October 29, 2007

North American Securities Administrators Association Announces Investment Adviser Best Practices

| Share

The North American Securities Administrators Association announced a series of investment adviser best practices that it is recommending after it conducted investment adviser tests that showed 2135 deficiencies in 13 compliance areas. 418 investment advisers in 43 states and provinces participated in the tests, which were overseen by NASAA's Investment Adviser Operations Project Group.

Five of the categories that had the largest amount of deficiencies included supervisory compliance (174 deficiencies), registration (504 deficiencies), books and records (384 deficiencies), unethical business practices (318 deficiencies) and privacy (142 deficiencies).

The leading three deficiencies in the category of registration involved:

• Inconsistencies between the first two parts of Form ADV
• Not amending the form in a manner that is considered timely
• Not providing or offering to give the disclosure document to clients

Leading unethical business practices included:

• Excessive fees
• Contract deficiencies,
• Misrepresenting qualifications, services, or fees
• Unsuitable recommendations

Maintaining appropriate financials and data was the number one books and records deficiency. Not having any written procedures was the number one deficiency in the supervisory/compliance area. Failure to provide privacy notices and create a privacy policy were the top privacy deficiencies.

NASAA is offering “Best Practices” to help advisers create compliance practices and procedures:

• Regularly review and update Form ADV and the disclosure brochure
• Keep all contracts current
• Prepare and keep current all records
• Prepare and keep client profiles up-to-date
• Create a written compliance and supervisory procedures manual
• Create and regularly distribute a privacy policy

NASAA is also recommending that advisory firms maintain accurate financial records and file documents and information in a timely manner. NASAA is encouraging advisory firms to properly supervise advisers’ activities.

If you have lost money because of the inappropriate actions of an investment advisor, call Shepherd Smith and Edwards today. We have helped thousands of investors recover their losses.

Related Web Resources:

Coordinated Examinations Identify Investment Adviser Deficiencies, NASAA.org, October 15, 2007

Nationwide NASAA Exams Reveal Advisor Deficiencies, Investment Advisor, October 16, 2007

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Miscellaneous

October 25, 2007

Ameriprise Financial Again Charged With Fraud

| Share

Ameriprise Financial Services, Inc. has been charged by The New Hampshire Bureau of Securities Regulation of forging and tampering with documents. The complaint also alleges that the firm failed to deliver nearly 500 financial plans, conducted unapproved sales contests and intentionally limited compliance oversight.

Furthermore, Minneapolis-based Ameriprise was accused of failing to adequately release fraudulent activities to the New Hampshire Bureau while it was under supervision of an independent consultant, which was mandated under an earlier action against the firm.

The New Hampshire securities regulator said that the latest action against the company, which maintains about 30 offices in the state, could result in penalties and client restitution of up to $10 million.

In 2005, Ameriprise, formerly known as American Express Financial Advisors, settled with the New Hampshire Bureau of Securities Regulation for $7.4 million on charges related to illegal incentives, conflicts of interest and lack of disclosure to clients, the largest in that state’s history. As a further sanction, the firm was required to hire an independent consultant to monitor its activities.

Shepherd Smith and Edwards represents institutional and individual investors nationwide in claims against securities firms. We have represented investors in more than 1,000 securities cases, including against Amerirpise Financial and its predecessors. To learn whether we may be able to assist you with a claim contact us to arrange a free consultation with one of our attorneys.

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Ameriprise - Securities America

October 25, 2007

Fired UBS Broker’s $2.4 Million NASD Arbitration Award is Upheld

| Share

A $2.4 million NASD Arbitration Award to a former UBS financial adviser, who was fired in 2003 by the company that preceded UBS PaineWebber Inc. is being upheld by the U.S. District Court for the Western District of North Carolina. The court said that it did not agree with UBS’s theory that the arbitration award did not honor provisions made in the arbitration contract or that it was in manifest disregard of the law.

Former financial adviser W. Van Pelt Jr. had served as a financial advisor UBS and its predecessor JC Bradford from 1999-2003. Upon his hiring, he filled out a Form U-4 industry form in which he agreed to not hold UBS liable if it provided specific information, including notice of termination.

He was let go in January 2003 during an internal probe. UBS filed a U-5 form reporting Van Pelt’s termination because of “concerns of conduct” in a matter involving a customer transaction. On the form, UBS said that Van Pelt was not under investigation because the probe was already over at that time.

Van Pelt started NASD arbitration proceedings soon after. He cited defamation, breach of fiduciary duties, and negligence among the tort claims that he cited. An arbitration panel ruled against UBS in 2005. The firm was ordered to pay the former UBS broker $2.4 million in compensatory damages and $16,579 million for expert witnesses.

The panel said that the Form-5 that UBS filled out included defamatory language in its explanation of Van Pelt’s firing and suggested that UBS revise the wording. The panel asked UBS to submit an amended form stating that Van Pelt was being investigated and to provide details of the probe.

In affirming Van Pelt’s award, the court said that even though Form U-4 did release UBS from liability regarding information it included on Form U-5, UBS could easily be held liable based on Van Pelt’s other claims, which included conversion, interference with contractual relations, or breach of duty of good faith and fair dealing.

If you are an investor who has lost money because of broker misconduct, your best chance of recovering your losses is to speak with a securities litigation attorney right away. Shepherd Smith and Edwards has helped thousands of investors across the United States get their money back.

At Shepherd Smith and Edwards, our securities fraud attorneys believe in holding shady brokers liable for their misconduct—not in rewarding them. Contact Shepherd Smith and Edwards today and ask for your free case evaluation.

Related Web Resources:

UBS

United States District Court, Western District of North Carolina

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Arbitration , UBS

October 23, 2007

Guardian Wealth Management - Where Stockbrokers Go to Stop Working but Keep Earning

| Share

In the Galleria area of Houston is Guardian Wealth Management LLC, a Registered Investment Advisory Firm with an interesting business model: To provide a home for stockbrokers who want to retire or pursue another career - and continue to get paid!

Securities regulators report over 660,000 registered representatives, with about 15% (almost 100,000) annually retiring or leaving the securities industry to pursue other careers. Since 1970, Guardian's partners say they have watched scores of co-workers leave their firms which then dealt out their clients to other brokers, often the newest kids on the block.

"Brokers can work for years developing relationships with investors but are then helpless to protect even their family and friends from those assigned to their accounts," says Guardian's Founder Jerrod Summers, adding that "Guardian was built as a 'safe harbor' for investors - free of widely publicized conflicts at brokerage firms such as tainted research, commission churning and high-load funds, annuities and other products."

