Securities Lawyer Blog | Victim of Fraud?

Archive for July 2011

Jul/11

30

Did you Purchase Fannie Mae/Freddie Mac Preferred Stock?

Comments off · Posted by Securities Lawyer in FINRA

Soreide Law Group, PLLC, is filing claims on behalf of Morgan Stanley Smith Barney clients that were sold Fannie Mae and Freddie Mac preferred stocks in 2007 and 2008.  Despite internal limitations to recommend no more than 10% of an investor’s portfolio in preferred stocks, Morgan Stanley Smith Barney investors were sold Fannie Mae and Freddie Mac preferred stocks in concentration.
 
The risks of subprime market exposure for Fannie Mae and Freddie Mac were largely known in the securities industry and by Morgan Stanley Smith Barney beginning in early 2007. Rather than advising its financial advisors and its clients to avoid these companies, Morgan Stanley Smith Barney profited handsomely from underwriting and investment banking fees  from these issuances, and by selling Fannie Mae and Freddie Mac preferreds to its clients in 2007 and 2008.
 
If you sustained significant losses in any of the following Fannie Mae issues you may have a claim:
 
9/28/07            Series P $1,000,000,000
10/7/07            Series Q $375,000,000
11/21/07            Series R $530,000,000
12/11/07            Series S $7,000,000,000
5/19/08            Series T $2,225,000,000
 
In addition, if you sustained significant losses in the following Freddie Mac non-cumulative preferred stock issue, you may also have a claim:
 
12/4/07            8.375% Preferred $6,000,000,000.
 
Securities Lawyer, Lars Soreide, of Soreide Law, PLLC, has represented clients nationwide before FINRA, the Financial Industry Regulatory Authority. If you or a family member purchased Fannie Mae or Freddie Mac preferred stock from Morgan Stanley Smith Barney, call a Securities Arbitration Lawyer for a free consultation on how to potentially recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.securitieslawyer.com.

 

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Jul/11

22

Did You Sustain Losses from “Principal Protected Notes?”

Comments off · Posted by Securities Lawyer in FINRA

There are many questions about how Wall Street marketed a very complex product, sold as solid and secure, now emerging in investor arbitration cases. The product is named, incorrectly as it turns out, “100 percent principal protected  notes.”

Securities regulators had warned brokerage firms that they should take special care when selling PPN’s and other structured products to retail customers because the products were so complex and, potentially, risky.

“Investors assumed that ‘principal-protected’ meant they couldn’t lose their initial investment, but they clearly could, and many investors unfortunately did,” said Lars Soreide, a securities lawyer from Soreide Law Group, PLLC. “Many of my clients were clearly given the wrong impression, and their brokers knew they were conservative, low-risk investors, but yet still sold them the PPNs.” Soreide adds, “Even though Lehman is gone we are actively pursuing claims against UBS for the sale of the Lehman Principal protected notes.”

One of the worst examples of PPN’s gone bad is Lehman Brothers’ Principal Protected Notes.  Brokers at UBS (Switzerland’s largest bank, UBS in particular sold over $1 billion worth) and other firms sold these products with the added benefit of up to 100% principal protection if the market went down. However, Lehman Brothers declared bankruptcy in September, 2008, leaving the investors with worthless paper.

Securities Attorney, Lars Soreide, of Soreide Law, PLLC, has represented clients nationwide. If you or a family member have purchased Lehman’s principal protected notes, call a Securities Arbitration Lawyer for a free consultation on how to potentially recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.securitieslawyer.com.

Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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Jul/11

21

FINRA Suspends Former NEXT Financial Broker, for Two Years for Improper Trading in Customer Accounts

Comments off · Posted by Securities Lawyer in FINRA

WASHINGTON —It was announced July 20, 2011, on FINRA’s website that The Financial Industry Regulatory Authority (FINRA) has suspended William Bailey, a former NEXT Financial Group, Inc. broker of Mesa, Arizona, from the securities industry for two years for unsuitable and excessive trading of mutual funds and variable annuities. Bailey also engaged in discretionary trading without receiving prior written approval from his customers.

