Investment Fraud Lawyer Blog

The Federal Home Loan Bank of Seattle has filed 11 lawsuits against an array of Wall Street banks, seeking rescind $4 billion of mortgage-backed securities with interest, according to a Feb. 16 Wall Street Journal article by Nick Timiraos, “Home Loan Bank Sues Wall Street Firm.” The lawsuits were filed in late December in King County Superior Court in Washington. A spokeswoman for The Federal Home Loan Bank of Seattle said the institution had "a responsibility to its member shareholders to enforce its rights."

Continue reading "Federal Home Loan Bank Sues Securities Firms to Recover Subprime Losses" »

There have been various developments over the past several weeks which investors may consider relevant in allocating their resources or evaluating alternatives that are available to them. Some of the more significant developments include, but are not limited to, the following:

• The Dow Jones Industrial Average opened the week at 10,023 and, on Monday, the market soared 204 points.

• On Tuesday, the Dow Jones Industrial Average rose 20 points.

• On Wednesday, the Dow Jones Industrial Average climbed 44 more points.

• On Thursday, the Dow Jones Industrial Average fell 94 points.

• On Friday, the Dow Jones Industrial Average rebounded 73 points and closed the week at 10,270.

Continue reading "Page Perry's Market Monitor - November 13, 2009" »

Wachovia Bank, JPMorgan and other major financial institutions have filed their second motion to dismiss a complaint brought against them by more than a dozen state and local governments alleging price-fixing and bid-rigging of municipal derivatives markets. This according to a recent article by Erin Fuchs in Law360 entitled “Banks Shoot To Kill Municipal Bond Antitrust MDL.” The MDL action, captioned In re: Municipal Derivatives Antitrust Litigation, case number 1:08-md-01950, is pending in the U. S. District Court for the Southern District of New York.

Continue reading "Wall Street Firms Want a "Free Pass" for Ripping Off State and Municipal Governments" »

Investors are bringing an increasing number of legal claims against brokerage firms as a result of inappropriate sales of preferred stocks issued by financial institutions. For example, Merrill Lynch has been hit with an arbitration claim filed by an elderly couple that lost $650,000 in the preferred stocks of financial companies according to Sue Asci in her August 16 article in InvestmentNews called “Merrill Lynch confronts arbitration claim involving financials’ preferred stock.” The claim, filed with FINRA, alleges that Merrill engaged in fraudulent sales practices, including self-dealing (more on that below).

Continue reading "More Investor Claims Focus on Sales of Preferred Stocks Issued by Financial Institutions" »

The Securities Industry and Financial Markets Association, an important Wall Street lobbying group, has decided to support the Obama administration’s proposal to hold brokers to the same standard as a fiduciary when they provide investment advice, according to a recent report in The Wall Street Journal. While investors who sue their brokers have long argued, with considerable success, that a fiduciary duty arises whenever there is a relationship of trust and confidence between broker and investor, that determination is presently made on a case by case basis under laws that vary from state to state. A federal standard, which is more likely to pass now that it has been endorsed by the industry, would make it easier for investors to prevail in claims against brokers.

Continue reading "Wall Street Trade Association Supports Fiduciary Standard" »

Citigroup and the U. S. Securities and Exchange Commission (SEC) are discussing possible settlement of an investigation into whether Citigroup overvalued billions of dollars of subprime mortgage-backed securities on its books in the latter part of 2007, according Susan Pulliam and Randall Smith of the Wall Street Journal in a May 28, 209 article entitled “Citi, SEC Are in Talks to Settle Probe.” The investigation followed a series of events that led to the resignation of CEO Charles Prince and the reporting of approximately $50 billion in overall losses, mostly due to its subprime mortgage-backed holdings. In October 2007, Citigroup reported a $1.83 billion loss of value in its subprime mortgage-backed securities. Weeks later, Citigroup reported that the loss of value was more like $8 to $11 billion, and also that it held far more subprime mortgage-backed securities than it had previously reported. The investigation centers on the validity of Citigroup’s valuation methods and whether it misled the investing public when there was no market to set prices for these non-conventional and complex assets.

Continue reading "Addressing Recent Wall Street Misconduct Requires The SEC to Adopt Creative Approaches" »

According to recent surveys, the public now views the U.S. Securities and Exchange Commission more unfavorably than the “always hated Internal Revenue Service,” reported Bruce Canton in his column called “Enforcement Action,” published on complianceweek.com. In its National Juror Survey, Litigation PostScript found that 55% of the respondents expressed an unfavorable opinion of the SEC compared with a 46% unfavorable rating for the IRS.

