Investment Fraud Lawyer Blog

Affinity fraud is a big problem and it is growing. The affinity aspect of it refers generally to the fraudster’s standing as an insider among a group of people who share a common interest. This standing as a member of the group, so to speak, makes the fraudster presumptively trustworthy. Unfortunately, affinity settings are breeding grounds for investment fraud.

Continue reading "Affinity Fraud Hits Close to Home" »

The Financial Industry Regulatory Authority (FINRA) recently issued a report outlining is its regulatory and examination priorities for 2012. The securities industry regulator is focusing on conduct and products meant to beat the market that are unsuitable investments for many investors.

Continue reading "Securities Regulator Alerts the Public About Dangerous Investments and Investment Strategies" »

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" »

Ordinarily, the evidence presented in a FINRA arbitration is kept “confidential” and secret from the public. That’s the way the securities industry likes it, because it really does not want the public to see the evidence against it. But in its zeal to try to overturn the largest amount ever awarded to individual investors in a FINRA arbitration, Citigroup inadvertently allowed New York Times columnist Gretchen Morgenson to have a look at the evidence that was presented to the arbitrators in that case. What she found is the subject of her recent article entitled “Secrets of a Sales Machine.”

Continue reading "MAT/ASTA Cases Reveal the Seamy Side of Wall Street" »

Broker-dealers that sold billions of dollars in fraudulent private placements, such as Medical Capital and Provident Royalties notes, “failed massively in their due diligence responsibilities to investors” according to Gordon Yale, a CPA and expert witness in securities fraud cases. (See “Private-placement due diligence ‘sloppy,’” Investment News). They grossly misrepresented investigations into the investments and issuers they claimed to have performed, and, in fact, merely relied on self-serving representations made by management that were false and fraudulent.

Continue reading "Expert Contends that Brokerage Firms are Failing to Satisfy their Due Diligence Obligations." »

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" »

Unfortunately, many investors are experiencing first hand the truism that hedge fund managers rarely outperform the market on consistent basis.

John Paulson, the hedge fund manager who made a killing when Goldman Sachs let him select bad CDO assets, which he turned around and bet against, is having a tough time in 2011. His hedge fund has declined nearly 50% this year as a result of a massive positions in Bank of America, which had lost half of its value by October, Rupert Murdoch’s scandal-plagued News Corp., which owns Fox News, and Sino-Forest Corp., which imploded after an accounting scandal.

Continue reading "Hedge Fund Heroes Getting Battered" »

As recently reported by InvestmentNews, The Securities and Exchange Commission (“SEC”) and the North American Securities Administrators Association, Inc. (“NASAA”) jointly issued an investor alert warning about risks associated with self-directed IRAs. These IRAs differ from traditional IRAs in that they allow owners to invest their retirement savings in a number of unusual and sometimes risky investment vehicles, including real estate, life settlements, limited partnerships and private placements.

Continue reading "Risky Investments Flood Self Directed IRAs" »

InvestmentNews reports that “the music has stopped for Boogie Investment Group Inc,” another small broker-dealer that collapsed under liabilities associated with sales of a fraudulent Reg D offering, Provident Royalties. See “Boogie down and out after selling private placements,” by Bruce Kelly, InvestmentNews.

Continue reading "Private Offerings Continue to Leave a Path of Destruction" »

State regulators uncovered 3,543 unethical practices and rule violations, an average of 4.3 violations per advisory firm, during the first half of this year. Among the violations that InvestmentNews, an industry publication, found to be especially noteworthy were individual advisers falsely designating themselves as “registered investment advisers.” See “States: Advisers violating rules by using ‘RIA,’” InvestmentNews). Misleading investors about credentials is a form of fraud.

Continue reading "Securities Regulators Say That Bad Business Practices Are on the Rise at Investment Advisers" »

Recent developments suggest that most non-traded (private) real estate investment trusts (REITs) are under water even though they may be valuing their securities at cost in reports to their investors.