It was reported that FINRA found between January 2006 and December 2007, Bailey recommended 484 short-term mutual fund switch transactions in seven customer accounts. In each of the accounts, Bailey, on his customers’ behalf, repeatedly sold mutual funds less than one year after purchasing them, and purchased new mutual funds with the proceeds. With Bailey’s frequent switches, on average, his customers held their mutual funds for only 60 days. The seven customers, who ranged in age from 66 to 93 and were all unsophisticated investors, incurred over $147,000 in sales charges and trading fees. Bailey received over $120,000 in commissions from these sales. To facilitate his mutual fund trading scheme, Bailey frequently traded in his customers’ accounts without first obtaining their permission and improperly completed customer account forms to make it appear the customers approved of the trading.

 In the FINRA article it was reported that FINRA also found Bailey convinced three customers to switch their variable annuities for new ones after holding them for a short period of time. These exchanges were unsuitable based on the customers financial objectives and needs, and did not improve the customers’ financial situations.

 Mr. Brad Bennett, FINRA Executive Vice President and Chief of Enforcement, said, “Brokers who engage in excessive trading will be held accountable. In this case, Mr. Bailey rapidly switched his elderly and unsophisticated customers in and out of mutual funds with high costs, providing a benefit to Bailey instead of to his customers.”

In settling this matter, Bailey neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.

This information was obtained on FINRA’s website.

Securities Attorney, Lars Soreide, of Soreide Law, PLLC, has represented clients nationwide. If you or a family member feel you have become a victim of William Bailey or Next Financial Group, Inc., or a similar situtation, call a Securities Arbitration Lawyer for a free consultation on how to potentially recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.securitieslawyer.com.

Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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Jul/11

21

FLORIDA OFR FINES BROWARD COUNTY INVESTMENT ADVISER $117,500 AND REVOKES REGISTRATION FOR DEFRAUDING VULNERABLE INVESTOR

Comments off · Posted by Securities Lawyer in FINRA

TALLAHASSEE, Fla. – On The Florida Office of Financial Regulation’s website it was announced, July 21, 2011, that The Florida Office of Financial Regulation (OFR) issued a final order on May 26, 2011, against investment adviser James Paul Birmingham (“Birmingham”) (CRD # 222511) and his Broward County companies Birmingham Investments and Birmingham Capital Advisors, LLC for multiple violations of the Florida Securities and Investor Protection Act (“Act”), Chapter 517, Florida Statutes.  Under Florida law, OFR has the authority to take enforcement actions against any firm or individual found to be in violation of the Act.  The registrations of both Birmingham and Birmingham Investments were revoked and fines of $117,500 were assessed against Birmingham and his two firms.  The time within which Birmingham could appeal the OFR final order expired on June 27, 2011.
 
The OFR reports that the order found that Birmingham misled a long time family acquaintance, with limited investment experience, to invest his incapacitated mother’s assets with Birmingham.  Birmingham then excessively traded the assets, resulting in substantial investor losses.  Birmingham’s trading pattern was inconsistent with the client’s wishes to preserve his mother’s assets, because the client’s mother was incapacitated and relied on her investments to survive financially.
 
“Investors cannot be too careful with whom they entrust their hard-earned money.  Once again, OFR had to take away a firm’s and individual’s registration to do business in Florida, because they took advantage of a trusting victim, with whom they had a long-time relationship,” OFR Commissioner Tom Cardwell said.  “When it comes to investing their money, investors should always be aware of the potential for greed, even with purported professionals they know.  Be vigilant about your investments, ask questions and be sure you know what is happening with your money and why.  After all, it’s your money, not the broker’s or adviser’s money.  Report anything suspicious to OFR, or the state securities regulator in your own state, if you live outside of Florida.”
 
