Investment Fraud Lawyer Blog

Former Credit Suisse broker Eric Butler, who was convicted of fraud by a New York federal court jury in August, was sentenced last week to five years in federal prison. Along with former Credit Suisse colleague Julian Tzolov, Butler was accused of making misrepresentations in the sale of auction rate securities, claiming that they were backed by federally-insured student loans when in fact they were backed by high-risk collateralized debt obligations, or CDOs. Prosecutors alleged that Butler and Tzolov had switched their clients to the CDO-backed securities because they paid higher commissions.

Continue reading "Broker Sentenced for Fraud in Selling Auction Rate Securities Issued by CDO's" »

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 year at 10,428 and, on Monday, the market soared 156 points.

• On Tuesday, the Dow Jones Industrial Average dropped 12 points.

• On Wednesday, the Dow Jones Industrial Average gained 2 points.

• On Thursday, the Dow Jones Industrial Average rose 33 points.

• On Friday, the Dow Jones Industrial Average moved up 11 more points and closed the week at 10,618.

Continue reading "Page Perry's Market Monitor - January 8, 2010" »

The Wall Street Journal reports that “hundreds of businesses are fighting to recover billions of dollars tied up in frozen auction-rates securities, a year after Wall Street firms agreed to $60 billion in settlements over the collapsed market for the investments.” See “Firms Fight Banks Over Billions in Frozen Notes,” WSJ 1/2/10. While regulators stepped in to help individual investors after the auctions froze in February 2008, many corporate and institutional investors did not benefit from settlements between banks, broker-dealers and the SEC, FINRA and state attorneys general. According to Atlanta attorney Craig T. Jones, investors were left holding about $330 billion in illiquid securities when the auctions froze, so $60 billion in settlements is only a drop in the bucket.”

Continue reading "The Auction Rate Securities Debacle Continues - Corporate America Takes on Wall Street" »

Roche International has sued Credit Suisse for over $270 million in losses that the drug company incurred after the bank’s brokers invested $545 million of its money in auction rate securities. Roche’s Credit Suisse relationship managers were Julian Tzolov and Eric Butler, who are now serving federal prison sentences for securities fraud in connection with auction rate securities. In its lawsuit, Roche alleges that it was among Tzolov and Butler’s victims, accusing them of investing the company’s money in risky auction rate securities while claiming it was invested in highly liquid, government-backed student loan securities.

Continue reading "Credit Suisse Sued Again over Auction Rate Securities Abuses" »

Brokerage firms who sold auction rate securities had to feel a jolt if they read Chad Bray’s recent article in the Wall Street Journal (“Broker Convicted in Auction-Rate Case”). A jury convicted a former Credit Suisse broker of a crime – subject to 45 years in prison – after less than a day of deliberation. It’s true that the government claimed that he and another broker changed the names of securities on communications with clients to conceal the fact that the securities were not backed by federally guaranteed student loans, which is not something every broker who sold auction rate securities did. Nevertheless, the jury found the broker “guilty of securities fraud and two counts of conspiracy,” according to the article, and “securities fraud” is a charge widely associated with sales practices related to auction rate securities. In the words of the U.S. Attorney who prosecuted the case: “The defendant’s fraudulent misrepresentations saddled investors with unknown risks they did not bargain for…. [an allegation found in most civil lawsuits involving auction rate securities] This case shows that those who engage in such schemes will be held to account for their criminal activity.”

Continue reading "Bad News for Brokerage Firms that Sold Auction Rate Securities" »

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" »

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" »

News stories and congressional inquiries into financial scams perpetrated by Madoff, Stanford and others have shined a light on the problem of lax enforcement of securities laws and rules by regulators. Recent trends suggest that arbitrators, however, are increasingly cognizant of their importance in the process of requiring financial firms to comply with applicable securities laws and rules, and protecting victims of firms that do not comply.

Continue reading "Arbitrators Have an Important Role in Keeping the Financial Markets Honest" »

Investors who still hold auction-rate securities are facing many increasing problems, according to an article in today’s Bloomberg.com by Michael McDonald. Last February, the $330 billion market for auction-rate securities essentially froze when major Wall Street firms discontinued supporting auction-rate securities. A year later, investors are still stuck with as much as $176 billion of auction-rate securities that pay an average of 1.36%. Thus, it is apparent that many investors have been left out in the cold even after regulators forced some firms to buy back more than $50 million of auction-rate securities. Investors are stuck is because the market remains frozen and issuers either have no incentive to refinance or are unable to refinance. Many investors rightly complain that a large portion their liquid wealth is frozen and paying next to nothing in interest, and, while they may be able to liquidate their holdings in the secondary market, they can do so only if they accept less than what they paid for the auction rate securities.

Continue reading "Things Continue to Get Worse for Auction-Rate Securities Investors" »

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 8281 and dropped 10 points on Monday.

• On Tuesday, the Dow Jones Industrial Average plunged 382 points.

• On Wednesday, the Dow Jones Industrial Average rebounded 51 points.

• On Thursday, the Dow Jones Industrial Average fell 7 points.

• On Friday, the Dow Jones Industrial Average lost 82 points and closed the week at 7850.

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

A FINRA arbitration panel entered a $400 million award against Credit Suisse based on claims that it improperly sold auction rate-securities to a large corporation, STMicroelectronics. The award also requires that Credit Suisse pay over $6.5 million in attorney’s fees. This is the first in what is likely to be a long line of significant awards against brokerage firms that engaged in improper sales of auction-rate securities to corporations.