As a registered investment advisory firm Guardian charges annual management fees - approximately 1% - based on assets under management, which is at the low end of the range charged by large firms. Client accounts are held at Fidelity Investments, but Guardian is not limited to Fidelity's funds or other investment alternatives.

When Brokers leave the securities business they can not retain their general brokerage license. Yet, their licenses usually qualify them as to serve as Investment Advisory Representatives (IAR's). IAR's do not advise clients but can share in the income on accounts they bring to a firm such as Guardian.

"Retired brokers can move clients to Guardian and, over time, receive two to three times their "book" (gross revenues earned on their client base)," says Summers, "and even more if their clients' accounts grow and/or if they chose to continue to build relationships."

Compared to the commission "grid" at large firms, it's possible for former brokers to earn the same in retirement as they did while working, with Guardian's staff doing the work. "Its a win-win-win situation", adds Summers, "clients receive professional services at a fair price, brokers continue to earn, yet Guardian is profitable."

Additional information about Guardian Wealth Management, LLC is available on its Web Site, www.guardian-ria.com .

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Financial Advisers

October 23, 2007

Mortgage Backed Securities and Collateralized Debt Obligation Losses Mount as Lawyers Weigh Investors' Options

| Share

The other shoe is dropping on mortgage securities holders who have already suffered devaluations on what many were told were low risk investments. Monthly interest payments are now falling and in some cases have ended on securities backed by risky home loans.

Large numbers of collateralized debt obligations (CDO's) and mortgage back securities (CMO's) made up of bonds backed by sub-prime home loans are starting to shut-off cash payments to investors. Such cash flow cutoffs are expected to accelerate, as observers speculate whether this will cause a new round of panic in the battered mortgage securities market.

Owners of collateralized obligations, including investment banks, hedge funds, insurance companies and public pension funds continue to write down mortgage investments beyond the billions they have already written off. Some of the securities may, for example, fall from 70 percent of face value to almost worthless overnight, bankers and analysts say.

The extent of the chain reaction this could cause is hard to predict. Such adjustments will adversely affect individuals sold such securities and could further disrupt their lives as the availability of credit to homebuyers and consumers could dry up and stock prices (and thus pension funds) fall in value. A resulting recession would cause many to lose jobs, which would result in new mortgage delinquencies which would fuel a repeat of this cycle.

“At this point, it’s fair to say that everybody expects this shoe will drop,” said Mark Adelson, an independent mortgage securities consultant and analyst. “It’s a foregone conclusion. But when it happens, there will be a market reaction to it.”

Standard & Poor’s recently lowered the ratings on $22 billion in bonds backed by mortgages made to people with weak credit in 2006, citing the continued deterioration in the housing market. Another credit rater, Moody’s Investors Service, lowered a similarly large group of bonds earlier in the month. Congress is investigating why so many securities were rated so highly in the first place.

Meanwhile, lawyers are evaluating cases for investors based on lack of, poor and even fraudulent information given to them at the time of purchase. Credit rating agencies will likely fall in the legal category established by the so-called "Good Housekeeping Seal" line of cases, which held that opinions are usually not actionable.

The question is, rather, why those selling the securities relied upon the inflated ratings in the first place. The ultimate issue is whether a credit rating alone is a "reasonable basis for a recommendation" and/or whether proper "due diligence" was performed concerning these investments prior to the sales.

Even after early warning signs and discussions of sub-prime mortgages emerged, in 2006 and 2007, investment banks issued and sold an additional half-trillion dollars in new debt obligations linked to mortgages. Sellers of these securities apparently chose to ignore the risks in order to peddle their wares. In any event, whether it be a case of commission or omission, sellers can be held liable under the law for their failures to properly appropriately disclose risks.

Comparing this situation to the "tech bubble burst" in early 2000, the few who advised clients early to reduce holdings avoided disaster. Most instead refused to admit their mistakes and told their clients to hold on as the majority of their clients' losses occurred in 2001 and 2002.

Most mortgage securities have not yet experienced significant internal losses, recorded when homes are foreclosed and sold. Up to two years can pass between a borrower’s falling behind on payments and an auction. Such securities usually have a reservoir of excess cash to draw upon to pay bondholders when borrowers do not make monthly payments.

"It’s only once the property is effectively sold that a loss is recorded,” said Nicholas Weill, chief credit officer at Moody’s. “The process of foreclosure is a long process. It doesn’t just happen overnight.” John Schiavetta, a group managing director at Derivative Fitch, which rates the debt obligations says “[The mortgage securities market] is still the early stages of a very significant stress.”

Investment brokers and advisors who sell their clients securities which then fall in value typically tell their clients to hold on, rather than heed warnings and act responsibly to advise clients to get out. If these brokers listened to credit agencies when saying the securities were safe, how can they now ignore those same credit agencies which are lowering ratings and warning of worse to come?

Shepherd Smith and Edwards represents institutional and individual investors nationwide in claims against securities firms. We have represented investors in more than 1,000 securities cases, including many involving mortgage securities. To learn whether we may be able to assist you with a claim contact us to arrange a free consultation with one of our attorneys.

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Mortgage Backed Securities

October 23, 2007

Ex-Wood Rivers Partners Hedge Fund Manager to Serve 3 Years in Prison for Defrauding Investors of $88 Million

| Share

Wood Rivers Partners LP Founder John Whittier has been ordered to serve 36 months in federal prison. The former hedge fund manager pled guilty to charges that he defrauded investors of about $88 million over a two-year-period.

Whittier admitted to deceiving investor clients and making them think that he would keep risks low while he employed diverse investment strategies. Prosecutors also say that Whittier lied when he told investors that the hedge fund they had invested in was being audited.

Instead, Whittier placed about 80% of the assets in his Wood River US hedge fund portfolio, worth $127 million, into one stock, called Endwave. In doing so, he was in breach of his investors’ trust.

Whittier had promised investors that no more than 10% of the fund’s assets would be placed in one holding. He also neglected to file mandatory beneficial ownership filings with the Securities and Exchange Commission that would have revealed his concentrated holdings.

Endwave’s stock price eventually dropped and Wittier could not meet shareholders’ redemption requests or fulfill certain margin calls. The hedge fund shut down in October 2005.

Whittier was also told to forfeit $5.5 million. He is scheduled to begin serving his sentence on January 15, 2008.

If you are an investor who is a victim of securities fraud, do not hesitate to contact Shepherd Smith and Edwards today. We are committed to helping investors recover their losses. We represent investors across the United States.

