Stock Broker Fraud Blog

MERRILL LYNCH: The firm’s retail brokerage revenues increased 13% to $3.3 billion, and new profits were up 23.7 %. Its broker count rose to 16,200 and it claims “net positive recruiting against all our major competitors, along with its lowest turnover of top producers in years. The firm also reported a rise in fee-based business, as it and other Wall Street firms operate on a short reprieve from the SEC to either register its representatives under the Investment Advisor’s Act, reassign the accounts to those already registered or restructure those accounts.

BEAR STEARNS: The firm continues to suffer the slings and arrows of critics over its CMO hedge fund debacle. Meanwhile, head manager of those funds was previously reported to have maintained his golf scores at the climax of the funds. Or did he? It has been reported that a three-member committee at the Hollywood Country Club in Deal, N.J., is investigating his victory at a July 4 golf tournament, to determine whether he changed his scores. Apparently, allegations of such cheating by executives at the club are frequent.

“We're FINRA - the Financial Industry Regulatory Authority”, announced the old NASD, plus the NYSE’s regulatory functions. As we reported weeks ago, it was the third try at names for the NASD. First it offended 1.4 billion Islamic persons, then embarrassed itself with an acronym that sounded like a disease. Finally, it chose FINRA, which brought criticism from those in the financial industry that it doesn’t regulate. As we predicted, the NASD was much too arrogant to make yet another change. As well, it was intent on replacing “association” with “authority,” so it would not appear to be a fox in charge of a henhouse, despite its structure being similar to a country club (see above).

SECURITIES ARBITRATION FILINGS: Only 1,650 securities arbitration cases were filed in the first half of 2007, an annualized rate of 3,400 compared to approximately 4.500 last year. During the same period, 2,752 cases were completed, also down about 30% from the same period last year. Turnaround on all cases fell to 13.5 months, but still over 16 months when hearings were required. The stated goal of the arbitration forums for years has been for such cases to be completed in an average of less than a year.

UBS: The Company’s CEO was replaced after its international hedge fund reported millions in losses. Peter Wuffli was replaced by Marcel Roehner, who was previously deputy CEO and head of global wealth management and business banking. The Swiss banking firm expressed disappointment in its U.S. Operations, which would include several units, including recently acquired Paine Webber, Piper Jaffray and McDonald Investments.

WACHOVIA SECURITIES: Federal anti-trust regulators (I envision one guy with a big rubber stamp) this week approved the acquisition of A.G. Edwards by Wachovia. The combined firm will have 15,000 brokers, second only to Merrill Lynch (see above). The securities operation will be based in the A.G Edwards headquarters in St. Louis. Wachovia’s banking base remains in Durham NC, while builds a huge new Manhattan headquarters for its New York operations. When you learn that Wachovia is moving its entire base of operations to New York, including securities, remember that you heard it here first.

WALL STREET & FEE-BASED BUSINESS: Will Wall Street lose its fee-based business? For decades Wall Street firms have sought assets under management and shied away from commission based business. Rather than “stock jockeys” they wanted “asset gatherers”. The goal was to earn a predictable 1% to 2% return on a larger asset base. A Federal Court in D.C. upset Wall Street’s applecart by deciding its brokers’ licenses did not exempt them from coverage under The Investment Advisor’s Act (IAA) when were acting as investment advisors. Wall Street sought time to adjust. They could simply license all their brokers under the IAA, some are already licensed, but they desperately seek to avoid the “fiduciary” duty of the IAA. Meanwhile, the SEC (Securities Executives’ Comrade) hurries to “tighten” the IAA. Mark my words, the final version of any bill will include an exemption for Wall Street!

Shepherd Smith and Edwards represents investors nationwide in claims against the securities industry. If you, your firm or your pension fund has sustained losses as a result of fraud, negligence or other wrongdoing and are curious whether you may be able to recover all or part of your losses contact us to arrange a free consultation with one of our attorneys.

“There are two things I worry about: Clients dying and the government putting me out of business,” said a Merrill Lynch rep who says he gets about 80% of his revenue from B-shares shares and fee-based business. Apparently, the safety of his clients' assets must be down the list.

Meanwhile, regulators are currently engaged in a crackdown on brokers who shove clients into B-shares when the breakpoints of A-shares are much more appropriate, and those who use wrap accounts then ignore their clients. Hundreds of millions of mutual fund load refunds have been ordered. It has been discoverd that some clients have paid $5,000 to $20,000 per transaction while ignored in fee-based accounts at major firms.

Loss of the fees “would make me wonder whether I should stay in business,” said Curtis Mohr, a Pasco, Wash., broker affiliated with Royal Alliance Associates Inc. Good riddance!

“I’m in trouble” if 12(b)-1 fees are eliminated, said Graham Parsons, an Erie, Pa.-based rep affiliated with LPL Financial Services. “I’ve had sleepless nights over this….They could literally legislate me out of business!” Worth considering. How much sleep has he lost over retirees who may be paying 20% of their income to him and his firm?

The total expense ratio on C-chares is 1.95%, according to Lipper Inc. of New York. Annual B-Share costs are about the same. Fees for separately managed accounts, which are all-inclusive, average 1.68%, according to a consumer group. Unless the assets of diversified portfolios consistently earn 9% (which has never happened over any 10 year period) 20% or more of these clients’ earnings are going to the house!

Thus, if one worked for 40 years to save a half million dollars to retire and put to work at an average of 8%, that person would earn $40,000 - less about a $10,000 haircut to the investment community, leaving the retiree $30,000. One-fourth - 10 years - of the retiree's work went to pay others, including an advisor who lays awake nights thinking he is a victim.

“The 12(b)-1 fee structure ... allows advisers to have relationships with lots of small accounts,” Mr. Nachmany said. An adviser doesn’t “have to be a collection agent.” “12(b)-1s make it easy to sit down with the little guy,” Mr. Mohr said. Changing the current system of 12(b)-1 fees will force brokers to evaluate what they charge each client, Mr. Nachmany said. “The market will tell them they’d be right to charge more than they’re charging now,” he said, and as a result, some small accounts might be dumped.

Such statements need no comment. As a group, stockbrokers earn more than Doctors, Lawyers, CPA’s and Engineers. No special degree is needed, in fact, not even a high school diploma is required to become licensed as a stockbroker, mutual fund or annuity salesperson.

Shepherd Smith and Edwards represents investors nationwide in claims against members of the securities industry. We have represented investors in more than 1,000 securities cases. To learn whether we are able to assist you with a claim contact us to arrange a free consultation with one of our attorneys.

Former Merrill Lynch employee Hydie Sumner sued that firm saying she was sexually harassed. She was represented by lawyer Linda Freidman. In 2004, a panel of three NASD arbitrators decided Hydie was right and awarded her $2.2 million. They also forced Merrill to reinstate her.

Meanwhile, an email was allegedly sent to Merill Lynch by Ms. Sumner’s attorney Linda Freidman, reportedly at Sumner’s direction, questioning Merrill’s ethics for employing “a man like [Blas] Catalani,” Sumner’s Merrill Lynch manager. According to Catalini, this defamed him and caused him to be fired, his clients were then distributed to other brokers at Merrill and he found it “extremely difficult” to becoming re-employed in the securities industry.

Catalini therefore filed a lawsuit against Sumner and her lawyer, claiming defamation. Not to be outdone, Hydie Sumner then filed a counterclaim against Catalini claiming that he damaged her reputation by reporting that she was the reason he was terminated by Merrill Lynch.

Making things more complicated, Catalini also filed suit against Merrill Lynch claiming sexual discrimination, saying that firm terminated him to make room for Sumner. The claims against Merrill have now been moved to arbitration.

How much damage has Catilini actually suffered? Apparently, he is now managing a seven broker private client unit in San Antonio for Dallas-based Southwest Securities. Reportedly, a spokesman for Southwest, Jim Bowman, stated: “We think there’s a growing market in [San Antonio] and we’re trying to grow that office.” Southwest Securities did not comment on Catalani’s ongoing lawsuit(s).

Who is the victim of what, when, why and to whom? Hard to say. But if you are keeping score: Hydie and her lawyer are a couple million ahead, Catalani is apparently doing well in River City, Merrill has already earned a couple of billion this year. I just wonder when anyone has the time to take care of investors - you know - the clients.

Shepherd Smith and Edwards has represented thousands of investors nationwide in claims against securities brokers and their firms. If you, your company or pension fund, or someone you know has been harmed by fraud, negligence or other wrongdoing by those in the securities industry contact us today to arrange a free consultation with one of our attorneys.

Usually lawsuits must be filed within a few years after the wrongful acts, or when one knew or should have known of the wrongdoing. For example, federal and most state securities laws require lawsuits to be filed by 2 or 3 years after the problem is known or made public, but no later than 5 years in any event.

However, if a class action is filed on behalf of shareholders, this “tolls” the limit for filing a case for those the case seeks to represent. If, for example, if a shareholder decides to “opt out” of the class action, or it is later decided the class action can not be maintained, the “window” for such shareholders to file their own cases remains open. (Caution: The remaining time to file a case may then be quite short.)

WorldCom Inc. bondholders were in this position. A class action was filed, including a class of bondholders. Some of these bondholders decided to file their own case before the class was “certified” (when the court decides whether the class members have claims common to all of them, etc.) Using strange reasoning, the federal judge presiding over their case decided that, because these bondholders did not wait for the class to be certified, they could not use the tolling benefit of the class action. Because the case was otherwise filed too late, it was dismissed.

The U.S. Court of Appeals for the Second Circuit disagreed and reversed that decision. (In re WorldCom Securities Litigation, 2d Cir., No. 05-6979-cv, 7/26/07). The appeals court said that the initiation of a class action puts defendants on notice of the claims, whether or not plaintiffs choose to become part of the class and whether or not they file their cases before the class is certified.

Victims of securities fraud are often included in class actions without their knowledge. Often they are notified of class actions years later. Either way, class actions can keep the window open to file lawsuits for as long as a decade. Currently Enron shareholders await word from the U.S. Supreme Court whether the recent dismissal of their case against Merrill Lynch and others will become final. If so, they could individually or in small groups sue Merrill Lynch and the other defendants. All Enron shareholders should already be in contact with an attorney.

Shepherd Smith and Edwards represents victims of securities fraud. If you, your company or pension fund, or someone you know lost in Enron, it is worthwhile to learn whether it is too late to act. For more information contact us today to arrange a free consultation with one of our attorneys.

For more almost forty years I could fell safe knowing that if a company's stock symbol had three letters it was listed on the New York Stock Exchange or possibly the American Stock Exchange. If the symbol had four or five letters, it was listed on the NASDAQ.

Delta Financial Corp. (DFC) recently transferred its listing to from the Amex to Nasdaq and sought to use the same symbol. Despite numerous (well-founded, I hasten to add) objections, the SEC decided to approved a rule change to permit an issuer to keep its three-character ticker symbol if it transfers its listing to Nasdaq from another domestic listing market.

