Investment Fraud Lawyer Blog

According to a recent article in InvestmentNews, leveraged and inverse exchange traded funds are high on the state securities regulators' watch list of “investor traps.”
According to Keith Woodwell, director of the Utah Commerce Department Division of Securities. “It is specifically related to complaints about leveraged and inverse ETFs. The concern is that they've become very mainstream.”

Continue reading " Regulators Focus on Exchange Traded Funds (ETFs) " »

Brokerage firms are trying to “browbeat” aggrieved customers who have filed arbitration claims against them into settling their claims by flooding them with overbroad and burdensome requests for documents and information, according an InvestmentNews article by Bruce Kelly. Firms engage in such intimidation with the express approval of the Financial Industry Regulatory Authority (FINRA), whose rules govern a system of mandatory arbitration of customer claims against brokerage firms and allow such practices. The industry knows it, and so do state regulators.

Continue reading " Brokerage Firms Continue to Abuse the Arbitration Process " »

Just last month (August 2010), a panel of arbitrators acting under the sponsorship of the Financial Industry Regulatory Authority (FINRA) ordered UBS Financial Services to pay $80.8 million as consequential damages to a corporate investor in Student Loan Auction Rate Securities – an amount equal to more than ten times the amount of the investment, according to a recent Wall Street Journal article by Randall Smith.

The investor, Kajeet, Inc., a marketer of cellphones for kids, had requested an award of $110 million for damage to its business when its cash was frozen in auction-rate securities in early 2008.

Continue reading " Investor Recovers Ten Times The Amount Of Investment In Auction Rate Securities Arbitration " »

Investors have poured $1 trillion into “bewildering array” exchange-traded funds, while they offer some advantages over mutual funds, they also come with risks, according to a recent CNBC/Bankrate.com article titled “Are Exchange-Traded Funds Dangerous?”

Continue reading " Danger Permeates Exotic ETFs " »

Lawyers across the nation have been getting calls from brokers, investment advisors and other financial professionals about fraud and securities law violations by their employers, competitors, or others in the industry. The reason for this surge of interest in “blowing the whistle” on securities violations is that the Dodd-Frank Financial Reform Act, which went into effect in July, has created a financial rewards program that could pay a large sum of any person who provides “original information” to the SEC that leads to a successful enforcement action relating to the violation of federal securities laws. While investors and members of the public are allowed to participate in the program, it stands to reason that those who are most likely to have access to “original information” about illegal activity by investment firms would typically be industry insiders, which also explains why they are calling lawyers instead of running directly to the SEC.

Continue reading " There's a New Watchdog on Wall Street - Whistleblowers Poised to Reap Huge Benefits " »

Should sales of life settlements be regulated as sales of securities? After eighteen months of a comprehensive review, the SEC’s Life Settlements Task Force thinks so, and has asked the SEC to urge Congress amend the federal securities laws to bring this about, according to a September 12 InvestmentNews article called “Point/Counterpoint: Are life settlements essentially securities?”

Continue reading " Life Settlement Investments Need to be Regulated " »

Three former Goldman Sachs employees are lead plaintiffs in a class action lawsuit alleging that male-dominated Goldman discriminates against women in five areas: (1) performance evaluations, (2) compensation, (3) promotions, (4) business opportunities, and (5) professional support, according to September 15 articles in the Wall Street Journal by David Benoit (“Goldman Is Sued for Alleged Bias Against Women”) and The New York Times by Peter Lattman (“3 Women Claim Bias at Goldman”).

Continue reading " Goldman Sued for Gender Discrimination " »

Most investors believe that financial advisers at brokerage firms are fiduciaries who are required to put clients’ interests first, because many firms hold out their brokers as “financial advisors” and because brokers ought to be held to a fiduciary standard, according to a Bloomberg article by Lexis Leondis called “Clueless Investors Think Brokers Are Fiduciaries, Survey Says.”

Continue reading " 97% of Americans Believe that Securities Brokers Are (And Should Be) Held to a Fiduciary Standard " »

Money market funds are accepting more risk in reaching for better yields only two years after the $62 billion Reserve Primary Fund “broke the buck,” according to a recent Wall Street Journal article by Eleanor Laise, “Money Funds Try Risk Again.” This despite new SEC safety rules requiring that 30% of money fund assets must be invested in assets maturing in seven (7) days. The increasing risk in money market funds is attributable to various factors.