To schedule your free consultation, contact Shepherd Smith and Edwards today.

Related Web Resources:
Ex-hedge fund manager sentenced in NYC, CNN.com, October 15, 2007

Hedge Fund Manager Sentenced to 3 Years in Prison for $88 Million Securities Fraud Scheme, Media Newswire.com

Meet John Whittier, Wood River Founder, BusinessWeek, October 21, 2005

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Securities Fraud

October 22, 2007

Merrill Liable for $6 Million to Estate of Elderly Couple

| Share

A Florida jury has ordered Merrill Lynch & Co. Inc. to pay $6 million to the daughters of a New Jersey philanthropist and his wife. The claims against Merrill Lynch included that its broker took advantage of the elderly couple's deteriorating mental condition in order to convert their money into investments that paid he and the firm higher commissions.

The suit also claimed the Merrill broker falsely told Mr. Rothman in three letters that the investments carried no fees or sales commissions. An attorney for the heirs said that Merill and its brokers made at least $2.5 million in fees on the Rothmans' $32 million investment in variable annuities, while the investors only made $600,000.

"The verdict is astonishing in light of the undisputed fact that the Rothmans, who were wealthy, sophisticated investors, made $10 million on the annuities at issue, and did not lose money," a Merrill spokesman said. "The verdict is unjustified by the facts and law."

The Merrill spokesman added that the firm will seek to have the verdict set aside by the court and will appeal the verdict it is not. Meanwhile, the issue of whether punitive damages may also be added to the verdict has yet to be determined by a jury.

Shepherd Smith and Edwards represents investors nationwide in claims against securities firms. We have represented investors in more than 1,000 securities cases, including many against Merrill Lynch. To learn whether we may be able to assist you with a claim contact us to arrange a free consultation with one of our attorneys.

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Merrill Lynch

October 21, 2007

HSBC Securities, Citigroup Global Markets Inc., UBS Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Inc., and Interactive Brokers LLC Among Firms Disciplined by NYSER

| Share

The New York Stock Exchange Regulation Inc. is disciplining nine companies and eight people for numerous violation. The firms disciplined include:

Merrill Lynch, Pierce, Fenner & Smith: Fined $100,000 for violating rule 123c about 480 times when it cancelled or submitted securities orders after the mandatory cutoff period.

Citigroup Global markets Inc: Find $300,000—half of this to be payed to NASDAQ; the other half to be paid to NYSE. The firm made inaccurate reports about short interest positions in securities that were listed on the NYSE.

Interactive Brokers LLC: Fined $250,000. The firm was fined for violations related to day-trading minimum balances.

HSBC Securities (USA) Inc.: Fined $500,000. Over a several year period, the firm recommended and sold CDs that were not appropriate for their targeted 1900 investors. The firm allegedly engaged in misrepresentations and withheld risks during these transactions.

UBS Securities LLC: Fined $150,000. The firm did not make disclosures in its published research reports about investment baking relationships and non-investment-banking connected compensation.

Eight individuals were also fined for numerous violations, including former securities specialist Freddie DeBoer, broker Stephen Mara, and Adam Lazarus.

DeBoer was fined $300,000 and was permanently barred because he intentionally defrauded customers involved in the sale or purchase of securities. Lazarus was barred for 30 months because of short term purchases sales that were “unauthorized and unsuitable” and involved four customer accounts. Mara was suspended for two weeks and censured because of his involvement in a “physical altercation” on the exchange floor

A number of other people were permanently barred because they failed to reveal that they had criminal records and for recordkeeping violations.

NYSE Regulation can discipline brokerage firms and brokers for broker misconduct. However, you if you want to recover any investments you may have lost because of the illegal actions of any member of the securities industry, your best bet is to retain the services of an experienced stockbroker fraud attorney. Over the years, Shepherd Smith and Edwards has recovered the losses of thousands of investors throughout the United States. Let us help you.

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


Related Web Resources:

NYSE Regulation

HSBC Securities

Merrill Lynch

Citigroup

Interactive Brokers

UBS Securities

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Citigroup , HSBC Securities , Interactive Brokers LLC , Merrill Lynch , NYSER , UBS

October 17, 2007

Fidelity Investments and The Vanguard Group Offer Retirees Managed-Payout Funds

| Share

Fidelity Investments has launched 11 funds focused on generating steady income for retired seniors. The launch followed a similar launch by The Vanguard Group Inc., who will launch three similar funds in the next couple of months. Fidelity and Vanguard are the largest and second largest mutual funds in the country.

The move by both companies will likely force competitors to do the same. Industry experts say that they expect fund companies with a solid 401 (k) plan market to announce similar fund launches.

However, a number of major fund companies have only admitted to closely monitoring open-end managed-payout funds. This type of fund has been part of a number of closed-end funds for awhile. However, closed-end funds only appeal to a small section of investors.

Lipper Inc. says that at the end of August, the collective net asset value of closed-end funds was $259. 28 billion. Closed-end funds are not as popular as open-end mutual funds because they are more complicated. They can trade at a discount or premium to their net asset value.

The Investment Company Institute says that in August, combined net asset value of open-end mutual funds was $11.49 trillion.

Fund advisers are enthusiastic about more open funds with managed-payout features. One of the reasons the new funds offered by Vanguard and Fidelity are generating interest is that they come with low expense ratios. Some skeptics, however, warn that this type of fund can result in abusive and fraudulent investment sales.

Fidelity says that the new funds with managed-payout features will make payouts by using principal. The funds will liquidate when they reach a designated date.

If you have lost money as an investor because you were the victim of fraudulent or abusive investment sales practices, contact Shepherd Smith and Edwards today. One of our experienced securities fraud attorneys will be happy to offer you a free case evaluation.


Related Web Resources:

New Funds for Retirement Payouts, Wall Street Journal, October 14, 2007

Others likely to follow lead of Fidelity, Vanguard, Investment News, October 8, 2007

Vanguard to Broaden Retirement Income Solutions with Three New Managed Payout Funds, Insurance Newsnet, September 27, 2007

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Fidelity

October 16, 2007

Morgan Stanley Former Associate and Husband Sentenced in Insider Trading Scheme

| Share

The U.S. District Court for the Southern District of New York has sentenced former Morgan Stanley Associate Randi Collotta and her husband, an attorney, to home confinement and ordered them to pay more than $10,000 in fines, plus a forfeiture, for their alleged roles in a large insider trading scheme which apparently resulted in at least $15 million of illicit profits.

