " Page Perry's Market Monitor - June 19, 2009 " »

It’s time to hold Wall Street accountable for meeting the standards of conduct that it promises to its customers. President Obama’s proposed regulatory overhaul contains a significant provision that should end any confusion about whether a broker has to act in your best interest or can just pitch a product, according to recent articles by Alexis Leondis and Elizabeth Hester in Bloomberg.com, and Jane J. Kim and Aaron Lucchetti in the Wall Street Journal. That provision would leave no doubt that brokers are required to meet a higher fiduciary standard that compels them to place their customer’s interests ahead of their own. Fiduciaries are not allowed to engage in self-dealing. This is reportedly “a change that could upend Wall Street."

Continue reading " Wall Street's "Fiduciary Duties" Should Be Formalized " »

The Department of Treasury released its financial regulatory reform proposal on June 17. The report, a product of consultations with a wide range of people from members of the President’s working group on financial markets to industry and market participants, recommends that the SEC study the use of mandatory arbitration clauses in retail investor contracts. Specifically, the proposal recommends legislation that would give the SEC specific authority to study mandatory arbitration and to prohibit mandatory arbitration clauses in broker-dealer and investment advisory accounts with retail customers if deemed appropriate.

Continue reading " Obama Proposal Urges Review of Mandatory Securities Arbitration " »

Once regarded as the retail investors’ friend, and somehow different from other fee-driven brokerage firms, Charles Schwab has been battling retail investors who were sold the Schwab YieldPlus Fund as a cash-equivalent investment, similar to a money market fund. The Schwab YieldPlus Fund has lost approximately half its value as a result of undisclosed, high-risk non-conventional investments. Schwab now has another black mark on its investor friendly image – deceptive sales of Lehman Brothers “100% Principal Protected” Notes.

Continue reading " Schwab Sued for Deceptive Sales of Lehman Principal Protected Notes " »

A former investment banker for Goldman Sachs who is a frequent commentator on cable news shows, John R. Talbott, has written seven (7) books on the economy and the financial industry. His latest, The 86 Biggest Lies on Wall Street, is an eye-opener for anyone who wants an understandable explanation of how we got into the current financial crisis. Examples of “The 86 Biggest Lies” on include:

Lie #2: “This was simply a subprime mortgage problem that no
one could have foreseen.”
Lie #9: “Investment banks, commercial banks, ratings agencies
and other middlemen are paid to represent your interests.”
Lie #28: “Before investing, you should talk with a financial advisor
whose professionalism and long-term investing perspective
will end up saving you a great deal of money over time.”
Lie #63: “Complex financial instruments are tailored to benefit both the
issuer and the investor.”
Lie #84 “The SEC prevents insider trading and market manipulation.”

Continue reading " Book Review: The 86 Biggest Lies on Wall Street " »

The SEC recently charged Alabama broker-dealer Aura Financial Services, Inc., and six registered representatives with churning of customer accounts, supervisory failures, and other securities violations that resulted in significant harm to clients and substantial profit to the firm. From roughly 2005 through April 2009, these brokers and broker dealer were allegedly involved in a scheme using fraudulent sales practices and high-pressure sales tactics to convince customers to open and invest money in Aura brokerage accounts. These accounts were subsequently churned and incurred excessive commissions and fees resulting in approximately $1 million in revenue to the firm while largely depleting the customers’ account balances through trading losses and excessive transaction costs.

Continue reading " Aura Financial Services Hit with Multiple Regulatory Charges " »

There have been various developments over the past several weeks which investors may consider relevant in allocating their resources or evaluating alternatives that are available to them. Some of the more significant developments include, but are not limited to, the following:

• The Dow Jones Industrial Average opened the week at 8763 and, on Monday, rose 1 point.

• On Tuesday, the Dow Jones Industrial Average dropped 1 point.

• On Wednesday, the Dow Jones Industrial Average fell 24 points.

• On Thursday, the Dow Jones Industrial Average jumped 32 points.

• On Friday, the Dow Jones Industrial Average rose another 28 points and closed the week at 8799.

Continue reading " Page Perry's Market Monitor - June 12, 2009 " »

Many prime mortgage loans taken out by upscale homeowners are experiencing serious problems now that the recession is in full swing. Although previously non-prime mortgage loans (subprime loans, Alt-A loans and home equity loans) were the main loans experiencing delinquencies and foreclosures, USA Today found that the percentage of delinquent prime mortgage loans has more than doubled from 1.1% at the end of March 2008 to 2.4% at the end of the year.