Attorney J. Boyd Page of Page Perry LLC in Atlanta applauded the decision saying, "It's good to see arbitration panels recognizing that many corporate and institutional investors were victimized by abusive conduct in the auction-rate securities debacle. These investments were sold as safe parking places for cash and important facts were withheld from investors. It would be a travesty of justice to deny recovery under such circumstances."

Continue reading "Corporate Investor Wins $400 Million on Auction-Rate Securities Claim" »

Time may be running out on certain auction-rate securities claims. Some investors may need to act promptly if they wish to protect their rights. The laws of each state establish time limits (statutes of limitations) within which legal claims must be asserted. Those time limits vary from state to state. Claims not brought within the applicable statute of limitations may be disallowed. To be conservative, investors should assume the clock starts ticking on the date of the transaction in question (although discovery and tolling rules that delay the running of the clock may apply).

Continue reading "Tick-Tock: Spurned Auction-Rate Securities Investors Need to Monitor the Clock" »

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:

• On Monday, the Dow Jones Industrial Average dropped by 680 points.

• On Tuesday, the Dow Jones Industrial Average rose by 263 points.

• On Wednesday, the Dow Jones Industrial Average advanced 173 points.

• On Thursday, the Dow Jones Industrial Average tumbled 215 points.

• On Friday, the Dow Jones Industrial Average rebounded 259 points and closed the week at 8635.

Continue reading "Page Perry's Market Monitor - December 5 , 2008" »

Swiss bank Credit Suisse has announced additional job cuts of 5,300. According to Reuters, the bank also announced a $2.5 billion loss in October and November, primarily in investment banking. The bank blamed the loss on adverse market conditions and risk reduction.

These job cuts represent 11% of Credit Suisse's total headcount of 50,300. They will be implemented "across all divisions throughout the bank" by the end of the second quarter of 2009. The investment banking business will suffer two-thirds of the job cuts as its staff is reduced from 21,300 to 17,500 by the end of 2009. These cuts include the already announced cut of 650 investment banking jobs in Brittan and 170 jobs in Asia.

Continue reading "Additional Job Cuts on Wall Sreet" »

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:

• On Monday, the Dow Jones Industrial Average jumped up by 275 points.

• On Tuesday, the Dow Jones Industrial Average fell 232 points.

• On Wednesday, the Dow Jones Industrial Average plunged 514 points.

• On Thursday, the Dow Jones Industrial Average rose 172 points.

• On Friday, the Dow Jones Industrial Average dropped another 312 points and closed the week at 8378.

Continue reading "Page Perry's Market Monitor - October 24, 2008" »

Yesterday the Financial Industry Regulatory Authority (“FINRA”) announced auction-rate securities settlements with SunTrust Robinson Humphrey, Comerica Securities, First Southwest, and WaMu Investments, Inc.

Continue reading "FINRA Announces Auction-Rate Securities Settlements with More Firms" »

Two noted money market funds, Reserve Primary Fund and Reserve International Liquidity Fund LTD, managed by Reserve Management Corporation, have “broken the buck.” “Breaking the buck” means that investors in a money market fund lose their invested principal. Stated another way, the net asset value of money market fund falls below the $1/share price paid by investors to invest in the fund.

This development could have significant ramifications for the entire money market mutual fund industry, which is based on confidence in the complete safety of the “buck.” Jeff Bobroff, mutual-fund consultant in Rhode Island, stated, “This is going to unsettle investors and probably create further runs on other money funds.” Experts fear that investors’ concern about the sanctity of money market funds could result in widespread withdrawals that would further aggravate the global credit crisis. Money market funds are major buyers of short-term debt issued by corporations and financial companies and significant withdrawals from money market funds could severely disrupt that market.

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A settlement, in principle, has been reached between a state auction-rate securities task force and Credit Suisse which would require the investment bank to buy back approximately $550 million in auction-rate securities. In addition, the firm will pay a $15 million fine. The investigation of Credit Suisse was lead by the North Carolina Secretary of State and Securities Commissioner.

Continue reading "Credit Suisse Enters into Auction-Rate Securities Settlement with Regulators" »

There will be some scary times for Wall Street firms in the months ahead according to Business Week writers David Henry’s and Mathew Goldstein’s September 8, 2008 article “More Trash Than Cash.” The writers portray a scenario that could result in tremendous chaos for both Wall Street firms and the capital markets. Christopher Whalen of Institutional Risk Analytics (a consulting firm) summarized the situation saying, “It’s really an ugly time, and it’s only going to get worse.”

Continue reading "Wall Street Firms Expected to Face Doom and Gloom in the Months Ahead" »

Corporate investors have begun filing lawsuits against major brokerage firms, including Merrill Lynch and Credit Suisse, seeking to recover losses sustained in auction-rate securities issued by CDOs and other structured finance vehicles, reported Elinor Comlay of Reuters on Wednesday, September 3, 2008. “I can assure you that more suits are going to be brought,” said J. Boyd Page, a senior partner at the Atlanta law firm of Page Perry, LLC. Corporate and institutional investors are likely to sue for losses, as well as consequential damages, added Mr. Page.

Continue reading "Brokerage Firms Face Suits Over Auction-Rate Securities Issued by CDOs and Other Structured Finance Vehicles" »