According to the OFR article, Birmingham had been designated in 2005 to be the mother’s guardian by the Circuit Court for Miami-Dade County.  The guardianship was to provide prudent financial management of her property, as provided to incapacitated Floridians under the law.  Birmingham was granted authority to invest the mother’s money and trade the mother’s account for eight months without consulting anyone.
 
It was reported that the account was opened in March 2008, the mother’s assets invested with Birmingham totaled $375,000, which was most of the mother’s net worth.  While Birmingham managed the account over the next year, Birmingham excessively traded the mother’s brokerage account resulting in a loss of $122,000.
 
OFR reports that Birmingham and his firm were found to have committed multiple violations of the Act, including:
• Securities fraud
• Excessive trading of the mother’s account
• Failing to account for all received property
• Making unsuitable recommendations
• Violating OFR’s safekeeping requirements for advisers with custody of client funds
 
The Florida OFR’s Division of Securities recommends that investors do their research before investing with or having an investment or securities firm or representative manage the investor’s money. 
This article was obtained on Florida’s OFR’s website.

Securities Attorney, Lars Soreide, of Soreide Law, PLLC, has represented clients nationwide. If you or a family member have become a victim of James Paul Birmingham of Florida, Birmingham Investments, or Birmingham Capital Advisors, LLC, call a Securities Arbitration Lawyer for a free consultation on how to potentially recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.securitieslawyer.com.

Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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Jul/11

21

Massachusetts is Suing RBC Capital, and Former Representative over Leveraged ETF Sale

Comments off · Posted by Securities Lawyer in FINRA

In a June 20, 2011, article from Bloomberg News, it was reported that Massachusetts’ top securities regulator is suing RBC Capital Markets LLC and one of its former registered representatives over the sale of leveraged exchange-traded funds, saying they sold them to clients who didn’t understand how the investments worked.

The Massachusetts Secretary of the Commonwealth, William F. Galvin, said RBC Capital and Michael Zukowski, a former agent, used “dishonest practices” in selling the funds, according to a statement e-mailed today. Galvin is seeking restitution to Massachusetts investors, a cease and desist order, and an administrative fine.

“The point of the complaint is not that the investors lost money,” Galvin said in the statement. “The dishonesty here is that the investors, and indeed the agent soliciting their investment, did not understand the workings of these funds.”

The Bloomberg article adds Galvin said that Zukowski, who worked in the firm’s Osterville office, sold clients “non-traditional” leveraged and inverse ETFs. Leveraged ETFs use swaps or derivatives to amplify daily index returns, while the inverse funds are designed to move in the opposite direction of their benchmark. The Financial Industry Regulatory Authority warned investors and fund sellers in June 2009 that such ETFs might not be a good fit for long-term investors. Galvin opened a probe into the products in July 2009.

It was noted that RBC Capital is a subsidiary of Toronto-based Royal Bank of Canada.

Securities Attorney, Lars Soreide, of Soreide Law, PLLC, has represented clients nationwide. If you or a family member feel you have become a victim of the sale of non-traditional ETFs by broker Michael Zukowski or RBC Capital Markets, LLC, of Massachusetts, call a Securities Arbitration Lawyer for a free consultation on how to potentially recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.securitieslawyer.com.  

Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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Jul/11

13

Wedbush ordered to pay $3.5M by FINRA for ‘morally reprehensible failure’ to Pay Muni Trader Owed Years of Incentive Compensation

Comments off · Posted by Securities Lawyer in FINRA

In a July, 2011, article by Liz Skinner for InvestmentNews.com, she writes that Wedbush Securities Inc. was ordered to pay a former municipal sales trader Stephen Kelleher $3.5 million for failing to give him years worth of incentive-based compensation he was owed.

A three-person Financial Industry Regulatory Authority Inc. (FINRA) panel found the firm’s “morally reprehensible failure and refusal to compensate” Mr. Kelleher in a timely fashion broke California’s labor laws. A “poorly written and ambiguous employment contract” was partly to blame, the Finra panel said.

