Investment Fraud Lawyer Blog

A Virginia bankruptcy court is considering a proposed $14.3 million settlement to be paid by SunTrust Banks Inc. over its sale of auction rate securities to LandAmerica 1031 Exchange Service Inc. (“LES”), according to Hilary Russ’s Law360 article entitled “$14.3M Deal Ends LandAmerica, SunTrust ARS Dispute.”

Continue reading " SunTrust Offers $14.3 Million to Settle an Auction Rate Securities Case " »

Brokers are switching firms in record numbers. For example, Jessica Toonkel of InvestmentNews is reporting that Legg Mason’s head of U.S. national broker-dealer sales, Joe Lohrer, and head of U.S. intermediary marketing, Benji Baer, are leaving the firm, marking the latest in a wave of departures of senior salespeople from the firm. Other departures from Legg Mason since last fall include the head of marketing and product; the head of operations for the Americas; the U.S. product head; and the co-head of distribution for the retail, subadvisory and institutional business.

Continue reading " Wall Street's Game of "Musical Chairs" Escalates " »

The Financial Industry Regulatory Authority (FINRA) has fined Credit Suisse Securities (USA) LLC $4.5 million, and Merrill Lynch $3 million. The fines arise out of FINRA’s findings that the firms misrepresented historical delinquency rates in connection with the residential subprime mortgage securitizations (RMBS) that the firms underwrote and sold. Upon learning of the errors, Merrill Lynch posted the corrected historical delinquency rates on its website, but Credit Suisse did not.

Continue reading " Merrill Lynch and Credit Suisse Fined for Misrepresenting Important Facts about Mortgage-Backed Securities to Investors " »

The Securities and Exchange Commission has voted to allow whistleblower employees to go straight to the SEC with information about securities law violations without reporting it to their employer, and still collect the full amount of the monetary reward authorized by the Dodd Frank financial reform act, according to a May 25, 2011 article in InvestmentNews entitled “SEC lets whistle-blowers bypass internal programs.” The SEC approved the rule by a 3-2 vote on Wednesday, May 25, 2011.

Continue reading " SEC Approves Whistleblower Rewards Program " »

FINRA CEO Richard Ketchum recently stated that structured products are “areas of concern” for the Financial Industry Regulatory Authority (“FINRA”), according to a Bloomberg article by Jesse Hamilton and Alexis Leondis entitled “Finra’s Ketchum Says Structured Products Are ‘Areas of Concern.’” If FINRA is concerned, it better act fast. “Sales of structured products rose 46 percent last year to a record $49.5 billion,” according to the article, citing data compiled by Bloomberg.

Continue reading " Attention Investors - Beware of Structured Products " »

The financial industry implosion of 2008 gave birth to the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). One of the most highly publicized sections of Dodd-Frank are the “whistleblower” provisions.

Continue reading " Dodd-Frank: "Whistleblower" Provisions " »

The Organization for Economic Cooperation and Development recently released a report observing that high unemployment will remain a threat for at least three years after the financial crisis, according to a New York Times article by David Jolly. The economy has shifted into a “self-sustaining recovery” and “the private sector is driving growth,” says Pier Carlo Padoan, the organization’s chief economist.

Continue reading " Unemployment Remains a Big Concern " »

The U.S. Securities and Exchange Commission is forming a small-business committee to review securities offering rules that would make it easier for small private firms to raise capital but might also make it easier for fraudsters to operate, according to a series of recent Wall Street Journal articles (“SEC to Form Small-Business Committee”, “’Startup America’ Embraces Crowd-funding,” and “SEC Boots Up for Internet Age,” by Jean Eaglesham and Jessica Holzer).

Continue reading " Will Small Business Capital Raising Exemptions Lead to Increased Investment Fraud? " »

Just when Wall Street banks thought they were was going to get off scot free, New York Attorney General Eric Schneiderman is launching an investigation into the very heart of fraudulent scheme that led to the financial crisis. This has the potential to be the “Mother of All Nightmares” for the banks, according to a Rolling Stone article by Matt Taibbi entitled “A New Wall Street Investigation: Is the Hammer Finally Coming Down?”

