Owner: Securities Fraud Blog URL:www.securities-fraud-blog.com Join Date: Sun, 22 Jul 2007 11:20:32 -0500 Rating:0 Site Description: Blog by lawyers who represent investors harmed by securities fraud, churning, lack of suitability, negligence, sales of unregistered securities, unauthorized trading, and other misconduct by stock brokers, investment advisors, financial planners and their Site statistics:Click here
CMOs and Mortgage Backed Securities 2007-07-20 18:21:00 CMOs, or collateralized mortgage obligations, are bundles of mortgages which are then divided up for sale by investment banks. Different types of these mortgage backed securities can vary widely in risk for investors, but recent problems with the subprime mortgage lending market could portend future problems for individual investors who have been sold these types of securities without their brokers fully explaining the risks involved. As set out in the following linked news stories, customers of Brookstreet Securities
and Wedbush Morgan Securities have filed arbitration claims against their brokerage firms related to the sale of CMOs and other mortgage securities.
Wall Street Journal article
Orange County Register Article Read more:Mortgage
Morgan Stanley Fined $250,000 by Rhode Island 2007-07-20 18:16:00 The RhodeIsland
Department of Business Regulation fined MorganStanley
$250,000 for failing to supervise sales representatives at its Providence, Rhode Island
office. According to the Rhode Island press release below, the charges related to the replacement of mutual funds with more expensive mutual funds and variable annuities.
Rhode Island Press Release Read more:Morgan Stanley
Suitability of Hedge Funds 2007-07-20 17:47:01 As set out in the NASD Notice to its Members linked below, the NASD has expressed its concern regarding the sale of hedge funds by its representatives to retail customers. The Notice emphasizes that the risks and disadvantages associated with hedge funds must be fully disclosed to retail customers, and the sales representative or member must use due diligence to investigate the fund and must make a customer specific determination of suitability for the customer’s situation.
NASD Notice to Members Read more:Funds
, Hedge
, Hedge Funds
Life Settlements 2007-07-20 17:41:00 The NASD has issued an Investor Alert regarding the purchase of life settlements, also known as senior settlements. Unlike viaticals, life settlements generally involve the sale of life insurance policies on policyholder individuals who are not terminally ill.
NASD Investor Alert
The National Association of Insurance Commissioners has also issued a statement regarding the risks involved in purchases of such settlements by individuals: it is not a liquid investment, there is no guaranteed rate of return, and you could be responsible for paying the premiums on the policy if the insured’s policy if they do not die within a certain time.
NAIC Statement to Consumers Read more:Settlements
Wachovia Fine Related to Fee Based Accounts 2007-07-20 15:29:00 Fee based accounts with brokerage firms are typically an alternative to commission accounts in which the account is charged a fixed annual fee or an annual percentage fee based on the assets in the account. These accounts may not be suitable for all customers. As set out in the link below, the NASD fined Wachovia for “failing to adequately supervise its fee-based brokerage business between 2001 through 2004.”
NASD Press Release Read more:Accounts
Merrill Lynch Fine for Supervisory Practices 2007-07-20 15:22:00 In the below release, the NASD announced that it had “fined MerrillLynch
, Pierce, Fenner & Smith Inc. $5 million for supervisory failures, registration violations, impermissible sales contests and other violations in connection with the operation of its Financial Advisory Center (FAC) located in Hopewell, NJ and Jacksonville, FL.”
NASD Press Release Read more:Merrill Lynch
Early Retirement Pitches 2007-07-20 15:13:00 Beware of sales pitches allowing early retirement which are based upon aggressive unrealistic annual returns without disclosure of the risks involved with such an aggressive strategy. As set out in the below NASD Investor Alert, following such a program may result in the depletion of your retirement nest egg if the broker is unable to meet the aggressive advertised annual returns.
NASD Investor Alert
See also the NASD charges against Citigroup regarding early retirement seminars in Charlotte, North Carolina for employees of Bellsouth.
NASD News Release Read more:Early
, Pitches
NASAA’s Top Ten Investment Scams 2007-07-20 15:05:00 The North American Securities Administrators Association’s (NASAA) has published a top ten list of investment scams, including ponzi schemes, affinity fraud, unlicensed securities sellers, prime bank schemes, and variable annuities sales practices:
NASAA Top Ten
Investment Scams.
