Investment Fraud Lawyer Blog

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" »

So many investors have lost money in investments mis-marketed under assurances the investment was “principal-protected,” or “capital guaranteed,” that the Financial Industry Regulatory Authority (FINRA) has found it necessary to issue a notice (Notice to Member 09-73) reminding brokerage firms of their sales practice duties when recommending investments such as so-called Principal Protected Notes. These securities are structured products that are typically comprised of a zero-coupon linked to the performance of some other asset. That asset might be, for example, a derivative product based on a stock index or a basket of securities as obscure as the Brazilian Real-U.S. Dollar exchange rate and the price of copper.

Continue reading "Regulators Express Concerns about "Principal-Protected" and "Capital Guaranteed" Investments" »

If you were sold Main Street Natural Gas Bonds that were guaranteed by Lehman Brothers, you are likely to have a compelling claim to recover any losses that you sustained when Lehman Brothers went bankrupt. These bonds were sold to income oriented investors as relatively safe investments. However, the brokerage firms that sold them, in many cases, did not do their homework. If they had, they would have realized that these bonds were totally inappropriate for almost any investor.

Continue reading "Investor Alert: Main Street Natural Gas Bonds Backed by Lehman Brothers" »

A Columbia, South Carolina-based Financial Industry Regulatory Authority (FINRA) arbitration panel awarded damages to a South Carolina resident as a result of losses sustained in Lehman Brothers Holdings Inc. principal-protected notes sold to her by UBS. The panel awarded Patricia Flanagan $150,000 in compensatory damages, plus an additional $35,000 designated as costs, plus interest. Ms. Flanagan had requested compensatory damages in the amount of $300,000.00, plus interest, costs, expenses, attorney’s fees, expert witness fees, FINRA fees, and punitive damages. The Panel assessed $6,075.00 of the hearing session fees to Claimant and the same amount to be paid by UBS. No attorney’s fees, expert witness fees or punitive damages were awarded.

Continue reading "Investors in Lehman Principal-Protected Notes Have an Opportunity to Recoup Their Losses" »

Investors and their accountants should scrutinize investment portfolios to see whether they contain Main Street Natural Gas Bonds that were guaranteed by Lehman Brothers Holdings, Inc. These bonds were not only guaranteed by Lehman Brothers, they were issued to finance the cost of acquiring a thirty-year supply of natural gas from Lehman Brothers Commodities Services Inc., a wholly-owned subsidiary of Lehman Brothers, as the designated Gas Supplier. Thus, the viability of these Lehman-backed bonds was directly dependent upon the viability of Lehman Brothers. In September 2008, Lehman Brothers filed for bankruptcy, and Lehman-guaranteed Main Street Natural Gas Bonds plummeted in value, but there were numerous red flags and storm warnings well before then.

Continue reading "Investors Sue to Recover Losses on Main Street Natural Gas Bonds" »

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" »

The Financial Industry Regulatory Authority (“FINRA”) is requesting information from brokerage firms involved in several recent municipal bond problems, according to a July 1 article by Leslie Wayne in the New York Times. FINRA says that it is conducting these information “sweeps” with an eye toward possible investigations and disciplinary actions.

Continue reading "Regulators Investigate Fraud in the Municipal Bond Market" »

Lehman Brothers Holdings Inc is being sued by two of its former clients for more than $190 million based upon allegations the failed bank mislead them about the market for auction-rate securities.

Continue reading "Lehman Brothers Hit with $190 Million Suit over Auction Rate Securities" »

UBS marketed and sold Lehman “structured notes” to ordinary retail investors. It instructed its brokers that the products were suitable for conservative investors who did not want to put their principal at risk. Investors who purchased these structured notes made a loan to Lehman Brothers and received a promissory note that promised that the value of notes would increase according to some formula if an underlying basket of securities increased, but the investor’s principal would never go down, even if the underlying securities tanked, because the notes came with a guaranty of “100% principal protection.” “If you lent me $100 and I drew up a legal documents that said in big, fat letters that you loan to me came with “100% principal protection,” as long as you stuck with our deal for 15 years, would you feel pretty good about getting your money back in 2024?” asks Susan Antilla of Bloomberg, in her June 10, 2009 article entitled “UBS Redefines Meaning of 100% Loss Protected.”

Continue reading ""100% Principal Protected Notes" - Designed to Deceive?" »

Once regarded as the retail investors’ friend, and somehow different from other fee-driven brokerage firms, Charles Schwab has been battling retail investors who were sold the Schwab YieldPlus Fund as a cash-equivalent investment, similar to a money market fund. The Schwab YieldPlus Fund has lost approximately half its value as a result of undisclosed, high-risk non-conventional investments. Schwab now has another black mark on its investor friendly image – deceptive sales of Lehman Brothers “100% Principal Protected” Notes.

Continue reading "Schwab Sued for Deceptive Sales of Lehman Principal Protected Notes" »

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" »

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" »

The New Jersey state pension fund sued top executives and board members of Lehman Brothers for misrepresentations leading to over $118 million losses due to investments in Lehman Brothers. This pension fund provides benefits to approximately 700,000 current and former employees. According to Terrence Dopp’s article published on Bloomberg, the suit is seeking compensatory and punitive damages for violations of state and federal securities laws, negligent misrepresentation, breach of fiduciary duty, fraud, and aiding and abetting.

Continue reading "State Pension Fund Sues Lehman Executives" »

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" »

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 ?" »

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 73 points.

• On Tuesday, the Dow Jones Industrial Average fell by 176 points.

• On Wednesday, the Dow Jones Industrial Average plunged 411 points.

• On Thursday, the Dow Jones Industrial Average surged 553 points.

• On Friday, the Dow Jones Industrial Average dropped 338 points and closed the week at 8497.

Continue reading "Page Perry's Market Monitor - November 14 , 2008" »

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" »

Many investors who purchased supposedly “principal protected” structured notes and “return optimization securities” issued by Lehman Brothers have compelling legal claims. While these investors are unsure whether they will recover any of their principal in the Lehman bankruptcy according to Eleanor Laise of the Wall Street Journal in a November 11, 2008 article entitled “Another ‘Safe’ Bet Leaves Many Burned”, many such investors have claims against the brokerage firms that sold these investments.

Continue reading "Structured Notes Issued by Lehman, Freddie and Fannie Leave Conservative Investors Burned" »

UBS AG is facing a growing number of arbitration claims from U.S. investors who were sold supposedly “100 per cent principal protected notes” issued by Lehman Brothers Holdings, Inc., according to a November 3, 2008 article in Bloomberg by Bradley Keoun and David Scheer. About $8 billion Lehman structured notes were outstanding in September of this year, including $2.8 billion sold this year. UBS sold about $1 billion of Lehman structured notes, according to the article. The notes are unsecured obligations of Lehman, and are now virtually worthless in the wake of the Lehman bankruptcy.

Continue reading "UBS Faces a Deluge of Claims for Selling Risky Lehman Structured Notes as Safe Investments" »