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September 26, 2007

Ex-Goldman Sachs & Co. Employee Pleads Guilty To Operating Multi-Million Dollar Insider Trading Scheme

Former Goldman Sachs & Co. Associate Eugene Plotnik has pled guilty to conspiracy to commit securities fraud, in addition to eight counts of insider trading. The charges carry a maximum of 165 years in prison.

Plotnik had been charged with running a “multi-faceted,” multi-million dollar scam that used inside information from at least three sources to conduct trading. The sources included a Merrill Lynch analyst, a federal grand juror, and two printing press employees that stole advance copies of a business publication with nonpublic information.

As part of his plea agreement, however, Plotnik promised that he would not appeal a lighter sentence ranging from 4 years and 9 months to 5 years and 11 months in prison. He also agreed to repay the money. More than $6.7 million acquired from the scheme is in illegal gains. Federal authorities have already frozen bank accounts to secure most of the funds.

According to prosecutors, the defendants in this operation at one point considered using strippers to persuade investment bankers that had insider information about upcoming acquisitions and murders to reveal stock tips. They also used the names of an exotic dancer and relatives to front accounts. The SEC has charged 13 people for their involvement in the scam.

Federal authorities began an investigation in 2005 when they noticed irregular trading activities right before Adidas bought Reebok. They became suspicious after a 63-year-old retired Croatian seamstress made several million dollars when she made call options before the deal. She turned out to be related to David Pajcin, the other Goldman Sachs employee accused of leading the scam. Pacjin and Plotnik traded in at least 25 stocks.

If you have lost money because members of the securities industry have chosen to commit securities fraud, you should contact Shepherd Smith and Edwards immediately. We help investors that are the victims of insider trading scams and other kinds of fraud schemes recoup their losses.

Contact Shepherd Smith and Edwards today.

Related Web Resources:

Ex-Goldman banker pleads guilty to insider trading, MarketWatch, August 28, 2007

Ex-Goldman Sachs Worker Pleads Guilty, ABC News, August 28, 2007

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Posted In: Goldman Sachs , Insider Trading

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September 25, 2007

Department of Defense Continues Crack Down on Crooked Financial Advisers Targeting Military Personnel

In the past year, the Department of Defense has kept up its “war” against bogus financial advisers in an effort to protect military members that are wanting to invest. Last September, state insurance regulators were given one year to cooperate with the Secretary of Defense in developing strategies to protect armed forces members from “dishonest and predatory insurance sales practices while on a military installation of the United States.”

The yearlong deadline was part of a new federal law created to protect soldiers and other members of the armed forces from shady financial advisers. To date, 14 states have been in compliance with the legislation. 16 more states are expected to follow by the end of 2007.

The law is called the Military Personnel Financial Services Protection Act. It also requires the Secretary of Defense to maintain a list of advisers (along with their contact information) that have been banned, barred, or restricted from military bases because they engaged in the dishonest selling of investment products at these sites. The first listing of agents was published last May.

The law was created after a flurry of news reports in 2005 talked about how certain investors were selling high-cost securities and life insurance policies to military personnel.

John Oxendine, the state insurance commissioner for the state of Georgia, says that soldiers have always been targets of crooked financial advisers during times of war. He cited soldiers’ lack of experience about financial matters, their youth, and their naiveté as reasons for why they were prime targets for shady advisers.

Oxendine says that under Georgia’s law, passed in August, insurance agents and companies must show how an investment product is suitable for junior soldiers. Certain products, including automatic premium payment provisions, are banned. Georgia’s law has also adopted the Defense Department’s solicitation rules. Financial adviser solicitation in a day room, barrack, or other restricted area is now a “deceptive trade practice.”

A draft report detailing the progress of this “war” is slated to be presented to the U.S. Congress by the Department of Defense’s inspector general in early October.

If you have been a victim of investment fraud, there are legal remedies at your disposal that can allow you to file a claim to get your money back. Shepherd Smith and Edwards is an experienced securities litigation firm that has helped thousands of people recoup their losses.

Contact Shepherd Smith and Edwards today and ask to speak with one of our securities litigation attorneys.

Pentagon on to ‘bad’ advisers, Investment News, September 17, 2007

Military Personnel Financial Services Protection Act, Veteransresources.org

Personal Commercial Solicitation Report, Department of Defense

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Posted In: Financial Advisers

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September 24, 2007

SEC Investigates Credit Rating Agencies’ Policies Regarding Debt-Related Securities

The SEC and NY Attorney General Andrew Cuomo are conducting a probe of credit rating agencies to examine their policies regarding debt-related securities.

