Investment Fraud Lawyer Blog

Congress is finally working on legislation to regulate the $592 Trillion market for over-the-counter-derivatives, according to a recent article in USA Today by Paul Wiseman and Pallavi Gogoi. Derivatives include futures contracts to take delivery of an underlying asset, such as oil, at an agreed price on a certain date. These contracts are used by dealers in the underlying assets to manage the risk of price variations. They are also used by speculators to place bets on the direction of the price. Speculators provide the liquidity needed to have a market in which some derivatives are bought and sold.

Continue reading "Congress Considers Regulation of OTC Derivatives" »

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Posted In: Bonds , Brokerage Firms , Derivatives , Investment Advisers , Market Developments , Regulatory Developments , Subprime Mortgage & Collateralized Debt Obligation Problems

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The Financial Industry Regulatory Authority (FINRA), which regulates securities firms and whose mission is to protect investors and educate them about the basic principles of investing, was a reckless market speculator, according to Randall Smith’s September 25th article in the Wall Street Journal, “After 27% Fall, Finra Plays it Safe.”

Continue reading "Market Watchdog is a Market Speculator" »

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Posted In: Brokerage Firms , Derivatives , Investment Advisers , Regulatory Developments

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Wachovia Bank, JPMorgan and other major financial institutions have filed their second motion to dismiss a complaint brought against them by more than a dozen state and local governments alleging price-fixing and bid-rigging of municipal derivatives markets. This according to a recent article by Erin Fuchs in Law360 entitled “Banks Shoot To Kill Municipal Bond Antitrust MDL.” The MDL action, captioned In re: Municipal Derivatives Antitrust Litigation, case number 1:08-md-01950, is pending in the U. S. District Court for the Southern District of New York.

Continue reading "Wall Street Firms Want a "Free Pass" for Ripping Off State and Municipal Governments" »

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Posted In: Bank of America , Bear Stearns , Brokerage Firms , Derivatives , Investment Advisers , J. P. Morgan Chase , Merrill Lynch , Municipal Bonds , Securities Class Actions , Securities Litigation , UBS

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Eric Kolchinsky, a former Moody’s analyst who oversaw ratings given to the toxic debt that brought our financial system to its knees, is scheduled to testify before Congress today, according to yesterday’s Wall Street Journal article “Congress Takes On Credit Ratings,” by Serena Ng and Aaron Luccheti. His testimony will be taken before the House Committee on Oversight and Government Reform, chaired by Representative Edolphus Towns, who represents the 10th Congressional District of New York. Testimony will also be provided by an attorney representing Standard and Poors.

Continue reading "Moody's Whistleblower to Testify before Congress on Ratings Fraud" »

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Posted In: Bonds , Brokerage Firms , Derivatives , Investment Advisers , Regulatory Developments , Smart Investing Tools , Subprime Mortgage & Collateralized Debt Obligation Problems

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There have been various developments over the past several weeks which investors may consider relevant in allocating their resources or evaluating alternatives that are available to them. Some of the more significant developments include, but are not limited to, the following:

• The Dow Jones Industrial Average opened the week at 9605 and, on Monday, moved up 22 points.

• On Tuesday, the Dow Jones Industrial Average rose 57 points.

• On Wednesday, the Dow Jones Industrial Average soared 108 points.

• On Thursday, the Dow Jones Industrial Average dropped 8 points.

• On Friday, the Dow Jones Industrial Average rebounded 36 points and closed the week at 9820.

