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?'" »

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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The risks are increasing for investors in principal protected notes, reverse convertibles and other structured products associated with Bank of America, Citigroup and Wells Fargo. Moody’s recently announced that it has downgraded the debt of those financial institutions. One reason given: the U.S. government is unlikely to bail them out again. “It is more likely now than during the financial crisis to allow a large bank to fail should it become financially troubled, as the risks of contagion become less acute,” said Moody’s.

Continue reading "Risks Increase for Structured Products Involving Bank of America, Citigroup and Wells Fargo" »

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" »

Regions Financial Corp. is trying to find a buyer for Morgan Keegan, but the clock is ticking, and the longer it takes, the greater the likelihood that its most valuable asset, the advisor reps, will leave, thereby reducing the value, and making a sale unlikely to happen at all, according to Andrew Osterand’s InvestmentNews article entitled “Morgan Keegan’s 1,200 reps are waiting to see if parent bank Regions can find a buyer.”

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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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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?”).

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FINRA CEO Richard Ketchum recently stated that structured products are “areas of concern” for the Financial Industry Regulatory Authority (“FINRA”), according to a Bloomberg article by Jesse Hamilton and Alexis Leondis entitled “Finra’s Ketchum Says Structured Products Are ‘Areas of Concern.’” If FINRA is concerned, it better act fast. “Sales of structured products rose 46 percent last year to a record $49.5 billion,” according to the article, citing data compiled by Bloomberg.

Continue reading "Attention Investors - Beware of Structured Products" »

Wells Fargo Securities LLC is the subject of an investor class action lawsuit alleging that it violated intended third-party beneficiaries of an auction rate securities settlement with the SEC by refusing to buy back auction rate securities from trusts that purchased and held those securities as trust property, according to a Law360 article by Richard Vanderford entitled “Wells Fargo Sued Over $7B Wachovia ARS Settlement.”

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Wells Fargo & Co. has agreed to pay $11.2 million to settle SEC charges that Wachovia Capital Markets LLC sold mortgage-backed securities called collateralized debt obligations (CDOs) at prices that were 70% higher than its own estimate of the mark-to-market value of the securities, according to articles by Liz Skinner of InvestmentNews (“Wells Fargo to pony up $11.2M for allegedly overcharging Zunis, other investors”) and Dan Fitzpatrick and Jean Eaglesham of the Wall Street Journal (“Wachovia Targeted Over Sales of CDOs”).

Continue reading "Wells Fargo/Wachovia Settles CDO Price-Gouging Charges" »

Structured products are little more than IOUs from issuers and brokers who have come up with complex ways to take investors’ money. They are marketed as “low risk and high yield” – an oxymoron when dealing with stocks and the market. But to many older, fixed income investors and those tired of low interest money market or CD offerings, the pitch sounds enticing. The promise of double-digit returns in one to three years has actually COST investors over $164 billion over the last two years! John F. Wasik in an article for AARP Magazine took a good hard look at structured products and how they rarely deliver on the hype.

Continue reading "Structured Products Aren't What You Think They Are" »

A recent article published by AARP aptly describes reverse convertible investments as a “time bomb” involving extreme risks for senior citizens and other investors. John F. Wasik’s article entitled “The Time Bomb in Your Nest Egg,” is a “must read” focusing on reverse convertibles and other structured product investments, which are being marketed to conservative fixed income investors seeking better yields. Sales are rising, and so are losses - $164 billion in the last two years, according to the article. As Mr. Wasik states at the outset, “They’re sold as supersafe investments… [a]nd they’re not to be trusted.”

Continue reading "Investor Alert: Are Reverse Convertible "Time Bombs" in Your Portfolio?" »

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" »

Two Wachovia Securities brokers sold 42 unsophisticated Wachovia clients supposedly “can't-miss” investments that resulted in $8 million of losses, according to a lawsuit filed by the Securities and Exchange Commission, as reported in an InvestmentNews article titled “Ex-Wachovia brokers accused of defrauding client.” Most of the victims were over 50 years of age and a number of them were retired and living on fixed incomes.

Continue reading "Investor Alert - Former Wachovia Securities Brokers William Harrison and Eddie Sawyers (d/b/a "Harrison/Sawyers Financial Services)" »

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" »