Investment Fraud Lawyer Blog

It is no surprise that retirees are often the targets of investment scams. But it is a surprise that the scammers are often empathy-challenged senior citizens themselves, and that is surprising. Attorneys and advocates for the elderly are reporting an increase in the number of elder scams perpetrated people their age, according to an article in Bloomberg BusinessWeek, “Senior Swindlers: A Sucker Retires Every Minute.”

Continue reading "Senior Citizens are Increasingly Targeted by Swindlers Who are Often Senior Citizens" »

One of the worst and most unsuitable investments we have ever come across is the reverse convertible. Like the Devil himself, they have so many names, and are not easy to recognize on brokerage statements. UBS calls them “Yield Optimization Securities.” They are also known as “revertibles,” “revertible notes,” “reverse exchangeable securities,” and so on. And they are devilishly popular – brokerage firms sell a lot of them to elderly, retired, and on-the-brink of retired investors who need a way to generate sufficient income to live on without undue risk to their principal. The problem is that these investments are essentially put option contracts that do jeopardize principal, and brokers do not explain that critical fact.

Continue reading "Investor Alert: Reverse Convertibles Can Be Extremely Toxic" »

The Financial Industry Regulatory Authority (FINRA) has ordered SunTrust Investment Services, Inc. of Atlanta, GA (“SunTrust”), to pay $1.44 million in fines and restitution for misconduct arising out of unsuitable recommendations and churning the accounts of 17 mostly elderly customers, according to an article by J. Scott Tinsley in the Atlanta Journal Constitution (“SunTrust unit fined for improper trades”). $900,000 of that amount is a fine, which includes nearly $224,000 in disgorgement of commissions flowing from the unsuitable trades. The remaining $540,000 will serve as restitution to the customers who incurred losses.

Continue reading "SunTrust Burns Elderly Victims" »

Financial abuse of elderly people is increasing as more seniors are being lured into investments that are unsuitable (inappropriate) or outright frauds.

According to recent articles in InvestmentNews and Bloomberg, one out of every five Americans older than 65 has been the victim of a financial scam. This means that more than 7.3 million seniors have been taken advantage of financially. New York-based insurer MetLife estimates the total costs of elder fraud comes to more than $2.6 billion a year. One of the reasons for the trend is the significant number of elderly individuals who have significant wealth and who may be suffering from some degree if cognitive difficulties.

Continue reading "Financial Abuse of the Elderly has become a Growth Business" »

CIT Group Inc., GMAC Inc., Prudential Financial Inc., and over a dozen other financial institutions sold their bonds to individual investors after being spurned by their sophisticated institutional counterparties, according to an article by Zeke Faux titled “CIT Debt Sold to Widows Has Fine Print Pimco Resists,” Bloomberg. CIT, a commercial lender, filed a Chapter 11 bankruptcy petition in November 2009. As of August 21, 2009, CIT’s debentures that were sold to individuals traded as low as 44 cents on the dollar, according to the article.

Continue reading "Brokers Dump Low Quality Securities on Elderly Investors" »

The $2.8 trillion municipal bond market, long considered one of the safest havens for investors, is actually fraught with risk, according to a recent CNBC article titled “More Cities on Brink of Bankruptcy.”

Continue reading "Have Municipal Bonds Become High Risk Securities?" »

In today’s low-interest-rate environment and with investors rightly suspicious of stock and bond investments, investment scams are flourishing. Investors should pay attention to the warnings of state securities regulators, whose list of Top 10 Investor Traps is featured on CNBC.com’s American Greed.

Continue reading "Beware of These Investment Scams" »

Private placement offerings (also known as Reg D offerings), such as Medical Capital Holdings Inc. and Provident Royalties LLC, have devastated unsuspecting investors. Such offerings, as well as the unscrupulous broker-dealers who pushed them, have wound up in the crosshairs of state securities regulators. See “Cracking Down on ‘Private Placement’ Investments,” March 27, 2010, Wall Street Journal, by Jane J. Kim.

Continue reading "The Hammer is Coming Down on Private Placement (Reg D) Offering Scams" »

New concerns have risen over investors being misled about the facts and risks of private placement offerings (Reg D offerings) often recommended by financial advisers in smaller towns that are outside the financial industry mainstream. While misrepresentations about high-risk private offerings are by no means limited to small towns, small town residents with nest eggs have been disproportionately victimized by unscrupulous offerings.

Continue reading "Many Investment Scams Target Small Town Investors" »

Life settlements - buying rights to senior citizens' life insurance policies - is a risky gamble that should be avoided by most investors, according to Leslie Scism and Larry Light in their Feb. 6 Wall Street Journal article, "Grim Risks of Reaping Death’s Rewards.“

Continue reading "Life Settlement Investments Carry Big Risks" »

Life settlement companies are soliciting independent broker-dealers to sell private placements of securities (Reg D offerings) based on life insurance policies, according to a recent InvestNews article by Darla Mercado.