Standard & Poor’s (S & P), Fitch Ratings Inc., and Moody’s Investors Service have all been contacted by the SEC and questioned about their procedures and policies on rating collateral debt obligations (CDOs) and residential mortgage-backed securities (RMBS).

On September 5, before the House Financial Services Committee, SEC Market Regulation Director Erik R. Sirri announced that the probe was taking place. He also said that the commission was examining the advisory services that agencies might have provided to mortgage originators and underwriters, as well as rating performance, disclosures, and what the designated ratings signify.

Sirri also informed the committee members that the SEC was looking at two kinds of conflicts of interest at the agencies. One conflict deals with how agencies are paid—either by the customers that are rated or the underwriters. The second conflict deals with the significance of the ratings and the agencies’ methods.

The investigation could result in investors and others filing lawsuits against the firms. Also on September 5, Charles McCreevy, the European Union Internal Market Commissioner, said that the rating agencies worked too slowly to downgrade structured financial instruments. He also mentioned the conflicts of interest. He wants the roles of the agencies to be more clear-cut.

The New York Attorney General’s office has sent subpoenas to the agencies. S & P and Moody have promised to cooperate with the investigation.

If you are an investor that has lost money because of the inappropriate actions of a credit rating agency, a brokerage firm, or any other company or individual affiliated with the securities industry, you should speak with a securities litigation law firm that is experienced in successfully handling securities fraud cases and can help you recover your investment.

Shepherd Smith and Edwards has helped thousands of investors in the United States recover their loss. Contact Shepherd Smith and Edwards today for your free consultation.

Related Web Resources:

SEC to review role of credit rating agencies, CNN.com, September 7, 2007

Standard and Poor's

Moody's Investors Service

FitchRatings Inc.

Attorney General Andrew Cuomo, New York State

U.S. Securities and Exchange Commission

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Posted In: Credit Ratings Agencies

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September 20, 2007

Shame on you Moodys! Shame on you S&P! A pox on both your houses!

Founded 99 years ago, Moody's Investors Service claims it "is among the world’s most respected and widely utilized sources for credit ratings, research and risk analysis."

Standard & Poor's traces its origins to the 1860 publication of Henry Varnum Poor's History of Railroads and Canals in the United States, a precursor of modern stock reporting and analysis. S&P claims it " is the world's foremost provider of independent credit ratings, indices, risk evaluation, investment research, data, and valuations."

For a century or more these two icons of the securities industry were respected as the gold standard for credit standards. Sadly, each has recently become just another Wall Street prostitude, peddling its opinions to anyone willing to pay them. Move over defrocked analysts Jack Grubman and Mary Meeker. Apparently, "POS" and "AAA" have much the same meaning when it comes to rating agencies.

Thirty-eight years ago a young banker in Houston became an investment banker building bond portfolios for banks and other institutions. "Investment quality" securities were required for the portfolio of most of these institutions. This was literally defined as either Baa, or higher, by Moodys or BBB, or higher, by Standard and Poors, these were the "gold standards" used when working with my clients. Today, such gold is tarnished and even questionable as to its authenticity.

Millions of investors have recently been harmed by the fall in prices of mortgage backed bonds and other obligations. Some of the losses was caused by poor credit risks. Yet, many investors who had purchased the securities, and even those who had sold these to them, were misled by the rating agencys who had given overly-inflated ratings to many of the instruments.

Moreover, the market for most mortgage-backed securities have suffered in recent months, as have other debt securities. A major reason for the fall of even sound securities has been that those who previously relied on credit rating agencies Moody's and Standard and Poor's had been betrayed. Credit these credit agenies for selling their souls to the highest bidders. A pox on both your houses.

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, including concerning mortgage backed securities. To learn whether we might assist you with a claim contact us to arrange a free consultation with one of our attorneys.

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Posted In: Analysts

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September 20, 2007

SEC Provides Brokerage Firms with New Loophole to Avoid Breach of Duty to Investors

As discussed in earlier postings, after a court overturned the "Merrill Rule," which exempted brokerage firms from duties of Investment Advisors Act of 1940, brokerage firms say they will cease "fee based" accounts rather than assume duties to clients mandated my that legislation. However, as predicted, regulators and legislators will instead come to their rescue.