The SEC says it approved the change to avoid the anti-competitive effect of the prior ban. It added that there was little reason to impose the costly and disruptive burden involved in changing a company's ticker symbol if it simply wants to list on another exchange.

So, Delta, are you happy now? Why ruin it for the rest of us? I do not really know why this is such a big deal for us diehards. There was just something comfortable in knowing that if it was three letters ... Look, I was finally learning how to post blogs on the internet when you hit me with this! If you think for one minute I will buy a single share of your stock, forget it.

By: William S Shepherd

After joining the securities industry in 1970, William Shepherd left in 1990 to found of the law firm of Shepherd Smith and Edwards. This securities law firm represents investors seeking to recover losses in accounts at investment firms. If you or someone you know has suffered investment losses, contact Shepherd Smith and Edwards today.

What do Bear Stearns, Deutsche Bank, Lehman Brothers, Merrill Lynch, UBS, Wachovia and Wells Fargo and other big securities firms have in common? No conscience. For decades we have thought that Wall Street will do anything for money. Now we are sure.

Two years ago, about 250 people attended an event in New York to discuss yet another exotic product to come out of Wall Street. This spring, as the subprime mortgage market was crumbling, nearly 600 representatives of most largest players in the finance industry met to talk about the product, one they could sell investors which had enough pricing difficulty that large mark-ups could easily be generated. That product is “death bonds.”

In brightly lit rooms with a festive atmosphere, the wizards of Wall Street discussed how they could profit off diseased and dying folks who happen to have life insurance. Death bonds are securitized products which, instead of mortgages, are backed by life insurance policies.

Almost one-third of Americans own life insurance – guarantees to pay a total of trillions of dollars. Yet, many policy owners are unable to pay the premiums, often because they are ill and can’t work and/or have medical costs consuming their resources. While some of those insured simply decide they would rather have the money while alive, others desperately need "life settlements" to pay for medical needs or avoid bankruptcy.

Viaticals, as death bonds are often called, are the result of policies being sold to investors, who then keep up the premiums until the sellers die, then collect the payout. The quicker the death, the higher the profit. Viaticals have been around for years, but were handled mostly by smaller firms with rampant fraud surrounding the industry. Hedge funds then seized on the opportunity to profit. Now, Wall Street sees huge profits in selling bonds backed by such policies, since valuations are problematic, which affords CMO-like sales pitches and higher mark-ups than on generic debt instruments.

Like many mortgage backed securities, there is a guarantee these will pay someday, so long as the insurance company remains solvent, because everyone will die sooner or later. Lets just hope impatient hedge fund managers and other investors do not decide to hasten the process in order to increase their returns.

Shepherd Smith and Edwards represents investors nationwide in claims against those in the securities industry. We handled claims in all types of investments. If you are a victim of worngdoing and suffered losses in any type investment contact us to arrange a free consultation with one of our attorneys.

FSC created "an extremely cozy environment for a man bent on defrauding his customers," said three NASD Securities Arbitrators, “management ineptness was broad" and the firm ignored red flags that the broker had "selling away" issues (using one's status at a firm to aid in the sale of investments not approved by the firm).

FSC Securities of Atlanta, part of the AIG Financial Group, had warning when it hired broker Scott Hollenbeck that he had problems during his past employment, said a panel of three arbitrators in their award to several investors. During his past employment, they say, he even embezzled money from a church organization.

Hollenbeck was based in Kernersville, N.C. where he was employed by FSC for over 5 years, ending in 2002, not counting a 20 month hiatus. Not named in the arbitration claim, Hollenbeck faces charges over an alleged Ponzi investment scheme which reportedly took place after he left FSC and included the use of billboards.

Securities arbitration is a private process, without records available to the public, and the decisions made ("awards") generally do not include much discussion about the case. However, these arbitrators saw fit to blast FSC while awarding victims almost $700,000, including legal fees and expenses. FSC claims the award includes payment to non-parties to the arbitration, a problem for all the victims if true and the award is challenged.

Shepherd Smith and Edwards represents investors nationwide in claims against members of the securities industry. We have represented investors in more than 1,000 securities arbitration cases. To learn whether we are able to assist you with a claim contact us to arrange a free consultation with one of our attorneys.

The Independent Directors Council (IDC) recently provided the Securities and Exchange Commission with a list of “reforms” regarding 12b-1 mutual funds, including that mutual fund directors should oversee the fees. The group claims that the fees are used to pay for advice and shareholder servicing, when the true use is to pay high comissions that can be hidden or obfuscated from investors.

In 2006, the mutual fund industry collected $11.8 billion in 12b-1 fees. The SEC sponsored a roundtable discussion on B-shares in June to discuss whether to do away with such shares. Seeking compromise, The IDC now suggests "clarification" of 12b-1 plans, improved disclosures to investors and send-it-to-committee type delay tactics - all intended to avoid the proposed end to the issuance of such shares.

Three decades ago Wall Street sought to compete with “no-load” mutual funds being sold directly by mutual fund companies. In 1980, it got help from Washington to create “B shares,” so-called because these are authorized under section 12-b of the Investment Advisors Act. While no front end load is paid to buy such shares, sellers are paid up front to sell the shares. Buyers are then charged fees each year for 5 years and, if they try to get our earlier, are charged a penalty for early withdrawal.

Such shares have been the subject of constant concern for more than 25 years. Salespersons often misrepresent the shares as “no load” and seek to avoid volume discounts available on old-fashion front end load A-shares to make higher commissions on the B-shares. While the industry does not want to end this $12 billion per year gravy train, the time has come to simply end the sale of such shares in order to stop the abuse.

Shepherd Smith and Edwards represents investors nationwide in claims against the securities industry. We represent clients who have been victims of wrongdoing by brokers and their firms, including in the sale of B-shares and other mutual funds. To learn whether we can also assist you to recover, contact us to arrange a free consultation with one of our attorneys.

A NASD arbitration panel ordered Merrill Lynch & Co. Inc. to pay an Iranian former employee $1.6 million, for claims that his boss set him up to be fired after discovering his ethnicity. Merrill is currently defending a suit filed in court by another Iranian who has also accused the firm of discrimination.

In an unusually lengthy decision, the securities arbitration panel awarded Fariborz Todd Zojaji $400,000 in compensatory damages and $1.2 million in punitive damages. The arbitrators explained that Merrill Lynch defamed Mr. Zojaji in a required exit disclosure form (Form U-5), which "destroyed claimant's ability to become employed in the securities industry."

This language may cause the award to be undone, since it was recently determined that brokerage firms have total immunity for statements made in such disclosures. Yet, the standard for vacating arbitration awards is quite high and a court could let the decision stand if it determines the arbitrators could have decided the case for any other reason. It is also possible the arbitrators heard evidence that the derogatory statements made in the U-5 were stated orally or in writing elsewhere, thus not be protected by the privilege.

The panel said an internal investigation of Zojaji was "so reckless and wanting in care that it constituted a conscious disregard and indifference to the rights of claimant." It also described that Mr. Zojaji, a broker in suburban Miami had been on a management track before his former manager relegated him to a reduced role after the terrorist attacks on September 11, 2001. In November 2004, Mr. Zojaji was fired on his manager’s charges he made unauthorized trades in two clients' accounts and broke the firm's privacy policy by allowing his wife to act as a translator during a phone call with a client who spoke Spanish.

Such determinations may keep the award viable even if the defamation claims are determined to be “manifest disregard for the law” by the arbitrators. While “manifest disregard” is not one of the statutory routes of overturning an arbitration award, it can be used in most jurisdictions as a “common law” reason to vacate an award. If the award is vacated, Mr. Zojaji would need to then file a new claim in arbitration to be determined by different arbitrators.

NASD securities arbitrators are not required to give reasons for their awards, which many lawyers would like to see changed. However, Mr. Zojaji’s and his lawyer are likely wishing the three arbitrators had simply awarded him the money without any discussion. It is likely that the parties will resolve the issue for a lesser amount rather than face lengthy litigation, and possibly additional arbitration to arrive at a final result.

Shepherd Smith and Edwards represents investors nationwide in claims against members of the securities industry. We do not represent brokerage firms but we often represent brokers who are victims of the conduct of brokerage firms. Whether client or broker, if you have a claim against a financial firm contact us to arrange a free consultation with one of our attorneys.

As a review: Instead of charging commissions to sell investments and products to their clients, as do brokerage firms, investment advisors charge a small percentage to advise clients how to invest their money. Wall Street decided this would be a lucrative addition to their business, but did not want to owe a fiduciary duty (of good faith) to their clients as required by the Investment Advisors Act of 1940. They therefore had their politically appointed friends at the SEC exempt them from registering as advisors. This was called the "Merrill Rule."

Investment advisors then cried foul and their largest association filed suit against the SEC. A few months ago, they won! After brooding for a few weeks but realizing the SEC had no power to exempt anyone from the law, the SEC's Chairman decided not to appeal. Instead, the Wall Street-friendly former Congressman began his retaliation.

The SEC Chairman first, without waiting for others at the SEC, personally asked Congress to investigate certain practices of investment advisors. The SEC then sprung a hasty investigation of some investment advisors and soon reported only one had properly disclosed facts in its performance claims.

Appearing to have now become a "regulator on steroids," the SEC is this week sending "Greetings" letters to RIAs. (These are reminiscent of letters sent during the Viet Nam War Era to notify young men they had been drafted, which began with "Greetings!") Such letters begin with a summary of the key provisions of the Investment Advisers Act.

The letter is being sent by email and is posted to the SEC's website. The goal is to "educate newly registered advisers about their compliance obligations" to promote investor protection, the Securities and Exchange Commission said in a statement. The letter also introduces advisers to their local office of the SEC and directs them to its website.

Of the 10,500 or so investment advisors registered with the SEC, which is expected to continue to increase. Approximately one-third have become registered in the past 18 months. Perhaps the letters will alert both old and newly registered RIAs that challenging the SEC may be hazardous to their health.

Shepherd Smith and Edwards represents investors nationwide in claims against members of the securities industry. To learn whether we may be able to assist you to recovery losses contact us to arrange a free consultation with one of our attorneys.

In one of its final regulatory acts before being folded into the NASD, the New York Stock Exchange’s regulatory unit has censured and fined Smith Barney $50 million over illegal trades, failures to supervise and record-keeping violations. The firm agreed to the sanctions without admitting or denying the charges.

The Smith Barney unit of Citigroup Global Markets Inc. will pay a fine of $10 million to the NYSE, and a fine of $5 million to the State of New Jersey, related to a "separate regulatory matter arising out of the same conduct." An additional $35 million will be paid into a restitution fund to compensate victims.