Continue reading "Beware Private Placements (Reg D Offerings) Investing in Life Settlement Policies" »

In an encouraging sign to those who despair about investors receiving full justice in a compulsory arbitration process financed by the brokerage industry, a California FINRA panel last month (December 2009) awarded compensatory damages of $319,798 to a 96-year old investor as well as treble damages of $959,394 under the California Elder Abuse Act.

Continue reading "FINRA Arbitration Panel Metes Out Harsh Punishment for Elder Fraud" »

The increasing number of senior citizens has resulted in an increase in the number of corrupt financial advisors looking to make a commission by persuading trusting seniors to buy unsuitable financial products, such as variable annuities, and engage in other inappropriate financial strategies, according to a July 2009 article in Trial magazine by Ingrid M. Evans and David L. Cheng, called “Protecting seniors from financial abuse.”

Continue reading "Financial Abuse of Senior Citizens is a Growing Problem but Remedies are Available" »

"What's up, Doc?" It may not sound like the start of a very effective sales pitch, but when Radical Bunny LLC (no relation to Bugs) talked, people listened, according to a recent article by John Emswhiller in the Wall Street Journal entitled "SEC Sues Four Over Real-Estate Deal." At least 900 investors placed over $197 million with Radical Bunny in connection with a purported Phoenix commercial real estate venture. The Securities and Exchange Commission (SEC) says the money was funneled to Mortgages, Ltd., which made short-term, high-interest loans to real estate developers that were building malls, office parks, condominiums, and other projects. When the commercial real estate bubble burst, and the borrowers defaulted, Mortgages, Ltd, Radical Bunny, its principals and investors were left holding a big, empty bag. Bankrutptcy filings ensued, as did enforcement actions by the SEC against Radical Bunny and its principals. Mortgages, Ltd.'s chief executive committed suicide.

Continue reading "SEC Cracks Down on Phoenix Investment Fraud" »

Authorities prosecuting more perpetrators of financial fraud and those convicted face increasingly stiff prison sentences, report Bruce Kelly and Sue Asci in their July 26 article in InvestmentNews entitled “Criminal convictions, jail time on rise for financial fraudsters.” Alabama has obtained felony convictions in 25 cases involving financial fraud with 20 more cases pending, according to Joseph Borg, Director of the Alabama Securities Commission and former President of the North American Securities Administrators Association (NASAA). “Convictions are up, and sentences are also lengthier,” says Denise Voigt Crawford, Texas Securities Commissioner. Texas convicted 13 people of financial crimes in 2008, has convicted 10 so far this year, and expects that number to at least double by year end, added Ms. Crawford.

Continue reading "Elder Fraud Cases Lead to More Criminal Prosecutions" »

Last year, the Securities and Exchange Commission issued a rule that brought Equity Index Annuities within its regulatory jurisdiction and provided greater investor protection. Previously, those insurance products were not considered to be securities subject to SEC regulation. The SEC rule was challenged in court by a group of insurance companies. A federal court of appeals ruled that the SEC does have the authority to regulate Equity Index Annuities, but it ordered the SEC to reconsider the rule’s effect on the economy, reported Sara Hansard in her July 26 article in InvestmentNews entitled “SEC’s EIA rule may resurface.” While it is not under a deadline to do so, some observers expect that the SEC will complete is assessment and reissue the rule pretty quickly, rather than asking the court of appeals to reconsider its ruling.

Continue reading "Insurance Companies Try to Thwart SEC Oversight of Equity Indexed Annuities" »

Investors who purchased variable rate annuities with guaranteed minimum returns may be surprised to learn that the guarantee is not necessarily guaranteed. Under some contracts, it is possible for the insurer who wrote the annuity to cancel the guarantee or significantly reduce its payout.

Continue reading "Variable Rate Annuities with Guarantees? - Check the Fine Print" »

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 8269 and, on Monday, soared 235 points.

• On Tuesday, the Dow Jones Industrial Average lost 29 points.

• On Wednesday, the Dow Jones Industrial Average fell 53 points.

• On Thursday, the Dow Jones Industrial Average dropped another 130 points.

• On Friday, the Dow Jones Industrial Average slipped 15 points and closed the week at 8277.

Continue reading "Page Perry's Market Monitor - May 22, 2009" »

Certain states have recently proposed legislation requiring additional penalties for financial firms/advisors targeting seniors in scams. In addition, some states are staging undercover “stings,” sending investigators to the “free lunch seminars” that seem to be a breeding ground for scams. These seminars are often billed as “educational;” however, in many cases, seniors may experience a “hard sell” of investments which are inappropriate for their individual needs, or be given misleading information about an investment’s merit.

Continue reading "States Are Acting to Deal with Financial Frauds Aimed at Seniors" »

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" »