Investment Fraud Lawyer Blog

Wall Street banks like Goldman Sachs, Deutsche Bank, Morgan Stanley, as well as smaller firms like Tricadia Inc., and certain of favored hedge fund clients that were tipped off by the banks, reaped huge profits by shorting (betting against) “synthetic” collateralized debt obligations (CDOs) linked to residential mortgages, which the banks created and sold to other clients, according to Gretchen Morgenson and Louise Story in their recent New Times article, “Banks Bundled Bad Debt, Bet Against It and Won.”

Continue reading "Wall Street Firms Bet Against Toxic Subprime Investments that they were Recommending to Unsuspecting 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 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" »

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 9996 and, on Monday, the market rose 96 points.

• On Tuesday, the Dow Jones Industrial Average fell 51 points.

• On Wednesday, the Dow Jones Industrial Average dropped 92 points.

• On Thursday, the Dow Jones Industrial Average moved up 132 points.

• On Friday, the Dow Jones Industrial Average sunk 109 points and closed the week at 9972.

Continue reading "Page Perry's Market Monitor - October 23, 2009" »

A retired securities lawyer and his wife have filed suit in the U. S. District Court for the Middle District of North Carolina over losses they sustained as a result of investing in preferred stock auction rate securities issued by Nuveen Investments. Auction rate securities are debt instruments -- in this case preferred stock-- for which interest is regularly reset through a Dutch auction. Auction rate securities were once routinely marketed as safe, cash equivalents that were highly liquid, but the broker-dealers who sold them failed to disclose that liquidity was entirely dependent upon the success of the auction process, which was being artificially supported by the undisclosed participation of brokers bidding in auctions where they had an interest. The North Carolina suit alleges fraud and securities law violations at all levels, including claims against the issuers, the underwriters, and the broker-dealers who sold the securities and managed the auction process.

Continue reading "Investor Sues Nuveen, Merrill, Citigroup and Deutsche Bank over Auction Rate Securities" »

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 9370 and, on Monday, dropped 32 points.

• On Tuesday, the Dow Jones Industrial Average fell 97 points.

• On Wednesday, the Dow Jones Industrial Average gained 120 points.

• On Thursday, the Dow Jones Industrial Average rose 37 points.

• On Friday, the Dow Jones Industrial Average fell 77 points and closed the week at 9321.

Continue reading "Page Perry's Market Monitor - August 14, 2009" »

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" »

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" »

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" »

Even sophisticated investors can be defrauded. M&T Bank Corporation, a bank holding company with a market capitalization of $4.4 billion, is suing Deutsche Bank to recover over $80 million in losses relating to an investment in a a collateralized debt obligation (CDO) called Gemstone, reported Vikas Bajaj in the January 20th edition of the New York Times. The suit alleges that Deutsche Bank misrepresented and omitted to disclose material facts about Gemstone, calling it “fully rock solid,” and “a layup,” when it was actually a piece of “subprime dross,” according to the article. In a nutshell, Gemstone consisted of bonds backed by subprime homes loans (a dubious asset) and credit default swaps (a contingent liability) pursuant to which Gemstone ended up owing millions of dollars to Deutsche Bank when the loans defaulted. The swaps represented a huge conflict of interest for Deutsche Bank, which stood to benefit when things did not go well for Gemstone.

Continue reading "Sophisticated CDO and Structured Finance Investors Have Rights Too" »

The loss of jobs in investment banking and brokerage is truly a worldwide phenomenon. Duetsche Bank announced that it is cutting 900 jobs in its investment banking operations in New York and London. According to James Wilson reporting on FT.com today, these cuts are the deepest yet by Germany’s largest bank. The move amounts to a reduction of about 12% of Deutsche Bank’s 7000-person investment banking team.

Deutsche Bank is also cutting jobs in credit origination, bond underwriting, and proprietary trading. The bank is not accepting any capital or liquidity guarantees from Germany’s government-backed financial sector stabilization fund.

This latest news on the job front demonstrates that employees of overseas financial firms are certainly not immune to the ongoing heavy job cuts that American-based firms such as Citigroup are experiencing.

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" »

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" »

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" »

In a recent SEC filing, SunTrust Banks announced that it was in talks with regulators in an effort to settle regulatory investigations regarding the firm’s auction-rate securities activities. Regulators have been investigating SunTrust regarding its sales practices in selling auction-rate securities and the adequacy of disclosures it made concerning these instruments.

Continue reading "SunTrust Considers Settling Auction-Rate Securities Investigations" »

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" »

While regulators have announced tentative settlements with major Wall Street firms (Merrill Lynch, UBS, JP Morgan, Goldman Sachs, Morgan Stanley, Wachovia, Citigroup, and Deutsche Bank) that underwrote auction-rate securities, these settlements have not addressed the situation of thousands of investors that purchased auction-rate securities through smaller brokerage firms. Most of these smaller brokerage firms were primarily “distributors” of auction-rate securities as opposed to underwriters of the securities. They have not yet settled with regulators and have taken no apparent action to address their customers’ auction-rate securities complaints. Such firms include Oppenheimer, Fidelity Investments, Northern Trust, H&R Block Financial Advisors, SunTrust, Comerica, Stifel Nicolaus, Raymond James, and Wells Fargo.

Continue reading "Many Auction-Rate Securities Investors May Be Left to Fend for Themselves" »

Massachusetts Secretary of State William Galvin has informed Bank of America that it must settle its pending auction-rate securities problems with Massachusetts or face legal action similar to those filed against UBS and Merrill Lynch in July. Galvin, who is part of a 12 state auction-rate securities task force, has told the bank that ”Time is running out for discussions.” Bank of America had previously resolved certain issues with Massachusetts and Galvin when it agreed to redeem approximately $43 million of auction-rate securities sold to two Massachusetts state agencies.

Continue reading "Bank of America Told to Settle its Auction-Rate Securities Problems or Else" »