Continue reading "Public Confidence in SEC Sinks to New Low" »

On May 13, 2009, the U.S. Securities and Exchange Commission (“SEC”) approved a rule change that requires brokers to disclose alleged sales practice violations made by a customer against a securities broker in the body of a civil lawsuit or arbitration claim, even if that broker is not named as a defendant or respondent. The SEC received a total of 1,654 comment letters on the proposed rule change. Approximately 1,451 of the letters were “form letters” from financial advisors and insurance agents (who sell insurance products such as variable annuities) opposing the change.

Continue reading "Regulators Require Financial Firms to Provide More Public Disclosure Regarding Customer Complaints" »

Many investors suffered losses in 2008 because they owned Tobacco Settlement Bonds. These bonds, which are tax exempt, were sometimes marketed by brokers as “municipal bonds”. They lost up to 50% of their value as a result of Wall Street’s self-induced credit crisis.

Other than their "tax-exempt" status, Tobacco Settlement Bonds have absolutely nothing in common with traditional municipal bonds.

Continue reading "Tobacco Settlement Bonds Give Rise to Legal Claims" »

Compelling pieces of evidence, including sworn statements from Bank of America, have been uncovered indicating that, during recent years, Wall Street brokerage firms conspired to cheat state and local governments and American taxpayers in the municipals markets. Municipal bonds are issued by state and local governments to raise funds for various public projects. Since the proceeds received by the governments are usually not spent all at once, they are invested in various contracts (collectively referred to as Municipal Derivatives) that provide a fixed rate of return or shift the risk of changes in interest rates. The market for Municipal Derivatives is large ($400 billion annually), concentrated among 20 major institutional sellers, and largely unregulated. Before engaging in Municipal Derivatives transactions, governments routinely engage brokers to find the best deals.

Continue reading "More Dishonesty from Wall Street - This Time Cheating State and Local Governments as well as Taxpayers" »

The hoopla surrounding the presidential election and the promise of a new team in Washington does not change the reality that we are still mired in a seemingly unending financial mess. But, according to New York Times business columnist Gretchen Morgenson, the lack of transparency surrounding both Wall Street’s activities and the financial bailout present serious problems going forward. President-Elect Barrack Obama needs to signal investors and taxpayers that he will be looking out for them. Morgenson argues that an essential first step is to insure that the officials in charge of taxpayer finance bailouts operate in the sunshine. It would also be helpful if those same people were more forceful in extracting concessions from the recipients of billions of taxpayer dollars.

Continue reading "Where is the Transparency ?" »

The hoopla surrounding the presidential election and the promise of a new team in Washington does not change the reality that we are still mired in a seemingly unending financial mess. But, according to New York Times business columnist Gretchen Morgenson, President-Elect Barack Obama needs to signal investors and taxpayers that he will be looking out for them.

Morgenson argues that an essential first step is to insure that the officials in charge of taxpayer finance bailouts operate in the sunshine. It would also be helpful if those same people were more forceful in extracting concessions from the recipients of billions of taxpayer dollars.

In all of the Government’s attempts to deal with this financial mess, major decisions have been made in a hurry, behind closed doors, and with many unidentified participants. Some analysts, financiers, and politicians suspect that special pleaders may be behind the scenes securing special favors.

Continue reading "Excessive Secrecy And The Bailout" »

The loss of jobs on Wall Street is keeping many attorneys busy as the need for legal representation increases. Contracts are being terminated and litigated, severance benefits are being proposed and fights for customers are escalating. Terminated employees are negotiating new arrangements, forming their own broker/dealers or investment advisory firms and entering into various contracts ranging from leases to client agreements. New registrations are being filed while licenses are being transferred. The need for experienced securities counsel has never been greater.

Continue reading "Wall Street's Downsizing Increases the Need for Legal Services" »

John Thain, Merrill Lynch's Chief Executive, said earlier this week at a speech in Dubai that, of Merrill’s 61,000 employees, thousands would lose their jobs when Merrill is merged into Bank of America. As reported in the Financial Times by Simeon Kerr and Greg Farrell, Mr. Thain said that jobs would be lost in the corporate and service sectors, such as information technology. Mr. Thain expects that Bank of America's acquisition of Merrill's investment and wealth planning businesses would be completed by year-end.

New York City is bracing itself for the loss of up to 35,000 jobs in the financial sector, according to estimates from William Thompson, the New York City Comptroller. Many of these job losses were the result of the collapses this year of Bear Stearns and Lehman Brothers. According to Mr. Thompson, New York City will lose as many as 165,000 private sector jobs over the next two years.