The NYSE regulators say Smith Barney agreed to these huge sanctions to resolve charges related to a variety of fraudulent trading activities, including excessive trading, improper trading in mutual fund shares, improper trading in variable annuity mutual fund sub-accounts, illegal market timing trades, plus the firm’s failures to supervise and to maintain adequate books and records.

The market timing charges also included deceptive acts to conceal the identities of the brokers involved as well as their customers, said the NYSE adding that, during a two year period, Citigroup financial consultants engaged in 250,000 market timing trades, generating approximately $32.5 million in gross revenues.

Shepherd Smith and Edwards represents investors nationwide in claims against members of the securities industry. We have helped numerous clients to recover in claims against both Smith Barney and Citicorp. To learn whether we can also assist you to recover contact us to arrange a free consultation with one of our attorneys.

Each year the research firm of J.D. Power ranks the largest brokerage firms based on customer satisfaction. This year's survey polled 5,000 investors and asked them to rate factors such as the quality of their broker, account set-up, investment offerings, and investment performance. Similar polls are taken regarding airlines and other companies which serve the public.

For the second straight year, Morgan Stanley’s retail brokerage unit ranked 11th in customer satisfaction, which was last place in the poll. Highly publicized problems at Morgan Stanley, including a public uprising of high level executives, prompted the ousting of that firm's CEO.

The management shake-up also included replacement of the head of Morgan Stanley's retail unit, with James Gorman moving from Merrill Lynch to accept the position. Changes have been initiated by Gorman, including the release of almost 1,000 under-performing brokers and addition of several new products. While his efforts may be a work in progress, results so far have obviously been less than stellar.

Morgan Stanley is not the only major Wall Street brokerage firm to score poorly. Only one Manhattan-based firm, Merrill Lynch, even scored above average in customer satisfaction. Two other large retail operations, Citigroup Inc.’s Smith Barney unit and UBS, ranked below average.

St. Louis based Edward Jones ranked first in the survey for the third consecutive year. A.G. Edwards and Sons, another St. Louis-based company, ranked second. Wachovia, which placed just behind Merill at fifth in the survey, is in the process of acquiring A.G. Edwards to become second to Merrill in number of retail brokers.

Shepherd Smith and Edwards represents investors nationwide in claims against members of the securities industry. We have helped numerous clients to recover in claims against each of the firms ranked by J.D. Power in the survey. To learn whether we can also assist you to recover, contact us to arrange a free consultation with one of our attorneys.

It seems that Wall Street has convinced state and federal regulators, as well as Congress and Presidential candidates, that the regulatory bar must be lowered if we are to compete in the international securities market (or perhaps Wall Street's donations have affected the judgment of these politicians). Yet, studies continue to show that most investors prize a company’s behavior over rich returns.

After the crash of 1929, and for over 70 years, our securities markets have been regulated by a network of federal and state securities laws. During that period, U.S. financial markets have thrived and becme the envy of the world. Conventional wisdom is that investors want to feel safe in investment waters - as shark free as possible. Yet, those on Wall Street, many of whom have proven themselves to be sharks, lobby regulators and lawmakers to attempt to win a “race to the bottom” in worldwide financial regulation.

Yet a recent study found, for example, that two-thirds of investors say they would sell their shares of a company that engages unethical but legal behavior—even if that behavior brought in higher returns. These results were found through poll research performed by Opinion Research Corp. for Pepperdine University’s Graziadio School of Business and Management.

Sixty-seven percent of the 482 investors polled said they knew about the ethical standards and practices of the companies they invest into and valued such standards even above performance. Only half of the investors said corporate boards are doing a good job of ensuring companies are managed ethically, while 42% said boards were doing fair or poorly.

“Clearly, investors are looking at more than the balance sheet and sales projections when it comes to investments,” said Linda A. Livingstone, dean of the Graziadio School of Business and Management, in a statement. “Corporate Board leadership that is centered on values and ethical behavior plays an important role in how investors evaluate options,” she added.

Similar results have been recorded regarding investment advisors, in which investors reflect that their feelings of trust, comfort and safety outweigh superior performance in their accounts.

Shepherd Smith and Edwards is a securities law firm which represents investors nationwide in claims against investment firms. To learn whether our firm can assist you contact us to arrange a free confidential consultation with one of our attorneys.

Ever notice how impressive titles are thrown around in the field of investments? Just what, if anything, to these mean. The Washington State Securities Division has proposed that that anyone who uses a professional designation that connotes some type financial planning expertise should fulfill the requirements and register as an investment adviser.

The Washington Department of Financial Instututions "notes the growth in the use of professional designations which state or imply that a person has special expertise, certification or training in financial planning," as quoted in a release by the North American Securities Administrators Association Inc. (NAASA).

The state therefore plans to clarify its rules to consider a person who uses such a professional designation as holding himself out as a financial planner. It would also prohibit the misleading use of other professional designations. Washington and other states have expressed the need to limit designations regarding advisors to senior citizens. Washington has now expanded its efforts to control the use of designations to protect investors of all ages.

Shepherd Smith and Edwards represents investors nationwide in claims against members of the securities industry. We have helped clients in more than 40 states, including victims of wrongdoing by those who call themsleves investment advisors, etc. To learn whether we can assist you, contact us to arrange a free consultation with one of our attorneys.

WIth securities class actions being dismissed at an alerming rate and charges being filed against high-profile securities class action attorneys, it's not suprising that securities class action filings fell 42% in the first half of 2007. In fact, this is the fourth consecutive semi-annual drop in filings of such cases, according to the Stanford Law School Class Action Clearinghouse and Cornerstone Research.

The study group has propounded a variety of possible theories for the precipitous drop in securities class actions. One absolutely preposterous theory, unsupported by data, is that securities fraud has dropped because of prior settlements and fines. A spokesman from the Stanford group states: "Economic theory suggests these factors should lead to a decline in the incidence of fraud--exactly what we have seen occur since the middle of 2005."

Another of the group's questionable explanations for the decrease in securities class action filings is a "strong stock market" hypothesis. Under that hypothesis, decreased levels of class action filings correlate to a strong stock market with low volatility. Yet, historical data also does not support this hypothesis.

Meanwhile, no mention was made in the group's report of the chilling effect of the wholesale dismissal of large numbers of class action cases by Wall Street friendly judges, for example, the case filed by Enron shareholders against Merrill Lynch and other firms. One Stanford Group spokesmen mentioned, but dismissed, any possible effect of indictments, guilty pleas and threats currently persued against leading class action attorneys by politically appointed federal prosecutors.

Judging from its irrational thinking, this study must have either been conducted in Stanford’s “Ivory Tower” or, more likely, the study group is funded by Wall Street, insurance companies and/or other anti-lawsuit factions.

Although securities class action claims may soon be extinct Shepherd Smith and Edwards specializes in representing clients one at a time. We have served thousands of individual and institutional victims of misconduct by members of the securities industry. Hiring an experienced law firm can greatly increase your chance of recovery. To learn whether your or your firm's investments were mishandled contact us to arrange a free consultation with one of our attorneys.

Related Web Resources:

The Stanford Group's latest mid-year report of securities class action claims.

The NYSE and its former boss Dick Grasso were heavily criticized over salary and benefits to Grasso of well over $100 million. Many thought it unconscionable for the head of a self-regulatory body to earn that kind of money. For that reason, and so it could play ball in the international arena, the NYSE simply bribed all 5000+ members of the NASD $35,000 each to vote to take over its regulatory functions.

The National Association of Securities Dealers, Inc. is an association. Its members are securities dealers. Yet, it does not like its name and wants to change it. After all, it sounds strange for an association of securities dealers to be the primary regulator of securities dealers - too much like a fox in charge of a hen house.

The NYSE takeover seemed a perfect excuse to change the name. So a few folks at the NASD thought about names that would sound more like it was something other than an association of securities dealers. After not so careful thought, the NASD came up with “The Securities Industry Regulatory Authority”, or SIRA.

Not too bad, except Webster’s defines an “authority” as “a governmental agency or corporation to administer a revenue-producing public enterprise, i.e. ‘the transit authority’.” In reality, the NASD is a non-profit corporation owned by its members. Basically, it has the same structure as a country club. Be that as it may, SIRA was announced as the new name of the NASD.

This name was not so carefully conceived because the NASD soon drew criticism for "SIRA." Even the slightest modicum of research would have revealed “sira” or “sirah” as a well recognized Islamic term for the study of the life of Muhammad. (What if, for example, the acronym “GOSPEL” had been selected?)

A test balloon was sent up for “The Securities Industry and Financial Markets Association," which semed ok -- until abbreviated “Sifma” which, said the NYSE Chief Executive, was reminiscent of "certain unpleasant diseases." Nor did it contain the misnomer “authority,” which was decidedly a keeper. Eventually, “Financial Industry Regulatory Authority” or “FINRA” was selected. It was a healthy name that did not offend any Constitutionally protected class and sufficiently obscured that the group is actually an association of securities dealers.

Well -- Oops! What were they thinking, says The National Association of Personal Financial Advisors (NAPFA) claiming the name will cause confusion. Securities dealers are dealers in securities and financial advisors are wholly different animals, not regulated by the NASD but by state regulators and the SEC.

Actually, these financial advisors have a point. For example, you have a problem with a “financial advisor” who would you call? If you called the “Financial Industry Regulatory Authority,” they would tell you “wrong number.” NAPFA said NASD made a “grave error in judgment,” since it would be insinuating it has “authority” over everyone in the financial industry, which is simply not true.

Back to the drawing board? Not likely! If the NASD has one quality it is arrogance. Offending 1.4 billion Islamic people in the world is one thing, but admitting yet another mistake is just not going to happen. As for confusion over what FINRA is or does … well, isn't that the whole reason for the name change?

During these events CEO of the NASD, Mary Schapiro remarked: "What's in a name?" Perhaps, Mary, a name might give some indication of what you are, so why not call your organization “The National Association of Securities Dealers?”

Shepherd Smith and Edwards is a securities law firm which represents investors nationwide in claims against securities dealers and investment firms (but rules require us to use our names). Thus, whether you have a problem with a securities dealer or an investment advisor you can call us at 800-259-9010 or contact us via email to arrange a free confidential consultation with one of our attorneys.

Defrauded Enron shareholders recently lost again, this time as victims of federal judges who seem intent on helping Wall Street crooks rather than Wall Street victims. With their case before the U.S. Supreme Court, the Enron shareholders lost yet again when the SEC and Bush Administration, who had indicated they would intervene, missed a deadline. Now, three former SEC Commissioners are asking the Supreme Court to allow them to intervene to help.

In 2001, the total value of Enron shares plummeted from over $80 billion to almost zero. Enron officials and its auditors were indicted, several persons were convicted and some are now serving jail terms. The auditing firm of Arthur Anderson was forced to close. The scandal then turned to several Wall Street firms which are claimed ot have played a large role in assisting Enron to falsify its books.

