Investment Fraud Lawyer Blog

The big four Wall Street wirehouses have lost market share since the financial crisis in part because of their role in the crisis and “customer distrust,” according to Bing Waldert, a director of Cerulli Associates Inc. (See “Wirehouse market share has shriveled since crisis,” InvestmentNews). Merrill Lynch Wealth Management, Morgan Stanley Smith Barney, UBS AG and Wells Fargo & Co. have also lost market share by terminating lower producing brokers. While the wiehouses have tried to focus on high net worth clients, their share of that lucrative market has declined as well.

Continue reading "Are Wall Street Wirehouses 'Killing the Goose that Laid the Golden Egg?'" »

The amount of dollars at stake in FINRA securities arbitrations has grown in recent years. Of the 7,000 claims currently pending, approximately 200 involve claims of $10 million or more. “The claims coming in now are substantially larger than what we had a few years ago,” Linda Fienberg, president of FINRA Dispute Resolution, was quoted as saying. (“FINRA flooded with multimillion-dollar cases,” Nate Raymond, The American Lawyer).

Continue reading "The Number of Very Large Securities Arbitration Cases is on the Rise" »

Unsophisticated state and local government officials have been sold billions of dollars of flawed financial products by Wall Street banks, leaving taxpayers on the hook for even more. The banks advised the governments to issue auction rate bonds to lower their financing costs and purchase interest rate swaps to protect the governments if the market moved in the wrong direction. The officials did not understand that the market was controlled by the banks and that the banks could impose penalties when the products unraveled, which they did.

Continue reading "Wall Street Professionals Fleece Government Amateurs - Main Street Suffers" »

Sixty-five years ago, the Justice Department filed an antitrust suit against 17 investment banks seeking to break them up for creating “an integrated, overall conspiracy and combination … to eliminate competition and monopolize” the investment banking business. It failed. Today, the investment banking business is much larger and more profitable, and much more concentrated than it was back then. Only 6 Wall Street firms monopolize the even richer investment banking business today, according to William D. Cohan’s Bloomberg article (“Cohan: How Wall Street Turned a Crisis Into a Cartel”).

Continue reading "Is Wall Street Evolving into an Illegal Monopoly?" »

Banking analyst Mike Mayo is an outlier because Wall Street’s intimidation apparently does not work on him. Mayo has written a book describing, among other things, what it was like for him to break the taboo against issuing a “Sell” recommendation on Wall Street. The title of his book, “Exile on Wall Street,” is a hint.

Continue reading "Wall Street Banks Use Threats and Intimidation to Generate Positive Recommendations" »

The securities industry in New York City has lost 22,000 jobs since January 2008, and will lose another 10,000 by the end of next year, according to a report by New York City’s Comptroller Thomas P. DiNapoli. If his predictions are correct, Wall Street will have lost 17% of its jobs. Wall Street has shed 4,100 jobs since April. Bonuses and other compensation are declining as well. (See “Wall Street Shrinkage,” by Andrew Grossman, Wall Street Journal).

Continue reading "Wall Street: Under Siege and Contracting" »

Merrill Lynch agreed to pay $1 million to settle charges by the Financial Industry Regulatory Authority (FINRA) that it failed to supervise Bruce Hammonds, a San Antonio-based representative, who was ‘selling away’ from the firm by operating a $1 million dollar Ponzi scheme for more than 10 months. The ponzi scheme, named B&J Partnership, used Merrill Lynch accounts.

Continue reading "'Selling Away' Abuses Result in Merrill Lynch Being Fined $1 Million" »

Many investors, both individuals and corporations, were misled by their brokers and harmed during the credit crisis. For various reasons, however, many such investors have not yet taken action to recover their losses. Some have delayed taking action in order to see whether the misconduct warranted legal action while others just put it off until a later time. Investors need to appreciate that time is running out on their claims, and they should act now or forever hold their peace.

Continue reading "Time Is Running Out On Credit Crisis Legal Claims" »

Sales of structured notes issued by Bank of America have sunk to the lowest level since January 2008 as a result of investors’ concerns about the creditworthiness of the bank, according to Matt Robinson’s Bloomberg article entitled “Bank of America Structured Notes Sales Drop as Buyers ‘Shy Away.’” Similarly, credit default swaps on BofA have surged recently, reflecting the increased premium being demanded by third parties to make good on BofA’s debt obligations should the bank default on them.

Continue reading "Concerns Arise Regarding Structured Notes Issued by Bank of America" »

On July 27, 2011, the Staff of the Securities and Exchange Commission’s Office of Compliance Inspections and Examinations published a report entitled “Staff Summary Report on Issues Identified in Examinations of Certain Structured Securities Products Sold to Retail Investors.” This report was based on the Staff’s review of eleven broker dealers that sell various structured securities: three large firms affiliated with bank holding companies that are issuers structured securities, on wholesale seller of structured securities issued by third parties, and seven smaller retail firms that also sell structured securities issued by third parties.

Continue reading "SEC Report Reveals Serious Abuses in the Sale of Structured Securities" »

The Financial Industry Regulatory Authority (FINRA) has issued an investor alert warning against chasing yield with structured products, junk bonds and floating-rate bank-loan funds. The alert was prompted by "significant recent inflows" into high-yield products. Investors may find enhanced yields attractive in the current market environment of low yields on conventional fixed-income investments and higher stock market volatility.