The Securities and Exchange Commission fought hard to exempt brokerage frims from the advisors act, but lost, and is now busily helping Wall Street with new enforcement loop holes. For example, the SEC has now decided to permit non-discretionary advisory accounts to be exempt from certain principal trading restrictions. A principal trade is an order a broker-dealer executes for its own account rather than one it simply executes in the market for its client.

Under the new rule, brokerage firms must first provide written notice and obtain blanket consent from these clients. They are then exempt from breach of fiduciary duty for self-serving actions as they profit on sales of securities to these clients sold from the firms' inventories.

The firms must notify investors in writing that the firm may engage in principal trading and describe possible conflicts of interest, as well as the way it will address those problems. ("Just a note to tell you that, although you are paying me to look out for you, I am instead selling you stuff for more than I paid for it. Have a nice day.")

SIFMA, the securities trade group, applauded the rule. "This decision provides important flexibility to these consumers and delivers increased consumer choice within the constraints set by the court," said Marc Lackritz, president and CEO of SIFMA.

Thanks to Marc and the rest of the securities industry for persuading their puppets at the SEC to provide investors with such "flexibility" and "choice." What would they do without you?

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.

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Posted In: Broker-Dealers , SEC

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September 19, 2007

Morgan Stanley Allegedly Made Illegal Financial Sales Calls to Individuals from CareerBuilder.com

Regulators in Massachusetts have charged Morgan Stanley and three of its employees with illegally cold calling people that had posted their resumes on CareerBuilder.com.

According to the complaint by the stae, Arlen Fox, a Morgan Stanley broker in Boston, regularly downloaded thousands of resumes off the Web site. He and Morgan Stanley allegedly did not check to see whether the names were on “do-not-call” lists, and violated federal and state lists as a result. This alleged scam, violates Morgan Stanley’s legal agreement with CareerBuilder.com, as well as the privacy of the latter’s customers.

The resumes had valuable data, such as cell phone numbers and salary figures that Morgan Stanley should never have accessed through the site for prospecting purposes.

Assistant branch manager David Swartz, was allegedly aware of Fox’s “business practice.” Swartz and Michael Rhoads, a branch sales manager, were also charged by the state. Another Morgan Stanley employee, also at the High Street Boston office where the other three are employed, allegedly made statements about the firm’s telephone record system that was inconsistent and/or untruthful.

Secretary of the Commonwealth of Massachusetts William Galvin called the illegal activity “dishonest and ethical.” A Morgan Stanley spokesperson called the case an isolated one.

Massachusetts wants a cease and desist order against Morgan Stanley, as well as an undetermined censure and fine.

If you are an investor that has lost money because of a scam or any other illegal activities by members of the securities industry, there are legal remedies to recover your money.

Shepherd Smith and Edwards is a securities litigation law firm dedicated to helping victims recover their losses. Contact us online for your free consultation. You can also call us at (800) 259-9010 or at (713) 227-7215.

Related Web Resources:

Morgan charged over prospecting methods, Investment News, September 14, 2007

Galvin: Morgan Stanley workers raid resumes for $$, Bostonherald.com, September 13, 2007

Related Web Resources:

Careerbuilder.com

Morgan Stanley

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September 18, 2007

Broker-Dealer Legacy Financial Shuts Down Operations

Legacy Financial Services Inc., an independent broker-dealer, has closed shop. Last July, the Petaluma, California company sold most of its affiliated registered representatives and their accounts to Multi-Financial Securities Corp.

Some 125 advisers with close to $10 million in gross dealer concession were transferred by Multi-Financial. A number of Legacy executives and Brecek & Young Advisors Inc., which is also a broker-dealer, also acquired advisers. Individual producers were given compensation packages to switch to Multi-Financial.

Legacy Financial is still facing allegations made by the Maryland Securities Division in an “order to show cause” earlier this year that the independent broker-dealer did not properly supervise Joseph Karsner, a formerly affiliated registered representative and insurance agent.

Karsner had recommended mutual funds that were not suitable to senior investors. He instead invested their money in stocks that were risky and focused on technology shares and small-cap and mid-cap stocks. Many of them lost a huge chunk if not all of their retirement portfolios.

Between 1999 and 2003, Karsner earned over $3.3 million in commissions. He was paid a $125,000 signing bonus by Legacy. The broker-dealer severed its affiliation with Karsner last year.