Several individuals and firms were accused - and four former Merrill Lynch Brokers were convicted of by a jury - for arranging loans to appear as sales in order for Enron to book the loans as profits. Yet, just as the Enron shareholders’ claims against Merrill Lynch were headed for trial, business-friendly appointed appellate judges dismissed the case.

The judges’ decision stated that the federal securities law simply does not allow investors to recover from Wall Street firms that assist companies to defraud them. (Changes by Congress in the last decade forbid securities class actions to be filed under any other law.) The Enron shareholders then appealed to the Supreme Court to try to reinstate their case.

Because this is the same law the SEC must use to regulate Wall Street participants, one would think the “Wall Street police” would object to being hamstring by this outcome. However, the politically appointed SEC commissioners now take the side of Wall Street firms rather than the investors it is designed to protect. In fact, the SEC did nothing on the Enron case until embarrassed by the press into stating it would intervene on behalf of the investors.

The SEC says it submitted documents to the Office of the U.S. Solicitor General, which speaks for the Bush administration before the Supreme Court. However, the Solicitor General’s office says it did not accept the SEC's position and instead allowed the deadline to pass for filing legal briefs in the case. That decision came after both President Bush and Treasury Secretary Henry Paulson said that if the Enron shareholders were allowed to win this would put U.S. companies at a disadvantage to foreign rivals and expose businesses to liability for fraud.

Shocked by the situation, a bipartisan group of former SEC leaders, including former SEC Chairmen William H. Donaldson (R) and Arthur Levitt (D), and former SEC Commissioner Harvey J. Goldschmid (D), have now asked the Supreme Court for permission to submit their own post-deadline brief on behalf of the Enron shareholders calling this a "critical" case.

"Holding liable wrongdoers who actively engage in fraudulent contact that lacks a legitimate business purpose does not hinder, but rather enhances, the integrity of our markets and our economy," wrote their lawyers, New York University law professor Arthur R. Miller and former SEC lawyer Meyer Eisenberg. "We believe that the integrity of our markets is their strength."

Federal Prosecutors in the Bush Administration also seek to put the Enron shareholders' lead attorney in jail and recently indicted his former firm and law partners.

Shepherd Smith and Edwards is a securities law firm which represents investors nationwide in claims against investment firms. If they fail in their appeal, we plan to represent many of the Enron shareholders in individual claims against Merrill Lynch and others. To learn whether we can assist you in a claim contact us to arrange a free confidential consultation with one of our attorneys.

Edward D. Jones & Co. will pay $75 million to settle charges by the Securities and Exchange Commission that it failed to adequately disclose financial incentives to sell mutual funds from its Preferred Families of mutual funds.

The SEC also said that Edward Jones did not make adequate disclosures on its website about its revenue sharing, its directed brokerage payments and other payments for distribution of mutual fund shares. The firm was also accused of failing to disclose information about college savings (or “529") plans it sold.

Edward Jones agreed to pay $37.5 million in civil penalties, as well as $37.5 million in disgorgement, and to alter its website disclosures about the preferred mutual fund family program and the college savings plan, but neither admitted or denied the claims against it.

Shepherd Smith and Edwards represents institutional and individual investors nationwide in claims against members of the securities industry. We have served thousands of victims of misconduct by investment firms and their representatives, including those at Edward Jones & Company. To learn whether our firm can assist you, contact us to arrange a free consultation with one of our attorneys.

Last month, when Brookstreet Securities suffered a flame-out over high risk mortgage investments, its second in command, also the son of its founder, joined Wedbush Morgan and invited Brookstreet brokers to join him at that firm. Some thought it an odd fit, but the firms may have more in common than earlier believed.

Recently, a group on nuns, who claim they were led to believe they were making safe investments, apparently had their funds invested by Wedbush into mortgage-backed CMO securities which were just pools of mobile home loans. They soon lost $1 million, according to a complaint filed by The Sisters of St. Joseph of Carondelet in California against Wedbush Morgan in arbitration through the National Association of Securities Dealers.

Ed Wedbush, president of the firm that handled the nuns' investments, said in an interview that the losses in this and other cases came on the riskier portions of mortgage investments and were the result of "clients being very aggressive and wanting high yields." They should have understood, he said, that "high yield is high risk." (The statement resembles another recently made by Oppenheimer & Company, which claimed an elderly widow “only has herself to blame” for losses in a joint account as her husband lay dying. Oppenheimer was subsequently fined $1 million and ordered to reimburse over a million to the widow by the state of Massachusetts.)

Wedbush has been named in over 40 complaints over CMO products. It was ordered to pay over $1 million to the Narramore Christian Foundation, a nonprofit mental-health organization in Arcadia, Calif. In another case, it was ordered to pay $3.8 million in damages and fees to 22 investors. Wedbush blames these problems on one broker who it says has since the left the firm.

These are among several broker-fraud complaints involving risky mortgage investments that have been filed with regulators and in securities arbitration actions. Some cases involve sub-prime loans while others are in “interest only”, “inverse floaters” and other high-risk, difficult to understand and dificult to price mortgage investments.

Samco Financial Services is another firm accused of defrauding a "novice investor" into investing her funds, which she wanted to be safe, into “inverse floater CMOs.” The complaint states that her $100,000 was wiped out before she even started, since the securities purchased in her account were worth $100,000 less than she even paid for them. The firm gave up its brokerage license last year, according to the NASD.

Just as multi-billion dollar portfolios such as hedge funds, including those managed by Bear Stearns Cos, have been hit hard by losses in sub-prime and other high-risk mortgage securities, so also have smaller institutional portfolios and even individuals' accounts endured losses. Such losses have come through CMO and other mortgage-backed securities, but also through certain partnerships, REITs shares, mutual funds and other investment vehicles.

Shepherd Smith and Edwards represents institutional and individual investors nationwide in claims against members of the securities industry. We have served thousands of victims of misconduct by investment firms and their representatives, including those at Brookstreet and at Wedbush Morgan. To learn whether our firm can assist you, contact us to arrange a free consultation with one of our attorneys.

UBS Financial Services, Inc. will pay $23.3 million to settle charges by New York’s Attorney General of "inappropriately steering" of brokerage customers into fee-based accounts. The NYAG said that under the agreement UBS will pay a $2 million fine and $21.3 million to approximately 3,000 customers it inappropriately placed in its InsightOne program.

According to the NYAG office, UBS charged one 91-year-old InsightOne client more than $35,000 over two years, although only four trades transpired in his account, meaning each trade cost him approximately $8,800. In another example, it says an 82-year-old paid approximately $24,000 in InsightOne fees one year in which only one transaction took place.

"UBS convinced customers to rely on its advice and then abused that trust," said NYAG Andrew Cuomo. "This major settlement is a win for customers inappropriately pushed into unsuitable brokerage accounts and a warning to the entire industry that customers' interests must come first."

UBS denied any wrongdoing, said it only settled to avoid litigation and is "disappointed with the AG's statement, which mischaracterizes the program and its operation." Meanwhile, a NYAG spokeswoman said the regulator will continue to investigate fee-based accounts of UBS and other firms statewide.

Our firm has noted that, when fees are charged on each transaction, there is an incentive to "churn" accounts. More recently we have noted that, when accounts are switched to being charged a percentage of the assets in the account, the opposite is true. The number of transactions falls dramatically and many clients are completely ignored as fees are generated.

Shepherd Smith and Edwards represents institutional and individual investors nationwide in claims against members of the securities industry. We have served thousands of victims of misconduct by investment firms and/or their representatives. To learn whether our firm may be able to assist you, contact us to arrange a free consultation with one of our attorneys.

Related Web Resources:

Office of New York Attorney General Press Release: "Largest Ever Settlement In Fee-based Brokerage Account History", with attached Complaint and Settlement Agreement

After a widespread investigation into late-trading of mutual funds the SEC levied sanctions against various mutual fund management companies and others, including fines as well as orders to disgorge profits and to reimburse the victims of the fraudulent trading. In 2004, Invesco was ordered to pay $325 million and AIM Advisors was ordered to pay $50 million.

The basis of the fraud was simple: Closing prices of mutual fund shares are set based on closing prices of the shares held in the funds. However, inflow and outflow of funds can legitimately occur based on orders placed prior to the close. The fraudulent orders were placed after the market closed but were made to appear as earlier orders. Those transacting the late orders had the unfair advantage of news announced after the close as well as post-closing changes in stock prices.

Over several years, billions were reaped from such improper market timing activities. The victims of the fraud were the millions of legitimate owners of the mutual funds. The SEC has established what it calls “Fair Funds” to reimburse victims of late trading and other scams. This week over $300 million will be also distributed to Time Warner shareholders who bought based on improper financial data. The SEC says that, with these distributions, the total paid from Fair Funds now tops $2 billion.

Shepherd Smith and Edwards represents individuals and institutions who are victims of securities fraud. We have represented thousands of investors nationwide to recover. If you our your firm have lost money in because of misconduct by those in the securities industry contact us to arrange a free consultation with one of our attorneys.

Securities America, Inc. agreed to a $375,000 fine to settle charges by the NASD that it received improperly directed mutual fund commissions on behalf of one of its brokers, failed to supervise and failed to disclose the arrangements to the affected mutual fund owners.

The NASD said that this situation, in which a mutual fund company directed brokerage fees specifically for the benefit of a lone broker, is the first known case of its kind. NASD rules prohibit registered firms from allowing sales personnel to participate in directed brokerage arrangements. NASD fair dealing regulations also require disclosure to clients of such fees and other compensation received through arrangements involving their accounts.

A directed brokerage arrangement is one in which a client, such as a pension fund, directs a planner to use a certain broker-dealer for trade executions. In return for the commissions received on the transactions, the broker-dealer provides other services to the advisor or these can be rebated to the clients. The Securities America broker arranged for such commissions from union-sponsored retirement plan clients to be directed to his firm for his own benefit.

In its sanctioning order, the NASD said the broker negotiated an arrangement with a mutual fund company to have thousands of dollars of brokerage commissions directed to him every month and that Securities America approved the arrangement for almost two years while it received $420,000 in directed commissions from the fund company for the broker’s benefit, of which $262,000 was paid to the broker.

Shepherd Smith and Edwards represents clients that are the victims of securities fraud. If you have lost money in because of misconduct by someone in the securities industry, hiring an experienced law firm can greatly increase the chances of recovering your losses. Contact us to arrange a free consultation with one of our attorneys.

Margin debt owed on stocks listed on the New York Stock Exchange has surpassed $350 billion. This is up $35 billion, or over 10%, in just one month. The jump in margin debt brings new warnings to investors concerning the risks of leveraged investments.

Traditional theories concerning the stock market include that small investors are always wrong. They jump into the market when it is near its highs and get out near the lows. There is both guesstimate and empirical date to support this theory. One measure of investing by small investors is margin debt. With the exception of hedge funds, most large investors do not use margin.

