Investment Fraud Lawyer Blog

Institutional investors and Barclays Capital have a message for those who think the sovereign debt crisis is over: It isn’t. Demand for such investments has plummeted just as the governments are ramping up supply. Barclays surveyed 582 institutional investors, 82% percent of whom said they expected either debt restructuring, default or a full-fledged euro-zone crisis, according to Stephen Fiedler’s recent Wall Street Journal article, “Investors in riskier bonds may not be coming back.” They do not believe government officials who tell them that all euro-zone government debts will be repaid on time.

Continue reading " The European Debt Crisis May Be Far From Over " »

Amid rising losses in mortgage-backed securities, institutional investors in mortgage securities are teaming up to recover their losses, according to Ruth Simon’s Wall Street Journal article, “Mortgage Losses Build Team Spirit.” Investigations by state regulators into the “mortgage mess” and growing awareness of their fiduciary duties to shareholders and retail investors is spurring the spike legal claims brought by institutional investors.

Continue reading " Institutional Investors Begin Fulfilling Fiduciary Duties by Filing Claims to Recoup Subprime Losses " »

SEC Commissioner Elisse Walter wants new authority for the SEC to require cities, states and other municipal-debt issuers to improve financial disclosures, according to a recent Wall Street Journal article entitled “SEC May Seek More Authority Over Muni Issuers,” by Meena Thiruvengadam and Jessica Holzer. Corporate bond issuers must meet registration and disclosure requirements under federal securities laws, and so should muni issuers, Walter believes. "If you don't believe you need it here, why do you need it in the corporate arena?" Ms. Walter was quoted as saying.

Continue reading " SEC Wants More Disclosure from Municipal Bond Issuers " »

Financial advisers are holding out bogus credentials in order to sell unsuitable, high-fee investments to older, wealthier clients, according to according to Jason Zweig and Mary Pilon in their Wall Street Journal column, “Is Your Adviser Pumping Up His Credentials?” Credentialed advisers make more money. A 2009 survey commissioned by the Million Dollar Round Table, a trade association of financial advisers, revealed that insurance agents and advisers who market themselves as "experts" made 40% more in annual revenues than advisers who did not.

Continue reading " Do Your Financial Adviser's Credentials Really Mean Anything? " »

The Securities and Exchange Commission has charged two Atlanta hedge fund managers, Paul T. Mannion, Jr. and Andrews S. Reckles, as well as their investment advisor firms with defrauding Palisades Master Fund, L.P. investors, according to an article in the Atlanta Journal Constitution by J. Scott Trubey. The advisor firms are PEF Advisors Ltd. and PEF Advisors, LLC.

Continue reading " The SEC Charges Atlanta Hedge Fund Managers With Fraud " »

A broker formerly employed by Affinity Investment Services LLC has won a $925,000 FINRA arbitration award from Affinity for allegedly firing her after she complained about wrongdoing at the firm. The broker was terminated in 2007 after complaining to Affinity management in 2005 and 2006 about annuity sales and 401(k) transactions that the broker thought were improper. Siding with the broker, the FINRA arbitrators not only awarded substantial damages, but they ordered the firm to remove negative information from the broker’s U-5 termination form.

Continue reading " Securities Broker Wins Big Whistleblower Award " »

The Real Estate Investment Securities Association (REISA) has drafted a proposed “best practices” guide for firms to use when they sell high-risk private placement securities, such as private notes, oil and gas deals, and real estate funds, which are also known as Reg D offerings, according to an October 19 article in InvestmentNews by Bruce Kelly (“Reg D guideline zeroes in on due diligence.” As the title says, the process of document review, checks and verifications called “due diligence” is at the heart of the proposed guideline.

Continue reading " Due Diligence Concerns Permeate Private (Reg D) Offerings " »

While certain exchange trade funds have enabled many investors to achieved diversified exposure to equities, the more esoteric, specialized or niche ETFs that have sprung into existence – there are more than 1,000 of them -- have created traps for the unwary, according to Alex Tarquinio’s WSJ article entitled “The Perils and Pitfalls of ETF Investing.”

Continue reading " Investors Should Be Wary of Niche Exchange Traded Funds (ETFs) " »

Although many analysts do not think “the bond market” as a whole is in a “bubble,” most analysts do think that bonds are becoming more risky, especially treasuries and high yield corporate bonds or junk bonds, according to a number of recent articles in the financial press. These articles include “Bond Markets Get Riskier,” by Carrick Mollenkamp and Mark Gongloff (WSJ); “As Bond Market Rallies On, Risks Lurk Beneath Surface,” by Mark Gongloff (WSJ); “The Bond ‘Bubble’: Are Small Investors Taking Too Big a Bet,” by Jason Zweig (WSJ); and “Bond Market at ‘Extreme Danger Level’: Strategist,” by Antonia Oprita (CNBC.com).

Continue reading " Danger Ahead for Bond Investments? " »

Arbitrations filed by brokerage firms against departed brokers to collect amounts due under promissory notes have accounted for 17% of all FINRA arbitration awards in 2010, the highest percentage in a decade, according to the Financial Industry Regulatory Authority (FINRA) and a recent Wall Street Journal article by Aaron Lucchetti (“Signing Bonuses Haunt Wall Street”).

