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).

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Wells Fargo will pay $148 million to settle charges that its Wachovia Bank unit conspired to rig bids on investment contracts for municipalities. (“Wells to Pay $148 Million to Settle Wachovia Bid-Rig Case,” Wall Street Journal). As part of the settlement, the Justice Department will not prosecute the bank. Wachovia reportedly admitted and accepted responsibility for the illegal conduct (which the SEC has so far not required settling defendants to do).

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Citigroup plans to cut 3,000 or more jobs, about 1 percent of employees, and BNP Paribas plans to cut about 1,400 jobs, or 7 percent of its employees, according to the New York Times (“Citi to Shed 1% of Its Workers; BNP Paribas Plans to Cut 7%”). The NY Times was told unofficially that one third of the cuts at Citigroup will come from its securities and banking unit, but the timing is uncertain.

Continue reading "Wall Street's Job Cuts Continue" »

Occupy Wall Street has swept the globe and is generating enormous sympathy and interest in Asia as well as Europe. The spread of Occupy Wall Street to Asia – especially Japan – is further evidence that it is a mistake to dismiss a global groundswell of anger over the flow of money from banks to governments that concentrates wealth in the hands of the 1 percent.

In Japan, the protesters gathered at the swanky Roppongi Hills complex where Goldman Sachs maintains offices. Bloomberg News columnist William Pesek was there, reporting signs saying “No Greed,” “Taxiderm the Rich” and “Stop Vampire Squids,” a reference to Goldman Sachs, which Rolling Stone colorfully characterized as a “great vampire squid wrapped around the face of humanity” (See “The 1 percent meets 2 billion in search of answers,” Daily Report).

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America’s big brokerage firms just don’t get it. Rather than focusing on their clients’ best interests, which would enhance the firms’ long-term interests, they are focused on getting rid of so-called “less productive” financial advisers to save money, and flogging the rest to sell more high-fee products to generate more revenues for the firm. Morgan Stanley’s chief financial officer Ruth Porat confirmed this on a conference call with analysts this week by reportedly saying: “Greg Fleming [head of retail brokerage]…is focused on reducing the number of less productive FAs and that brings some cost savings.” Again, big brokerage firms keep track of what is produced for the firm, not what is produced for clients. CEO James Gorman seconded: “We are not focused myopically on our size but on the returns we generate for our shareholders.”

Continue reading "Why Wall Street has a Culture of Corruption" »

Many investors have reason to support the Occupy Wall Street movement that objects to Wall Street greed. These investors have seen their hard-earned money dissipate in the hands of their “trusted financial professionals.”

Continue reading "Investors Should Be Leading The 'Occupy Wall Street' Charge" »

Jobs at Wall Street banks are being eliminated at an increasingly rapid pace and this bodes ill for many employed in the financial services sector.

Bloomberg’s recent article “UBS Bankers Face Dwindling Options for Jobs” underscores this situation. Those pushed out at UBS will doubtless find few opportunities on Wall Street. The bigger story, however, is that what is happening at UBS is just a small part of the overall “brain drain” occurring all across Wall Street these days, as the larger global banks are cutting jobs at the fastest rate since 2008.

Continue reading "Job Cuts at UBS - A Microcosm of What's Happening on Wall Street" »

UBS will slash bonuses and eliminate more positions as a result of the now estimated $2.3 billion trading loss it has called “unauthorized,” according to observers. Apparently, the positions that resulted in the $2.3 billion loss were normal in size and appeared to be hedged, but the hedges were “fictitious positions.” As a result, there may be no bonus pool at all as well as sharp employee cuts. See Bloomberg article, “UBS Bonuses at Risk After $2.3B Trading Loss” (Sep 18, 2011).

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The recent UBS “rogue trader” debacle illustrates that, while exchange traded funds based on major indices may be suitable investments for many investors, more extreme and exotic exchange traded funds often involve tremendous risk, and are therefore unsuitable for most investors.

Continue reading "Exchange Traded Funds Can Blow Up" »

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" »

A UBS exchange-traded-fund director has lost $2 billion of the firm’s money, raising questions about the bank’s proprietary trading and risk management systems just three years after it lost over $39 billion and had to be rescued by the Swiss National Bank.

Continue reading "Rogue Trader Reportedly Costs UBS $2 Billion" »

UBS AG said it will lay off more than 5% of its employees, according to Neil Maclucas’s Wall Street Journal article entitled “UBS to Cut 3,500 Jobs.” Forty-five percent of the cuts will come from investment banking and thirty-five percent will come from the wealth-management and Swiss bank unit. The high proportion of cuts at the wealth-management and Swiss banks business reportedly surprised Rainer Skierka, an analyst at Bank Sarasin.

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The current free fall in the stock market is likely to activated the ticking time bombs that are hidden away in some investors’ portfolios. These time bombs are embedded in a type of structured product called Reverse Convertible Notes or Reverse Exchangeable Notes. The problem has to do with the way these products are structured.

Continue reading "Reverse Convertible Securities More Likely to Become Toxic as Market Swoons" »

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.

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The Georgia Securities Commissioner has launched an investigation into sales of structured products called reverse convertible notes made by broker-dealer firms to Georgia residents. The brokerage firms under investigation include UBS AG, Morgan Stanley and Ameriprise Financial. The investigations were begun after the Commissioner received complaints from investors who lost money in these purportedly safe investments.

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JP Morgan Chase will pay $228 million to settle SEC charges that it rigged nearly 100 transactions involving municipal-bond auctions, according to David Benoit’s and Jessica Holzer’s Wall Street Journal article entitled “J.P. Morgan Settles Bid-Rig Case.” There are concurrent settlement agreements with various states. The SEC has settled similar cases against Bank of America for $137 million and UBS AG for $160.2 million.

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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.

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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" »