Continue reading "Page Perry's Market Monitor - September 18, 2009" »

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Posted In: Bank of America , Brokerage Firms , Citigroup/Smith Barney , Derivatives , Employment Issues , Exchange-Traded Funds (ETFs) , Merrill Lynch , Morgan Stanley , Regulatory Developments , Smart Investing Tools , Subprime Mortgage & Collateralized Debt Obligation Problems , UBS

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The Wall Street Journal recently reported on a federal district court decision that could pave the way for future lawsuits by investors against credit rating firms such as Moody's, Standard & Poors and Fitch, whose ratings of junk investments as investment grade have come under fire by Congress. The September 4th article by Nathan Koppel, Andrew Edwards and Chad Bray, entitled "Judge Limits Credit Firms' 1st-Amendment Defense," describes an Opinion and Order ("Order") issued by Judge Shira A. Scheindlin in a class action brought by two institutional investors, Abu Dhabi Commercial Bank, King County, Washington, against Moody's Investors Service, Inc. and its affiliates, and The McGraw Hill Companies, Inc. and its affiliates, including its wholly owned and controlled business division, Standard and Poors Ratings Services (collectivley, "the Rating Agency Defendants"), and others. The case is pending in the U.S. District Court for the Southern District of New York.

Continue reading "Court Ruling Paves Way for Legal Claims against Credit Ratings Firms" »

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Posted In: Bonds , Brokerage Firms , Derivatives , Investment Advisers , Securities Arbitration , Securities Class Actions , Securities Litigation , Smart Investing Tools , Subprime Mortgage & Collateralized Debt Obligation Problems

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A hedge fund has sued Swiss banking giant UBS in Connecticut state court for unloading risky collateralized debt obligations (CDOs) on the eve of the financial crisis without disclosing that the CDOs were about to be downgraded and would eventually become “toxic waste. “ So far the Connecticut court has allowed the case to proceed in order to give the plaintiffs an opportunity to prove their allegations and has required UBS to post a bond sufficient to cover a $35 million judgment in the event that it loses the case.

Continue reading "Hedge Fund Sues UBS for Selling "Crap" and "Vomit"" »

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Posted In: Brokerage Firms , Common Securities Broker Abuses , Derivatives , Securities Arbitration , Securities Litigation , Subprime Mortgage & Collateralized Debt Obligation Problems , UBS

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There have been various developments over the past several weeks which investors may consider relevant in allocating their resources or evaluating alternatives that are available to them. Some of the more significant developments include, but are not limited to, the following:

• The Dow Jones Industrial Average opened the week at 9544 and, on Monday, fell 48 points.

• On Tuesday, the Dow Jones Industrial Average dropped 186 points.

• On Wednesday, the Dow Jones Industrial Average lost 30 points.

• On Thursday, the Dow Jones Industrial Average jumped 64 points.

• On Friday, the Dow Jones Industrial Average rose 97 points and closed the week at 9441.

Continue reading "Page Perry's Market Monitor - September 4, 2009" »

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Posted In: Brokerage Firms , Derivatives , Employment Issues , Market Developments , Smart Investing Tools , Subprime Mortgage & Collateralized Debt Obligation Problems

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One of the causes of the financial meltdown has reappeared, according to a recent MSNBC.com/AP article entitled “Wall Street’s new old idea: Mortgage securities.” The problem to be solved is what to do about the hundreds of billions of dollars of enigmatic, high-risk securitized mortgage pools that threatened (and some say still threaten) to bring down the global economy. The solution being developed by Wall Street is something called “resecuritization of real estate mortgage investment conduits” or “Re-REMIC” for short. If this remedy sounds a bit like “the hair of the dog that bit you,” it is.

Continue reading "More Toxic Structured Finance Securities are on the Way to Market" »

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Posted In: Bonds , Brokerage Firms , Common Securities Broker Abuses , Derivatives , Investment Advisers , Market Developments , Smart Investing Tools , Subprime Mortgage & Collateralized Debt Obligation Problems

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The Securities and Exchange Commission (SEC), the North American Securities Administrators Association (NASAA), and the Financial Industry Regulatory Authority (FINRA) have all recently warned that leveraged exchange traded funds (ETFs) are very dangerous investments and not suitable for most retail investors. Moreover, the State of Massachusetts has announced an investigation into the sales practices of brokerage firms selling ETFs.