Continue reading " New York Attorney General's Investigation Could be a Nightmare for Wall Street Banks " »

A recent article in InvestmentNews calls on Congress to “cut the purse strings that have long impeded the SEC’s ability to do its job.” Under this proposal, the SEC could support its own operations by using the fees collected from those whom it regulates. If SEC were to fund itself, it could still have to submit a annual budget to Congress and could not “be allowed to pocket the fines and penalties it collects through its enforcement program, thereby eliminating the temptation to demand higher penalties to pay for new copy machines or warm bodies.”

Continue reading " It's Time to Consider a Self-Funded SEC " »

Meredith Whitney argues that States’ unfunded obligations threaten the economic recovery in her Wall Street Journal article “The Hidden State Financial Crisis.” Is she correct? While some experts dispute her analysis, people should remember that she called the subprime crisis in 2005 at a time when many of her counterparts scoffed. As she set them out, the essence of her current opinions are essentially as follows.

Continue reading " Do State and Local Government Debt Pose a Threat to the Economy? " »

Daniel Indiviglio writes that Wall Street is designing a new derivative that would allow purchasers to hedge against longevity risk (or speculate on it) in his article entitled “Death Derivatives: Has Wall Street Finally Gone Too Far?” in the Atlantic.

Continue reading " Wall Street Wagers on Death Benefits " »

The Texas securities commissioner has issued an emergency cease-and-desist order against Insignia Energy Group Inc., its affiliate IEG Permian Basin LLC, Martin D. Lewis, president of both firms, and salesman Jarvis Wayne Willis, arising out of findings of fact by the commissioner that they made misrepresentations and omissions of material facts about an oil and gas limited partnership called the Sabine Partnership that was sold to teachers and school employees, according to an InvestmentNews article by Darla Mercado entitled "Hot Air? Oil and gas company allegedly misled teachers."

Continue reading " School Teachers Scammed in Oil and Gas Deals " »

In the largest illegal stock-tipping case in a generation, and the first pure insider trading case in which the prosecution introduced wiretapped telephone conversations, Galleon hedge fund co-founder Raj Rajaratnam was found guilty on 5 counts of conspiracy and 9 counts of securities fraud. See “Rajaratnam guilty on all counts in insider trading case,” (InvestmentNews, May 11, 2011). The maximum prison sentence for securities fraud is 20 years, and for conspiracy is 5 years.

Continue reading " Hedge Fund King Guilty of Insider Trading " »

In the midst of the most life-changing recession in recent history, it has been a struggle for many to find their way. Many are still lost in a sea of bills, nowhere to live, no health insurance and no job. We rely on our elected officials on both the Federal and State levels. They are charged with governing the many, not the few who can afford to influence them, to make the right policy decisions. What is “right” can mean different things to different people. For the purpose of this article “right” will mean “whatever provides a benefit to the most people affected by such policies and further insures the security and operation of the country as it is constructed”.

Continue reading " Is America Sacrificing its Children and Future for the Benefit of a Privileged Few? " »

A low-cost advisory niche has developed between full-service advice and no-advice, do-it-yourself securities portfolio construction. These so-called “portfolios-to-go” may be the next big thing and the next big threat to Wall Street full-service brokerage/advisory firms, according to an article by Elizabeth Ody published in Bloomberg.com (“Portfolios-To-Go May Become Wall Street’s Next Thundering Herd”) and InvestmentNews (“Brokerages Next Big Threat? Portfolios-to-go”).

Continue reading " "Portfolios to Go" - A Threat to Financial Advisers? " »

Concerned that securities industry zealots and a Republican Congress will succeed in delaying an SEC rule that would require brokers who provide retail investment advice to act solely in their client’s best interest, investor advocates are stepping up their campaign to urge the SEC to move forward with a rule, according to an InvestmentNews article by Mark Schoeff, Jr. entitled “Fiduciary advocates make push for new rules.”

