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 Financial Industry Regulatory Authority (FINRA) has fined Wells Fargo Investments $2 million and ordered it to pay restitution to customers for unsuitable sales of reverse convertible securities, and other misconduct. The reverse convertibles sales involved one broker and 21 customers with 172 accounts. Seventy one percent of the customers were over 80 years old. (See “Wells to pay $2M to settle claims broker sold unsuitable investments to seniors,” Investment News).

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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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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" »

Wells Fargo & Co. has agreed to pay $125 million to a group of pension funds to settle a class action filed by various public pension funds that purchased billions of dollars of mortgage-backed securities believing their money was in AAA-backed investments, according to a Wall Street Journal article by David Benoit entitled “Wells Fargo Settles Pension-Fund Mortgage Suit.” The proposed settlement is subject to court approval.

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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.”

Continue reading "Morgan Keegan for Sale?" »

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" »

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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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.”

Continue reading "Wells Fargo's Auction Rate Securities Woes Continue" »

The Financial Industry Regulatory Authority (FINRA) has fined Wells Fargo Advisers $1 million for failing to timely deliver prospectuses to approximately 934,000 customers who bought mutual funds in 2009, according to an InvestmentNews article entitled “Wells took up to 153 days to get prospectuses to mutual fund buyers: Finra.”

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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.

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Rumors persist that Wells Fargo & Co. is in discussions with UBS AG about acquiring its retail-wealth-management operations in the U.S., according to Andrew Osterland’s InvestmentNews article, “Wells Fargo and UBS at the table again?” The rumors seem to be supported by Wells Fargo CEO John Stumpf, who was quoted as saying: “In the wealth and retirement business we are suboptimized. If we could jump a curve with the right deal, that's great.”

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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?" »

The asset-backed securities market – “the Wall Street credit machine that helped set off the financial crisis” – has come back to life, according to a New York Times article called “Wall Street Securitization Machine Back Into Gear?” Securities backed by commercial real estate, which apparently did not reach expected lows, are leading the pack. Bankers are calling the resurgence C.M.B.S. 2.0, referring to new versions of commercial mortgage-backed securities. But securities backed by bundles of car loans and collateralized loan obligations are also on the upswing.

Continue reading "Wall Street is Back Up to its Old Tricks - Sales of Risky Asset Backed Securities Return" »

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.

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Wall Street apparently hasn't learned anything from the recent financial crisis that has brought the U.S. economy to its knees. Wall Street publicly traded companies paid out a record $135 billion in compensation and benefits last year, according to a Wall Street Journal article by Aaron Lucchetti and Stephen Hough titled “On Street, Pay Vaults to Record Altitude.” That is up 5.7% from $128 billion in 2009.

Continue reading "It's Business as Usual on Wall Street - Paychecks Reach All-Time Highs" »