Considering this theory, the warnings are thus two-fold. Not only is high margin debt an indicator of a market top, margin investing can be very dangerous. Margin debt amplifies losses and even a moderate drop in stock prices can cause forced liquidations. As well, the cost of margin interest exacerbates losses in leveraged accounts. Non-margined investors can wait for a recovery without liquidation or enduring interest costs.

While dangerous for investors, margin loans are remarkably safe for brokerage firms. Margin loans begin as 200% collateralized, comparable to making home loans which require a 50% down payment. As well, the loan collateral is required to be liquidated if an investor’s equity falls below 25% of the portfolio value. These standards, coupled with high liquidity of the securities collateral, mean losses to brokerage firms on margin loans are relatively small.

Brokerage firms earn huge bucks on margin debt. Interest rates charged investors are usually several percentage points higher than brokerage firms’ cost of capital. Because the losses are quite small, as discussed above, firms can easily earn as much as a third of the interest it charges its clients. If, for example, the net return to brokerage firms is 2% of the current margin debt on NYSE stocks, margin loans would earn them an extra $7 billion! Add perhaps another $7 billion made from loans on NASDAQ stocks and (as a U.S. senator once said) pretty soon we are talking about real money!

NYSE officials wish to attribute the rise in margin debt to relaxed standards granted on margin requirements when option hedging techniques are used. In any event, margin accounts are very profitable to Wall Street. Meanwhile, using the stock market as a casino is simply not appropriate for many investors. How about you?

Shepherd Smith and Edwards represents clients that are the victims of securities fraud. If you have lost money in a margin account or because of misconduct by someone in the securities industry, hiring an experienced law firm can greatly increase the chances of recovering your losses. Contact us to arrange a free consultation with one of our attorneys.

After sale if its U.S. Trust subsidiary to Bank of America for $3.3 billion, Charles Schwab Corporation has decided to distribute even more than the proceeds of that sale to its shareholders by buying back shares and paying a special dividend.

Under the plan, San Francisco-based Schwab will pay up to $22.50 per share for 84 million shares of its own stock -- 10 percent above the previous closing price. It will guarantee selling stockholders at least $19.50 per share, and also purchase up to 18 million additional shares from its founder. Charles Schwab will himslef receive over $400 million and will maintain his stake at its current level of 18%, which would be valued at over $4.5 billion.

The auction, which covers about 7 percent of Schwab's outstanding shares has already begun and is to be completed by July 31. In addition to $2.3 billion to buy the stock, in August Schwab will also pay $1.2 billion to shareholders through a $1 per share special dividend.

The U.S. Trust sale caused speculation that Schwab may buy one or more of its online competitors, such as E-Trade Financial Corp. or TD Ameritrade Holding Corp. Schwab repeatedly said it was not interested in any such takeover. Some of the speculation came from those wanting their shares in the other companies to be purchased. Two hedge funds publicly urged TD Ameritrade to seek a sale to E-Trade or Schwab.

Schwab’s chief financial officer said "We have conducted a thorough review of alternatives for deploying both the proceeds from the sale of U.S. Trust and our other available financial resources, and we believe this plan is an efficient means of achieving an appropriate level and mix of capital for Schwab."

Since Charles Schwab again assumed control of the firm three years ago, his shares and the other shareholders have tripled in value. The company lowered its commissions, stepped-up its "no-nonsense" investment advice and earned a record $1.2 billion last year.

Shepherd Smith and Edwards represents clients that are the victims of securities fraud. If you have lost money because of misconduct by someone in the securities industry, hiring an experienced law firm can increase the chances of recovering your losses. Contact Shepherd Smith and Edwards today.
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The Securities and Exchange Commission recently made a $37 million disbursement to more than 300,000 investors in the Columbia Funds who were injured in the widespread fraudulent mutual fund market timing scandal. The SEC said this was the first of four anticipated distributions of approximately $140 million total to be paid to 600,000 affected Columbia account holders.

These funds were obtained in a settlement in 2004 with Columbia Management Advisors Inc. and Columbia Funds Distributor Inc. The SEC had charged that between 1998 and 2003, the two entered into or allowed arrangements to market-time Columbia funds.

The SEC has returned more than $1.8 billion through such distributions, said Linda Thomsen, director of the agency's Division of Enforcement. Additional information can be learned by contacting David P. Bergers, John T. Dugan, or Celia D. Moore in the SEC's Boston Regional Office at 617-573-8900.

Shepherd Smith and Edwards represents individuals and institutions with claims against investment firms. If you or your firm are the victim of misconduct by members of the securities industry, contact us to arrange a free consultation with one of our attorneys.

Related Web Resource:

Full Text of the Discribution Plan

The Securities and Exchange Commission has published a 121-page proposal for dropping the requirement that non-U.S. companies reconcile to the generally accepted accounting principles (GAAP) as required by U.S. firms in financial reports.

The proposal would apply to foreign private issuers that file financial statements to comply with the English language version of IFRS as published by the International Accounting Standards Board. “The Commission has taken a significant step on this important policy matter that was outlined in the 'Roadmap' announced in 2005," said Conrad Hewitt, the SEC chief accountant.

“Along with the Commission's work relating to internal control reporting and deregistration, this proposal to accept financial statements prepared in accordance with IFRS as published by the IASB without a US GAAP reconciliation represents another significant action to tailor the regulatory environment for foreign companies in the U.S. public capital markets," said John White, director of the SEC's Division of Corporation Finance.

This latest move in the “Race to the Bottom” in securities regulation is in response to fear mongering by Wall Street interests. They claim the U.S. will otherwise lose the battle for listing shares and say our nation is on the brink of disaster, since it can not compete with foreign markets with little oversight. This is notwithstanding a multitude of scandals on Wall Street in the past few years, and while record profits are being earned by the perpetrators.

The strictest securities regulation in history began in the U.S. about seventy-five years ago. This came after the stock market crash of 1929, which sent this country into a tailspin followed by the depression years of the 1930’s. Since then, under those regulations, the U.S. economy and capital markets have boomed and become the envy of the world. Yet, to listen to Wall Street, such regulation will soon be our downfall.

Conventional wisdom has held that investors prefer investing into companies and markets which have regulations. The new un-conventional theory is that lawless oversees markets will rob the U.S. of its financial markets. Or could there be a different motive? If we continue to remove restrictions on Wall Street, its participants will not have to worry about behaving – or even paying token fines if caught.

Shepherd Smith and Edwards represents individuals and institutions with claims against investment firms. If you or your firm are the victim of misconduct by members of the securities industry, hiring an experienced law firm can increase your chances of recovery. Contact us to arrange a free consultation with one of our attorneys.

Related Web Resource:

Text of SEC Reconciliation Elimination Proposal

Massachusetts securities regulators fined Oppenheimer & Company, Inc. a million dollars for failing to supervise its representatives and ordered the company to also pay $135,000 to the victim, the difference between the losses she sustained and the amount Oppenheimer earlier paid her.

Oppenheimer was charged with failing to supervise a broker as he allegedly engaged in acts including theft, fraud, churning and unauthorized trading in the account of an elderly couple. The firm consented to the order without admitting or denying the claims. The broker is currently under indictment for securities fraud.

After her husband died, personnel at the elderly woman's bank raised concerns over the activity which had occurred in the couple's brokerage account. The widow approached Oppenheimer and claims were ultimately filed in arbitration. Oppenheimer then responded by saying she “only has herself to blame for any losses or other injury she may have suffered.” The arbitration claims were later resolved with Oppenheimer paying less than was lost.

The Massachusetts Consent Order states that Oppenheimer failed to reasonably supervise the broker whose trading was excessive based on the couple’s age, objectives, risk tolerance, financial condition, financial sophistication and personal health. It adds that Oppenheimer’s branch manager repeatedly reviewed and approved the activity and that inadequate action was undertaken by the compliance department.

Further action will apparently also be taken against Oppenheimer for stating that it had provided the regulators with all relevant e-mails during the investigation, which the regulators claim is false.

Shepherd Smith and Edwards represents individuals and institutions with claims against investment firms. If you or your firm are the victim of misconduct by members of the securities industry, hiring an experienced law firm can increase your chances of recovery. Contact us to arrange a free consultation with one of our attorneys.

Related Web Resources:

Massachusetts Securities Division's Consent Order against Oppenheimer & Company, Inc.

The former chief administrative officer of Trautman Wasserman & Co. Inc. agreed to pay a $50,000 fine to settle SEC administrative charges he helped facilitate a scheme to engage in late-trading in mutual funds shares on behalf of certain favored customers and for the firm's own account.

The man who once served as TWCO’s "de facto chief compliance officer" consented, without either admitting or denying wrongdoing, to be barred from the securities industry, cease and desist from future violations and cooperate in the SEC’s investigation.

Earlier this year, the SEC charged the executive, TWCO and five of its other officials over their alleged roles in the scheme. The SEC claims included that he and two others he supervised thwarted efforts by mutual fund companies to curtail excessive timing.

According to the SEC, the three used various means to conceal from the fund companies the identities of the firm's market timing customers as well as the involvement of two TWCO brokers who were "widely known" to work with market timers.

Shepherd Smith and Edwards represents individuals and institutions with claims against investment firms. If you or your firm are the victim of misconduct by members of the securities industry, hiring an experienced law firm can increase your chances of recovery. Contact us to arrange a free consultation with one of our attorneys.

Related Web Resource:

In re Trautman Wasserman & Co. Inc., SEC, Admin. Proc. File No. 3-12559, 6/29/07

Text of SEC's Order

Authorities in Knoxville have arrested an Ameriprise Financial Services broker who is accused of defrauding Tennessee residents. The charges include theft and forgery. At least five alleged victims have come forward claiming losses of almost $1 million. A client in another state claims damages of more than a million dollars and detectives are seeking to learn of more victims.

Delbert Forster Blount III worked out of an Ameriprise office in Knoxville and another in Morristown, Tennessee. It is reported that Blount received checks from clients made out to his firm but deposited these into his personal account rather than his clients' investment accounts.

According to the latest disclosures made by Ameriprise, fifteen complaints have been lodged against Blount by his clients alleging damages totaling more than $2.5 million. Many of those complaining are reported to have provided Ameriprise with copies of cancelled checks made out to the investment firm which were instead deposited into an account opened by Blount.

The disclosure records indicate that, after working for a year at a Nissan dealership in Aleda, Tennessee and a year at John Hancock Financial Services, Blount then joined American Express Financial Advisors in 1998. In 2005, American Express sold that firm and it was then renamed Ameriprise Financial Services.

Shepherd Smith and Edwards represents individuals and institutions with claims against investment firms. If you or your firm are the victim of misconduct by members of the securities industry, hiring an experienced law firm can increase your chances of recovery. Contact us to arrange a free consultation with one of our attorneys.