Legacy executives say that the shutting down of operations has nothing to do with the Karsner case. Rather, Legacy was unable to keep up with competitors. Legacy says it is not culpable in the Karsner case and that they properly supervised him.

Multi-Financial purchased Legacy’s assets for 11.5% of advisers’ fees and commissions from May 2007 to April 2008. Proceeds from the sale are expected to go toward outstanding Legacy Financial costs. Anything left will be for general corporate purposes.

If you are an investor that has lost money because of wrong advice given to you by a member of the securities industry, do not hesitate to call Shepherd Smith and Edwards today. We have helped thousands of investors recover their investment losses.

Contact Shepherd Smith and Edwards and ask for your free consultation.

Related Web Resoures:

Legacy Financial closes shop, Investment News, September 4, 2007

State could ban broker from selling securities, Baltimore Business Journal, April 6, 2007

Multi-Financial Securities Corp.

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Posted In: Broker-Dealers

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September 16, 2007

SEC and FINRA Say “Free Lunch” Seminars are Investment Scams Targeting Seniors

FINRA, SEC, and state regulators are saying that the “free lunch” investment seminars for senior citizens are actually high-pressure sales pitches, involving fraud and misleading claims about financial products that are not suitable for its elderly audience. A report of these findings will be issued to the public this week.

Alabama, California, North Carolina, Florida, Texas, Arizona and South Carolina are the U.S. states with the largest numbers of retirees. All seven states were included in the probe. The investigation took place from April 2006 to 2007 and concentrated on 110 investment firms and branch offices that held “free lunch” seminars for seniors.
The report blames investment firms for failing to properly supervise the employees that conducted the senior seminars.

The law states that sales pitches and materials at the seminars have to be approved by investment firm supervisors or brokerages. SEC Chairman Christopher Cox affirmed his agency’s commitment to stop anyone attempting to take advantage of senior investors.

Findings from the year long investigation included the following:

• “Free lunch” seminars were promoted as workshops or sessions where no products would be sold. However, sales presentations too place, and attendees were pressured to make investments or open accounts. Follow up sales calls were then conducted. The seminars took place at upscale locations, such as restaurants, hotels, and golf courses.

• More than half of the 110 firms and offices investigated seemed to provide weak supervision to the employees that were overseeing the seminars. Seminar materials were not reviewed properly.

• Misleading and exaggerated claims were heard at many of the seminars.
• Unsuitable recommendations were found at 23 of the inspections.

Senior investors make up 30% of fraud victims. Since 2005, the SEC has brought more than 40 cases involving senior fraud schemes. FINRA has also filed cases against employees and brokerage firms involved in senior investment scams.

FINRA is also investigating a number of other senior-related areas, including pitches persuading seniors to retire early and cash out their 401(K)’s, high-risk mortgage securities investments, collateralized mortgage obligations sales, and life settlements.

If you are a senior investor—or any kind of investor—that has lost money because you were the victim of an investment scam, contact Shepherd Smith and Edwards. You did not work your entire life to have your retirement pulled from under you. We have helped many investors get their money back.

Your first consultation with us is free. Contact Shepherd Smith and Edwards today.

Probe of Seminar for Seniors Finds Fraud, ABC News, September 10, 2007

Seniors — Beware of Investment Seminars No Free Lunches, SEC.gov

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Posted In: FINRA , SEC , Senior Investors

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September 13, 2007

Highly Touted Whistleblower Protection Law Is Lost in the Wind

Only a tiny fraction of whistleblower claims against companies have been successful since the passage of the Sarbanes-Oxley law five years ago, raising questions about the ability of employees to raise the alarm about corporate malfeasance, a study claims.

While corporate America whines almost daily about "burdens" placed by it by the so-called "Sorbox" legislation, the truth is that companies continue to defraud investors almost with impunity, while abusing any employee who might dare point a finger at them.

Sarbanes-Oxley contained new pro-whistleblower provisions when it was passed in 2002 in the wake of the Enron and WorldCom scandals. Touted by some as a "revolution in corporate freedom of speech", it was intended to strengthen the protections available to employees who bring to light cases of fraud by including strong "anti-retaliation" provisions.

Yet, a study by the University of Nebraska College of Law of 700 cases brought in the three years after Sarbox confirmed that only 3.6 per cent of cases were found in favor of employees and only 6.5 per cent were successful on appeal. Richard Moberly, author of the study, stated: "It's an incredibly low win-rate that ought to be cause for concern."