Continue reading " The Mortgage-Backed Securities Market - Is the Other Shoe Getting Ready to Drop? " »

FINRA, the financial industry’s self-regulating watchdog, has proposed that the organization’s central database for providing background checks on securities brokers be expanded to provide more information to both the investing public and prospective employers. FINRA, which stands for Financial Industry Regulatory Authority, was created in 2007 by the merger of the NASD (National Association of Securities Dealers) and the self-regulating entities of the New York Stock Exchange to provide uniform standards for self-regulation of the securities industry, including an online background database called BrokerCheck. By going to BrokerCheck, investors can check out a broker before entrusting him or her with their money. BrokerCheck lists the broker’s credentials and licensing, employment history, and discliplinary history—including prior claims, criminal prosecutions and regulatory actions. But under current FINRA rules, there is a loophole in BrokerCheck that allows some brokers who left the industry due to misconduct, but were later allowed to return, to escape detection.

Continue reading " FINRA Proposes Improving Disclosures about Brokers' Backgrounds " »

The joint venture announced by Morgan Stanley in January to take 51% control of Citigroup Inc.’s Smith Barney brokerage unit was completed last week on June 1. The $2.75 billion joint venture creates the biggest retail brokerage firm on Wall Street. With a collection of over 18,000 financial advisors, according to press reports, the new venture will control both firms’ retail operations. The new venture is also expected to execute both institutional and retail orders although each firm’s institutional business will remain separate. The venture is expected to bring in $14 billion annually and Morgan Stanley has the option to purchase the remainder of Smith Barney from Citigroup over five years.

Continue reading " Smith Barney and Morgan Stanley "Tie the Knot" " »

At least one Securities and Exchange Commission member believes that broker representatives have a fiduciary duty to their clients, and that is Luis Aguilar, reports Blaine F. Aikin in an article entitled “SEC’s Aguilar urges fiduciary standard” published in the June 7, 2009 edition of InvestmentNews. In a speech delivered May 7th at the Advisers Association’s annual conference, Commissioner Aguilar said that broker representatives increasingly provide investment advice, and such advisors have “an affirmative obligation to put a client’s interest above his or her own.” Aguilar warned that other “proposed standards may have the effect of diluting the existing high fiduciary standard that serves an as important investor protection.”

Continue reading " SEC's Aguilar Stands Up for Investors - Let's Hope Someone Listens " »

Since the collapse of the auction rate securities market in February 2008, many of the broker-dealers who sold those securities have made arrangements to help customers get their money back—either because of regulatory actions, because of lawsuits, or because it was the right thing to do. Raymond James was one of the firms that hawked auction rate securities as a safe cash equivalent, but it does not appear that Raymond James's customers have gotten any relief even though these securities were clearly misrepresented and most of the the investors who bought them have been unable to cash out for the last 14 months. Why are the regulators ignoring Raymond James and leaving that firm's customers out in the cold to fend for themselves?

Continue reading " Auction Rate Securities Update: Why Are The Regulators Ignoring Raymond James's Customers? " »

Evergreen Investment Management Company (“Evergreen”), a unit of Wells Fargo & Co., has agreed to pay more than $40 million to settle an enforcement action by the Securities and Exchange Commission (“SEC”) and the Massachusetts Securities Division, according to articles in the Wall Street Journal and Reuters. Evergreen was a subsidiary of Wachovia at the time of the violation, according to Reuters.

Continue reading " Evergreen Pays Over $40 Million to Settle SEC Charges that it Overvalued Mortgage-Backed Investments " »

The Wall Street Journal reported this morning that the Federal Deposit Insurance Corp. (“FDIC”) is trying to purge Citigroup’s Chief Executive, Vikram Pandit and other senor managers. The article by Damian Paletta and David Enrich also reported that FDIC Chairperson Sheila Blair has been pressuring her fellow regulators to cut their rating of Citigroup’s financial health, which would allow regulators to keep the bank on a tighter leash. Taxpayers own or will own 34% of Citigroup. Federal officials would like former U.S. Bancorp CEO Jerry Grundhofer to replace Mr. Pandit, according to the article. Mr. Grundhofer is reportedly well-regarded for avoiding the risky lending that hurt Citigroup and other banks.