At all relevant times, Randi Collotta was an associate in Morgan Stanley & Co. Inc.'s global compliance division, the indictment said. Her husband practiced law at a firm in Long Island at the time of his arrest, a source knowledgeable with the case said. The SEC charged the Collottas and 12 others with insider trading violations for using information stolen from UBS Securities LLC and Morgan Stanley.

The indictment detailed trades the Collottas allegedly made with insider information gained by Collotta at Morgan Stanley. She passed the information to her husband, who passed it to a co-conspirator, who then made trades based on the information and passed the information to a second co-conspirator, who traded on the information as well.

Mrs. Collotta was sentenced to four years' probation and her husband was sentenced to three years’ probation. Each was required to spend the first six months in home confinement. (One might wonder whether six months confinement at home with a spouse is to easy or too harsh.) Ms. Colotta must also spend 60 days in prison during the course of her probationary period.

Shepherd Smith and Edwards represents investors nationwide in claims against securities firms. We have represented investors in more than 1,000 securities cases, including many against Morgan Stanley. To learn whether we might assist you with a claim contact us to arrange a free consultation with one of our attorneys.


Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Morgan Stanley , Securities Fraud

October 15, 2007

Interactive Brokers LLC Sanctioned for Failing to Supervise Its Compliance Staff

| Share

The U.S. Commodity Futures Trading Commission (CFTC) ordered Interactive Brokers LLC (IBL) to relinquish $175,000 in commissions, for failing to properly supervise its compliance employees while handling a commodity futures trading account. The National Futures Association (NFA) recently fined IBL $125,000 regarding the same matter and for failing to maintain adequate books and records.

IBL is a discount direct access brokerage firm and registered futures commission merchant (FCM) headquartered in Greenwich, Connecticut. According to the order, an account was maintained at IBL in the name of Kevin Steele, a Canadian who used the account to defraud more than 200 Canadian, German, and US citizens of over $8 million in a commodity pool fraud that was the subject of an earlier CFTC enforcement action.

The CFTC found that, from February 2003 through May 2005, IBL accepted 135 third-party deposits in the form of wire transfers and checks totaling $7.7 million into Steele’s personal account, but did not have procedures reasonably designed to detect the deposit of third-party funds in an individual trading account. The frequency and magnitude of deposits and withdrawals to Steele’s account, relative to his stated liquid net worth, and the pattern of deposits followed by withdrawals suggested that Steele might be operating as an unregistered commodity pool operator.

IBL compliance staff telephoned Steele on several occasions to inquire about the trading activity in his account. Yet, IBL’s compliance staff each time accepted Steele’s explanations as reasonable without conducting any additional or independent inquiries. The order states that IBL’s procedures for determining the source of funds received through wire transfers were inadequate to meet its supervisory responsibilities.

The ability to determine if funds in customer accounts are coming from someone other than the account holder is a necessary part of an FCM's supervisory system. If an FCM fails to monitor the source of funds being deposited into customer accounts at the time such funds are received, its ability to detect illegal activity such as pool fraud or money laundering is impaired.

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

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: CFTC , Interactive Brokers LLC

October 15, 2007

MetLife Securities Broker Charged with Stealing from 9/11 Victim’s Widow

| Share

The Securities and Exchange Commission and U.S. Attorney for the Eastern District of New York have filed cases accusing a former MetLife employee of what is perhaps a new low in securities fraud: Misappropriation of funds from the widow of a victim of the September 11 terrorist attack on the World Trade Center.

The SEC said that defendant Kevin James Dunn Jr., then an employee of MetLife Securities Inc., was friends with the widow and convinced her to invest her terror-attack compensation funds with him and MetLife. The SEC said Dunn "then proceeded to betray the customer's trust" by engaging in a "series of material misrepresentations" about the purchase and sale of securities in her account. That and other fraudulent actions were "aimed at swindling [the client] out of a substantial portion" of her 9/11 widow's compensation.

Dunn allegedly misappropriated $248,000 from the client by creating a joint account in both their names, forging her signature on transaction documents, and "telling her outrageous lies" concerning the status of the account. He also deceived her into providing him with blank checks which he used to deposit funds into his own bank account.

Although MetLife terminated Dunn in February, the SEC claims he continued to deceive the widow for two months by acting as if he still was a broker employed at MetLife. It is unclear whether MetLife had knowledge of the brokers’ activities at the time of his departure or whether it provided any warning of those activities to any client.

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

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: MetLIfe Securities , SEC Enforcement , Securities Fraud

October 14, 2007

SEC Commissioner Annette Nazareth’s Departure Leaves Agency With No Democrats On Panel

| Share

Annette Nazareth, the only Democratic commissioner left on the Security and Exchange Commission’s five-member panel is leaving her post for the private sector.

Her departure is the second one in the past month and leaves the panel with three members—all of them Republicans. Roel Campos, also a Democrat, left in September. The remaining panel members are SEC Chairman Christopher Cox and Commissioners Paul Atkins and Kathleen Casey.

The SEC released a statement saying that Nazareth had requested that she not be renominated for the position. Nazareth has been a member of the SEC panel for nine years. The SEC cited her contributions to include modernizing national market system regulations and working on issues affecting the securities markets and investor protection.

The vacancies left by the departure of the two panel members could further complicate a shareholder rights initiative. One proposal could allow for board seat elections at U.S. public companies. The other proposal would keep the issue of electing company board members from proxies shareholder proposals.

Although Nazareth’s term expired in June, she could have to stay in her position for up to a year and a half unless someone else is nominated. The Senate has to confirm anyone chosen by the White House.

Prior to joining the commission, Nazareth served as SEC Market Regulation Division director. She also worked for investment firms Lehman Brothers and Smith Barney.

Shepherd Smith and Edwards is a securities litigation law firm committed to helping institutional and individual investors recover losses incurred because investment firms or their employees acted inappropriately. To schedule your free consultation with one of our stockbroker fraud attorneys, contact Shepherd Smith and Edwards today.

Related Web Resources:

SEC's Nazareth Leaving Agency, AP, October 2, 2007

SEC Biography: Commissioner Annette L. Nazareth, SEC.gov

SEC Commissioners

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: SEC

October 12, 2007

Oppenheimer, Morgan Stanley, Nomura Securities, and A.G. Edwards Traders Face SEC Charges of Stealing Stock Loan Kickbacks Worth $12 Million Plus

| Share

38 stock loan traders from A.G. Edwards, Morgan Stanley, Oppenheimer, and Nomura Securities are accused of stealing over $12 Million in stock loan kickbacks from their Wall Street firms. The Securities and Exchange Commission has charged the employees with the more than $12 million theft.