Continue reading "FINRA Warns Investors about Structured Products and Other Non-Conventional Securities" »

A Financial Industry Regulatory Authority (FINRA) arbitration panel in New York has awarded $880,000 to elderly clients of Phil Scott of Bank of America Merrill Lynch's Bellevue, Washington, office, who were unsuitably 100% invested in stocks, according to Dan Jamieson’s InvestmentNews article entitled “Merrill hit for $880K arbitration award.” The arbitrators also assessed 100% of the hearing session fees against Merrill Lynch. A claim for punitive damages was denied.

Continue reading "Elderly Investors Concentrated in 100% Stock Portfolio Win $880,000 Award" »

SEC Enforcement Chief Robert Khuzami recently stated that the SEC’s decision not to charge top executives of Wall Street banks with wrongdoing in cases involving structured products was appropriate, according to Suzanne Barlyn’s Wall Street Journal article entitled “SEC: Structured-Product Cases Haven’t Reached Top Bank Officers.” According to Mr. Khuzami, top executives were not involved in, and did not know about, the key decisions relating to structured product problems.

Continue reading "SEC Refuses to Take Action Against Senior Executives in Structured Product Cases" »

The jobs crisis is starting to hit Wall Street banks and brokerage firms, according to a series of Wall Street Journal articles (“Wall Street Wielding the Ax,” by Aaron Lucchetti and Liz Rappaport; “Credit Suisse Set to Ax 600 Jobs,” by Katharina Bart; and “Here’s Why Wall Street Is Cutting Jobs”). A regulatory crackdown on high-risk proprietary trading is reportedly to blame. As the Wall Street Journal put it, “[a] longtime secret sauce on Wall Street – derivatives trading – is drying up.” In addition, less trading by retail and hedge fund clients means less fees and commissions are coming in.

Continue reading "Securities Industry Employment Disputes on the Increase as Wall Street Cuts Jobs" »

Bank of America and its Countrywide unit have reportedly agreed to pay $8.5 billion to settle claims made by a group that includes the Federal Reserve Bank of New York, Pimco Investment Management, and Blackrock Financial Management, who have been pressing the bank for a year to honor its obligation to buyback $47 billion in defaulted mortgages that the group purchased as mortgage-backed bonds from Countrywide. Bank of America bought Countrywide in 2008 for $4 billion.

Continue reading "Mortgage-Backed Securities Settlement Costs Bank of America $8.5 Billion" »

J.P. Morgan Securities LLC has agreed to pay $153.6 million to settle SEC charges that it misled investors in a complex “built to fail” mortgage securities transaction just as the housing market was starting to plummet.

Continue reading "The Real Truth Regarding Some of Wall Street's Subprime Shenanigans Begins to Emerge" »

Best-selling “Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led To Economic Armegeddon,” by Gretchen Morgenson and Joshua Rosner, “calls out greedy guys behind mortgage mess,” according to a USA Today book review by Kathryn Caravan. See also “Home Truths,” by James Freeman of the Wall Street Journal. Both reviews provide examples of how the book peels back layer after layer of a bad onion to reveal how a nice-sounding idea (home ownership for all) turned into a house of cards that was doomed to collapse, after being propped up by private greed and public corruption.

Continue reading "The Subprime Mortgage Mess: How the American Dream Turned into a Nightmare" »

Investors in today’s markets, particularly seniors, are caught between extremely low interest rates and the risk of pursuing higher returns they want or need. Brokerage firms are capitalizing on that dilemma by selling structured products as a way to earn above-market returns purportedly without market risk. But as Robert Powel, editor of MarketWatch’s Retirement Weekly, points out in his article entitled “Investors warned about risky structured products,” structured product sellers routinely overstate the potential upside and understate the potential downside of these investments. The net result has been the rampant destruction of investors’ wealth.

Continue reading "What are Structured Products and Why are They so Dangerous?" »

The Securities and Exchange Commission is broadening its investigation into the world of “built to fail” collateralized debt obligations (CDOs) by looking at Merrill Lynch’s CDO business, according to articles by Marian Wang of Pro Publica (“Merrill Lynch Investigated for CDO Deal Involving Magnetar”) and Kara Scannell of the Financial Times (“SEC Probes $1.5 Billion Merrill CDO Sale). The news is apparently “sending chills” through other banks that put together deals with Magnetar, such as Citigroup, UBS, Wachovia (now Wells Fargo) and Deutsche Bank, according to John Carney of CNBC (“Who Else Did Magnetar Deals?”).

Continue reading "Magnetar CDO Deals Haunt Wall Street Firms" »

Retail investors in structured products that were sold as safe and secure investments have lost at least $113 billion, according to a report by the nonpartisan policy center Demos and The Nation Institute. "In my three decades of Wall Street experience, I have not seen any other product as absurdly destructive as retail investments linked to structured products," securities arbitration consultant Louis Straney wrote in the report.

Continue reading "Experts Conclude that Structured Products are 'Absurdly Destructive'" »