Investment Fraud Lawyer Blog

A Financial Industry Regulatory Authority (FINRA) arbitration panel has awarded damages to the Gale family as a result of losses sustained in Lehman-backed Main Street Natural Gas Bonds sold to them by their broker. The panel granted rescission, which is to say it ordered the brokerage firm to take back the bonds and reimburse the Gales the purchase price they paid for the bonds. On top of that, the panel awarded $11,000 as “compensatory damages” (which probably represented interest on the purchase price) and $300 for reimbursement of the non-refundable portion of the FINRA filing fee.

Continue reading " Investors Recover Losses on Main Street Natural Gas Bonds " »

In the wake of suing Goldman Sachs for fraud in the creation and sale of mortgage-backed derivatives, the Securities and Exchange Commission said it will look closely at other similar transactions by other big Wall Street banks, according to a recent Wall Street Journal article by Carrick Mollencamp, Serena Ng, Gregory Zuckerman and Scott Patterson (Note: the WSJ appears to have double the usual number of reporters on this story).

Continue reading " Wall Street's "Moral Corruption" Goes Far Beyond Goldman Sachs " »

“Who wants to entrust their money to a Goldman Sachs fund after this?” asks Brett Arends in his ROI column in the Wall Street Journal. Arends is referring to the sorry spectacle of a Senate hearing at which four Goldman executives were asked questions about the firm's role in the collapse of the mortgage market. They seemed unable or unwilling to explain why Goldman sold investments that internal Goldman emails described as “shitty.”

Continue reading " Goldman Sachs Refuses to Confirm that "Goldman Puts Its Clients' Interests First " »

The Associated Press is reporting that a Senate probe has determined that Goldman Sachs implemented a strategy to profit from the housing meltdown and reap billions at the expense of clients.

Continue reading " Senate Probe Reveals Goldman Sachs' Scheme to Defraud Investors in the Sale of Toxic Securities " »

The Securities and Exchange Commission has charged Goldman Sachs with defrauding clients by selling them toxic collateral debt obligations (CDOs) containing residential mortgage-backed securities (RMBS) that were secretly selected by a hedge-fund manager, who stood to benefit if the value of those securities declined. Unfortunately for Goldman, this is just one of several major problems facing the firm.

Continue reading " Goldman Sachs' Problems Continue to Grow " »

The SEC’s civil lawsuit filed on April 22, 2010 against Roy Dixon, Jr. and his allegedly fraudulent private equity fund Onyx Capital Advisors, LLC, serves to illustrate an important point about dealing with registered securities salespersons such as Mr. Dixon: their employing brokerage firms often are unable or unwilling to detect the alleged fraudulent conduct of their representatives. Mr. Dixon was employed by a licensed brokerage firm during the period of his alleged fraud, but that did not stop it from occurring. In fact, being a licensed representative of a licensed firm often gives a representative a “halo” or imprimatur of trust that can facilitate the fraud.

Continue reading " SEC Action Against Private Equity Fund Onyx Capital Advisors May Expose Brokerage Firm to Significant Legal Claims " »

James Grant, editor of the oft quoted Grant’s Interest Rate Observer, has an idea to improve the financial reform proposal being considered by Congress. “Let the senior financiers keep their salaries and bonuses, and let them do with their banks what they will. If, however, their bank fails, let the bankers themselves fail. Let the value of their houses, cars, yachts, paintings, etc. be assigned to the firm's creditors….The plausible threat of personal bankruptcy would suffice to focus the minds of American financiers on safety and soundness as they have not been focused for years.” See “The best financial reform? Let the bankers fail,” by James Grant, Washington Post.

Continue reading " Financial Reform - "Put the Fear of God into Wall Street" " »

The Securities and Exchange Commission is conducting a review of certain types of exchange traded funds. The SEC’s primary focus is on leveraged and inverse leveraged exchange traded funds and actively managed exchange traded funds, especially derivatives-based exchange traded funds. See John Spence’s Wall Street Journal article, “Leveraged ETF’s Are Under SEC Scrutiny.”

Continue reading " SEC Scrutinizes Use of Derivatives by Exchange Traded Funds (ETFs) " »

In the wake of suing Goldman Sachs for fraud in the creation and sale of mortgage-backed derivatives, the Securities and Exchange Commission said it will look closely at other similar transactions by other big Wall Street banks, according to a recent Wall Street Journal article by Carrick Mollencamp, Serena Ng, Gregory Zuckerman and Scott Patterson (Note: the WSJ appears to have double the usual number of reporters on this story).

Continue reading " Goldman - Like CDO Abuses Were Prevalent Across Wall Street " »

When the Securities and Exchange Commission voted to file its enforcement action against Goldman Sachs, the two Republican commissioners voted against it, reported Kara Scannell in her Wall Street Journal article, “SEC Split on Party Lines Over Goldman Case.”