The SEC says that from 1998-2006, the traders worked with fake stock loan finders to skim profits from their employers through finder fees as well as cash kickbacks from finders. The stock loan traders conducted actual, legal stock loans but logged that the transactions involved finders, so there would be finder’s fees.

The finders were usually friends or relatives of the traders who were in charge of illegitimate “shell companies” that were not even a part of the stock loan business. The “finder” would then pay traders with kickbacks. The more sophisticated scams involved traders using their kickbacks to pay the other traders who had pushed through the loan transactions.

21 stock shell companies/stock loan finders (including a perfume salesman, a mailman, a dental receptionist, and a pharmacist) and 17 former and current stock loan traders now face SEC charges. The SEC says a few of these illegal operations took place in bars and restaurants throughout New York City where participants passed around payments worth thousands of dollars. The money was wrapped in newspapers or in envelopes.

In one case, two stock loan traders from Morgan Stanley are accused of stealing $1 million in undisclosed kickbacks from a shell company run by one of the trader’s relatives.

Federal prosecutors have filed charges of criminal fraud and conspiracy against 5 of the stock loan traders. 10 people have pled guilty in the case.

If you are an investor that has lost money because a member of the securities industry engaged in illegal activities, you should contact Shepherd Smith and Edwards today. We have helped thousands of people recover their financial losses. One of our experienced securities litigation attorneys would be happy to speak with you.

Related Web Resources:

US SEC charges 38 traders in stock loan scheme, Reuters, September 20, 2007

SEC Charges 38 Defendants in Multi-Million Dollar Stock Loan Scams, SEC.gov, September 20, 2007

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: AIG SunAmerica , Morgan Stanley , Nomura Securities , Oppenheimer , SEC Enforcement

October 11, 2007

Merrill Lynch, Morgan Stanley and Bear Stearns Suffer Losses as Ratings Agencies Are Grilled over Sub-prime's

| Share

Merrill Lynch will soon report third quarter earnings which analysts have revised downward. An analyst at competitor Goldman Sachs says that Merrill’s earnings for the third quarter will be about $1.80 per share, down from $1.95 and lowered Merrill's stock price target to $94 from $108. The Goldman analyst predicted that Merrill will have $4 billion in write-downs, primarily from the fixed income division, resulting in a net loss of $1.5 billion for the quarter.

Other analysts' expectations were even even lower: Fox Pitt Kelton's analyst lowered earnings per share estimate for Merrill to $1.20, from a previous estimate of $1.91, “while noting that forecasting confidence is low in periods such as these.” He also expected the firm to experience $3.5 billion “in gross negative marks and realized losses” on leveraged loans, CDOs, and mortgages resulting in $2.2 billion in net losses and attributes the more positive net loss estimate to “$700 million in hedging gains; $500 million in loan fees; and $100 million in gains on liability marks.”

Morgan Stanley reported last week that it suffered a 17 percent drop in profit compared to the third quarter last year, earning $1.44, about ten cents below analysts’ estimates, with loan losses of $1 billion the culprit.

Bear Stearns has been center stage in mortgage related investment problems which have hit the investment community. That firm reported last week that it experienced a 61 percent drop in profits compared to the third quarter last year. This was mostly caused by multi-million dollar losses in mortgage focused hedge funds.

Meanwhile, Goldman Sachs, beat all analyst’s earnings per share predictions by more than $1.50, with $6.13 earnings per share in the third quarter, claiming that credit hedging had mitigated the firms loss. Lehman Brothers reported better than expected earnings of $1.54 per share despite $700 million in losses related to the credit crunch.

In the wake of the mortgage backed securities meltdown, Congress is investigating credit rating agencies over how and why ratings on such securities failed to reflect the danger. The SEC Chairman testified that the SEC is examining whether agencies including Moodys Investors Service and Standard & Poors were “unduly influenced” by issuers and underwriters that paid for the credit ratings. A union pension fund is suing the Moody’s credit rating agency over its “excessively high ratings” of bonds backed by subprime mortgages.

Shepherd Smith and Edwards represents investors nationwide in claims against securities firms. We have represented investors in more than 1,000 securities cases, including against Merrill Lynch, Morgan Stanley and Bear Stearns. To learn whether might assist you with a claim contact us to arrange a free consultation with one of our attorneys.

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Bear Stearns , Credit Ratings Agencies , Merrill Lynch , Morgan Stanley

October 10, 2007

Morgan Stanley Fined $7.5 Million by SEC for Trade Confirmation Violations

| Share

The Securities and Exchange Commission has filed Morgan Stanley $7.5 million to settle charges that it provided insufficient written trade confirmations to its customers for municipal securities and bonds.

Morgan Stanley Dean Witter, Inc, a subsidiary of Morgan Stanley, furnished customers with trade confirmations that had missing or incorrect information relating to yield, call dates and/or prices and other features of the bonds, the SEC said.

This sanction by the SEC against Morgan Stanley Dean Witter comes on the heals of $10.4 million in fines against 14 other broker-dealer firms by the New York Stock Exchange over similar charges. Morgan Stanley agreed to pay the settlement without admitting or denying the commission's findings in its investigation.

Shepherd Smith and Edwards represents investors nationwide in claims against securities firms. We have represented investors in more than 1,000 securities cases, including dozens against Morgan Stanley Dean Witter. To learn whether we may be able to assist you with a claim contact us to arrange a free consultation with one of our attorneys.

Morgan Stanley to pay $7.5 mil., Reuters, October 10, 2007

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Morgan Stanley , SEC Enforcement

October 9, 2007

Citigroup, Lehman Brothers, DeutscheBank and other Firms Fined for Failing to Deliver Trade Confirmations.

| Share

NYSE Regulation fined 14 of its member firms a total of $10.4 million in fines for failing to deliver trade confirmations to their clients and other violations.

Citigroup Global Markets received the heaviest fine of $2.25 million for failing to deliver trade confirmation documents in more than a million consumer transactions. Lehman Brothers and DeutscheBank were each fined $1.25 million.

Other firms sanctioned included UBS Securities; Bear Stearns & Co.; Credit Suisse Securities (USA) LLC ; Banc of America Securities LLC; Goldman Sachs & Co.; JP Morgan Securities; Wachovia Capital Markets LLC; and Keefe, Bruyette & Woods Inc. Fines levied against these firms ranged from $375,000 to $800,000.