Continue reading " Wall Street Firms May Face Problems Collecting on Bonus Loans and Retention Loans Given to Brokers " »

When brokers switch firms taking clients and information with them, they risk being in breach of contracts that they were sometimes unaware they even had. Employment contracts often contain restrictive covenants, such as non-solicitation and non-disclosure agreements. If a broker runs afoul those agreements, the employer can generally sue for injunctive relief or damages, which, if granted, could damage the departing broker’s business. But these potential legal problems may be eliminated if the departing broker follows the “Protocol For Broker Recruiting,” according to a Wall Street Journal article by Suzanne Barlyn called “How to Switch Firms… and Not Get Sued.”

Continue reading " Stockbrokers Switching Firms Should Proceed with Caution " »

SEC Inspector General H. David Kotz told Congress that the SEC discouraged enforcement staff from taking on complex cases or cases that were not considered as being “slam dunks,” according to an InvestmentNews article by Mark Schoefer entitled “SEC monitor: Only ‘slam-dunk’ enforcement cases were encouraged.” For example, even though the SEC saw red flags as early as 1997 about certificates of deposit that Robert Allen Stanford was offering with unusually high interest rates, the enforcement staff refused to pursue the matter.

Continue reading " The SEC's Decision to Pursue Only 'Slam Dunk' Cases Undermines Effective Enforcement " »

The Financial Industry Regulatory Authority (FINRA) said it will file a proposed rule with the Securities and Exchange Commission this month to allow all investors filing arbitration claims the option of having an all-public panel of arbitrators. Brokerage firms have indicated their opposition, but not too vehemently, “perhaps because the alternative is more worrying: an end to mandatory arbitration altogether,” according to a Wall Street Journal article by Daisy Maxey, entitled “’Public’ Arbitration? Brokers Balk.”

Continue reading " Wall Street Opposes Move to All Public Arbitration Panels " »

Two Detroit retirement system pension plans are suing UBS AG for allegedly defrauding them into investing and losing $40 million in a complex structured product called a Collateralized Loan Obligation or CLO. The Plaintiffs allege, among other things, that UBS misrepresented the risks associated with the CLO as well as its ability to monitor and control those risks. Plaintiffs further allege that the misrepresentations were part of a fraudulent scheme by UBS to move risky loans from its balance sheet by securitizing them and selling tranches or slices to unsuspecting buyers like Plaintiffs.

Continue reading " Municipal Pension Plans Sue UBS To Recover Losses In Structured Product Investments " »

The Securities and Exchange Commission is looking into the sale of model portfolios comprised of exchange-traded funds that are being sold by financial advisers, InvestmentNews reported. A spokesman for the SEC said the agency is examining the practice, according the article.

Continue reading " SEC Investigates Sales of Model Exchange Traded Fund (ETF) Portfolios " »

Jesse Westbrook’s Bloomberg.com article (“Finra Managers Got $11.6 Million in 2009 Amid Pay Criticism,” Oct. 1, 2010) provides an interesting glimpse inside the relationship between the Financial Industry Regulatory Authority and the 4,700 securities firms whose sales practices it is charged with regulating.

Continue reading " FINRA's Executive Compensation Packages Raise Serious Questions " »

Securities firms have sold over $30 billion of complex structured products to investors (often retirees seeking safe income) who do not understand the nature and risks of these securities, according to an article by Zeke Faux which was published in the October 4-10, 2010 edition of Bloomberg Businessweek under the title, “Individual Investors Duped by Derivatives.”

Continue reading " Retirees Are Being Duped Into Purchasing High Risk Structured Products That They Do Not Understand " »

In his September 9, 2010 article in The Bond Buyer entitled “Judgment Aids Investors in Citi Case,” author Dan Seymour describes a recent Financial Industry Regulatory Authority (FINRA) arbitration award of more than $1.8 million in favor of MAT/ASTA investors as “[a] grand-slam judgment [that] has emboldened the lawyers and investors seeking to recoup losses on $2 billion in municipal arbitrage funds run by Citigroup.”

Continue reading " Citigroup's Mismanagement of MAT/ASTA Funds Produces "Grand Slam" Award for Investors " »

After five months of analysis, the staffs of the Securities and Exchange Commission and the Commodities Futures Trading Commission have determined that the May 6th Flash Crash was set in motion by a huge sale of S&P 500 futures contracts by a single firm’s computer trading program, which dumped $4.1 billion of the contracts on the market in just 20 minutes, according to “Lone $4.1 Billion Sale Leads to ‘Flash Crash’ in May,” by Graham Bowley of The New York Times; and “How a Trading Algorithm Went Awry,” by Tom Lauricella, Kara Scannel, and Jenny Strassburg of The Wall Street Journal. Some have criticized the report for describing “how” it happened without explaining “why” it happened.

Continue reading " Could Program Trading Cause Another "Flash Crash?" - Unfortunately the Answer is "Yes" " »

While Morgan Stanley spokesmen say the merger with Smith Barney is going swimmingly, sources both inside and outside the company paint a different picture, according to an October 1 article in CNBC.com by John Carney (“Morgan Stanley-Smith Barney Brokerage Merger Hits Snags, Delays”).

Continue reading " Is the Morgan Stanley/Smith Barney Merger Coming Unglued? " »