Morgan Stanley fined for corporate bond overcharges 2007-08-03 20:30:00 As set out in this FINRA press release MorganStanley
was fined and forced to pay restitution to retail customers for overcharging for corporate
bond sales and for “having an inadequate supervisory system for monitoring the pricing of corporate fixed income securities sold to customers.” Read more:Morgan Stanley
Universal Leases found to be Unregistered Securities 2007-08-03 20:13:01 As set out more fully below on our firm’s website (link below), the sale of Universal
Leases in the name of Resort Holdings, Yucatan Resorts, and Avalon Resorts have been found by many states to be violations of securities laws prohibiting the sale of unregistered securities. The federal government has alleged that these investments relating to timeshares were a ponzi scheme. The link below further has a link to the FBI press release regarding the arrest of Michael Kelly.
Greco & Greco Universal Lease page Read more:Securities
Securities Fraud Guilty Plea for IPOF Fund Manager 2007-08-17 16:03:00 A fund manager who had utilized Ferris Baker Watts accounts for his IPOF fund plead guilty in Cleveland, Ohio to securities fraud related to stock price manipulation. According to this Baltimore Sun article, David A. Dadante lost $28 million dollars of investors’ monies in a scheme that started as a ponzi scheme and led to at least four different illegal trading techniques to artificially increase the price of a specific stock, Innotrac.
The Baltimore Sun has extensively covered the involvement of Ferris Baker Watts in this matter in these linked articles, which discuss the early retirement of several executives since the investigation began, a 2003 company memo regarding concerns, and internal flags of potential problems in Dadante’s accounts. Read more:Guilty
, Securities
News from SEC’s Senior Summit 2007-09-21 18:31:01 The SEC reported at its 2nd Annual Senior Summit
that it was working on codifying suitability rules as they apply to recommendations for the purchase of securities by stock brokers, and further clarifying sales practice principals for investment professionals. If properly crafted, additional guidance in these areas should help prevent abuse of investors as well as provide additional tools for attorneys representing investors who have been abused by their stock brokers.
The SEC, FINRA, and state regulators also reported the results of their “free lunch” sweep of seminars targeted as seniors. The findings included 59% of the brokerage firms involved failing to properly supervise the seminars, and 23% of the seminars including advice that was unsuitably risky for senior investors.
InvestmentNews article.
FINRA Investor Alert.
Morgan Stanley Fined Over Failure to Produce E-mails in Arbitrations 2007-11-02 20:40:00 Morgan Stanley
was fined $3 million and forced to pay $9.5 million in restitution to arbitration Claimants as a result of its failure to produce emails in response to document requests in arbitrations with customers. According to the FINRA press release, Morgan Stanley incorrectly represented in the arbitration proceedings that “the destruction of the firm’s email servers in the Sept. 11, 2001 terrorist attacks on New York’s World Trade Center resulted in the loss of all pre-9/11 email.”
The unknown at this point is the amount of financial benefit gained by Morgan Stanley by this behavior through arbitration settlements and awards, and whether this benefit far exceeds the relatively small punishment ordered by FINRA. Read more:Morgan
, Morgan Stanley
Auction Rate Securities Failures 2008-03-03 20:42:00 Auction rate securities (ARS) are a debt security made up of long term bonds and preferred stock with variable interest rates and yields. The yields are periodically reset through Dutch auctions. ARS are often marketed and sold by a single dealer with the only resale market being through a successful auction. Problems have arisen in recent months as a result of the failures of the auctions, leaving investors in the lurch and unable to redeem the security. As set out in this SmartMoney article, ARS have been marketed as a safe, liquid alternative to money market funds. Investors believing they had their money in a safe liquid investment are understandably concerned by the failures in the marketplace for these securities, and our firm has been monitoring the sit Read more:Auction
, Securities
Fraud charges by SEC against Former UBS broker 2008-01-25 20:21:00 Fraud charges related to the sale of a hedge fund operated as a ponzi scheme were settled with a former broker of UBS according to this CCH Wall Street article.. The SEC alleged in its Complaint that the UBS broker made misrepresentations regarding the GLT Venture Fund, L.P. while raising $14.1 million for the fund. The broker agreed to pay disgorgement and civil penalties in addition to an injunction forbidding future violations. Read more:against
, Former
New York subpoenas firms in mortgage fraud probe 2008-01-11 19:36:01 Reuters has reported here that the state of New York
has subpoenaed three large Wall Street banks (Merrill Lynch, Bear Stearns, and Deutsche Bank) pursuant to a probe related to the creation of mortgage-backed securities. The New York probe reportedly is looking into how mortgages were packaged together by Wall Street to create securities sold to investors and the banks’ relationship with credit-rating firms
. Read more:fraud
, subpoenas
Some Auction Rate Securities to be bought back at discount 2008-05-09 19:23:00 The Missouri Higher Education Loan Authority announced this week that it would begin buying back a portion of its auction rate securities at a discount on the Restricted Securities
Trading Network. See the related news stories in Forbes and the St. Louis Business Journal.