Continue reading "Concerns about Leveraged Exchange Traded Funds (ETFs) Increase" »

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Posted In: Brokerage Firms , Common Securities Broker Abuses , Derivatives , Exchange-Traded Funds (ETFs) , Investment Advisers , Regulatory Developments , Smart Investing Tools

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The SEC's inspector general, David Kotz, released a report last Friday finding that the SEC failed to properly do its job of overseeing credit rating firms. However, based on an August 29 Wall Street Journal article ("SEC Criticized on Raters") by Sarah N. Lynch, Mr. Kotz's report apparently focused on the applications of smaller firms, not the big three agencies - Moody's, Fitch, and Standard & Poors - whose ratings are primarily relied upon by the investing public. The big three were criticized for assigning toxic mortgage securities their highest ratings after the housing price bubble began to burst in the summer of 2006 and being paid by the issuers for their ratings. (For background, see our November 3, 2008 blog called "Are Credit Rating Agencies Just a Bunch of Bull?").

Continue reading "Inspector General Criticizes SEC Oversight of Credit Ratings Firms" »

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Posted In: Bonds , Brokerage Firms , Derivatives , Investment Advisers , Market Developments , Regulatory Developments , Smart Investing Tools , Subprime Mortgage & Collateralized Debt Obligation Problems

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The Securities and Exchange Commission is outmanned and outgunned by the folks it is trying to police, according to an August 20 article in the Wall Street Journal by Tom McGinty and Kara Scannell. The SEC turned over daily surveillance of the markets to the markets’ own self-regulatory organizations (“SROs”) long ago. Now, under pressure from Congress and investors to prove it is up to the job, after its glaring failures in the Madoff Ponzi scheme and other scandals, Chairman Mary Shapiro’s SEC is trying desperately to catch up. But surveillance of complex modern markets requires “the quantitative, analytical capacity that the agency has never had,” observes Jonathan Katz, who left the SEC in 2006 after 20 years as secretary.

Continue reading "The SEC Simply Does Not Have Sufficient Resources To Do Its Job" »

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Posted In: Brokerage Firms , Derivatives , Investment Advisers , Market Developments , Ponzi Schemes , Regulatory Developments , Securities Arbitration , Securities Litigation , Subprime Mortgage & Collateralized Debt Obligation Problems

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There have been various developments over the past several weeks which investors may consider relevant in allocating their resources or evaluating alternatives that are available to them. Some of the more significant developments include, but are not limited to, the following:

• The Dow Jones Industrial Average opened the week at 9321 and, on Monday, dropped 186 points.

• On Tuesday, the Dow Jones Industrial Average rose 83 points.

• On Wednesday, the Dow Jones Industrial Average gained 61 points.

• On Thursday, the Dow Jones Industrial Average rose 37 points.

• On Friday, the Dow Jones Industrial Average jumped 156 points and closed the week at 9506.

Continue reading "Page Perry's Market Monitor - August 21, 2009" »

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Posted In: Brokerage Firms , Derivatives , Employment Issues , Smart Investing Tools , Subprime Mortgage & Collateralized Debt Obligation Problems

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Reuters reports that the State Street Corporation, a financial services holding company, may not have enough money to pay fees and penalties stemming from lawsuits centered on risky investments the firm made.

Continue reading "State Street's Subprime Woes Continue" »

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Posted In: Brokerage Firms , Derivatives , Investment Advisers , Regulatory Developments , Subprime Mortgage & Collateralized Debt Obligation Problems

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Smaller securities firms that trade their own capital are recruiting the risk-takers that major Wall Street firms are letting go, according to an August 11 article in the Wall Street Journal by Aaron Lucchetti. These firms received no government bailout money and are not subject to tougher regulation and compensation oversight reserved for the major firms that pose a “systemic risk.” We are “a recipient of the purge,” according to one such firm.

Continue reading "Small Brokerage Firms Are Attracting Big Firm Traders" »

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Posted In: Bonds , Brokerage Firms , Derivatives , Market Developments , Subprime Mortgage & Collateralized Debt Obligation Problems

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In her August 4th Wall Street Journal column called Compliance Watch, Suzanne Barlyn reports that Morgan Keegan is engaging in a rarely used hardball tactics in three arbitrations arising out of sales of its proprietary bond mutual funds in which arbitration panels have awards. So far, Morgan Keegan has moved to vacate awards issued in three cases involving more than $1 million in damages, attorneys’ fees and costs.

