March 31, 2011

Number of Securities Class Action Settlements Reached in 2010 Hit Lowest Level in a Decade, Says Report

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Per a new study by Cornerstone Research Inc., 86 securities class action settlements were approved in 2010—that’s significantly less than the 101 securities class action settlements that the courts approved in 2009. The settlements for last year’s cases totaled $3.1 billion. In 2009, the settlements reached $3.8 billion.

One reason for this may be that some securities class action lawsuits, including a number of complaints related to the 2007 – 2009 financial collapse, are taking a longer time to settle because they are likely more complex. Close to 200 securities class actions related to the credit crisis have been filed. Largest settlements under consideration include:

$624M - Countrywide Financial Corp.
$475M - Merrill Lynch & Co. Inc.
$124.8M - New Century Financial Corp.
$80M - MoneyGram International Inc.

Also per the report, total funds in court-approved settlements for 2010 dropped 17.8% from the settlement fund level in 2009. 70% of securities class action cases that were settled last year included allegations over generally accepted accounting principals—compare that to the 65% of cases settled the year before.

Our stockbroker fraud law firm represents individuals and institutions with securities cases against investment advisers, broker-dealers, brokers, and others. Filing your own claim or lawsuit usually gives you the opportunity to recover more than you would if you opt to be part of a securities class action complaint. Over the years, we have helped thousands of investors who have suffered financial losses get their money back.


Related Web Resource:
Read the Report (PDF)


Related Blog Posts:
Charles Schwab & Co. Defendant in Class-Action Securities Fraud Lawsuit Filed on Behalf of Schwab Total Bond Market Fund Investors Over CMOs and Mortgage-Backed Securities, Stockbroker Fraud Blog, September 7, 2011

$277 Million Verdict Against Apollo Group for Alleged Misstatements to Investors Upheld by US Supreme Court, Institutional Investors Securities Blog, March 22, 2011

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Posted In: Class Action Lawsuits

March 30, 2011

Venezuelan Workers Fall Victim to Francisco Illarramendi's Ponzi Scam

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Our Stockbroker Fraud Blog and our Institutional Investor Securities Blog have been following the story of Michael Kenwood Capital Management, LLC principal Francisco Illarramendi, who recently pleaded guilty to securities fraud, investment adviser fraud, and conspiracy to obstruct justice, and wire fraud. Now, news that the Ponzi scam, which targeted clients overseas, may be impacting workers in Venezuela.

Illarramendi is Venezuelan-American. According to National Public Radio/AP, he was in charged of investing hundreds of millions of dollars from a state oil workers’ pension fund. Now, the Venezuelan government is attempting to recover what it can from the employee retirement fund for Petroleos de Venezuela, which put forth about 90% of the investment. Rafael Ramirez, Venezuela’s oil minister, says that any pension fund losses would be made up by the oil company. Per The Wall Street Journal, officials from the petroleum workers union are claiming that about $500 million was invested.

The monetary scope of the Ponzi scheme has not been verified. The Securities and Exchange Commission, however, has said that at one point Illarramendi gave over a bogus letter from an accountant in Venezuela in an effort to verify some $275M in nonexistent assets.

Prosecutors claim that Illarramendi transferred money between investment accounts without notifying clients, as well as falsified documents to fool his clients.
While all his investors are located abroad, the financial fraud scam has impacted startup technology companies in the US that depended on Investments from Illarramendi’s group.

If convicted, Illarramendi could end up serving up to 70 years behind bars.

Venezuelan Workers Caught Up In Conn. Ponzi Scheme, NPR/AP, March 30, 2011

Venezuela Oil Min: Working With US To Recover Pension Fund Money, The Wall Street Journal, March 27, 2011


Related Web Resource:
Petroleos de Venezuela


More Blog Posts:
Michael Kenwood Capital Management, LLC Principal Pleads Guilty to Securities Fraud Involving Ponzi Scam, Institutional Investors Securities Blog, March 17, 2011

Order to Freeze Assets in $53M Fund Fraud Allegedly Involving Michael Kenwood Asset Management LLC Obtained by SEC, Stockbroker Fraud Blog, February 21, 2011

Continue reading "Venezuelan Workers Fall Victim to Francisco Illarramendi's Ponzi Scam" »

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Posted In: Ponzi Scams

March 28, 2011

FINRA Panel Orders Wedbush Securities to Pay $233,000 in Securities Fraud Damages

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A Financial Industry Regulatory Authority (FINRA) arbitration panel says Wedbush Securities Incorporated must pay Karen E. Ray $233,000 in damages. Ray had accused the brokerage firm of numerous causes of action, including negligence, purposely negligent misrepresentations, and violating FINRA Rules of Fair practices.

Rays case isn’t the first one against the broker-dealer. FINRA’s broker report on the financial firm noted that Wedbush has been at the center of a number of customer complaints and over 40 regulatory inquiries brought by the Securities and Exchange Commission, FINRA (previously NASD), the NYSE Division of Enforcement, as well as regulatory bodies in Colorado, Washington, New Jersey, Georgia, Idaho, and Oregon. Among the allegations are those involving supervisory failures and market timing. The broker report also noted that Wedbush had received over 40 securities arbitration claims by customers alleging unsuitability, negligence, excessive margin, churning, misrepresentation, and/or breach of fiduciary duty. Their cases involved different kinds of securities, such as mutual funds, bonds, stocks, municipal securities, annuities, and options.

In July 2007, our stockbroker fraud blog posted a story about a securities complaint against Wedbush filed by a group of nuns. The Sisters of St. Joseph of Carondelet contended that they lost $1 million because Wedbush placed their money in mortgage-backed CMO securities.