Continue reading " Some Money Market Funds are Taking on More Risk " »

Charles Schwab’s Total Bond Market Fund is the subject of another class action lawsuit against Schwab, according to a September 12 article by Dan Jamieson of InvestmentNews called “Another lawsuit filed over Schwab bond fund. The lawsuit reportedly alleges that, as of May 31, 2007, Schwab misrepresented the fund to investors as tracking the Lehman Brothers U.S. Aggregate Bond Index, which contained 37% mortgage-backed securities, when the fund actually held over 67% in residential-mortgage-backed securities.

Continue reading " Charles Schwab's Total Bond Market Fund Has Become a Focus of Investor Claims " »

The Securities and Exchange Commission tried to defend its offered $75 million settlement with Citigroup after expressions of frustration and skepticism by U.S. District Judge Ellen Segal Huvelle, according to Kara Scannell’s recent Wall Street Journal article entitled: “Regulators Defend Citi Settlement.” Judge Huvelle reportedly told the parties: "I look at this and say, 'Why would I find this fair and reasonable?' You expect the court to rubber-stamp, but we can't." The judge may approve or disapprove the agreement.

Continue reading " Proposed SEC Settlement with Citi is No Real Deterrent to Fraud " »

Much of the Dodd-Frank Financial Reform Legislation passed by Congress is broad-brush painting with the critical details to be contained in regulations created by the Securities and Exchange Commission. For investors, one of the most important of these regulations will determine whether brokers will be held to a fiduciary duty standard, and – most importantly – what the scope of that standard will be. As Bloomberg recently reported, the SEC has received about 2,700 comments on the fiduciary standard, and its report is due to Congress in January (“Insurance Agents Ask U.S. Regulators: Don’t Make Us Put Our Clients First,” September 2, 2010).

Continue reading " The Securities and Insurance Industries Oppose Rules that Would Require Them to Put Their Customers' Interests First " »

The Financial Crisis Inquiry Commission has been holding hearings to find out how and why the financial crisis occurred, and (presumably) make recommendations to Congress about what is needed to prevent a reoccurrence. At the same time, Congress has already passed a version of regulatory reform that delegates many key rules to regulatory agencies. Wall Street lobbyists are working hard on those agencies to water down and stifle any meaningful reform.

Continue reading " Real Change is Needed to Avert Another Financial Crisis " »

Citigroup misled its representatives who sold the firm’s MAT/ASTA municipal arbitrage hedge funds, and arbitrators are placing the blame squarely on the firm, according to a September 5 article by Bruce Kelly in InvestmentNews (“Arbitrators: B-Ds Kept Brokers in the Dark on Private Deals”).

Continue reading " The MAT/ASTA Municipal Arbitrage Funds - Citi's Latest Product Problems " »

Target date mutual funds are reportedly introducing complex new and untested strategies ostensibly to add ballast to their portfolios. But that make them more like hedge funds, according to a September 4 Wall Street Journal article by Jane J. Kim and Anne Tergesen called “A Hedge Fund Lurking in Your 401(k).” They are being marketed as risk-reducing mechanisms but, in fact, they may introduce new risks as well as costs.

Continue reading " Red Flags Rise at Some Target Date Mutual Funds " »

In the wake of broad stock market declines and uncertainty, it is only natural that investors are attracted by products with promises of downside protection, a minimal guaranteed return, and a slice of any increase of the stock market. Equity-indexed annuities are marketed by insurance companies as having those attributes, but they carry downsides and are risks that are not well-understood. The net result is that you can achieve the same benefits pretty simply and without the negatives associated with equity-indexed annuities, according to Jason Zweig in his Wall Street Journal column, “Downside Protection Has Its Downsides.”

Continue reading " Equity Indexed Annuities Criticized " »

Investors in a so-called “feeder” fund that channeled money to Bernard Madoff have been awarded $12.74 million (which includes interest and $112,000 to cover “fees”) by an arbitration panel, according to a Reuters article published in the Wall Street Journal (“Investors Win $12.74 Million in Madoff Feeder-Fund Case”). The feeder fund is Gabriel Capital LP. The investors are the Sandalwood Debt Fund A LP and Sandalwood Debt Fund B LP.

Continue reading " Madoff "Feeder Fund" Investors Awarded $12.74 million " »

The Securities and Exchange Commission has declined to bring an enforcement action against Moody’s despite alleging that Moody’s engaged in deceptive ratings by deciding to withhold information from the investing public, according to an August 31 Wall Street Journal article by Jessica Holzer entitled “SEC Won’t Sue Moody’s.”

Continue reading " The SEC Backs Down Again - Gives Moody's a Free Pass " »