According to the New York Stock Exchange (NYSE) enforcement wing, the violations occurred between July 1, 2003 and Oct 31, 2004. These include failures to ensure delivery of prospectuses to customers who purchased securities and mutual funds, failure to deliver product descriptions to customers purchasing exchange traded funds and failure to establish and maintain appropriate supervisory procedures regarding such activities.

Each of the member firms also agreed to certify that its current policies and procedures are reasonably designed to ensure compliance with current federal securities laws and regulations regarding such requirements. This action was one of the final acts by the regulatory staff of the NYSE prior joining the Financial Industry Regulatory Authority (FINRA) which has taken over all former NASD and NYSE regulatory responsibilities.

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


Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Bank of America , Bear Stearns , Citigroup , Credit Suisse , Deutsche Bank , Goldman Sachs , J P Morgan - Chase , Stockbroker Regulation , UBS , Wachovia

October 9, 2007

EKN Financial Services Fined and Sanctioned for Transactions in Unregistered Securities

| Share

The NASD imposed a $200,000 fine against EKN Financial Services Inc. and levied sanctions against the firm’s CEO, President, Head Trader and Financial and Operations Principal for improper short selling in connection with three unregistered PIPE securities offerings. As part of the settlement, EKN was also suspended for six months from engaging in transactions in PIPES.

"This action represents NASD's continued commitment to ensuring that those firms and individuals who engage in improper activity involving PIPE trading will be held accountable," said the NASD’s Head of Enforcement. "Suspending the firm for six months from future PIPE deals illustrates the seriousness with which we view these violations."

A PIPE is a private offering in which accredited investors agree to purchase restricted, unregistered securities of public companies. The companies agree, in turn, to file a resale registration statement so that investors can resell the shares to the public. Only after the PIPE shares registration is approved by the Securities and Exchange Commission (SEC) are investors free to sell them on the open market.

EKN (formerly known as Ehrenkrantz King Nussbaum, Inc.) reportedly agreed to purchase shares in registered securities, then immediately short positions in the stock without either owning unrestricted shares or borrowing unrestricted shares to cover the short sales. When the PIPE shares were later registered, it covered the short positions.

In addition to the PIPE-related violations, NASD also found that EKN failed to maintain adequate written supervisory procedures and records, including research activities. The regulators also found that EKN failed to report certain customer complaints to NASD, violated net capital rules and allowed transactions through an unregistered agent.

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

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Stockbroker Regulation

October 9, 2007

Study Says Securities Arbitrators Often Expunge Investor Settlements from Brokers’ Records

| Share

A recent study conducted by the Public Investors Arbitration Bar Association indicates that securities arbitrators frequently agree to erase past settlements that were paid to investors from brokers’ records. Removing brokers’ settlement payments from their histories could cause future investors to not find out about the brokers’ past misconduct.

The study reveals that 99% of the time, FINRA arbitrators are the ones who suggest expunging these records. Over 70% of these decisions were made without hearings, even though there are new rules in place that say that a record can only be expunged if the complaint is false, erroneous, or did not involve the broker that was accused.

FINRA disagrees with the study results and claims expungements have dropped dramatically since the new rules were put in place in 2004.

According to a number of securities litigation lawyers, FINRA officers, and regulators, arbitrators are not the only ones at fault. 93% of the time, the people filing complaints are small investors that agree to not contest an expungement as part of their settlements.

Melanie Senter Lubin, Maryland’s securities commissioner, says that most claimants are more focused on receiving compensation from brokers that they believe misled or defrauded them than they are about preserving the integrity of the brokers’ disclosure system.

The study examined 200 cases from 2006. In these cases, parties reached settlements based on the claims’ merits and without hearings. FINRA says that these cases are just a small percentage of the cases that were settled last year and that the study had been selective when citing statistics.

Public Investors Arbitration Bar Association President David B. Caruso says that the specific cases that were chosen for the study were the ones that regulators had expressed concern over because no arbitrators had been involved in the hearings. Caruso also said that even though investors wanting settlements could be held partially responsible for the expungements, it was up to arbitrators to figure out whether the settlements should be expunged from broker's records.

In one case, Karsner & Associates broker Joseph Karsner IV allegedly recommended that investors make investments that were not suitable but did not properly notify them of the risks. Karsner’s lawyer has denied the allegations. Settlements were reached between Karsner and the investors that complained. Arbitrators consented to 18 expungements for Karsner.

If you are an investors that has lost money because of the misconduct of a broker or a brokerage firm, Shepherd Smith and Edwards would like to offer you a free consultation. Our securities litigation lawyers are dedicated to helping investors that have been the victim of broker misconduct recover their losses. We have helped thousands of investors throughout the United States.

Contact Shepherd Smith and Edwards today.

Related Web Resources:

Brokers' Settlement Records Often Wiped Clean, Washington Post, September 25, 2007

Public Investors Arbitration Bar Association

FINRA


Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Arbitration , FINRA

October 8, 2007

New Primary Regulator of Securities Brokerage Firms Is Run Only By Brokerage Firms

| Share

The National Association of Securities Dealers (NASD) recently absorbed the regulatory unit of the New York Stock Exchange (NYSE) and changed its name to the Financial Industry Regulatory Authority (FINRA). Yet nothing has really changed. The primary regulator of securities brokerage firms industry is run solely by … brokerage firms.

There are a number of industry associations which oversee that industry. Yet, no other has the power of the FINRA. The Securities and Exchange Commission (SEC) is charged with the responsibility of policing the securities industry. (The last SEC commissioner appointed by a Democrat left this week leaving only Republican appointees and the Director is a former Republican Congressman, but that is another story.)

In any event, the SEC, the nation’s securities police force, delegates to the securities industry the power to police itself. There is now only FINRA, the rent-a-cop group in charge of that duty. FINRA is run by seven directors. Almost unbelievably, all of the directors of FINRA are representatives of brokerage firms. None are “public” directors.

To make matters worse, FINRA – the brokerage industry - not only regulates itself, it also administers the only justice system available to investors, the single securities arbitration forum. When they open accounts, investors are almost always required to sign documents stating that they agree to arbitrate any dispute they have with the brokerage firm and/or its broker. Investors therefore can NOT file a case in court.

Thus, the same industry that solely decides whether its members have broken the rules is the same industry which runs its own “court” system if clients of that industry are defrauded, et cetera. The situation is made even worse when we learn that every contending candidate for President in both parties are getting major contributions from the securities industry.

