Beware of equity indexed annuities, says Forbes Investment Guide. If your goal is to protect principal, you give up too much for that protection in an equity indexed annuity; there are better ways to do it, according to a Forbes article by William P. Barrett entitled “Protection Racket.”
Continue reading " Forbes - Equity Indexed Annuities are a "Racket" " »
Federal prosecutors and the SEC are reportedly poised to file huge criminal and civil insider-trading cases against an array of consultants, investment bankers, hedge-fund and mutual-fund traders, and analysts across the nation, according to The Wall Street Journal (“U.S. in Vast Insider Trading Probe,” by Susan Pulliam, Michael Rothfeld, Jenny Strasburg and Gregory Zuckerman), and The New York Times (“U.S. Is Said to Pursue Broad Insider Trading Inquiry” by Peter Lattman).
Private (Reg D) offerings, which allow companies to raise money from investors off the regulatory radar screen, are tempting to some investors in this low interest rate environment, but beware: sellers often do not disclose all the important risks associated with these investments, according to Alexis Leondis’s Bloomberg article, “Private Placements Woo Investors with ‘Nowhere to Go.’”
Continue reading " Investor Alert - Private (Reg D) Offering Abuses are on the Increase " »
Wall Street may face a wave of lawsuits under an expanded version of the Martin Act, New York’s securities anti-fraud statute, if the newly elected Governor of New York has his way, according to a Wall Street Journal Deal Journal blog entitled, “And the Next Mortal Threat to Wall Street Is…”.
Continue reading " Proposed Changes to New York Law Would Make Wall Street More Accountable " »
Given the disdain that surveys show most people have for Wall Street, it may not be all that surprising to see some Wall Street insiders jumping on the bandwagon. In her New York Times Dealbook article, “Cracks Emerge in Wall St.’s Unity,” Heidi N. Moore says that the unity of top Wall Street executives appears to be cracking.
Revenue shortfalls of states and cities and a growing backlog of new bonds for sale overwhelmed the market recently, leading some to question whether the day of reckoning has arrived for municipal bonds, according to a New Times article by Mary Williams Walsh, “Municipal Bond Market Shudders.” Municipal bonds took their biggest hit since the financial collapse of 2008.
Continue reading " Storm Clouds Gathering Over the Municipal Markets? " »
The upheaval in the financial industry has prompted long time brokers in the full-service brokerage firms like Morgan Stanley Smith Barney, Bank of America Merrill Lynch, and UBS Wealth Management Americas to make a break for independence. New smaller firms with strategic alliances within the industry have rewarded these brokers with more flexibility to be more client-centered. But all of this freedom comes with risks as well.
Continue reading " Disillusioned Brokers Seek "Greener Pastures" " »
On September 10, 2010, the Financial Industry Regulatory Authority (FINRA) initiated a regulatory action against Joey Wade Dean, a former Morgan Stanley broker based in Arkansas. FINRA alleges that Dean made significant misrepresentations and failed to disclose important facts to customers in connection with the sale of so-called “principal protected” structured notes. FINRA further alleges that Dean recommended and sold the structured notes without having a reasonable basis to believe they were suitable for the customers, given their financial circumstances and stage in life as well as the associated risks of the securities.
Brokerages are marketing structured products that use complex derivatives and promising equity-like returns with less risk. But they are not as safe as they may appear to be, and experts say that most of them are actually worth less than what you pay for them, according to Jane J. Kim and Ben Levinsohn in their Wall Street Journal article, “Structured Notes: Not as Safe as They Seem."
Continue reading " Structured Notes Carry Big Risks for Unwary Investors " »
The rapid growth of exchange traded funds has over concentrated the ownership of thinly traded stocks, led to an increasing number of trading failures, and could trigger another "flash crash," according to Jason Zweig’s Wall Street Journal article, “Are ETFs a Menace—or Just Misunderstood?”, citing a report by distinguished researchers at the Kauffman Foundation.
Continue reading " Kauffman Foundation Warns of Exchange Traded Fund (ETF) Risks " »
Major institutional investors such as Charles Schwab, PIMCO, and the Federal Home Loan Bank of Chicago are suing firms like Citigroup, Wells Fargo, and Bank of America to force them to buy back billions of dollars of mortgages and mortgage-backed securities that allegedly failed to conform to underwriting standards, according to Nelson D. Schwartz, “Banks Brace for Costly Fights Over Mortgage Mess.”