Continue reading " The Battle Over a Fiduciary Standard Heats Up " »

Life Partners Holdings, Inc. and its two top officers have received a Wells notice from the Securities and Exchange Commission informing them that the SEC staff intends to recommend a civil enforcement action against them for allegedly misrepresenting the life expectancies of insureds whose life insurance policies it sold to retail investors, according to a Wall Street Journal article by Mark Maremont and Leslie Scism entitled “Life Partners Could Face SEC Action.” According to the article, Life Partners has sold billions of dollars of these policies.

Continue reading " Life Partners is in the SEC's Crosshairs " »

Small unrated municipal bonds whose coupons are not backed by tax revenues (“mini munis”) are a class of troubled assets that are imbedded in some seemingly safe municipal bond funds, according to a SmartMoney article by Russell Pearlman entitled “The Growing Impact of ‘Mini Muni’ Bonds.” Thousands of them are missing payments and may impair the performance of municipal bond funds that hold them, according to the article.

Continue reading " "Mini Munis" Haunt Bond Funds that Own Them " »

Raymond James Financial claims that it would face a loss of $25 million to $50 million if it is forced to immediately repurchase auction-rate securities that it sold to clients, according to an InvestmentNews article by Bruce Kelly entitled “ARS mess could cost Raymond James up to $50M.” That would cut into the firm’s total revenues of over $1 billion for 2010, as well as the average payout of $311,513 for each of the firm’s 3,237 registered representatives in 2010, according to InvestmentNews’ B-D Data Center.

Continue reading " Auction Rate Securities Update - Raymond James " »

With Republicans pressuring the Securities and Exchange Commission to back off, there is a good chance that the SEC will not promulgate a new fiduciary-standard any time soon, according to Evan Cooper’s InvestmentNews article entitled “The B-S solution to the fiduciary issue.”

Continue reading " Special Interest Groups and House Republicans Continue to Pressure SEC to Delay Formal Approval of a Fiduciary Standard for Financial Services Firms " »

Underwriters Goldman Sachs, UBS, and Bear Stearns (now owned by JP Morgan) allegedly sold more than $175 million of mortgage-backed securities to insurance giant Mass Mutual without disclosing that they were composed of troubled loans, which made the securities “junk” worth only $40 million, according to a Law 360 article, citing a civil action filed by Mass Mutual. Many similar actions have been filed by major institutional investors against “the architects of the subprime implosion,” according to the article.

Continue reading " Mass Mutual Sues Goldman, UBS and JP Morgan Over Soured Mortgage-Backed Securities Deals " »

Investment advisors and brokers continue to go independent, and they are taking more assets with them when they leave their firms, according to an InvestmentNews article by Lavonne Kuykendall entitled “When going indie, advisers take more assets: Fidelity,” which cites Fidelity Investments’ 2011 Broker and Advisor Sentiment Index.

Continue reading " Brokers Transition to Smaller,Independent Firms " »

Goldman Sachs disclosed that it has been notified that the Commodity Futures Trading Commission’s staff will recommend that the agency bring "aiding and abetting, civil fraud and supervision-related charges" against its division, Goldman Sachs Execution & Clearing, according to a Wall Street Journal article by Liz Moyer entitled “Goldman Discloses CFTC Probe.” The charges reportedly have to do with its role as a clearing broker for an unnamed registered broker-dealer.

Continue reading " Goldman's Legal Woes Keep Growing " »

JP Morgan says that it is in “advanced” negotiations to settle its part of a broad U.S. Securities and Exchange Commission investigation into how mortgage-linked securities were packaged and sold as the housing market unraveled, according to a Bloomberg article by Joshua Gallu and David Scheer entitled “JPMorgan Is in ‘Advanced’ Negotiations to Resolve CDO Probe.”