In the securities industry the fox is not only in charge of the henhouse, the fox actually owns the henhouse. Oh, and I should add that those candidates, and others in both parties, all agree the requirements to prove securities fraud must be lowered (on everyone) so that foreign companies will list their securities here. If you are an investor … good luck!

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

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: FINRA

October 8, 2007

Former GunnAllen Financial Branch Manager Allegedly Involved in Partnership Ponzi Scheme

| Share

A former broker and branch manager of a Michigan office of GunnAllen Financial, Inc. is accused of selling fraudulent investments. His clients, many of whom are retirees, recently learned that the partnership investments may have been part of a Ponzi scheme. According to reports, a mastermind of the scheme stated in a sworn statement that the investments were fraudulent and that he had acted on advice of the GunnAllen broker/manager.

Frank Bluestein, who has been in the investment business for a over decade, joined GunnAllen Financial in 2004. There, he was not only a registered stockbroker but also as one of the firms’ branch office managers. According to reports, Bluestein, his son and another broker worked in a Detroit area office fo GunnAllen.

Along with other investments, Bluestein's clients were persuaded to invest millions of dollars into partnerships which ceased paying earlier this year. Those who invested recently learned about investigationa, a court action seeking to freeze partnership assets and that their total investment in the partnerships could be in peril

Bluestein sometimes operated through a firm he formed called "Maximum Financial," yet he was a licensed representative and manager through GunnAllen, where he maintained client accounts. Securities industry regulations require firms to have in place and enforce compliance procedures to supervise brokers and managers. It was recently reported that Bluestein has retired from both GunnAllen and the securities industry, while there is an additional report that he is in the process of joining another securities firm.

When most investors seek recovery, based on documents they signed, any claims filed against a brokerage firm andor its representatives must be filed in securities arbitration and can not be filed in court.

Shepherd Smith and Edwards represents investors nationwide in claims against securities firms. We have represented investors in more than 1,000 securities cases, including several against GunnAllen Securities. To learn whether we might assist you with a claim contact us to arrange a free consultation with one of our attorneys.

Additional Information:

Michigan Rep Probed By Regulators, Investment News, by Bruce Kelley, October 11, 2007

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: GunnAllen Financial

October 8, 2007

Enforcement Actions Against Brokerage Firms And Individuals Went Down in 2006, Says Study

| Share

Last week, a securities law journal published a study illustrating how securities regulators went “soft” last year. According to the study, NYSE and NASD fined securities companies and individuals $111 million in 2006, which was lower than the $184 million in collective fines that their two regulatory units issued in 2005. Regulators only issued 19 actions of $1 million or greater. There were 25 such actions the year prior.

The report cited a similar decrease in penalties at the SEC. Penalties issued in 2005 were $1.5 billion. Penalties went down to $974 million in 2006.

Barbara Roper, Consumer Federation of America’s Director of Communications, says, however, that public-company managements and brokerage firms actually outdid themselves in their handling of research-analyst conflict, accounting scandals, and mutual fund-trading scandals.

Regulators, however, are facing a definite backlash. The U.S. Chamber of Commerce and others have conducted studies that show that the U.S. could be doomed unless it cuts back on regulations and tries to compete with the lower standards that exist in other countries. Roper says that she believes regulatory agencies have reduced enforcement efforts because of the pressure to regulate less.

In 2006, NYSE and NASD brought only four actions tied to variable annuities. 35 such actions were issued in 2005. Five brokerage firms involved in “directed brokerage” cases—where the mutual funds handed the firms more business—were ordered to pay $13.1 million in fines. In 2005, 27 firms were fined $55 million in similar cases.

However, the NYSE issued 281 actions in 2006. It issued only 110 actions in 2005.

It will be important to see whether regulation numbers continue to go down in 2007.

Shepherd Smith and Edwards is a securities litigation firm that represents investors that have lost investments because of broker misconduct. We have helped thousands of investors recoup their losses. To schedule your free consultation, contact Shepherd Smith and Edwards today.

Related Web Resources:

Regulators Catching Zzzs, Not Rogues, Bloomberg.com, October 3, 2007

U.S. Chamber of Commerce

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Stockbroker Regulation

October 5, 2007

Former InterSecurities Brokers Investigated for Fraud

| Share

The Florida Office of Financial Regulation and the Florida Department of Law Enforcement are investigating Michael O. Traynor and his son, Matthew O. Traynor, former brokers at InterSecurities, Inc. Complaints from at least a dozen investors allege that the Traynors defrauded clients out of approximately $8 million.

In addition to an affiliation with InterSecurities, Inc., the Traynors are reported to have been affiliated with or operated under the firm names of Mariner Financial Services, Western Reserve Life, Association of Professional College Advisors, Inc., College Advisors Group, Inc., LifeTime Advisors, Inc. and LifeTime Advisors Group, Inc. Michael Traynor was licensed in securities and insurance and represented himself as a financial planner and certified college planning specialist.

According to reports, many of the investors were first in contact with the Traynors through their church and were lured to invested funds into accounts entitled “Freedom Bond Account,” “7 Day Freedom Money Market,” as well as “CGU Broker Services” and “Allianz Broker Services”. Apparently, statements on these accounts were falsified to indicate assets, income and profits which did not exist.

Michael Traynor served not only as a registered representative of InterSecurities, Inc., but also as the branch manager of that firm until he was terminated. According to alleged victims, they were not contacted by InterSecurities regarding the reason for his termination.

Shepherd Smith and Edwards represents investors nationwide in claims against securities firms and brokers 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.

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Broker Fraud , InterSecurities, Inc. , Investor Fraud

October 4, 2007

Stock-Loan Traders from Morgan Stanley, Janney Montgomery Scott, and Other Brokerage Firms Charged In $12 Million Stock-Loan Scam by SEC and DOJ

| Share

The Securities and Exchange Commission and the Department of Justice have separately filed charges against a number of people for their alleged involvement in a $12 million stock-loan fraud scam.

The criminal case involves charges filed for securities fraud conspiracy and other charges against stock-loan traders at Janney Montgomery Scott LLC and Morgan Stanley, including Anthony Lupo, Peter Sherlock, Donato Tramontozzi, Craig DeMizio, and Andrew Caccioppoli.

The DOJ says charges stem from its going investigation kickbacks and bribery that are allegedly happening within the securities industry. It says that securities firms frequently borrow and lend securities to each other, as well as coordinate short-sale transactions. Stock-loan finders look for inventories of a given security and match lenders and borrowers for transactions.

the DOJ says that several stock-loan traders illegally funneled millions of dollars in fraudulent finder fees to co-conspirators, even when finders’ services had not occurred. In return, the traders received cash bribes or payments made to their family members.

