Investment Fraud Lawyer Blog

Given the array of exotic alternative investments being sold to the public, it’s logical that many investors often don’t understand what they are buying. What is even scarier is that it is likely their professional investment adviser doesn’t understand the alternative investment either. Investment advisers – 75 percent of them – admit they do not understand alternative investments. Notwithstanding their puzzlement, 50 percent of advisers said they intend to increase their use of them in their clients’ accounts this year. They could use some help, however, because of alternative investments are so confusing. (“Alternatives spur anxiety,” InvestmentNews).

Continue reading " Most Financial Advisers Don't Understand Alternative Investments According To John Hancock Survey" »

An increase in corporate borrowing costs and Eastman Kodak’s recent bankruptcy filing have set off a round of speculation about whether it is the start of a growing trend in corporate bankruptcy filings. While Chapter 11 bankruptcy filings have been falling since 2009, George Putnam of BankruptcyData.com is expecting an uptick in corporate bankruptcy filings. (“Are corporate defaults set to rise?” USA Today) "We're going to see more big bankruptcies this year," Putnam was quoted as saying, adding: "We'll see a reasonable number even if the economy is pretty strong."

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A recent Bloomberg Markets Magazine article raises troubling questions about investment corruption at the highest levels of government. In July 2008, as market fears mounted, Treasury Secretary Henry Paulson reportedly met with a group of hedge fund managers (five of whom were former officers of Goldman Sachs, where Paulson was CEO), and described a scenario in which the government would put Fannie Mae and Freddie Mac into conservatorship, thereby wiping out the common stockholders of those institutions, according to a fund manager who attended the meeting (“How Paulson Gave Hedge Funds Advance Word,” Bloomberg Markets Magazine, By Richard Teitelbaum). But earlier that morning Paulson had provided a different message to New York Times reporters and editors (i.e., the public): that the Federal Reserve and the Office of the Comptroller of the Currency were inspecting Fannie and Freddie’s books, and he expected their report would boost market confidence in Fannie and Freddie, according to the article.

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When world markets move significantly in apparent response to major macroeconomic news, even supposedly “uncorrelated assets” move in unison with them, according to Jason Zweig’s Wall Street Journal article, “Caging Raging Contagion.” Such a significant move occurred last week when the Italian government and bonds collapsed over its fiscal problems, and everything else fell, too.

Continue reading "High Correlations Among Asset Classes Means There's No Place To Hide" »

Many investors in alternative investments are in for unpleasant surprises. Alternative investments are very popular these days, as traditional stock and bond investments are not doing well. Alternative Investments include a wide variety of investments that fall outside the traditional stock and bond categories. Examples include structured products (such as principal protected notes and reverse convertibles); hedge funds; private equity; nontraded REITs; niche, leveraged, inverse leveraged, and synthetic exchange traded funds; and many others.

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Many registered investment advisors and brokerage firms have increased their use of alternative investments for clients, many of whom are retired and lack the knowledge and sophistication to understand the complex investments, according to Liz Skinner’s InvestmentNews article entitled “Clients clamoring for alternative investments and advisers obliging.” But are alternative investments suitable for most investors? Similarly, are most investors provided with balanced disclosures of the risks that they are taking when they invest in alternative investments? Unfortunately, the answer to both questions appears to be no.

Continue reading "Alternative Investments Are Very Complex and Involve Significant Risks" »

Defense-minded institutions that have long remained on the sidelines when defrauded have finally woken up and are jumping on the plaintiff-recovery bandwagon as they seek to protect themselves against a variety of wrongdoing, according to Vanessa O’Connell’s Wall Street Journal article entitled “Company Lawyers Sniff Out Revenue.” These actions include waves of claims against Wall Street financial institutions for fraud in the sale of mortgage backed securities, CDOs and related exotic investments.

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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" »

Many risk-averse, income-oriented investors in this low interest rate environment have put their hope in preferred stock dividends. But are preferred stocks with an average yield of nearly 7% a safe oasis in the “howling wilderness” of fixed income investments, asks Jason Zweig in his Wall Street Journal column, “Preferred Stock: Are Those Juicy Yields Worth the Extra Risk?” In a word, no, for several reasons.

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The sale of billion of dollars of Fannie Mae and Freddie Mac preferred stock in 2007 and 2008 was accomplished by fraud on unsuspecting public investors and the complicity of mortgage originators that bought the shares knowing they were poison, according to attorney and professor Seth E. Lipner in his July 7th Forbes article entitled “How Fannie And Freddie Unloaded Their Trash.”

Continue reading "Wall Street's Dump of Freddie Mac and Fannie Mae Preferred Stocks Cost Investors Billions" »

Recently released figures show that colleges across the nation suffered a 19 percent decline in their endowments in 2009. Some school endowments have reported even steeper declines, including Georgia Tech (26%), the University of Georgia Foundation (23%), and Emory University (21%). While the financial markets as a whole experienced a significant downturn in 2008, the stock market began rebounding in early 2009 and many investment portfolios have since regained much of their value—but not all. According to an article in the Atlanta Journal Constitution, Emory has had to cut its expenses by $50 million a year and eliminated 500 administrative positions, despite having one of the richest endowments in the country. Smaller schools with more modest endowments are in a more precarious position, because a single bad investment may threaten the very survival of the institution.

Continue reading "Have College Endowment Funds Been Victimized by Unscrupulous Brokers?" »

The first public hearings by the Financial Crisis Inquiry Commission were notable for what did not happen. The well-prepared Wall Street bankers faced the cameras with apparent humility, parried Commission clunkers with their own platitudes, and left pretty much unperturbed. Those who expected the reprise of the 1930s Pecora hearings must have been disappointed. “Pecora’s revelations enraged the public and stampeded Congress into creating the SEC and separating commercial banks from investment banks,” according to Paul Wiseman in his USA Today column, “Depression-era star muckraker shapes Wall Street inquiry.” He added: “In public hearings, Pecora squared off against the elite financiers of the age, pointing at them with his cigar and coaxing them into what [Senate historian Donald] Ritchie calls ‘startling admissions of wrongdoing.”

Continue reading "The Reason Real Change is Needed - Wall Street Maintains a Business as Usual Stance as Public Hearing Begin on the Financial Crisis" »

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.

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