Continue reading " Institutional Investors Are Suing Financial Firms Over the Mortgage Mess " »
The Fed’s “quantitative easing” (QE2) a second round of experimental monetary policy in which the Fed buys long-term government bonds and other assets, is designed to bring down interest rates, spur lending and borrowing, reduce unemployment, and reignite the economy. Whether it will do that remains to be seen. “But it has already worked in one significant way: the speculative juices of the markets are flowing,” according to Jesse Eisinger’s New York Times Dealbook blog, “Where the Bubbles Are.”
Continue reading " Is Fed Action Fostering Another Bubble? " »
"Socialized" or "social" investing is the latest way that some brokerage firms are creating a casino-like atmosphere and catering investors’ worst instincts, according to a Forbes article by Zack O’Malley Greenburg called “Tweets on the Street.” “Social networking is coming to the brokerage business. It’s unlikely to do much to enrich your retirement,” Greenburg writes.
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The Wall Street Journal reports that several former Citigroup/Smith Barney brokers have been sharing information with the SEC about alleged fraudulent practices associated with the MAT/ASTA municipal bond arbitrage funds that lost more than 75% of their value between 2007 and 2008. (“Citi Debt Funds Probed by SEC,” 11/8/10). These brokers may stand to be compensated handsomely if the SEC imposes big financial penalties against Citigroup for misrepresenting the risks of MAT/ASTA funds. That is because of an obscure provision in the recently enacted Dodd-Frank Financial Reform Act creating a financial rewards program that can pay a large sum of money to any person who provides “original information” to the SEC that leads to a successful enforcement action relating to the violation of federal securities laws. The Act provides for payments to “whistleblowers” ranging between 10% and 30% of the amount recovered by the SEC.
A recent front-page Wall Street Journal article by Randall Smith entitled “Citi Debt Funds Probed by SEC,” which concerns Citi’s disastrous MAT/ASTA municipal arbitrage fund, features a highly significant $1.8 million award issued against Citigroup in a MAT/ASTA case by a Financial Industry Regulatory Authority (FINRA) arbitration panel.
$130 billion of retail and institutional investor money is still being held in auction rate securities over two years after the $330 billion auction rate market failed and froze, according to Daisy Maxey in her Wall Street Journal article, “Still Frozen After All These Years.” But just as the Paul Simon song modulates from gloom into glee at the line, “But I would not be convicted by a jury of my peers…,” there may be a way out for ARS holders who are ineligible for the buy-backs some firms have agreed to as a result of their settlements with regulators.
Continue reading " Many Auction Rate Securities Investors Remain Left Out in the Cold " »
HSBC Holdings Plc and JPMorgan Chase & Co. allegedly placed “spoof” trading orders to manipulate silver futures and options prices in violation of U.S. antitrust law, according to a Bloomberg News article carried by InvestmentNews, “JPMorgan placed 'spoof' orders to drive down silver prices: Suit.”
Continue reading " Suit Alleges Manipulation of the Silver Markets " »
Are ETF investments set to take a big fall? For the first time ever, individual investors’ purchases of exchange traded funds has surpassed that of investment advisers during the last six months, according to The Charles Schwab Corp. and Jessica Toonkel’s InvestmentNews article, “Retail investors now piling into ETFs, says Schwab.” Advisers began using ETFs early on, and retail investors, as they became more comfortable with ETFs, followed suit.
Continue reading " Investments in Exchange Trade Funds (ETFs) Surge - Risk Grows " »
The financial crisis and recent bear market have caused many investors to become more concerned about safety of principal. The investment industry has taken advantage of that concern by creating so-called “principal protected” notes and pushing them hard on retirees and others in need of safe, steady income.
A whistleblower has informed the SEC that Bank of America sold complex derivatives products to customers during the financial crisis without disclosing their substantial risks – even misrepresenting the products as "extremely conservative," according to a New York Post article by Kaja Whitehouse called “Informer: Bank of America hawked risky deals to customers.”