This news is a mixed blessing for investors stuck with these or other auction rate securities. While such a buy-back will finally allow them to escape from these investments, they will probably have to take a loss on the investment if it is bought back at a discount on a secondary market. Many investors around the country were sold auction rate securities by major brokerage firms who incorrectly claimed they were safe, liquid, cash equivalents. This has turned out to not be the case as evi Read more:Auction
Schwab YieldPlus Losses 2008-05-26 12:51:00 In a decline that has been described as “one of the more spectacular meltdowns in mutual fund history” by this San Francisco Chronicle article, the Schwab YieldPlus fund has declined by over 25% this year.
The Schwab Yield Plus fund was supposed to be an ultra short term bond fund which was a “smart alternative for your cash,” but investors who expected the safety of a money marke Read more:Losses
UBS Charged With Fraud in Auction Rate Securities Sales 2008-06-26 19:54:00 The State of Massachusetts filed a Complaint today against UBS claiming UBS engaged in fraud and dishonest and unethical conduct with regard to its sales of Auction
Rate Securities
(ARS). Link to Complaint and Exhibits. In a 101 page Complaint, Massachusetts references voluminous emails it obtained from UBS supporting its claims, and further charges UBS with books and records violations for Read more:Charged
, Sales
Only 4% of Student Loan Auction Rate Securities Have Been Refinanced to Date 2008-07-11 19:44:00 According to this Bloomberg article, only 3 billion of the 85 billion in outstanding student loan Auction
Rate Securities
have been refinanced to date. Furthermore, due to these securities’ low interest rates, the prospects for an immediate solution are bleak. The article further reported that approximately two-thirds of publicly traded companies that are holding student loan auction Read more:Student
, Student Loan
Criminal Probe Initiated Regarding Auction Rate Securities Sales 2008-07-09 13:44:00 According to this Wall Street Journal article, federal prosecutors in New York are investigating sales of auction rate securities by two former Credit Suisse brokers. According to the article, the investigation allegedly involves representations made that the auction rate securities were backed by student loans, when in fact they were actually backed by CDO’s (collateralized debt obligatio Read more:Auction
, Criminal
, Probe
, Sales
, Securities
Businesses left out of Auction Rate Securities Settlements? 2008-08-22 19:58:00 As discussed in this Bloomberg article, the settlements reached by regulators regarding auction rate securities sales with many of the large brokerage firms fail to help medium to large businesses who were also sold ARS. Although the required buyouts in the settlements with UBS, JPMorgan Chase, Morgan Stanley, and Wachovia Corp. reached $35 billion, this amount only approximates 18% of the $ Read more:Auction
, Securities
, Settlements
Consequential Damages for Auction Rate Securities Unresolved 2008-08-21 20:22:00 As set out in this Kansas City Star article Wachovia and JP Morgan Chase have joined UBS, Morgan Stanley, and Citigroup in settling charges related to their sale of Auction
Rate Securities
. Although the settlement agreements with exact details are not completed, it appears that the firms will be buying back frozen auction rate securities sold to individuals and small businesses.
Left open i
INVESTIGATION OF WORLD FINANCIAL GROUP CLAIMS 2008-11-26 20:03:00 Greco & Greco, in conjunction with local Ohio counsel, is currently investigating alleged claims of individuals sold securities and real estate related investments out of the Ohio and Florida offices of World Financial Group and World Group Securities. If you think you may have a claim and wish to speak to an attorney, please contact Greco & Greco toll free at 877-821-5550.
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