Investment Fraud Lawyer Blog

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?" »

If you are an investor who lost money in the financial crisis, your stockbroker or investment advisor may owe you money. There are a variety of legal claims that can be brought for investment malpractice, ranging from fraud and misrepresentation to making unsuitable investment recommendations. But there are also legal deadlines for bringing such claims, and time may be running out if you have not yet discussed your options with a lawyer who handles investor rights claims.

Continue reading "Victims of Investment Malpractice or Other Financial Misconduct During the Recent Financial Crisis May Be on the Verge of Losing Legal Rights" »

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" »

While many investors who lost money when the auction rate securities market collapsed in 2008 have now been made whole by regulatory settlements and redemptions, others have not been as fortunate and are still holding on to illiquid securities. Because regulatory settlements focused on the worst offenders in the industry, not all firms that sold auction rate securities were included in the settlements. Furthermore, most of the regulatory settlements have only benefited smaller investors leaving many corporate, institutional and other investors to fend for themselves. According to Craig T. Jones of Page Perry LLC in Atlanta whose firm has represented many large investors in auction rate securities cases, “we are continuing to file arbitration claims for investors nearly 3 years after the market failure. A lot of investors have patiently waited to be made whole, and now that the statutes of limitations are starting to run out, they are realizing that they must take action in order to protect themselves legally.”

Continue reading "Large Investors Who Have Sustained Losses on Auction Rate Securities Investments Need to Take Action" »

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" »

$130 billion of retail and institutional investor money is still being held in auction rate securities over two years after the $330 billion auction rate market failed and froze, according to Daisy Maxey in her Wall Street Journal article, “Still Frozen After All These Years.” But just as the Paul Simon song modulates from gloom into glee at the line, “But I would not be convicted by a jury of my peers…,” there may be a way out for ARS holders who are ineligible for the buy-backs some firms have agreed to as a result of their settlements with regulators.

Continue reading "Many Auction Rate Securities Investors Remain Left Out in the Cold" »

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" »

The Securities and Exchange Commission is investigating the sale of $200 million in collateralized debt obligations (CDOs) to several Wisconsin school districts, according to a recent Wall Street Journal article by Meena Thiruvengadam and Kelly Nolan (“SEC Investigates Failed CDOs Sold to Wisconsin Schools”). The schools have also filed a lawsuit alleging that the CDOs were misrepresented and that important risk disclosures were omitted.

Continue reading "Wall Street's Sale of Toxic CDOs Undermines Education and Other Government Services" »

Merrill Lynch and other Wall Street firms sold the riskiest tranches of collateralized debt obligations (“CDOs”), not just to institutions, but to individual investors, as safe investments, according to a recent Wall Street Journal article by Dan Fitzgerald titled “Didn’t See Risk, and Got Stung.” Now that the CDOs have imploded, and investors are seeking recovery of their losses, Merrill is telling them that risk disclosure documents and the investors’ supposed sophistication mean they cannot recover. Merrill is wrong for a number of reasons.

Continue reading "Wealthy Individuals Have Been Victimized By Wall Street's CDO Fraud" »

According to a recent article in the Atlanta Journal Constitution, “at least a dozen local governments and other institutions that used derivative deals called swaps to try to lower the cost of bond issues have ended up owing as much as $394 million in fees to the Wall Street investment banks that set up the deals….” AJC, 5/30/10, “Paying a Price for Risky Schemes.” That article looked at how much money a small number of governmental and institutional investors in Georgia have paid to buy their way out of interest rate swaps in the wake of the financial crisis, but it is likely that this is a nationwide phenomenon. The article raised a number of questions—including whether it was appropriate for taxpayer money to be invested in securities with such a high level of risk—but it did not raise the question of whether there are legal remedies that would allow government officials and others to recover the financial losses resulting from such investments.

Continue reading "Local Governments and Non-Profits Have Suffered Catastrophic Losses as a Result of Wall Street's Excesses" »

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?" »

According to a recent Bloomberg National Poll, more than 50% of Americans despise Wall Street and favor punishment of the bankers who caused the worst financial crisis since the Great Depression. The majority of poll participants -- 56 percent -- say big financial companies are more interested in enriching themselves at the expense of ordinary people.

Continue reading "It's Official - Most Americans Despise Wall Street" »

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" »

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" »

A new wave of lawsuits and arbitrations are being filed on behalf of investors who purchased auction rate securities but have not been eligible to participate in redemptions offered by big banks as a result of regulatory settlements. See article entitled “’Stranded’ ARS investors sue for a share of pie” by Jed Horowitz in the May 24, 2009 edition of InvestmentNews. These stranded investors purchased auction rate securities from “downstream” broker-dealers who sold but did not underwrite auction rate securities. The firms include Raymond James Financial Inc., Oppenheimer Holdings Inc., E*Trade Financial Corp., and TD Ameritrade Holding Corp., which were among the biggest distributors of auction rate securities, according to the article.

Continue reading "Investors Left Out of the Auction Rate Securities Regulatory Settlements Are Suing to Recover Losses" »

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" »

Ashland Inc., the maker of Valvoline motor oil, has filed sit against Oppenheimer & Co. for selling the company $194 million of illiquid auction-rate securities after lying about the nature of auction-rate securities and the stability of the auction-rate securities market. So reported Morgan Bettax in an April 17, 2009 article entitled “Valvoline Maker Lodges ARS Suit Against Oppenheimer” posted on Law360.com.

Continue reading "Ashland, Inc Sues Oppenheimer for Mismarketing Auction-Rate Securities" »

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" »

Right before the stock market fell off a cliff in September, the news media were filled with stories about the regulators forcing investment banks to settle the claims of individual investors whose assets were stuck in frozen auction rate securities. It turns out, however, that many investors have fallen through the cracks.

Obviously, the largest group of investors that have been ignored are large institutional and corporate investors that have typically been excluded from auction rate settlements notwithstanding the fact that they were not provided with full disclosure and material information was withheld from them. Most of these investors will have to decide whether to take legal action in order to protect themselves and their shareholders.

Continue reading "Not All Auction Rate Securities Investors Are Getting Their Money Back" »