The defendants are facing up to 25 years in prison for conspiracy. A conviction of money laundering carries up to 20 years in prison. “Structuring” and false statement convictions can lead to up to five years in a federal penitentiary.

The SEC filed two lawsuits against 38 defendants. 17 current and ex-stock-loan traders from a number of brokerage firms, such Morgan Stanley, Janney Montgomery, Van der Moolen, Oppenheimer, A.G. Edwards, and Nomura Securities, are among the defendants.

The SEC says that the defendants regularly defrauded the brokerage firms that they worked for, as well as other people, by taking part in collusive loan transactions. As a result, the firms had to pay sham finder fees to firms that the traders, their friends, or family members controlled. These firms acted as fronts. They received large finder fees on thousands of stock loan transactions even though they did not provide a finder fee service. In many instances, the firms were not involved in the stock loan industry at all.

A few of the SEC defendants have already settled the charges by agreeing to be barred from the securities industry and from future violations. By settling, the defendants are not admitting to or denying wrongdoing. Three of the civil defendants say they will disgorge $94,262 in total and prejudgment interest.

If you have lost money because of the fraudulent actions of a securities industry member, you should contact Shepherd Smith and Edwards right away. We are stockbroker fraud attorneys that are known for our ability to help our investor clients recover their losses.

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

Related Web Resources:

38 charged in alleged stock loan scam, Newsday.com, September 20, 2007

Five Wall Street Workers Accused Of Fraud, WNBC.com, September 20, 2007


Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: SEC Enforcement , Securities Fraud , Stock-Loan Fraud Scams

October 2, 2007

Callan Associates Resolves SEC’s Incomplete Disclosure of Conflict Charges

| Share

Callan & Associates has settled charges made by the SEC that the pension consultant firm incompletely disclosed a conflict of interest in an investment adviser registration form. The firm has agreed to obey the SEC’s cease and desist order.

According to the SEC, Callan told clients that BNY Brokerage Inc. is its preferred securities broker, but failed to disclose that Callan received payments based on the amount of commission it could generate from investors for BNY. The SEC says that not revealing this key information resulted in Callan’s disclosure to be misleading.

Callan sent letters to retirement clients every year to let them know that BNY is the firm’s preferred broker and clients could use BNY to pay Callan for services through direct brokerage. The letters, however, failed to reveal that the amount of compensation that Callan received from BNY depended on how much commission came from Callan clients.

Under the Callan-BNY contract, BNY said it would pay Callan an annual fee, which was 8% of what was contingent on BNY’s generating gross brokerage commissions over a certain minimum threshold that had come from Callan clients. This contract was in effect from 1998 until 2006.

The Securities and Exchange Commission told Callan that it needed to cease and desist from violating Section 207 of the 1940 Investment Advisers Act, which makes it illegal to purposely misrepresent or mislead by omission when filing a commission report or in a registration application.

It is against the law for an investment consulting firm or a brokerage company to withhold, exclude, or misrepresent key information or facts about an investment from an investor. If an investor loses money because of an omission or misrepresentation, the consulting company or brokerage firm can be held legally liable.

In the United States, Shepherd Smith and Edwards has helped thousands of clients that have been the victim of investor fraud recover their losses. Contact us online or call us, toll-free, at (800) 259-9010 and ask for your free consultation with one of our experienced securities litigation lawyers.

Related Web Resources:

Pension adviser Callan cited by SEC on disclosure, Reuters, September 21, 2007

Callan Associates

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: SEC Enforcement

October 1, 2007

Morgan Stanley to Pay $12.5 Million in Compensation and Fines

| Share

Morgan Stanley says it will pay $12.5 million as part of a settlement to resolve charges that the company neglected to produce e-mails that had been lost during the September 11, 2001 terrorist attacks in New York.

The Financial Industry Regulatory Authority (FINRA) announced the settlement on Thursday. Morgan Stanley will pay $9.5 million to a fund designated for thousands of investors that have filed arbitration complaints. The remaining $3.5 million is a fine. The settlement also resolves charges that Morgan Stanley did not provide other documents required for certain arbitration cases.

Morgan Stanley will retain an independent consultant to make sure that retail brokerage clients in arbitration get specific materials that they need. By agreeing to the settlement, Morgan Stanley is not admitting to any wrongdoing.

In the past 5 years, Morgan Stanley has agreed to pay over $29 million related to withholding e-mails. The company’s e-mail servers were destroyed in New York on September 11, 2001. The World Trade Center was the headquarters for the company’s brokerage business.

Although millions of e-mails were thought lost, these e-mails had apparently been backed up on employees’ computers and other servers. In December 2006, the NASD filed a complaint against Morgan Stanley for issuing a false claim when it said it was not able to produce the e-mails.

In February 2006, Morgan Stanley said it would resolve SEC charges that the firm did not provide e-mails that were necessary for analyst research and initial public offerings by paying $15 million. Morgan Stanley and four other firms were each fined $1.6 million in December 2002 for destroying e-mails.

In 2005, a Florida state court jury told Morgan Stanley that it had to pay $1.58 billion to Ronald Perelman, a billionaire investor, because of a failed merger. E-mails that had gone missing had reappeared in this case, which resulted in the verdict. The award was thrown out, and Perelman is appealing.

FINRA says that until March 2005, Morgan Stanley had told regulators and arbitration claimants under false pretenses that the firms did not have any e-mails from before October 2001. Documents, however, show that Morgan Stanley did not look through its restored e-mails before March 2005. Until that time, Morgan Stanley had destroyed millions of e-mails by letting users delete them or overriding files.

Thousands of investors may have suffered financial losses because the e-mails were supposedly destroyed. It is not clear whether investors will want to revisit their cases.

If you are an investor that has lost money because of the fraudulent actions of a firm or individual in the securities industry, do not hesitate to contact Shepherd Smith and Edwards today. We have helped thousands of people like you recover financial losses through negotiation, arbitration, mediation, and litigation.

Morgan Stanley to Pay $12.5 Million in Compensation and Fines, Reuters, September 27, 2007


Related Resources:

Morgan Stanley

Arbitration Discovery Fund - Morgan Stanley & Co., FINRA

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: FINRA , Morgan Stanley

Call for a Free Consultation
(800) 259-9010

Contact Us

The code above is for the protection of your information.

Browse

  • Topics
  • By Date
  • Search
Topics
By Date
Search

Recent Entries

Legal Blogs