Employees rarely won claims. A major problem is that Government agencies, such as the Department of Labor, that adjudicate such cases interpret the whistleblowing provisions in the law as narrowly as possible. Most cases did not qualify to be heard, he said. (Strange that a governmental administration charged with enforcing a law would work so hard to gut its effect - unless you remenber who is in charge of this administration.)

Moral: Whether shareholder or employee, the rights of the rest of us hardly exist in a government dedicated to protecting corporate criminals. Welcome to the "New America": Home of rich and powerful crooks who own its government.

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.

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Posted In: Crime , Investor Fraud

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September 13, 2007

Fraud is Cause of Financial Loss! Say One in Five Older Americans

"Mr. Chairman, there is no doubt financial fraud aimed at older Americans is real."

This astounding statement was made at the SEC's Senior Summit by Mary L. Schapiro, the Chief Executive Officer of the Financial Industry Regulatory Authority (FINRA), the regulatory body formed by the merger of the National Association of Securities Dealers and the regulatory arm of the New York Stock Exchange.

Ms. Schapiro backed her statement with the results of a recent FINRA survey which found that, of the 55 percent of respondents who said they lost money on an investment, 19 percent—almost one in five—attribute that loss to being misled or defrauded. While this is cause for concern, she added, it's also an opportunity for creative collaboration by regulators.

With the financial well-being of millions of seniors at stake, she added, FINRA is dedicated to tackling this issue on multiple fronts. As I speak to you today, FINRA, in addition to participating in the "free lunch seminar" sweep, is conducting sweeps in four separate issue areas.

However, Ms. Schapiro and the other regulators must recognize their limitations. There are simply not enough "securities police" to oversee trillions in investments being sold to millions of investors by hundreds of thousands of salespersons at thousands of firms. Only a fraction of violations are found resulting in almost meaningless fines compared to profits being made. In short: Investment crime pays!

Thus, millions of retirees have collectively lost billions of dollars because of investment fraud. And, despite tough talk by regulators, the problem grows worse on a daily basis. Yet, rather than rely on their government to protect them, seniors must take action themselves! The best solution is to contact an attorney who specializes in investment fraud to go after those who have defrauded them and seek recovery of their losses.

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.

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Posted In: FINRA , SEC , Senior Investors

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September 12, 2007

Money Manager Sentinel Management Group is Missing $505 Million from Accounts

Sentinel Management Group, the Chicago-based money manager that the Securities and Exchange Commission has accused of misappropriating client assets and defrauding clients, is reportedly missing $505 million in its accounts. The National Futures Association found the shortfall during a recent investigation.

The missing funds could bring up questions regarding a settlement that Sentinel made to creditors and Citadel Investment Group.

According to the SEC, the money manager allegedly mixed up funds from clients with its own funds. The Financial Times says that creditors from one account were given their money back after Citadel bought a number of assets. The SEC was opposed to the transfer, however, saying that the refunded assets likely belonged to creditors from a different account.

The FTA, however, says that there is currently no hard evidence to support the SEC’s conclusion that the assets that were refunded came from another account. The investigation will continue and the assets could still be found.

NFA president Daniel Roth says that customers of future traders have not lost any money due to Sentinel. He cited the $321 million that the Bank of New York lent to Sentinel as the main source of the missing funds.

The NFA is the in-house agency of the futures industry that examines trading practices. The Commodity Futures Trading Commission, the futures market overseer of the U.S. government, is also conducting its own probe of Sentinel.

Roth says that investigators are focusing on commingled accounts, rather than accounts that were kept separate.

If you are an investor that has lost money because of the wrongful or illegal actions of any individual or company within the securities industry, do not hesitate to call Shepherd Smith and Edwards and ask to speak with one of our securities fraud attorneys. We can represent you and protect your interests and we will do everything to recover your lost funds for you.

Related Web Resources:

Sentinel missing $505M, says NFA, Investment News, September 5, 2007

Investigator: Sentinel missing $500 mil., Chicago-Sun Times, September 1, 2007

Citadel removed from Penson suit, Chicagotribune.com, September 5, 2007

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Posted In: Financial Advisers , Miscellaneous , SEC

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September 11, 2007

FINRA Is Pressured to Cut Ties Between Public Arbitrators and the Industry

Industry arbitration critics want the Financial Industry Regulator Authority to forbid “public” arbitrators from having any connections to the industry. Although the majority of arbitration panels in the industry continue to be made up of one industry member and two “public” panelists, critics say that the public members are not actually public—especially if the arbitrator has any industry ties.