Barclay's is also preparing to cut at least 3,000 jobs from its United States payroll. Barclay's inherited almost 10,000 Lehman employees when it purchased some of Lehman’s business operations shortly after the firm’s bankruptcy filing.

Continue reading "Some Layoffs Are More Equal Than Others" »

There have been various developments over the past several weeks which investors may consider relevant in allocating their resources or evaluating alternatives that are available to them. Some of the more significant developments include, but are not limited to, the following:

• The Bush Administration proposed a $700 billion bailout plan to purchase bad mortgage investments from financial companies.

• On Monday, September 29, Congress rejected President Bush’s proposed $700 billion bailout plan.

• On Monday, September 29, the Dow Jones Industrial Average plunged 778 points.

• Later in the week, the markets rebounded somewhat as Congress decided to reconsider a modified bailout proposal. Indications are that some form of this bailout will pass.

Continue reading "Page Perry's Market Monitor -October 3,2008" »

Today, Beth Healy of the Boston Globe reported that Bank of America warned the State of California about problems in the auction-rate securities markets late in 2007 while the firm was still marketing auction-rate securities to individuals and other investors without disclosing such risks. Among other things, Bank of America warned the State of California that there had been “significant dislocation” in the auction-rate securities marketplace, that demand for auction-rate securities was dropping, that many corporate clients were selling auction-rate securities, and that there was significant uncertainty in various parts of the auction-rate market. Reportedly, Bank of America also warned the State of California that it was “in a defensive position, facing capital constraints,” due, in part, to its high inventory of auction-rate securities.

Continue reading "Bank of America Withheld Important Information about Auction-Rate Securities from Investors" »

Today New York Attorney General Andrew Cuomo urged JP Morgan Chase, Morgan Stanley and Wachovia Securities to take immediate steps to settle their auction-rate securities problems. According to reports, Cuomo’s office has sent a letter to each of these firms strongly suggesting that they enter into settlements with regulators resolving their auction-rate securities problems on terms similar to those previously agreed to by Citigroup and UBS.

Under such proposal, it appears that regulators are seeking to compel JP Morgan, Wachovia and Morgan Stanley to buy-back securities held by individual customers, charities and small businesses, reimburse those clients for any damages which they sustained in selling auction-rate securities, use best efforts to assist larger institutional customers in disposing of their auction-rate securities and pay fines.

Continue reading "More Auction-Rate Securities Settlements Ahead?" »

Today, Massachusetts securities regulators charged Merrill Lynch with fraud in the sale of auction-rate securities. The State’s complaint asserts that the major Wall Street firm was pushing its brokers to sell auction-rate securities without making the proper disclosures to investors for months after the firm knew that the market for auction-rate securities was on the brink of collapse. The states of Massachusetts, New York and Texas had previously filed similar claims against UBS.

Continue reading "State Sues Merrill Lynch For Fraud In The Sale Of Auction-Rate Securities" »

The subprime and credit crises have resulted in a surge of fraudulent misrepresentation and omission cases against Wall Street firms. A rising stock market concealed many such abuses because values were rising, making fraudulent misrepresentations and omissions hard to identify. Recently, however, many of these misrepresentations and omissions have become apparent. For example, many risk-averse investors with conservative objectives have recently discovered that they have sustained huge losses on investments that were misrepresented to them as being very safe and conservative.

Perhaps even more critical than what was affirmatively misrepresented to investors in these cases is what the firms and their brokers omitted to disclose to investors about these securities. The bedrock principle of the securities laws is the duty of complete and truthful disclosure. Once a broker undertakes to disclose any information about a security to an investor or potential investor, the disclosure must be complete and truthful in all material respects. This is an absolute requirement. It applies to every broker (whether discount or full service), every security, and every person who receives any information about a security (rich or poor, financially sophisticated or not, whether or not that person has an account with the broker). If a broker fails to provide complete and truthful disclosure, and the undisclosed information would have been important in deciding whether or not to invest, the investor has a legal right of action against the broker and the firm to recover resulting losses and damages.

Continue reading "Investor Misrepresentation And Omission Claims Escalate" »

Many auction rate securities investors are asking whether they should sell their illiquid holdings or should wait in hopes of their auction rate securities being refinanced or redeemed. Unfortunately, there is no one answer that is right for every investor. This article attempts to discuss various factors that investors may wish to consider in making their own decision. Among other things, we discuss the status of the market, describe relevant considerations and discuss the advantages of selling and of waiting. We also provide investors with information on what they can do if they are interested in selling their auction rate securities.

Continue reading "Should Investors Sell Their Illiquid Auction Rate Securities?" »