Continue reading "Morgan Keegan Continues "Hardball" Arbitration Tactics" »

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Posted In: Brokerage Firms , Common Securities Broker Abuses , Derivatives , Morgan Keegan , Morgan Keegan Bond Funds , Mutual Funds , Securities Arbitration , Subprime Mortgage & Collateralized Debt Obligation Problems

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On both sides of the Atlantic, regulatory officials have increased scrutiny of structured financial products such as credit-default swaps and collateralized debt obligations. In an article entitled, “U.K. Probes Structured-Finance Products,” the Wall Street Journal highlights investigations into possible fraud in the valuation and sale of these assets.

Continue reading "False Valuations of Structured Finance Securities Continue to Concern Regulators" »

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Posted In: Brokerage Firms , Common Securities Broker Abuses , Derivatives , Regulatory Developments , Subprime Mortgage & Collateralized Debt Obligation Problems

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In her recent article in the Wall Street Journal, Eleanor Laise reports that sales of Leveraged and Inverse Exchange Traded Funds (ETFs) have exploded to $32.8 billion as of June 2009, almost tripling the $11 billion held at the start of 2008. The number of such ETFs has increased to 119, an increase of 86%, over the same period. “The explosive growth in this area over the past year reflects an aggressive sales effort,” said William F. Galvin, Secretary of the Commonwealth of Massachusetts. These products are unsuitable for and should not have been sold to most investors.

Continue reading "Regulators Investigate Sales of Leveraged and Inverse ETFs" »

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Posted In: Ameriprise , Brokerage Firms , Charles Schwab , Citigroup/Smith Barney , Common Securities Broker Abuses , Derivatives , Exchange-Traded Funds (ETFs) , Investment Advisers , Linsco Private Ledger , Morgan Stanley , Regulatory Developments , Smart Investing Tools , UBS

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In the wake of a FINRA Regulatory Notice and a number of articles in the financial press, some brokerage firms say they are either issuing warnings about the products or silently following the discussions surrounding them. So reports Daisey Maxey of the Wall Street Journal in her July 30 article entitled “Warning Signs Up for Leveraged ETFs. Morgan Stanley Smith Barney says its sales of leveraged and inverse ETFs is “under review.” Charles Schwab says it is warning clients to “proceed with extreme caution” because “these funds may not give you the returns you may be expecting.” Schwab says that, while it does not “recommend” leveraged ETFs, investor may purchase them on their own through Schwab. Likewise, TD Ameritrade says it does not “actively sell” leveraged ETFs but they are available on its web platform.

Continue reading "Beware Leveraged and Inverse Exchange Traded Funds" »

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Posted In: Brokerage Firms , Charles Schwab , Citigroup/Smith Barney , Common Securities Broker Abuses , Derivatives , Exchange-Traded Funds (ETFs) , Investment Advisers , Morgan Stanley , Regulatory Developments

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"For nothing is hidden that will not become evident, nor anything secret that will not be known and come to light.” Thus hinteth today’s Wall Street Journal article by Suzanne Barlyn entitled “COMPLIANCE WATCH: SEC Warning May Help Unhappy Investors.”

The United States Securities and Exchange Commission (the “SEC”) Staff’s warning that it intends to recommend an enforcement action against Morgan Keegan for possible violations of the federal securities laws may incline more arbitrators to require Morgan Keegan to disclose documents it supplied to the SEC in its investigation, but wants to keep hidden from investors and arbitrators, according to the article. Here is the background.

Continue reading "It's Time for Arbitrators to Grant Investors Access to the SEC Evidence that Morgan Keegan Is Trying to Hide" »

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Posted In: Bonds , Brokerage Firms , Common Securities Broker Abuses , Derivatives , Morgan Keegan , Morgan Keegan Bond Funds , Mutual Funds , Regulatory Developments , Securities Arbitration , Subprime Mortgage & Collateralized Debt Obligation Problems

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