Continue reading " JPMorgan Chase is Close to Settling "Built to Fail" CDO Investigation " »

There is a disconnect between financial advisers and GenXers. Financial advisers agree about how to save for retirement: start young, and invest automatically and regularly. Financial advisers also generally recommend that people now in their 30s and early 40s have at least 70% of their retirement portfolios in stocks. But the GenXers have just 48% of their 401(k) money in stocks as of the end of 2009, according to a Smart Money article by Jilian Mincer entitled “What’s Gen X So Scared Of? Stocks.”

Continue reading " Who's Right - Financial Advisers or GenXers? " »

U.S. Senate Republicans are threatening to block any nominee to head the Consumer Financial Protection Bureau unless Democrats agree to change the agency’s structure and funding, thereby attacking one of the cornerstones of financial reform in the Dodd-Frank Act, to the delight of financial-industry lobbyists, according to a Bloomberg article entitled “Senate Republicans Plan to Block Consumer Bureau.”

Continue reading " Financial Services Firms and Special Interest Groups Seek to Thwart Consumer Financial Protection " »

Wells Fargo Securities LLC is the subject of an investor class action lawsuit alleging that it violated intended third-party beneficiaries of an auction rate securities settlement with the SEC by refusing to buy back auction rate securities from trusts that purchased and held those securities as trust property, according to a Law360 article by Richard Vanderford entitled “Wells Fargo Sued Over $7B Wachovia ARS Settlement.”

Continue reading " Wells Fargo's Auction Rate Securities Woes Continue " »

Forty-seven percent of respondents in a world-wide survey of 400 investors believe that one-on-one meetings with companies regularly lead to “price sensitive information” being privately disclosed, according to a Yahoo Finance “Breakout” article by Peter Gorenstein entitled “Is the Market Rigged? Survey Says … ‘Yes?’”

Continue reading " Investors Question the Integrity of the Financial Markets " »

Silver futures plummeted to their biggest decline since March 1983 after Comex’s owner, CME Group Ltd., raised margin requirements for new speculative positions by 84 percent in less than two weeks, according to according to an InvestmentNews article entitled “Silver investors holding ‘a falling knife.’” Gold also fell.

Continue reading " Silver Investments Plummet " »

A California federal court has unsealed a whistleblower suit accusing AIG, Goldman Sachs, Merrill Lynch, Deutsche Bank, and Societe Generale of perpetrating a fraudulent scheme to dupe the Federal Reserve Bank of New York and the U.S. Department of the Treasury into issuing AIG more than $137 billion in bailout loans during the 2008 financial crisis, according to a Law 360 article by Derek Hawkins entitled “Whistleblower Accuses AIG, Banks of $137B Bailout Fraud,” referencing an amended complaint that had been under seal since September 2010.

Continue reading " Financial Services Firms Accused of Duping the Government out of $137 Billion " »

House Republicans are beginning to move legislation that would roll back parts of the Dodd-Frank financial reform law to the detriment of investors, according to Mark Schoeff Jr.’s InvestmentNews article entitled “Sen. Durbin says Dodd-Frank rollback would kneecap regulators.” As the title suggests, Sen. Dick Durbin, assistant majority leader, indicated that he will fight efforts to scuttle or delay implementation, because slowing down Dodd-Frank would make the country vulnerable to another financial crisis.

Continue reading " House Republicans on "Mission" to Undercut Investor Protection " »

The Financial Industry Regulatory Authority (FINRA) has fined Wells Fargo Advisers $1 million for failing to timely deliver prospectuses to approximately 934,000 customers who bought mutual funds in 2009, according to an InvestmentNews article entitled “Wells took up to 153 days to get prospectuses to mutual fund buyers: Finra.”

Continue reading " Wells Fargo Sanctioned for Failing to Deliver Prospectuses " »

Federal prosecutors have filed a civil mortgage fraud lawsuit against Deutsche Bank and MortgageIT unit for alleged “reckless lending practices,” according to a New York Times Dealbook article entitled “U.S. Sues Deutsche Bank Over Mortgages.” Deutsche Bank acquired MortgageIT in July 2006. The complaint reportedly seeks over $1 billion in treble damages and penalties under the False Claims Act.

Continue reading " Feds Charge Deutsche Bank with Mortgage Fraud " »