Investor attorneys want FINRA to adopt a “zero tolerance” policy toward any public arbitrators that have a connection to the industry.

Public arbitrators currently can have up to 10% of their yearly income from the last two years come from clients that participate in activities related to the securities industry.

FINRA has suggested limiting the revenue amount that a public arbitrator can earn from brokerage firms for overseeing disputes to $50,000. This proposed rule awaits approval from the SEC. The purpose of the rule is to allow defense attorneys that don’t work a lot in the industry to keep serving as “public” panelists.

Plaintiff’s attorneys have praised the $50,000 proposed limit but say that to call someone a “public” arbitrator that is “neutral” when he or she has industry connections is misleading. State regulators are in agreement and have called for FINRA to remove any semblance of bias from the arbitration forum.

The SEC is considering all feedback and will very likely not rule on FINRA’s proposal until later this year.

Whether you choose to pursue your investment losses through litigation or arbitration, it is important that you retain the services of an experienced securities litigation law firm so that you can maximize the results and obtain the most successfully outcome possible for your case.

At Shepherd Smith and Edwards, we are one of the law firms on record that advocates the zero tolerance policy of no ties between the industry and public arbitrators. We have successfully represented thousands of investors in arbitration and in federal and state courts. We are committed to helping our clients recoup their investment losses caused by the negligence or wrongful actions of members of the securities industry.

Contact Shepherd Smith and Edwards today and ask for your free consultation with one of our securities litigation attorneys.

Related Web Resources:

FINRA urged to cut industry ties for arbitrators, Investment News, September 4, 2007

FINRA

U.S. Securities and Exchange Commission

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Posted In: Arbitration , FINRA

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September 10, 2007

SEC Files Charges in $428 Million Securities Fraud Case Over Exploitation of Senior Investors

The Securities and Exchange Commission filed charges against 26 defendants for their alleged involvement in a $428 million securities fraud scheme targeting thousands of senior citizens and other investors in the United States.

According to the SEC action, filed in Chicago’s federal district court, the defendants participated in selling “Universal Lease” securities that were structured as timeshares in hotels located in Cancun, Mexico. A pre-arranged rental agreement promising investors a high, fixed return rate was also included. The fraudulent scheme fell apart and investors have reportedly lost more than $300 million from the scam.

The SEC says that Michael E. Kelly and others scammed thousands of U.S. investors by persuading them to spend their retirement savings on the purchase of Universal Leases. Kelly and his team falsely promised returns that were secure and guaranteed. The SEC claims that Kelly and his group raised at least $428 million from investors, with IRA accounts as the source of over $136 million.

The SEC also claims that Kelly and a number of other people ran the scam from Cancun through several foreign entities in Panama and Mexico. Supposed “rental income” payments that were actually new investors funds were issued to investors.

The SEC also alleges that a number of unregistered representatives in the US collected undisclosed commissions of over $72 million. The fact that more than $72 million in investor funds were used to pay commissions of up to 27% to brokers was also allegedly not mentioned to investors.

SEC Division of Enforcement Director Linda Chatman Thomsen said that although Kelly and his group promised safe investments, the scheme was run in a manner that placed investors at great risk because it was going to inevitably fall apart.

Kelly and the other defendants are charged with violation of the federal securities laws’ antifraud and registration provisions. The SEC is asking for civil penalties, disgorgement of ill-gotten gains, and permanent injunctions.

The SEC’s action is one of more than 40 enforcement actions since 2005 that the SEC has brought as part of its crackdown on investment scams targeting the elderly. The SEC thinks that Kelly and his group may have hoped to avoid detection by operating their securities fraud scam from abroad. It expressed its ongoing commitment to holding anyone trying to scam elderly investors accountable.

If you are a senior investor that has lost money because you were the victim of investment fraud, you should contact Shepherd Smith and Edwards right away. We have dedicated our legal practice to helping investors recover their losses.

Contact Shepherd Smith and Edwards today and ask for your free case evaluation.

Related Web Resources:

SEC Charges 26 Defendants in $428 Million Securities Fraud That Targeted Senior Citizens and Retirement Savings, SEC.gov, September 5, 2007

SEC charges 26 with fraud preying on elderly, Reuters.com, September 5, 2007

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Posted In: Senior Investors

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September 7, 2007

NASD Successor “FINRA” Hypes Retail Investor Online Info Section

The new Financial Industry Regulatory Authority has launched a section on its website to provide online information for retail investors.