According to the InvestmentNews.com article, Mr. Kelleher, who joined Wedbush in 2007, had requested $4.2 million in bonus compensation he was due, but is satisfied with the arbitration award. Mr. Kelleher resigned days after the arbitration case finished up and he is not working right now. Wedbush plans to appeal the ruling.

Wedbush had been paying Mr. Kelleher’s salary, but not the incentive comp that he was due writes Ms. Skinner. The arbitration panel also blamed “a corporate management structure” that required Edward W. Wedbush, the majority shareholder in the firm, to approve bonus pay to senior employees. That approval “was routinely withheld,” the Finra panel wrote. Another Wedbush employee testified that he also went for two years without receiving the incentive-based compensation due him.

Skinner goes on to say that Mr. Wedbush was originally named in the suit. Mr. Kelleher dropped the case against him during the hearing, however, after Mr. Wedbush requested to testify in person, which would have delayed the hearing.

Securities Attorney, Lars Soreide, of Soreide Law, PLLC, has represented clients nationwide. Call a Securities Arbitration Lawyer for a free consultation.  To speak with an attorney, call 888-760-6552, or visit www.securitieslawyer.com.

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Jul/11

13

SEC, FINRA Issue Retail Investor Alert Re: Investing in Structured Notes With Principal Protection

Comments off · Posted by Securities Lawyer in FINRA

The following article was posted on FINRA’s website:

WASHINGTON — It was announced that The Securities and Exchange Commission’s (SEC) Office of Investor Education and Advocacy and the Financial Industry Regulatory Authority (FINRA) have issued an investor alert called Structured Notes with Principal Protection: Note the Terms of Your Investment to educate investors about the risks of structured notes with principal protection, and to help them understand how these complex financial products work. The retail market for these notes has grown in recent years, and while these structured products have reassuring names, they are not risk-free.

 Structured notes with principal protection typically combine a zero-coupon bond — which pays no interest until the bond matures — with an option or other derivative product whose payoff is linked to an underlying asset, index or benchmark. The underlying asset, index or benchmark can vary widely, from commonly cited market benchmarks to currencies, commodities and spreads between interest rates. The investor is entitled to participate in a return that is linked to a specified change in the value of the underlying asset. However, investors should know that these notes might be structured in a way such that their upside exposure to the underlying asset, index or benchmark is limited or capped.

 ”Structured notes with principal protection contain risks that may surprise many investors and can have payout structures that are difficult to understand,” said Lori J. Schock, Director of the SEC’s Office of Investor Education and Advocacy. “This alert is a ‘must read’ for investors considering these products, especially those with the mistaken belief that these investments offer complete downside protection.”

 ”The current low interest rate environment might make the potentially higher yields offered by structured notes with principal protection enticing to investors,” said FINRA Senior Vice President for Investor Education John Gannon. “But retail investors should realize that chasing a higher yield by investing in these products could mean winding up with an expensive, risky, complex and illiquid investment.”

Investors who hold these notes until maturity will typically get back at least some of their investment, even if the underlying asset, index or benchmark declines. But protection levels vary, with some of these products guaranteeing as little as 10 percent — and any guarantee is only as good as the financial strength of the company that makes that promise.

 FINRA and the SEC’s Office of Investor Education and Advocacy are advising investors that structured notes with principal protection can have complicated pay-out structures that can make it hard to accurately assess their risk and potential for growth. Additionally, investors considering these notes should be aware that they could tie up their principal for upwards of a decade with the possibility of no profit on their initial investment.

Structured Notes with Principal Protection: Note the Terms of Your Investment also includes a list of questions investors should ask before investing in these products.

 The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. The SEC’s Office of Investor Education and Advocacy provides a variety of services and tools to address the problems and questions that individual investors may face. The Office conducts educational outreach, assists with investor complaints and inquiries, and facilitates individual investors in bringing their perspectives to the Commission and its staff.  

