Securities Regulator Alerts the Public About Dangerous Investments and Investment Strategies

February 2, 2012 by Page Perry, LLC

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.

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Most Financial Advisers Don't Understand Alternative Investments According To John Hancock Survey

January 30, 2012 by Page Perry, LLC

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).


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Securities Regulators Fine Wells Fargo $2 Million for Elder Fraud

December 16, 2011 by Page Perry, LLC

The Financial Industry Regulatory Authority (FINRA) has fined Wells Fargo Investments $2 million and ordered it to pay restitution to customers for unsuitable sales of reverse convertible securities, and other misconduct. The reverse convertibles sales involved one broker and 21 customers with 172 accounts. Seventy one percent of the customers were over 80 years old. (See “Wells to pay $2M to settle claims broker sold unsuitable investments to seniors,” Investment News).

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Morgan Stanley Bitten by 'Built to Fail' Structured Products

November 17, 2011 by Page Perry, LLC

Morgan Stanley’s motion to dismiss a class action involving “built to fail” structured products has been denied as to the fraud claims against it, and the case will go forward. The plaintiffs – a group of Singapore retail investors – allege that Morgan Stanley committed fraud in selling them sold them $154.7 million of Pinnacle Notes. The notes, which lost almost 100 per cent of their value during the financial crisis, were linked to synthetic (i.e., derivatives-linked) collateralized debt obligations (CDOs) in 2006 and 2007.

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High Correlations Among Asset Classes Means There's No Place To Hide

November 14, 2011 by Page Perry, LLC

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.

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Hedge Fund Heroes Getting Battered

November 7, 2011 by Page Perry, LLC

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.

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Risky Investments Flood Self Directed IRAs

November 7, 2011 by Page Perry, LLC

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.

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Alternative Investments - High Risk 'Pigs in a Poke'

October 21, 2011 by Page Perry, LLC

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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Investors Should Be Leading The 'Occupy Wall Street' Charge

October 18, 2011 by Page Perry, LLC

Many investors have reason to support the Occupy Wall Street movement that objects to Wall Street greed. These investors have seen their hard-earned money dissipate in the hands of their “trusted financial professionals.”


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The Performance of Alternative Funds Leaves Much to be Desired

October 13, 2011 by Page Perry, LLC

While alternative funds have grown in popularity, they have not lived up to their hype. Mutual funds composed of alternative investments have proliferated in recent years and brokerage firms have sold billions of dollars of them as a way to combat low returns and high volatility that have soured investors away from traditional stock and bond investments. There are reportedly 251 alternative-style mutual funds and 303 alternative exchange traded funds, according to Morningstar.

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Wall Street Pays to Play

October 12, 2011 by Page Perry, LLC

Financial industry lobbyists know that money is the key that opens doors on Capitol Hill. Trade groups representing the insurance, securities brokerage and financial advisor industries are lobbying and donating huge amounts of money in an effort to buy hearings and sway votes on legislation and rulemaking they deem important to their interests, according to an InvestmentNews article by Mark Schoff Jr. entitled “Industry trade groups flex lobbying muscles.”

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Is Morgan Stanley Telling the Truth about its Condition?

October 7, 2011 by Page Perry, LLC

Liquidity concerns are swirling around Morgan Stanley. Worries of defaults by European banks or governments are eroding the value of its assets and derivatives contracts. Hedge funds are so concerned that they have begun to withdraw cash from their prime brokerage accounts at Morgan Stanley. In the face of these developments, Morgan Stanley is telling investors not to worry, that its liquidity is strong.

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Most Alternative Investments Carry Huge Risks

October 5, 2011 by Page Perry, LLC

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.

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Whistleblower Problems Add to Bank of America's Woes

September 28, 2011 by Page Perry, LLC

A Bank of America employee will collect $930,000 from his former employer, Bank of America, for being fired in violation of the whistleblower protections. The employee blew the whistle on fraud at Countrywide Financial Corp. and led internal investigations that found “pervasive wire, mail and bank fraud involving Countrywide employees,” according to the U.S. Department of Labor. He was terminated soon after the bank acquired Countrywide in 2008. In addition, Bank of America must reinstate the whistleblower. He claimed that others who tried to report fraud to Countrywide’s employee-relations department suffered persistent retaliation. The $930,000 includes back wages, interest, compensatory damages and attorney fees.

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Do Hedge Funds Create and Burst Bubbles for their Own Benefit?

September 27, 2011 by Page Perry, LLC

In recent years, hedge funds have become dominant players in the investment markets and the evidence suggests that hedge fund trading (which regularly involves thousands, if not hundreds of thousands, of shares) has been a significant contributing factor to market volatility.

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Risks Increase for Structured Products Involving Bank of America, Citigroup and Wells Fargo

September 27, 2011 by Page Perry, LLC

The risks are increasing for investors in principal protected notes, reverse convertibles and other structured products associated with Bank of America, Citigroup and Wells Fargo. Moody’s recently announced that it has downgraded the debt of those financial institutions. One reason given: the U.S. government is unlikely to bail them out again. “It is more likely now than during the financial crisis to allow a large bank to fail should it become financially troubled, as the risks of contagion become less acute,” said Moody’s.

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Time Is Running Out On Credit Crisis Legal Claims

September 16, 2011 by Page Perry, LLC

Many investors, both individuals and corporations, were misled by their brokers and harmed during the credit crisis. For various reasons, however, many such investors have not yet taken action to recover their losses. Some have delayed taking action in order to see whether the misconduct warranted legal action while others just put it off until a later time. Investors need to appreciate that time is running out on their claims, and they should act now or forever hold their peace.

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Concerns Arise Regarding Structured Notes Issued by Bank of America

September 9, 2011 by Page Perry, LLC

Sales of structured notes issued by Bank of America have sunk to the lowest level since January 2008 as a result of investors’ concerns about the creditworthiness of the bank, according to Matt Robinson’s Bloomberg article entitled “Bank of America Structured Notes Sales Drop as Buyers ‘Shy Away.’” Similarly, credit default swaps on BofA have surged recently, reflecting the increased premium being demanded by third parties to make good on BofA’s debt obligations should the bank default on them.

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Alternative Investments Are Very Complex and Involve Significant Risks

September 7, 2011 by Page Perry, LLC

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.


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Investors Should Pass on Reverse Convertibles and Other Structured Products

September 2, 2011 by Page Perry, LLC

Wall Street is aggressively selling so-called structured notes as a “safe” way to earn increased returns without increased risk. The appeal of such a pitch is obvious in these times of low interest rates and stomach-churning stock market volatility. Structured notes are gaining in popularity. Retail sales of structured notes increased by 46% in 2010 to a record $49.4 billion, according to Bloomberg, and are expected to be up again sharply in 2011. But beware, says Fortune magazine contributor Janice Revell (“Beware of Wall Street’s latest ‘safe’ investment,” CNNMoney), there is increased risk and the increased returns are illusory.

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