Related Web Resources:

Knox County Tennessee Sheriff Victims' Alert

Additional Information about Ameriprise Financial Service

Enemies of Wall Street learned even before the recent Alberto Gonzales affair that indictments by U.S. Prosecutors can be in their future.

King of securities class action suits was the law firm of Milberg Weiss & Bershad LLP. Federal prosecutors indicted the firm last year on charges of paying kickbacks to clients to serve as lead plaintiffs in class-action lawsuits.

The government probe of the firm began just after the Bush Administration entered the White House promising to curtail law suits. After the firm pleaded not guilty, prosecutors went after the firm’s partners. With little headway seemingly made, prosecutors were criticized that the case must lack legs.

Yet, on Monday, David Bershad, a 67 year old a former senior Milberg partner with knowledge of the firm's finances, pleaded guilty to a conspiracy count in federal court in Los Angeles. In court papers he said he and others agreed to conceal secret payment arrangements that the firm had with named plaintiffs in class actions.

Bershad will forfeit $7.75 million, pay a $250,000 fine and could face as much as five years in prison, depending on his cooperation. His attorney says "David Bershad is committed to making amends for what he has done.”

There is speculation that the prize targets in the case are partner Melvyn Weiss and former partner William Lerach. Neither Mr. Weiss nor Mr. Lerach has been charged, but the government reportedly offered both plea deals involving prison time, which they rejected. Lerach left Milberg in 2004 to form his own firm but has announced retirement at the end of the year.

After the deal struck with Mr. Bershad, attention also turns to the Milberg Weiss firm, which has reportedly held settlement talks with prosecutors. The terms mentioned include Milberg paying a fine and agreeing to increased oversight of its practices.

Some Wall Street observers compare the action against Milberg Weiss to that against Drexel Burnham Lambert in the late 1980’s. At the time, junk bonds dominated the capital landscape and Drexel’s Beverly Hills bond financing unit had gained a significant portion of the financial markets. Was New York’s Wall Street afraid of losing its control?

Suddenly, in stepped an unknown federal prosecutor from New York – one Rudolph Guiliani - who single-handedly closed Drexel and jailed the head of its bond unit, Michael Milken. As for Guiliani, the rest is history ... perhaps.

Shepherd Smith and Edwards represents individuals and institutions with claims against investment firms. If you or your firm are the victim of misconduct by members of the securities industry, hiring an experienced law firm can increase your chances of recovery. Contact us to arrange a free consultation with one of our attorneys.

Morgan Stanley & Co. Inc. agreed to pay a $250,000 civil penalty to end claims by Rhode Island Regulators that it failed to supervise sales representatives who engaged in unethical and dishonest practices in the sale of mutual funds and variable annuities.

According to the director of the Rhode Island Department of Business Regulation, the practices in question took place in Morgan Stanley's Providence office. Morgan Stanley agreed to the penalty and will undertake a comprehensive review of the practices of the two sales representatives involved to ensure that there are no other violations of the securities statutes and rules involving other clients.

The state's superintendent of securities said the investigation uncovered securities laws violations that occurred over a three-year period and involved a lack of supervision and oversight of the sales representatives. “Morgan Stanley failed to ensure that there were adequate procedures in place reasonably designed to prevent these unlawful practices,” she said.

The investigation reportedly revealed multiple instances where a sales representative sold less-expensive, no-load mutual funds owned by the clients and replaced them with more-expensive mutual funds and variable annuities. This practice resulted in an increase in investment costs to the clients, while reducing the investment diversification of the clients’ portfolios.

According to the claims: That same representative liquidated a certificate of deposit owned by an 80-year-old customer to purchase a variable annuity, a product determined to be totally unsuitable for a person that age and a second representative failed to exchange mutual funds for a customer in a manner that would have avoided the payment of sales charges, and failed to provide the customer with the benefit of available breakpoints on commissions.

The state regulators also determined the sales representatives recommended investments in mutual funds and variable annuities that were not suitable for customers. Morgan Stanley agreed to the sanctions without admitting or denying the allegations.

Shepherd Smith and Edwards represents clients that are the victims of securities fraud. If you have lost money because of misconduct by someone in the securities industry, hiring an experienced law firm can increase the chances of recovering your losses. Contact Shepherd Smith and Edwards today.

First, a recap: The Investment Advisors Act of 1940 states that investment advisors have a fiduciary duty to clients. Stock Brokerage firms have worked for decades attempting to escape any fiduciary duty to their clients. When they decided that, in addition to being brokerage firms, becoming investment advisors was also lucrative, what were they to do?

Simple, use their political influence at the SEC. While the SEC's job is to protect investors, as political appointees, its Commissioners are political (the present SEC Chairman is a former activist Republican Congressman). To accommodate Wall Street, the SEC simply said Wall Street firms were exempt from the Investment Advisors Act.

Crying foul, the Financial Planning Association, those who are not stock brokers, sued the SEC - and, two months ago, they won! Stinging from the defeat, the SEC decided not to appeal. (After all, how can the SEC exempt anyone from laws written by Congress?) Wounded, Wall Street then asked for and was granted several months to decide what to do.

The Director of the SEC then personally, not waiting for SEC backing, asked Congress to look into "soft dollar" arrangements of investment advisors with securities dealers, which he said is a subject of abuse. The SEC also investigated several large investment advisors and remarked that only one was properly disclosing its fees. This is a huge shot across their bows!

So much for a vendetta against investment advisors, but how is the SEC going to now save Wall Street firms from being fiduciaries of their clients, and quickly! Well, maybe the law could be changed.

The SEC has announced a hasty open meeting to be held this Wednesday to consider the adoption of a new antifraud rule under Section 206 of the 1940 Investment Advisers Act, saying the change is "designed to provide more protection to investors." This, of course, would mean Congress would have to amend the Act.

Warning to Investors: BEWARE OF SEC COMMISSIONERS BEARING GIFTS! In case you haven't noticed, nothing good for investors has come out of Washington in years. Why would anyone think a final bill on investment advisors would not grant some sort of exemption to Wall Street? These folks are paying mega-bucks to lobby both parties to get what they want.

by: William S. Shepherd

William Shepherd is the founder of the law firm of Shepherd Smith and Edwards a securities law firm that represents investors seeking recovery of losses in their accounts at investment firms. If you or someone you know has suffered investment losses, contact Shepherd Smith and Edwards today.

As we reported in June: Brookstreet Securities Corp. reported severe problems with CMO securities and soon announced its closing. Scott Brooks (son of Stan Brooks, founder of Brookstreet) left for Wedbush Morgan Securities Inc. of Los Angeles, inviting Brookstreet's representatives to join him.

Brookstreet operated using independent contractors almost exclusively and Wedbush reportedly plans to sign the Brookstreet representatives to similar agreements. Wedbush Morgan had about 40 independent contractor reps of 260 total brokers, said Ed Wedbush, that firm's CEO. About 100 of the 650 Brookstreet brokers have so-far followed Scott Brooks, according to Ed Wedbush. "We're recruiting, like other firms, some of their brokers and bond traders,” he said.

Many Brookstreet reps don't know much about Wedbush, said Larry Papike, a San Diego-based recruiter, “So I think brokers really started looking around for other solutions,” he said. Securities America Inc. and J.P. Turner & Co. have picked up a number of Brookstreet reps, Mr. Papike said.

Shepherd Smith and Edwards represents clients that are the victims of securities fraud. If you have lost money because of misconduct by someone in the securities industry, hiring an experienced law firm can increase the chances of recovering your losses. Contact Shepherd Smith and Edwards today.

As a sub-prime mortgage hedge fund managed by Bear Stearns encountered margin calls and was no the brink of liquidation, the situation apparently did not faze the golfing of its chief executive, John Cayne.

Weather permitting, Mr. Cayne hops a helicopter from Manhattan to a golf club in Ocean Township, N.J., landing on the grounds. According to posting on an online golf database, Cayne continued to golf through the weeks in June as one of his firm's hedge funds was evaporating.

On June 14, the day Bear Stearns reported a 10 percent drop in its operating earnings for the second quarter, Mr. Cayne played a round of golf, shooting a 96, according to the online database. The next day, he played again.

The following week, as Merrill Lynch and others pressured Bear Stearns to increase the collateral on loans they had made to its sinking fund, Mr. Cayne was back on the course. That day, he shot a 98. The next day, in the biggest rescue of a hedge fund in almost a decade, Bear Stearns committed $3.2 billion to bail out the fund (later revised to $1.6 billion) That day, Mr. Cayne did not miss his golf game and shot a 97.

A spokeswoman for Bear Stearns said that Mr. Cayne flies down after work on Thursdays and plays an evening round of golf. On Fridays, he plays a round and works from his New Jersey home, where he is in constant touch with the office, she said.

Shepherd Smith and Edwards is a securities law firm which represents investors nationwide in claims against investment firms. To learn whether our firm can assist you or your firm, contact us to arrange a free confidential consultation with one of our attorneys.

The SEC has stirred controversy with its new online tool that allows investors to search for companies with ties to countries the State Department has designated as "state sponsors of terrorism." The official list includes Sudan, Syria, North Korea, Iran and Cuba.

The SEC initiated the online search site on June 25, with its Director saying that "no investor should ever have to wonder whether his or her investments or retirement savings are indirectly subsidizing a terrorist haven or genocidal state."

However, some in the business community claim that some companies, including Baker Hughes and Immtech Pharmaceuticals, were wrongly placed on the SEC's so-called terrorism "blacklist." The list, they say, unfairly portrays a number of internationally-headquartered financial institutions and other corporations in a misleading, negative light and has been compiled without regard to the extent of their dealings, if any, with the five countries.

This action by the SEC will "needlessly discourage international firms from listing their securities in the U.S. at a time when (Treasury) Secretary Paulson and others are working to enhance the international competitiveness of our capital markets," according to the head of a banking group.

Chalk this up as yet another outcry by the business community and Wall Street using the scare of lost company listings. Their real goal is to get yet another "get-out-of-jail-free" card to reduce legal, regulatory and other restraints sought to curtail "crime in the suites."

By: William S Shepherd

William Shepherd is the founder of the law firm of Shepherd Smith and Edwards a securities law firm that represents investors seeking recovery of losses in their accounts at investment firms. If you or someone you know has suffered investment losses, contact Shepherd Smith and Edwards today.

According to the Government Accounting Office (GAO) Americans over 65 hold more than $15 trillion in assets and, with "Baby Boomers" soon reaching retirement age, that figure will likely balloon. As financial firms, including insurance companies, design products aimed at this pot of gold, scam artists lick their chops for a piece of the action. Unfortunately, their paths cross.