Continue reading " It's Time for Better Regulation of the Financial Markets " »

There have been various developments over the past several weeks which investors may consider relevant in allocating their resources or evaluating alternatives that are available to them. Some of the more significant developments include, but are not limited to, the following:

• The Dow Jones Industrial Average opened the week at 8500 and, on Monday, soared 221 points.

• On Tuesday, the Dow Jones Industrial Average rose 19 points.

• On Wednesday, the Dow Jones Industrial Average fell 66 points.

• On Thursday, the Dow Jones Industrial Average soared 75 points.

• On Friday, the Dow Jones Industrial Average rose another 13 points and closed the week at 8763.

Continue reading " Page Perry's Market Monitor - June 5, 2009 " »

Even though 2009 has been a bad year for Georgia banks to date--with six bank failures since the start of the year--the rest of 2009 could be even worse. According to a research analyst at FIG Partners, an Atlanta based consulting firm, there are at least 49 Georgia banks that are at risk of failing. FIG generated a list of distressed banks using a index known as the "Texas Ratio," which measures a banks total problem loans and foreclosed properties (so-called "non-performing assets") compared to its cash or other liquid capital available to absorb potential losses. When the Texas Ratio equals 100% or more that means its non-performing loans or the value of its non-performing loans exceeds its cash equivalence. According to the Atlanta Journal & Constitution, there were 42 Georgia banks with a Texas Ratio of 100 or more at the end of 2008.

Continue reading " 2009: A Very Bad Year for Georgia Banks " »

OppenheimerFunds' 529 Plans are facing a rash of suits and complaints regarding alleged mismanagement of its college education funds. The State of Oregon has sued OppenheimerFunds to recover money lost by members of the plan, alleging mismanagement of a nominally conservative bond fund in which Plan funds are invested. According to the Oregon Attorney General's Office, OppenheimerFunds began investing in highly aggressive and risky investments notwithstanding the conservative nature of the fund. Over the past comparable one-year period, the Oppenheimer Fund fell 36%, while the Barclay's Aggregate Bond Index, the Index to which the fund compared itself, rose 5% during the same period.

Continue reading " OppenheimerFunds 529 Plans Under Fire " »

In recent years, state securities regulators have done an admirable job as "the securities cops on the local beat." Not only have they led the way in dealing with local frauds but they have played a significant role in addressing broader based national frauds. The truth is that they play an essential role in the securities regulatory process. Federal regulators and self regulatory organizations simply do not have ample resources to deal with the number of fraudulent schemes that have proliferated in the last decade.

Continue reading " Let's Give State Securities Regulators the Tools to do their Job " »

Citigroup and the U. S. Securities and Exchange Commission (SEC) are discussing possible settlement of an investigation into whether Citigroup overvalued billions of dollars of subprime mortgage-backed securities on its books in the latter part of 2007, according Susan Pulliam and Randall Smith of the Wall Street Journal in a May 28, 209 article entitled “Citi, SEC Are in Talks to Settle Probe.” The investigation followed a series of events that led to the resignation of CEO Charles Prince and the reporting of approximately $50 billion in overall losses, mostly due to its subprime mortgage-backed holdings. In October 2007, Citigroup reported a $1.83 billion loss of value in its subprime mortgage-backed securities. Weeks later, Citigroup reported that the loss of value was more like $8 to $11 billion, and also that it held far more subprime mortgage-backed securities than it had previously reported. The investigation centers on the validity of Citigroup’s valuation methods and whether it misled the investing public when there was no market to set prices for these non-conventional and complex assets.

Continue reading " Addressing Recent Wall Street Misconduct Requires The SEC to Adopt Creative Approaches " »

Brokerage firms like UBS (the “Raiding Firms”) are paying millions of dollars to hire brokers who generate big fees and commissions and who can bring perhaps 80% of their customers with them. In response, other firms (the “Raided Firms”) are promising waivers of fees for as long as two years to their managed-money customers to keep them on board, according to a recent article in the Wall Street Journal by Aaron Lucchetti. We know why the Raiding Firms shell out the big bucks – they stand to make a whole lot of money off of the customers of those brokers who move their accounts. Customers are important assets to any firm, and the name of the game is to make those assets pay.

Continue reading " Wall Street Firms Battle Over Assets Under Management " »

Investors who purchased variable rate annuities with guaranteed minimum returns may be surprised to learn that the guarantee is not necessarily guaranteed. Under some contracts, it is possible for the insurer who wrote the annuity to cancel the guarantee or significantly reduce its payout.

Continue reading " Variable Rate Annuities with Guarantees? - Check the Fine Print " »