Citigroup has consented to charges by the Securities and Exchange Commission that it misled public investors about the extent of its exposure to sub-prime mortgage-related assets during 2007. Citigroup will pay $75 million to settle the charges, as widely reported in the financial press.
Investors in the MAT Municipal Arbitrage Funds sold by Citigroup/Smith Barney recently won a total of $2.1 million in separate arbitration proceedings and these awards may just be the tip of the iceberg. In fact, Wall Street brokerage firms are being ordered to pay millions to investors who incurred significant losses on what they thought were low-risk investments, but were, in fact, leveraged municipal arbitrage hedge funds, according to a Wall Street Journal article by Randall Smith (“Crisis-Era Munis Haunt Wall Street,” July 27, 2010).
Continue reading "Investors Are Winning MAT/ASTA Claims Against Citigroup/Smith Barney" »
White House executive “pay czar” Kenneth Feinberg has decided not to negotiate with 17 Wall Street firms to rescind $1.6 billion in payments to executive that Feinberg himself described as “ill advised” and payments that “[t]hey should not have made,” according to articles in the Atlanta Journal Constitution (“Bank execs get to l]keep $1.6 billion” by Daniel Wagner) and CNNMoney (“Banks paid big $ to execs during crisis” by David Ellis).
Continue reading "Wall Street Executives Get $1.6 Billion, Main Street America Picks Up the Tab" »
Wall Street brokerage firms are being ordered to pay millions to investors who incurred significant losses on what they thought were low-risk investments, but were, in fact, leveraged municipal arbitrage hedge funds, according to a Wall Street Journal article by Randall Smith (“Crisis-Era Munis Haunt Wall Street,” July 27, 2010).
Continue reading "First Republic Municipal Arbitrage Investors Recover Substantial Damages" »
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" »
A United States District Court judge has ruled that a class action may proceed against Citigroup and others for making an array of material misrepresentations and omissions in public offering materials associated with bonds purchased by the plaintiffs (Reuters, “Judge Rules Bondholders Can Pursue Citigroup Suit,” July 12, 2010).
Mainstream USAToday editors expressed amazement over the “just say no” partisanship of the Republican party and the unnecessarily long and contentious battle to pass the financial reform package (“Mindless partisanship mars passage of banking reform,” July 16, 2010). The editors had though that “the worst financial meltdown since the Depression” would have provided sufficient motivation to rise above the partisan excess that was unfortunately displayed. For instance, they thought that the “chastened banks” would accept change. “But that’s not quite how things worked out. After a few weeks of remorse, Wall Street got its swagger back and fought like mad to preserve its profits.”
Goldman, Sachs & Co. has agreed to pay $550 million and reform its business practices to settle SEC charges that it misled investors in a subprime mortgage CDO known as ABACUS 2007-AC1, which collapsed, according to multiple articles in the Wall Street Journal, CNBC.com, and others. In so doing, Goldman admitted it made a “mistake” in failing to disclose the fact that the CDO’s investments were selected in part by a hedge fund manager who was betting on the CDO to fail. The SEC had charged Goldman and its vice president, Fabrice Tourre, with fraud. At this time, the SEC's litigation will continue against Tourre.
Continue reading "Is Goldman Getting Off Too Easy in its SEC Settlement?" »
Investors will soon be able to see more customer complaints, criminal convictions and rulings against brokers when they check out their broker on the Financial Industry Regulatory Authority’s (FINRA’s) web site through its free online BrokerCheck service, according to a July 14th article in InvestmentNews. While the absence of complaints does not guarantee that brokers will always adhere to “high standards of commercial honor and just and equitable principles of trade,” as FINRA purports to demand, investors should always avail themselves of this opportunity, preferably before doing business with a broker.
Continue reading "Soon You Will Be Able to Learn More about Your Financial Adviser" »
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" »
Retention bonuses and other perks are not enough to quiet brokers’ yearning to leave their wirehouse firms for advisory firms or non-wirehouse brokerage firms, according to a recent InvestmentNews article by Hilary Johnson titled “Exodus of brokers still a big threat for wirehouses.” Just 29% of brokers who did not receive a “lock-in” bonus (usually because they do not generate big commissions) said they are “satisfied” with their firm. Tip: As an investor, you should consider it a plus if your broker is not a “big producer.”
Continue reading "Brokers Continue to Leave Major Wall Street Firms" »