As we very recently reported, a federal judge in Hawaii dismissed a class action suit against Midland National Insurance saying that, because different sales pitches were used by different salespersons, the claims by elderly Hawaiians can not go forward. Meanwhile, regulators warn that scam artists are selling insurance products to the elderly. Thus, it appears that insurance companies can simply look the other way while con artists victimize the elderly using their annuities. [OUR FIRM PURSUES CLAIMS ONE AT A TIME TO AVOID THIS PROBLEM.]

A NY Times article today reports that a Massachusetts insurance agent became a "certified senior adviser" then advertised this and other credentials to retirees. Yet, he did not mention how easily he received that title: He paid $1,095 for a correspondence course, then took a multiple-choice exam with dumbed-down questions. The agent, and over 18,700 other applicants since 1997, passed the course.

The article further states that insurance companies, eager for sales representatives, embraced this agent as they have thousands of other such newly credentialed advisers. As his retiree business boomed, insurers paid the agent commissions over $720,000 the following year.

Massachusetts regulators then stepped in, filing a lawsuit claiming the agent improperly sold annuities and other products to the elderly. While the agent denies any wrongdoing, one of his clients - a 73-year-old widow caring for a son with Down syndrome - said he tricked her into buying complicated insurance contracts that left her unable to pay dental and home-repair bills. "His office was filled with things saying he was certified to help seniors," she said

According to the Times article, this salesman is one of tens of thousands of financial advisers who work hand-in-hand with insurance companies to reach "older Americans using impressive-sounding credentials like 'certified elder planning specialist,' 'registered financial gerontologist,' 'certified retirement financial adviser' and 'certified senior adviser'."

In only a few days, titles are obtained sounding similar to "certified financial planner" (CFP), and other credentials that require years of study, difficult tests and extensive background checks. "The degree isn't worth the paper it's written on," said another Massachusetts financial adviser, who took the certified senior adviser exam but does not use the credential. "It's a scam - a way to put a title on a business card that impresses gullible seniors," he said.

Advocates of the elderly complain that scam artists, many using such credentials, often give financial advice they are not qualified to offer. Yet, an overwhelming number are being paid by country's largest insurance companies - including Allianz Life, Old Mutual Financial Network and American Equity Investment Life Insurance - to sell elderly clients complicated investments that economists say most retirees should never own.

Some programs linked to insurance companies have taught agents to use abusive sales techniques, regulators say. Allianz, Old Mutual and American Equity have been listed as sponsors of seminars with names like the "Million Dollar Academy", where thousands of sales representatives were advised to scare retirees by saying, "I am all that stands between you and potential catastrophic loss." Other seminars instructed agents to "drive a wedge" between retirees and their established advisers.

"The insurers are happy to turn a blind eye to what salesmen are doing, as long as they make a sale," said Minnesota's attorney general, who is suing several companies, including Allianz, contending their products are inappropriate.

Allianz, Old Mutual and American Equity, whose revenues last year were a combined $163 billion, said they investigate the backgrounds of all agents, screen all sales to consumers to make sure they are appropriate, and have terminated representatives using improper sales methods. Those companies said they were not aware of abusive methods taught at any seminar they endorsed and otherwise distanced themselves from such tactics.

The North American Securities Administrators Association, an association of state regulators, reports that over one-third of all cases of financial exploitation of the elderly involve annuities. Hundreds of class actions have been filed against insurers over annuity sales to the elderly, including one in Minnesota against Allianz for nearly 400,000 plaintiffs. Yet, the latest ruling in Hawaii may change that.

Sales agents accused of wrongdoing say they followed the guidance of insurance companies. "I did what I was told," says the agent charged by Massachusetts regulators ..."If it was so wrong, why did everyone let me do it for so many years?"

Meanwhile, insurance companies pay commissions on annuities which are often two, three or even 10 times the amount paid on mutual funds, which have more strictly regulated cost disclosures. Such high and difficult to ascertain commissions are no doubt a factor in why annuities sales, according to the Insurance Information Institute, reached $182.8 billion last year.

Shepherd Smith and Edwards is a securities litigation firm dedicated to helping those who are victims of investment fraud to recover their losses. We have filed hundreds of claims involving improper sales of annuities to retirees and others. Contact us today to schedule a free consultation.

Related Web Resource:

Referenced New York Times Article

A judge in The U.S. District Court in Honolulu ruled that those who lost in annuities cannot bring a class-action suit against the annuity insurer, despite potential misleading and deceptive actions by the insurance firm. [Yokoyama et al. vs. Midland National Life Insurance Company.]

Lawyers representing the plaintiffs in the case alleged the defendant, Midland National Life Insurance Company, sold elderly Hawaiians inherently unsuitable, deceptive indexed annuity products that were designed to hide the true cost of an early contract cancellation.

The court cited two reasons it denied the class action against Midland. The first was that, whether or not Midland's actions were misleading or deceptive, different sales pitches by different insurance salespersons were made to those purchasing the annuities, therefore the investors did not have similar claims. The second, said the judge, was that the losses were not caused by the alleged misleading actions, but by changes in the securities market.

A comparison would be to say that: Although batches of tires were defective, the tire salespersons made different statements about how good the tires were and, although the tires exploded in the summertime, it was the heat not the tires that caused the explosions.

Sound Stupid? It is!

Yet, this is just another blow to investors who have been decimated court rulings over the past few years which have denied their claims against large financial firms. Once again, as the judge admitted, the court decision was based solely on procedural grounds, without any consideration of the actions which are claimed to have harmed those sold the annuities.

This is what those crying for "tort reform" and against "frivolous law suits" have been seeking all along: Change the law so insurance companies will not have to pay grandpaw when he is sold an annuity as a safe place for his pension savings, only to have the annuity lose half its value.

This may not have what you had in mind when you voted for those who said the the court system should be changed - but it is what you got. The question now is: How many legal rights will Americans have to give up before they "Get it?"

By: William S Shepherd

William Shepherd is the founder of the law firm of Shepherd Smith and Edwards a securities law firm that represents investors seeking recovery of losses in their accounts at investment firms. Cases such as these DO NOT prevent nvestors from seeking their own indivisual cliams against those who have decieved them. If you or someone you know has suffered investment losses, contact Shepherd Smith and Edwards today.

The Securities and Exchange Commission filed an emergency action in a Dallas federal court against Amerifirst Funding, Inc. and Amerifirst Acceptance Corporation alleging fraud.

The SEC contends that the offering of securities, known as Secured Debt Obligations ("SDOs"), are notes purportedly secured by automobile financing receivables created or purchased by the defendants. The district court entered temporary restraining orders suspending the offering, freezing the defendants' assets and requiring an accounting and repatriation of assets.

The court also appointed a receiver to secure assets for investors, and ordered defendants to preserve documents and submit to expedited discovery. The SEC says the ruling has frozen the assets of the investment firm, which it accused of running a scam that targeted senior citizens, mostly in Texas and Florida, since early 2006.

The complaint says the firm violated securities laws, including representing the investments were virtually risk-free when the fund instead invested in risky high-yield bonds, stocks and options. The firm's managing director is also accused of spending $4.7 million of investors' money for personal use, including land, cars, travel and child support.

Other individuals connected with Amerifirst and subsidiaries of the firm were also named in the civil action. An attorney for individuals named said they would vigorously contest the accusations.

SEC v. Amerifirst Funding, Inc., et al. (U.S.D.C., Northern District of Texas, Dallas Division, Civil Action No. 3:07-CV-1188-D)

Shepherd Smith and Edwards is a securities law firm which represents investors nationwide in claims against investment firms. To learn whether our firm can assist you or your firm, contact us to arrange a free confidential consultation with one of our attorneys.

In the U.S. District Court for the Eastern District of New York, a jury issued its verdict in the “squawk box” front running case. Seven people were acquitted of securities fraud, while Timothy O’Connell, a former Merrill Lynch & Co. stockbroker was found guilty of making false statements and of witness tampering. The judge, however, declared a mistrial for the one remaining conspiracy count to commit securities fraud against O’Connell. He faces up to 15 years in prison for the convictions, and prosecutors have announced that they will retry the conspiracy charge.

According to prosecutors, O’Connell, and the two other broker defendants, David Ghysels—a former Lehman Brothers broker—and Kenneth Mahaffy—a former Merrill Lynch & Co. brokers, purposely placed off-the-hook phones that were active next to internal speaker systems at their firms.

The purpose of doing this was to let a number of former A.B. Watley employees, including ex-president Robert Malin, former proprietary trading supervisor Keevan Leonard, former compliance director Linus Nwaigwe, and former CEO Michael Picone, listen in while large orders about to be made by institutional clients were broadcast over the boxes.

Anyone who hears these kinds of orders can trade in the same issue before the client’s order is completed and benefit from the changes in price that will be caused by the large order. This can, however, can lead to the customer not getting as good a price as he or she would have if the misconduct had not taken place.

According to the government, the three brokers were among those who regularly gave day traders at A.B. Watley information like this through the “squawk boxes.” In return, the traders allegedly paid the brokers large amounts of money via “wash trade” commissions. Some brokers also allegedly received bribes in cash.

The U.S. Securities and Exchange Commission says it will go forward with its civil lawsuits against the defendants for similar misconduct allegations.

If you are an investor who has lost money because of the misconduct of members of the securities industry, contact Shepherd Smith and Edwards right away. We are a law firm dedicated to helping investors like you, and we have a very good success record for helping our clients get their losses back. Shepherd Smith and Edwards offers a free consultation to all prospective clients.

Prosecutors to retry "squawk box" conspiracy case, Reuters, May 24, 2007

Two Ex-Brokers Acquitted in `Squawk' Case; One Guilty, Bloomberg.com, May 10, 2007

Related Resource:

A.B. Watley Group

A Texas judge dismissed a shareholder class action against the directors of energy firm TXU, holding that, under Texas law, shareholders of a company can not sue that company's directors. Thus, shareholders can only sue the company itself, which is really suing themselves. Meanwhile, the company can sue the board members but, since the board members would decide that, what is the likelihood? (An arcane action known as a shareholders derivative suit can be filed by the shareholders, if they can demonstrate the board should have initiated the action - against themselves - but did not.)

The lawsuit filed by the TXU shareholders claimed the directors violated their fiduciary duty in agreeing to acquisition of TXU by a private equity firm for $45 billion paid to the shareholders. Were the shareholders cheated? We will never know, will we, because the suit was dismissed, meaning that these and other shareholders can't sue a company’s directors - at least not in Texas.

If you learn of job openings for Corporate Directors, apply fast – and give me a call!

By: William S Shepherd

William Shepherd is the founder of the law firm of Shepherd Smith and Edwards a securities law firm that represents investors seeking recovery of losses in their accounts at investment firms. If you or someone you know has suffered investment losses, contact Shepherd Smith and Edwards today.

On June 11, 2007, we published an article entitled “Should Brokerage Firms Continue to Vote Their Clients' Shares without Permission, Including for Corporate Directors?” State Treasurer Richard Moore of North Carolina has recently answered that question with a resounding “No!”

