Investment Fraud Lawyer Blog

In another example of brokerage firms catering to retail investors’ worst instincts, supposedly investor-friendly firms like Charles Schwab and TD Ameritrade are focusing on expanding their trading business beyond traditional investment like stocks and bonds into alternative investments like options because the commissions are so high. (“’Easy Money’ Options Pushed by Online Brokers,” Bloomberg).

Continue reading "High Risk Options Trading Is Being Pushed By Some Brokerage Firms" »

A study by the Charles Schwab Corporation indicates that retail investors want more information about the bonds they invest in, specifically, the base price of bonds and the amount of the markup by brokers. Andrew Osterland’s recent InvestmentNews article entitled “Bond buyers in the dark about broker markups – and not happy about it” discusses this study. Schwab arranged for the study in connection with promoting its BondSource platform. It reportedly provides access to new bond issues from more than 200 dealers, as well as in the secondary bond market, at a price of $1 per bond.

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Most investors are not well informed about exchange traded funds and 46% describe themselves as “novices,” according to a survey taken by Charles Schwab Corp. Yet the survey also found that 44% planned to increase their exchange traded funds investments. Let’s hope these investors avoid the numerous extreme and exotic funds out there, which add risks that most investors do not understand or want.

Continue reading "Survey - Most Investors Don't Really Understand ETFs (Exchange Traded Funds)" »

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" »

Expecting licensed professionals who provide investment advice to act in their clients’ best interests “should be a basic tenet of the business,” but brokerage firms and their brokers don’t want that fiduciary yoke, says Karen Blumenthal in her InvestmentNews article, “When Your Adviser Can’t Be Trusted.” Moreover, they don’t want the public to know that they don’t want to be held to a fiduciary standard. So, while brokerage firms profess to be trusted advisers or like a member of a client’s family in their advertising, their lobbyists are working hard to persuade the SEC to weaken the “devil in the details” definition of the term “fiduciary” for purposes of governing brokers’ relationships with customers.

Continue reading "Are Brokerage Firms Really the Trusted Financial Advisers that Their Advertisements Claim that They Are?" »

Sophisticated institutional investors are bringing claims in waves against Wall Street financial institutions for fraud in the sale of mortgage backed securities, CDOs and related exotic investments. Most recently, Charles Schwab Corp. is among a group of financial institutions suing Goldman Sachs for making material misrepresentations and omissions in connection with the offer and sale of mortgage-related securities, according to Liz Moyer and Brett Philbin in their Wall Street Journal article, “Goldman Tallies Possible Litigation Losses.”

Continue reading "Sophisticated Institutional Investors "Jump on the Bandwagon" - Sue to Recoup Losses in Mortgage-Backed Securities and CDOs" »

The new whistleblower program that pays big cash rewards for tips about investment fraud has already resulted in a large number of high quality tips to the SEC, according to a news story this week on CNBC. According to the report, the SEC expects to receive 30,000 tips this year—just one year after the program was created under the Dodd-Frank financial reform act. SEC Enforcement Director is quoted as saying “we’re gonna get information hopefully sooner on in the life cycle of a fraudulent scheme, so there’s less investor loss, less harm.” In addition to helping the feds detect fraud in the securities industry, however, the program promises to pay big financial rewards to the whistleblowers whom report it.

Continue reading "Wall Street Whistleblower Program Already Paying Off" »

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" »

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"" »

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" »

"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.

Continue reading "Social Networking Services Present a New Risk for Investors" »

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" »

A Financial Industry Regulatory Authority (FINRA) arbitration panel has ordered Raymond James & Associates, Inc. and one of its registered representatives to pay $925,000 to a Texas couple who purchased $1.4 million of municipal auction rate securities issued by Jefferson County, Alabama, according to August 26th articles in InvestmentNews by Bruce Kelly (“Raymond James pays more auction rate claims”) and in the Wall Street Journal by Suzanne Barlyn (“Raymond James Forced to Buy Back Securities”).

Continue reading "Raymond James' Auction Rate Securities Problems Mount" »

Liz Ann Sonders, Charles Schwab’s chief investment strategist, is skeptical about bonds and emerging markets and believes that “[i]nvestors are doing what they do well, which is chase past performance,” according to a recent article by Mina Kims posted on CNNMoney.com, “Bond investors are chasing the past.”

Continue reading "Bonds - Is It Time To Be Cautious?" »

Brokerage firms’ advertising portrays brokers as trusted members of the family, writes Tara Siegel Bernard in her New York Times article, “Trusted Adviser or Stock Pusher? Finance Bill May Not Settle It.” Anyone who has tried to hold a broker to a fiduciary standard of conduct, however, hears a very different response: “We are mere order takers. You never should have trusted us.”

Continue reading "Is Your Financial Adviser Acting in Your Best Interest?" »

Charles Schwab Corp. added a record number of independent investment advisors in 2009 as thousands of brokers left Wall Street firms, like Bank of America, Merrill Lynch, and Morgan Stanley Smith Barney, to launch their own investment advisory firms. See Reuters “Schwab says ‘breakaway broker’ trend has legs,” by Joe Rauch, Jan. 25.

Continue reading "Charles Schwab Confirms Trend of Brokers Breaking Away from Major Firms" »

Independent financial advisers are gaining on Wall Street brokers in the competition to manage more than $5 trillion in Americans' savings, according to E. S. Browning in his recent Wall Street Journal article, “More Brokers Flee Big Firms, Taking Investors With Them.”

Continue reading "Yes, Wall Street can be Replaced - Independent Brokerage Firms and Investment Advisers are Gaining on Big Wall Street Firms" »

A Financial Industry Regulatory Authority (FINRA) arbitrator awarded damages to Mr. Weigel as a result of losses sustained in the Schwab YieldPlus Fund. The panel awarded the Mr. Weigel $19,400 in a claim submitted under FINRA’s special “simplified” procedure for claims of $25,000 or less (exclusive of interest and costs). Mr. Weigel’s actual trading loss in Schwab YieldPlus Fund was $22,279 while his net out of pocket loss was $15,359. In a simplified claim, a single arbitrator decides the case based on the paper submissions of the parties without an in-person hearing.

Continue reading "The Beat Goes On - Schwab Loses Another Schwab YieldPlus Case" »

Time is running out for Schwab YieldPlus investors to opt out of the class action. A properly completed Request for Exclusion must be received by the class action administrator no later than December 28, 2009. With the holidays, the time to do that is running very short.

Continue reading "Less Than 15 Days are Left for Schwab YieldPlus Investors to Preserve their Rights" »

A federal court recently certified a class action against Charles Schwab & Company, Inc. brought on behalf of investors in the Schwab YieldPlus Fund. The certification means that the lawsuit can proceed as a class action; no settlement has been reached. Most importantly for YieldPlus investors with significant losses, the deadline to be excluded from this class action is December 28, 2009.

Continue reading "Only 40 Days Left for Schwab YieldPlus Investors to Preserve their Rights" »