Continue reading " Republican Commissioners Opposed SEC Action Against Goldman Sachs " »

Paulson, the hedge fund manager who shorted the Goldman Sachs CDO that is the subject of the SEC’s enforcement action, and the other "shorts" were “driven by disgust and indignation … against Wall Street and its corrupt system designed to generate undeserved bonuses,” according to USAToday’s article entitled “Goldman case shows what’s the matter with Wall Street.”

Continue reading " USAToday Observes that Wall Street Banks "Are No Longer in the Game for Their Clients but for Themselves" " »

The SEC’s enforcement action against Goldman Sachs will deepen the “mistrust among investors that the market is rigged against them,” according to Jeff Cox in his recent CNBC post, especially if it is shown to be part of a systemic moral bankruptcy of major Wall Street banks.

Continue reading " Capital Markets Will Suffer as the Distrust of Wall Street Grows " »

The Securities and Exchange Commission has filed a Complaint against Goldman, Sachs & Co. and one of its vice presidents, charging them with defrauding investors by misrepresenting and omitting to disclose material facts about a financial product that was tied to subprime mortgages as the U.S. housing market was beginning to implode.

Continue reading " SEC Charges Goldman Sachs with Fraud in the Creation and Sale of Subprime CDOs " »

A Financial Industry Regulatory Authority (FINRA) arbitration panel has awarded damages to the Marcus family and their affiliated profit sharing and retirement plans as a result of losses sustained in so-called Lehman principal protected structured notes sold to them by UBS Financial Services, Inc. The panel awarded $432,000.00 in compensatory damages, which is 100% of the amount of compensatory damages claimed, plus an additional $53,000.00 in attorney’s fees, plus another $5,610.00 as reimbursement for expert witness fees.

Continue reading " Arbitrators Hammer UBS for Improper Sales of Lehman Principal Protected Notes " »

Jason Zweig is a respected and widely-read personal finance writer. His column, “The Intelligent Investor,” has been published in the Wall Street Journal since 2008, as well as in other major publications. He is Editor of the updated edition of Benjamin Graham's The Intelligent Investor, the classic text that Warren Buffett has called "by far the best book on investing ever written."

So, when Zweig asks “Will We Ever Again Trust Wall Street?,” even Wall Street banks and the editorial board of the Wall Street Journal (currently in hot pursuit of Attorney General Cuomo) should pause and pay attention. As Zweig reported, a recent survey revealed that, on a trust scale of 1 to 5, with 1 meaning no trust at all, Wall Street rated 1.7. But that was in December. Today, may be closer to 1, wouldn’t you think?

Continue reading " Wall Street's Breach of Trust " »

In today’s low-interest-rate environment and with investors rightly suspicious of stock and bond investments, investment scams are flourishing. Investors should pay attention to the warnings of state securities regulators, whose list of Top 10 Investor Traps is featured on CNBC.com’s American Greed.

Continue reading " Beware of These Investment Scams " »

Last week, in an almost unprecedented manner, three groups of securities regulators – the SEC, the Financial Industry Regulatory Authority (FINRA), and various state regulators – almost simultaneously filed enforcement actions against Morgan Keegan for fraud arising out of its sales of 6 toxic bond funds. The regulatory investigations had been going on for several years. The allegations in the regulatory actions are quite serious and sound in egregious fraud.

Continue reading " Regulatory Actions Against Morgan Keegan Raise Grave Doubts about the FINRA Arbitration Process " »

On April 8, 2010, the Wall Street Journal ran an article under the headline “Banks Winning When Investors Sue.” However, that article only told part of the story.

According to Craig T. Jones, a lawyer who represents investors at the Atlanta law firm of Page Perry LLC, “the Journal article was focused on lawsuits filed in court, primarily class actions in federal court. But the vast majority of individual investors who make claims against banks and broker-dealers do so in arbitration, and investors have won a higher percentage of securities arbitrations over the past year than they have in years past.” Jones, whose firm handles investment fraud cases all over the country, points out that recent changes in federal law have made it more difficult to sue in federal court, and class action reform legislation over the last several years has made it tougher for investors to bring such cases. “Big class actions get a lot of press,” says Jones, “and a disproportionate number of those have been thrown out on technical grounds due to new procedural requirements, but getting a case thrown out on a technicality should not be taken as a vindication of the banking industry for the abuses that led up to the financial crisis.”

Continue reading " Investors Are Winning Cases Against Wall Street Banks " »

Bloomberg writer Mark Gilbert says that the trouble with collateralized debt obligations (CDOs), which slice bundles of asset-backed securities into different risk-reward classes, is that no one has a clear idea of how risky any given slice is or any sense of how to quantify and value that risk.