FINRA, the Financial Industry Regulatory Authority, is the largest non-governmental regulator for all securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business – from registering and educating all industry participants to examining securities firms, writing and enforcing rules and the federal securities laws, informing and educating the investing public, providing trade reporting and other industry utilities, and administering the largest dispute resolution forum for investors and registered firms.

This very valuable information comes from FINRA’s website.

Securities Attorney, Lars Soreide, of Soreide Law, PLLC, has represented clients nationwide. If you or a family member feel you have become a victim of structured notes with principal protection loss, call a Securities Arbitration Lawyer for a free consultation on how to potentially recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.securitieslawyer.com.

Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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Jul/11

13

FINRA Awards 80+ year-old Merrill Client $880K

Comments off · Posted by Securities Lawyer in FINRA

In a July 8, 2011, article by Dan Jamieson for InvestmentNews.com he writes that clients of a prominent Bank of America Merrill Lynch have won an $880,000 arbitration award against the firm. Phil Scott of the firm’s Bellevue, Wash., office, was this year ranked No. 30 on the Barron’s list of top advisers, with $1.8 billion under management. He ranks No. 1 on the list for the state of Washington.

The arbitration award, decided June 22, was recently made available by Finra.

The InvestmentNews.com article lists the clients as, Harriet Baker, her son John Baker and his wife Natalie Baker, all of New York state. It claims they were 100% invested in stocks through the financial crisis. That heavy allocation in stocks was not suitable for them. Harriett Baker was in her late 80s when she started doing business with Mr. Scott in 2005. Ms. Baker died the day the award was issued.

Jamieson goes on to say that Mr. Scott runs more than $1 billion of client money in a dividend growth strategy, called the Phil Scott Income Portfolio.

“Everyone has the same position — 100% equities. That’s what our clients had,” he said.

The Bakers “sold at or near bottom” of the market drop, despite Mr. Scott’s recommendation to remain invested in a portfolio that subsequently performed well. The award was about half of the $1.7 million in compensatory damages the Bakers demanded.

The InvestmentNews.com article goes on to say that aside from the arbitration award from last month, Mr. Scott has three other pending arbitrations, according to disclosures he made on his Finra BrokerCheck report. One case was filed in April of this year, and two others were filed last summer. The customers allege misrepresentations and unsuitable stock investments from 2007 through 2009, according to the report.

Securities Attorney, Lars Soreide, of Soreide Law, PLLC, has represented clients nationwide. If you or a family member feel you have become a victim of Bank of America Merrill Lynch, Phil Scott, or Phil Scott Income Portfolio, call a Securities Arbitration Lawyer for a free consultation on how to potentially recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.securitieslawyer.com.

Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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Jul/11

13

Did You Invest in FutureSelect Prime Advisor II?

Comments off · Posted by Securities Lawyer in FINRA

Recently, a FINRA arbitration panel made a monetary award  in the case of Stone & Youngberg v. Kay Family Revocable Trust, No. 3:11-cv-00198 (N.D. Cal., 6/22/11),  which was appealed by the defense and lost.  

 This case involved the challenge by a broker-dealer to a $750,000 award to a former customer, who was advised by Stone & Youngberg to invest funds in a hedge fund known as FutureSelect Prime Advisor II. According to the Court, “each of the Trust’s claims was based on the theory that Stone &Youngberg did not perform requisite due diligence before advising the Trust to invest in the Fund, which, according to the Trust, invested substantially all of its capital with Bernard Madoff….”

Attorney Lars Soreide would like you to know that if you or a family member have invested in the FutureSelect Prime Advisor II Fund with Stone & Youngberg, or another broker/dealer, call Soreide Law Group, PLLC and speak to a Securities Arbitration Lawyer for a free consultation on how to potentially recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.securitieslawyer.com.

Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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