In a statement, Moore contends that allowing such votes thwarts corporate reform and prevents shareholders of a company from having adequate representation in director elections. Moore is also a board member of NYSE Regulation and called on SEC to approve an NYSE proposal that would change its Rule 452 to eliminate broker voting in all director elections.

Under the NYSE’s current rule, brokers may vote on "routine" proposals if the beneficial owner of the stock has not provided specific voting instructions to the broker at least 10 days before a scheduled meeting. The proposed change would end all voting of customer shares for directors by categorizing all such elections as "non-routine."

Moore cites as an example a recent vote to elect Roger Headrick a director of CVS/Caremark, following a merger between CVS Corp. and Caremark Rx Inc. Headrick had been on Caremark's board of directors and, according to Moore, was criticized for his role in the controversial merger. Moore said that had broker votes been discounted, Headrick "would have become the first major public company director to be unseated by shareholders pursuant to a 'majority vote' bylaw."

“As shareowners, we continue to fight for a real voice and for strong governance measures that support long-term value," Moore said, "but these broker votes are rubber stamps for management, thwarting real change and preventing shareholders' voices from being heard."

Our Law Firm contends that Brokerage firms should do more to encourage shareholders to vote their own shares, rather than to simply ask if they want their identity revealed to companies. The knee-jerk reaction to revealing ones identity is to just say no. Brokerage firms claim they do a public service by helping companies obtain a quorum. Yet, these firms can also use their power to vote their clients' shares as clout over companies to get or keep these companies as investment banking clients.

Shepherd Smith and Edwards represents institutional and individual investors in claims against investment firms. If you have lost in your account at an investment firm contact us to arrange a free confidential consultation with one of our attorneys.

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More information on the hearing on investor protection and market oversight is available from the House Hearings Website

Hallmark Capital Corporation sought a “No Action” letter from the SEC’s Division of Market Regulation seeking it be given an exemption from registration as a broker-dealer (securities firm).

Hallmark states that it serves small businesses as a financial consultant, to assist such business with capital raising and other matters. It informs clients and potential clients it is not a broker-dealer, does not act as an agent for the client company and does not effect transactions for the account of others. The company also does not offer to sell securities to or solicit investment funds from the general investing public.

More specifically, its CEO stated that Hallmark assists small businesses with revenues under $25 million with their debt and equity capital needs, including preparing confidential information summaries describing the business, identifying broker-dealer firms that might work with these companies and arranging meetings for engaging broker-dealers to raise capital. It then has control over significant aspects of any securities transactions.

The company states that it is compensated with "a modest upfront retainer and a fee based on the outcome of the transaction." Hallmark states that it also provides its clients assistance with mergers and acquisitions and strategic consulting. These functions, the company contends, do not constitute the activities of a broker-dealer, since it does not effectuate transactions for the account of others, does not act as an agent on behalf of the client company and does not solicit investment funds from the general public.

The SEC Responded by stating that, although Hallmark "does not provide advice regarding ongoing activity, … based on the general descriptions of the activities included … it appears that [it] would be required to register with the Commission as a broker-dealer pursuant to Section 15(b) of the Securities Exchange Act of 1934."

Isn't this is the same SEC which, only after losing a lawsuit to investment advisors, stopped exempting large brokerage firms which were acting as investment advisors, from being subject to the Investment Advisors Act of 1940?

Shepherd Smith and Edwards represents investors in securities fraud claims. We have helped thousands of U.S. investors recover financial losses. Call Shepherd Smith and Edwards at 1-800-259-9010 for a free consultation.

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The text of the letter is available on the SEC's Website

The Securities and Exchange Commission filed suit in a New York Federal Court contending that Simpson Capital Management Inc., its owner and its head trader entered into late-trades in hundreds of mutual funds, defrauding the funds and their shareholders of approximately $57 million.

The SEC claims that the defendants placed more than 10,000 unlawful mutual fund trade orders after the market closed, enabling them to take advantage of knowledge of after-market events while receiving the price previously established that day as the fund's closing net asset value. Simpson Capital is the investment adviser to two hedge funds, Simpson Partners L.P. and Simpson Offshore Ltd.

The SEC further charged that the firm's owner, who was also an investor in the Simpson Funds, "personally earned at least $19 million in fees and profits" as a result of the fraudulent transactions, adding that the head trader “received more than $996,000 in salary and bonuses during the late trading scheme." The SEC is asking the court to order permanent injunctions, disgorgement plus prejudgment interest, and civil penalties.

This suit is one of many civil and criminal actions initiated by the SEC and other regulators for improprieties in the operation of hedge funds, as well as actions regarding the late trading of mutual funds by hedge funds, high profile Wall Street investment banks, mutual fund advisors and individuals.

Shepherd Smith and Edwards is committed to fighting for the rights of investors that are the victims of securities fraud. We have helped thousands of U.S. investors recover their financial losses. Call Shepherd Smith and Edwards at 1-800-259-9010 for your free consultation.

Related Web Resource:

SEC's Complaint filed in the NY Federal Court

The U.S. Treasury Secretary announced the second stage of its “capital markets competitiveness plan” devoted to efforts to “modernize the structure” of the regulatory system for all U.S. financial services providers. The announcement was made before the New York Stock Exchange’s conference on deals and deal-making, hosted by the Wall Street Journal.

As the securities industry is rapidly being globalized, Wall Street insists it can not compete with loose regulations elsewhere in the world unless U.S. standards for reporting, fraud and other wrongdoing are relaxed. Frenzied cries to federal and state officials hype this theme as if the “sky is falling.” Meanwhile, Republicans and Democrats, including candidates for both state and federal office, are taking the bait. Or, perhaps, these candidates know that many of the largest campaign donors around are found on Wall Street.

The fear mongering about losing the battle for listing shares has even invaded the courts as observers, including the SEC, lobby even the U.S. Supreme Court, stating that our nation is on the brink of disaster since it can not compete with foreign markets with almost no oversight.

Thus, U.S. must join in a “race to the bottom” in order to provide aide and comfort to crooks and would be crooks in corporate and investment banking circles. Notwithstanding all the scandals on Wall Street in the past few years, and while record profits are being earned by the perpetrators, there is a fear that there is just too darn much regulation here for honest folks to survive!

The strictest securities regulation in history began in the U.S. about seventy-five years ago. This was just after the stock market crash of 1929, which sent this country into a tailspin followed by the depression years of the 1930’s. Since that time, and under those regulations, the U.S. economy and capital markets have boomed and become the envy of the world. Yet, to listen to Wall Street’s “Chicken Littles,” such regulation will soon be our downfall.

The conventional wisdom has been that investors prefer investing their money into companies and markets which are overseen by watchdogs. Make sense? The new un-conventional theory is that lawless oversees markets will rob the U.S. of its financial markets. While investors scratch their heads at this, perhaps we should explore another motive: If we remove more restrictions on Wall Street, it can get away with murder, instead of simply being exempt from highway robbery (except for token fines).

The Treasury Secretary states "To maintain our capital markets' leadership, we need a modern regulatory structure complemented by market leaders embracing best practices." (That’s code for "the heck with investors, we represent Wall Street's interests.") Meanwhile, Under Secretary Robert Steel admitted that the Treasury would capitalize on its "great relationships with industry people" and "invite input from others to ensure that there is consultation and discussion from outside Treasury on the initiative ... I'm optimistic that people will reach out to us so we'll have the right dialogue," he said.

We note how well utility deregulation fared after input from Enron and others became policy. So, as many Americans cry out to have laws enforced to throw the poor out of our country, perhaps the investing public should also demand that laws be maintained and enforced to prevent multi-billionaire firms from continuing to rob them blind.

By: William S Shepherd

William Shepherd is the founder of the law firm of Shepherd Smith and Edwards a securities law firm that represents investors seeking recovery of losses in their accounts at investment firms. If you or someone you know has suffered investment losses, contact Shepherd Smith and Edwards today.

NASD levied a fine of $250,000 against Wells Fargo Securities LLC and $40,000 against its former research director, plus other sanctions, for failing to disclose that the lead analyst on reports issued on a company had accepted a position with that company.

The research reports concerned Cadence Design Systems, which designs semi-conductors for use in the global electronics market. According to the NASD, the analyst had applied for a job with that company prior to issuance of a report in 2005, and had two job interviews prior to issuance of others, none of which was disclosed in the reports.

The NASD’s sanctioning order states that the analyst was then offered a position at Cadence to earn over $300,000, plus Cadence stock and options, which she disclosed to the Wells Fargo and its head of research. Yet, weeks later Wells Fargo published a third research report favorable to Cadence, without disclosure of the hiring.

"The actions announced today should remind brokerage firms and research analysts of the importance of full disclosure of conflicts of interest in research reports," said the NASD’s Head of Enforcement. "There is no doubt that, where a research analyst is pursuing employment or has accepted a job with a covered company, NASD rules require that information concerning such a clear conflict of interest must be disclosed in research reports."

The analyst was also charged over her alleged role but is fighting the charges. Her lawyer called the allegations a "departure from the industry's current understanding of the rules," adding that the charges "ignore the plain language of the rules, which place the burden of disclosure in a member's research report on the member itself", meaning the disclosures were Wells Fargo’s duty, not that of the analyst.

Shepherd Smith and Edwards is a securities law firm which represents investors nationwide in claims against investment firms. To learn whether our firm can assist you or your firm, contact us to arrange a free confidential consultation with one of our attorneys.

The NASD fined four firms for mutual fund sales violations and for failures to properly supervise such sales. The fine amounts are $473,000 against MML Investors Services, Inc., $354,000 against NYLIFE Securities LLC, $322,000 against Securities America, Inc. and $100,000 against Northwestern Mutual Investment Services.

The violations charged include sales of Class B and Class B shares, causing investors not to receive the benefits of price breaks on Class A shares, failures to properly notify clients of available cost free transfers from one mutual fund to another at the funds’ net asset values and failure to have adequate supervisory systems and procedures to prevent such violations.

In resolving the case, MML and Northwestern must also pay their clients who qualified for, but did not receive, the net asset transfer benefits and pay refunds to those who did not benefit from the price breaks. Including the refunds already paid, it is estimated that thousands of clients of these two firms will receive a total of more than $6.5 million.

"The cases announced today are the result of NASD's continuing commitment to help ensure that sales of mutual funds - the investment product most commonly held by investors - are made appropriately and with the benefit of full consideration of all available share classes and pricing features," said the NASD’s Head of Enforcement. Each firm consented to the sanctions without admitting or denying the allegations.

Shepherd Smith and Edwards is a securities law firm which represents investors nationwide in claims against investment firms. To learn whether our firm can assist you or your firm, contact us to arrange a free confidential consultation with one of our attorneys.