Continue reading " Many Wall Street Banks Disguised CDO Scraps as Tasty Morsels " »

Goldman Sachs has long been known for being notoriously silent about publicity, whether good or bad. Yet, in the wake of the credit crisis, news of federal investigations, negative publicity about executive bonuses, and rumors of double-dealing, Goldman Sachs issued a letter to its shareholders denying any wrongdoing. In addition, a story titled “Goldman Sachs: Don’t Blame Us” was published in the April 12, 2010 edition of BusinessWeek magazine and extensively quoted Goldman executives denying misconduct. Are Goldman’s attempts to revamp its image to the American public done to “set the record straight,” or out of a gnawing fear of a future day of reckoning?

Continue reading " Goldman - Why So Defensive? " »

A recent report by Securities and Exchange Commission’s inspector general H. David Kotz shows that the SEC’s investigation of Bernard Madoff was not the only one it botched. The Kotz report also reveals that the SEC’s enforcement division was unduly influenced by former colleagues-turned defense lawyers to drop enforcement matters, according to a New York Times DealBook article by Peter J. Henning called “How Not to Run an S.E.C. Investigation.”

Continue reading " The Revolving Door at the SEC Compromises Investigations " »

The Securities and Exchange Commission has charged Morgan Keegan and its touted managing director, James Kelsoe, with securities fraud for deliberately inflating the value of subprime securities in order to hide losses in Morgan Keegan’s proprietary toxic bond mutual funds. See Joe Bel Bruno’s recent Wall Street Journal article, “Morgan Keegan and Its Onetime Star Kelsoe Charged by SEC.”

Continue reading " Regulators Sue Morgan Keegan Over Toxic Bond Funds " »

Goldman Sachs, among other Wall Street banks, and certain of favored hedge fund clients that were tipped off by the banks, reaped huge profits by shorting (betting against) “synthetic” collateralized debt obligations (CDOs) linked to residential mortgages, which the banks created and sold to other clients, according to Gretchen Morgenson and Louise Story in their New Times article, “Banks Bundled Bad Debt, Bet Against It and Won.”

Continue reading " Goldman Sachs Bet Against Toxic Subprime Investments that it Was Recommending to Unsuspecting Investors " »

In 2006 and 2007, Goldman Sachs Group sold over $40 billion in residential mortgage backed securities (RMBS) backed by at least 200,000 risky home mortgages, but never told the buyers it was secretly betting that a sharp drop in U.S. housing prices would cause those securities to plummet in value. (“How Goldman Secretly Bet on the U.S. Housing Crash,” Greg Gordon, McClatchy Washington Bureau.)

Continue reading " Was Goldman Sachs Honest in Recommending CDOs and Other Mortgage Backed Securities to Its Clients? " »

The Atlanta Journal-Constitution reported today that an Atlanta hedge fund manager is being sued for fraud by investors who contend that he diverted money for personal use and falsified financial statements to hide the theft. This is just one example of the problems that can arise when investors – particularly those who are unsophisticated – invest in hedge funds. Though similar to mutual funds in that they pool investors’ money to invest in a variety of financial instruments, they are generally not required to register with the Securities and Exchange Commission (SEC). Hedge funds typically issue securities in “private offerings” that are exempt from SEC registration requirements because they can only be offered to a limited number of accredited investors.

Continue reading " Have You Lost Money in a Hedge Fund? " »

McClatchy Newpapers has reported that Goldman Sachs sold more than $57 billion of risky, mortgage-backed securities in fourteen months in 2006 and 2007. The bank unloaded its unwanted exposure on unsuspecting foreign investors and avoided major losses that plagued many of its competitors during the financial crisis.

Continue reading " Goldman Sachs Unloaded Toxic CDOs and Other Mortgage-Backed Securities on Foreign Investors " »

Brokerage firms’ advertising portrays brokers as trusted members of the family, writes Tara Siegel Bernard in her New York Times article, “Trusted Adviser or Stock Pusher? Finance Bill May Not Settle It.” Anyone who has tried to hold a broker to a fiduciary standard of conduct, however, hears a very different response: “We are mere order takers. You never should have trusted us.”

Continue reading " Is Your Financial Adviser Acting in Your Best Interest? " »

In a recent article, “Brokers Win, Investors Lose Key Reform,” Wall Street Journal columnist Jason Zweig wrote that the financial reform bill pending in Congress was likely not to require securities salesmen to operate under a fiduciary standard of conduct, because it has been horse-traded away. He explained that investors should be very concerned about this because, while a fiduciary is required to place his client’s interest ahead of his own, the typical stock broker might not have to comply with this standard. At the time Zweig predicted that, instead of calling for a fiduciary standard of conduct, the bill will call for – a study.

Continue reading " The Brokerage Industry is Winning its Fight Against Financial Reform " »