The “Market Data” section on FINRA's website provides data on equities, options, mutual funds and corporate, municipal, Treasury and Agency bonds. The site also provides a page for all stock exchange-listed companies, including a company description, recent news stories and Securities and Exchange Commission filings, and an interactive list of domestic securities the company issues.

The site also provides equities indices and the FINRA-Bloomberg Active U.S. Corporate Bond Indices for investment-grade and high-yield bonds. Additionally, the site features U.S. Treasury Benchmark yields, market news an economic calendar and other information indicating current market conditions.

Although such ratings have been greatly maligned Market Data's coverage also includes credit ratings from the three major rating agencies. Real-time transacted price information is also provided for corporate bonds and municipal bonds along with end-of-day prices are provided for Treasury bonds.

The purpose of the site is unclear, since most online data services along with Yahoo and other search sites make the same information available. One would think that the job of regulation of tens of millions of accounts through hundreds of thousands of brokers at over 5,000 investments firms would keep the non-profit organization of investment firms charged with primary regulation of its members busy enough.

Shepherd Smith and Edwards represents investors nationwide in actions against securities firms and/or their representatives. If you, your firm or your pension fund has sustained losses as a result of fraud, negligence or other wrongdoing contact us to arrange a free consultation with one of our attorneys.

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Posted In: FINRA , Stockbroker Regulation

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September 6, 2007

State Regulators’ Association Seeks to Abolish Bogus Finanical Advisory Designations

The North American Securities Administrators Association Inc. of Washington (NAASA) plans a vote by its members by the end of this year on a proposal which would make it a violation of state securities regulations to "misuse, mischaracterize or fraudulently represent a designation that has little or no value,” said the President of NASAA, Alabama securities commissioner Joseph Borg.

Mr. Borg announced the NASAA plan at a hearing being held this week by the Senate Special Committee on Aging. Mr. Borg appeared to testify on matters involving securities fraud of the elderly, and within his presentation he chose to specifically adress the use of questionable senior financial adviser designations.

State securities regulators have authority to take action against financial advisers for unethical sales practices, such as churning and selling unsuitable products, he said. “This would be an enhancement to cover fraudulent use of designations,” Mr. Borg said. NASAA initiative is part of ongoing efforts by state and federal regulators to beef up regulatory authority to protect seniors from financial fraud.

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

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Posted In: Senior Investors , Stockbroker Regulation

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September 5, 2007

Pump and Dump Scheme Involving Prime Time Stores Inc. Sends Global Spam Levels Up 30%

In one of the largest online stock manipulation campaigns in history, spammers sent out some 500 million e-mails last month advising recipients to invest in Prime Time Stores Inc.

This prime example of “pump and dump” scamming involved spammers purchasing shares in a company, promoting it, and then waiting for share prices to rise before selling their stocks and making a profit. This particular pump and dump scheme caused the amount of spam sent around the globe to increase by 30% over a 24-hour period.

Prime Time Stores owns the exclusive licenses for 7-Eleven stores in the Caribbean and Puerto Rico. The company is also involved in automotive, gas, and oil activities. The spam e-mails promoting the company announced the opening of Prime Time Stores in Puerto Rico and said that a huge change in the stock would occur on August 8, 2007.

In the days leading up to the spam campaign’s discovery, the stock did go up.

Pump and dump spam perpetrators can reportedly be very difficult to catch. This type of scam can be effective—especially when small stocks are involved and only a small gain is necessary to make a profit.

The spam e-mail promoting Prime Time Stores came with a PDF attachment. The PDF was what allowed it to get past the spam filters. The perpetrators of this scam have not been identified.

According to SophosLabs, stock scams via e-mail make up about 25% of all spam. At the start of 2005, e-mail stock scams only made up less than 1% of all spam emails.

Earlier this year, the SEC temporarily suspended trading in 35 Pink Sheet-listed companies that were involved in ongoing spam e-mail campaigns involving the companies’ securities. The suspension was part of SEC’s "Operation Spamalot” crackdown.

If you have been the victim of investor fraud, call Shepherd Smith and Edwards today. We have helped thousands of investors nationwide recoup their losses. We have represented clients in Federal and state courts and before the NASD, the NYSE, and the AAA.