Continue reading "Are Non-Traded REITs Really immune from the Market Downturn?" »

Investors should use extreme caution before investing in alternative investments. Alternative investments have become the popular “investment du jour" but these investments are fraught with risks. Simply stated, alternative investments are not the panacea that so-called experts represent them to be. For the reasons discussed below, investors need to be very skeptical of any recommendation encouraging them to invest in alternative investments.

Continue reading "Most Alternative Investments Carry Huge Risks" »

Brokers often pitch alternative investments when the stock market is declining and returns on traditionally safe investments are too low. A few alternative investments may have some merit. Many more are flawed, bad and ugly in that they provide investors little more than uncompensated high risk. Then there are those that cross the line into the realm of the outright fraudulent. Unless the brokerage firm is itself a criminal enterprise, brokers often try sell fraudulent investments away from the firm to avoid detection by the firm. The practice is known as “selling away.”

Continue reading "'Selling Away' Abuses Are Costing Investors Millions" »

Investment fraud accounts for $40 billion in investor losses per year, according to the association of state securities regulators called the North American Securities Administrators Association (NASAA). Con artists take advantage of fear as well as greed, and fear of running out of money is prevalent these days.

Continue reading "Protect Yourself Against Investment Scams" »

The time is ripe for financial scammers who seek to take advantage of senior investors. Recently a 76-year-old Texas insurance agent was sentenced to up to 15 years for selling fake annuities to other elderly investors. The scammer in this case just happened to be the same age as many of his elderly victims. Mr. Langford apparently stole close to $7 million from dozens of clients through the sale of phony “private annuities” and promissory notes that promised interest rates as high as 9%.

Continue reading "Seniors Are Increasingly Targeted in Financial Scams" »

Nontraded (private) real estate investment trusts ('REITs') are highly risky for retail investors. These investments typically charge extremely high fees, are illiquid and are virtually impossible to value. The Financial Industry Regulatory Authority (FINRA) is reportedly finalizing a proposed rule that would decrease the time that broker-dealers have to estimated the value a nontraded REIT.

Continue reading "Regulators Seek More Accurate Disclosures about Nontraded (Private) REITs" »

The association of state securities regulators known as NASAA has released its top 10 investment traps. NASAA finds that scam artists are peddling various get-rich-quick schemes to take advantage of the economic uncertainty. According to NASAA, investments that investors should be particularly wary of include distressed real estate schemes, energy investments, gold and precious metal investments, promissory notes, and securitized life settlement contracts. Tactics used to peddle such investments often involve affinity fraud, bogus or exaggerated credentials, mirror trading, private placements, and securities and investment advice offered by unlicensed agents.

Continue reading "Securities Cops Issue Warnings about Current Investment Scams" »

Just as a low tide near the seashore can reveal shipwrecks, a falling stock market often reveals misconduct by investment advisers. This is particularly true with respect to an investment adviser’s duty to recommend only investments to a customer that are suitable in light of the customer’s investment objectives, status in life and risk tolerance. Unfortunately many investors only learn that their advisers have violated this duty when adverse market conditions develop.

Continue reading "Market Turmoil Expected to Precipitate an Avalanche of Suitability Claims" »

Many non-traded (private) REITs are very dangerous for retail investors. These investments typically charge extremely high fees, are illiquid and are virtually impossible to value. Many non-traded REITs have routinely been valued at their original cost on reports provided to investors when such valuations are highly suspect given the tumultuous conditions that have existed in the economy and real estate markets during the past four years. Such valuations are often deceptive and misleading.

Continue reading "Investor Alert - Non-Traded (Private) REITs Involve a Dangerous Mix of Risks for Retail Investors" »

The Securities and Exchange Commission is scrutinizing of the selling of real estate investment trusts that are private placements, that is, are not traded on an exchange, according to an Wall Street Journal article by Anton Troianovski and Craig Karmin entitled “Nontraded REITs Are Put on Notice by SEC.” The SEC is inquiring into the operations and disclosures of nontraded REITs, according to the article.

Continue reading "SEC To Investigate Nontraded REITs" »