Related Web Resources:

Inbox hell: Half a billion stock spam e-mails, Reportonbusiness.com, August 9, 2007

Prime Time Stores, Inc.

Sophoslabs

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September 3, 2007

American Funds’ Europacific Growth Fund, Allegiant Advantage Fund, and Vanguard 500 Index Fund Are Among Mutual Funds Offering Data to Investors Via SEC's EDGAR

The U.S. Securities and Exchange Commission says that a number of mutual funds have started providing risk/return data with the use of interactive reporting language.

Vanguard 500 Index Fund, Allegiant Advantage Fund, Muhlenkamp Fund, and American Funds’ Europacific Growth Fund are among the mutual funds that have taken what the SEC is calling this "significant step.”

The agency says that it will continue to observe the way information can be used to keep mutual fund investors informed. It will also look at whether anything else needs to be done to create greater accessibility for investors.

Mutual fund investors can access the information through EDGAR, which is the SEC’s online database that provides corporate data. XBRL, a computer software language that lets users more easily manipulate and analyze data, powers the interactive information.

Each mutual fund prospectus comes with a risk/return summary that offers details about a fund’s performance history, objectives, costs, and strategies.

SEC Chairman Christopher Cox says that he believes that as more mutual funds use the interactive language to provide information, investors will be more able to easily choose from thousands of funds while sitting in front of their computers.

At least 40 publicly traded companies are using XBRL to file their financial statements.

Shepherd Smith and Edwards represents mutual fund investors that have sustained losses while investing in the securities industry and wish to file a claim against a negligent party. Contact Shepherd Smith and Edwards today if you want to speak with one of our stockbroker fraud attorneys about your case.

Mutual Funds Begin Providing Risk-Return Information Using Interactive Data, SEC.gov, August 21, 2007

EDGAR Database

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Posted In: Mutual Funds

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September 2, 2007

Wealth Advisor Institute Calls for Reforms of the U-5 Termination Process For Brokers

The Wealth Advisor Institute wants the way U-5 termination forms are filed to be reformed. The forms are used for reporting information about why a broker has left a firm. A copy of the form then has to be given by the broker to a new employer.

The WAI called on NASD (Now part of FINRA) to make the reforms after the New York State Court of Appeals gave total legal immunity to the information that firms choose to include on U-5 forms. This means that under New York law, brokers cannot obtain monetary damages in rulings involving U-5 defamation cases. An appeals court in California issued a similar ruling regarding U-5 forms two years go.

The WAI says it was appalled by the New York Court's decision and expressed worries “advisers can end up getting sold out” by their firms.

The WAI issued a paper last month outlining several modifications it wants made to the U-5 process:

• Require that brokers be informed of any suggested U-5 language and why the specific wording is being used.
• Provide representatives a means of challenging the language that is chosen.
• Set up an unbiased review board to oversee and resolve disagreements regarding U-5 filings.
• Set up a “fast track” expungement process that will allow any false records to be cleared quickly.
• Have FINRA (Financial Industry Regulatory Authority Inc) send a notice to members that clearly delineates what the reporting standards are for investment firms so that filings will be accurate.
• Issue automatic fines to employers over misleading or inaccurate filings.
• Reimburse legal fees to representatives that are involved in these disputes.

FINRA says that it does not have the authority to rule over employment and business disagreements between firms and registered representatives. Arbitration panels and courts are generally in charge of these kinds of disputes.

WAI has also recently addressed illegal late trading activities involving mutual fund shares.

If you believe you have a victim of fraud by a broker or a brokerage firm, Shepherd Smith and Edwards would like to offer you a free consultation. Contact us today. Over the years, we have successfully represented thousands of clients that have been the victims of securities fraud.

Stock Broker Fraud Blog

Published by Houston Securities Fraud Lawyers Shepherd Smith Edwards & Kantas

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NASD Successor “FINRA” Hypes Retail Investor Online Info Section

State Regulators’ Association Seeks to Abolish Bogus Finanical Advisory Designations

Pump and Dump Scheme Involving Prime Time Stores Inc. Sends Global Spam Levels Up 30%

American Funds’ Europacific Growth Fund, Allegiant Advantage Fund, and Vanguard 500 Index Fund Are Among Mutual Funds Offering Data to Investors Via SEC's EDGAR

Wealth Advisor Institute Calls for Reforms of the U-5 Termination Process For Brokers

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