In Ray’s securities arbitration case, the FINRA panel is ordering Wedbush to pay her $177,791 in compensatory damages. Wedbush also must pay $42,026 in lawyer fees, $5,000 for the Claimant’s expert witness fee, and $3,604 in costs.

Related Blog Post:
Wedbush Hit with Nun’s Complaint over CMO’s - May Have More Than Brokers in Common with Brookstreet, Stockbroker Fraud Blog, July 18, 2007

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Posted In: FINRA , Financial Firms , Securities Fraud , Wedbush Securities

March 26, 2011

Prison Term for Broker Accused of Investment Fraud Affirmed by 7th Circuit Even Though Sentence Exceeds Guidelines

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The U.S. Court of Appeals for the Seventh Circuit has affirmed broker Scott Schlueter’s 48-month prison sentence even though it exceeds sentencing guidelines. Schlueter is accused of conducting an investment scam that resulted in over $300,000 in financial losses for investors, who also happened to be friends of his.

Schlueter has admitted that rather than placing investors’ money in no-risk investments, he kept the funds while paying out interest from time to time. He has pleaded guilty to securities fraud, wire fraud, and mail fraud.

Although sentencing guidelines call for 33 to 41 months behind bars, the district court judge sentenced Schlueter to 48 months. The judge contends that the serious impact of the rogue broker’s actions was not accounted for in the sentencing guideline range and that an above-range sentence was “more than adequate” considering that Schlueter not just bilked investors of money they needed during “critical stages of their lives,” but he also took advantage of his friendships with investors to defraud them.

For example, one 75-year-old man ended up having to go back to work. Another investor, a widow, had to get a second job after she lost her insurance money.

Schlueter, who argued that he should only sentenced for two year because he had a tough childhood and suffered from alcoholism, contested the above-range sentenced. The appeals court, however, turned down his request down and affirmed the four-year sentence.

Related Web Resources:
United States v. Schlueter, Leagle.com, March 10, 2011

7th Cir. Affirms Broker Sentence Even Though It Exceeds Guidelines, BNA, March 16, 2011


More Blog Posts:
Wall Street Targeting Older Investors With Structured Product Sales, Reports AARP, Stockbroker Fraud Blog, March 11, 2011

Increase of Structured Notes with Derivatives Sales Seduces Retirees, Reports Bloomberg, Stockbroker Fraud Blog, September 25, 2010

Combatting Elder Financial Fraud: SEC, NASAA, & FINRA Update Their Best Practices to Protect Senior Investor, Stockbroker Fraud Blog, August 29, 2010

Continue reading "Prison Term for Broker Accused of Investment Fraud Affirmed by 7th Circuit Even Though Sentence Exceeds Guidelines " »

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Posted In: Securities Fraud , Senior Investors

March 24, 2011

Reductions to SEC’s Budget Will Cause Staff Furloughs, Says Schapiro

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Securities and Exchange Commission Chairman Schapiro says reducing the agency’s budget to where it was at in 2008 would result in “significant’ staff furloughs. Other likely consequences would be the curtailment of crucial travel, including visits to registered entities, the cessation of technology infrastructure initiatives, and the curtailing of the SEC’s Dodd-Frank enforcement capabilities. House Republicans are the ones pushing for the budget reductions. Schapiro made her case earlier this month while testifying before the Senate Banking Committee’s Securities subcommittee. Our securities fraud law firm will continue to monitor the developments regarding this matter.

Schapiro says that the continuing resolution, which would find the agency at fiscal year 2010 levels, already makes it tough to close deals with top-rank industry experts she has recruited. She also says any steep cuts would impede the SEC's ability to oversee broker-dealers, mutual funds, investment advisers, and other participants in the retail investing market in “anything but the most cursory way.” Schapiro also expressed concern that credit rating agencies would be able to evade serious examination if the SEC’s budget was tightened.

Sen. Michael Crapo (R-Idaho.), a ranking subcommittee member, noted that while underfunding the SEC can make it hard for the agency it to do its job “aggressively” and “effectively,” he believes that in the wake of the financial crisis, it is now more than ever necessary for all levels of government to perform with greater efficiency. Crapo is calling for an “agency-wide examination” of where the SEC’s resources are going and an assessment of whether they can be “better utilized.” For example, is there technology that can compensate for a reduced staff? What about sharing technology costs over Dodd-Frank oversight needs with the Commodity Futures Trading Commission?

Schapiro also said that the SEC has been effectively implementing a 60-day comment period for most Dodd-Frank rulemaking, rather than just 30 days, to allow time for thoughtful feedback. Current SEC rules are also being examined to determine whether any of them are no longer applicable.


Related Web Resources:
Cuts will stifle, SEC chief warns, The Boston Globe, March 11, 2011

Schapiro Says SEC Will Have to Furlough Staff If House Republican Cuts Are Enacted, BNA Securities Daily, March 11, 2011

Continue reading "Reductions to SEC’s Budget Will Cause Staff Furloughs, Says Schapiro" »

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Posted In: Miscellaneous , SEC

March 23, 2011

FBI Arrests Texas Leader of Pump-and-Dump Scheme

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FBI agents have arrested Christopher Rad, a Texas man who is charged with one count of conspiracy to commit securities fraud and transmit email messages. Rad, 42, is the alleged ringleader of an international securities fraud group accused of working with botnet operators, hackers, and email spam in a pump-and-dump scam.

Between November 2007 and February 2009, Rad allegedly acted as the middleman between computer experts, who know how to inflate a stock’s value, and stock promoters. The FBI says that he agreed to work with others to trade manipulated stock between themselves to make it appear as if the stocks were active. The hackers that he worked with would break into third-party brokerage accounts, liquidate the stocks, and use the balance to buy shares of the manipulated stock. They also allegedly distributed viruses so that computers around the world became infected. This created a “botnet,” a virtual army of computers that would then send out spam to promote the manipulated stocks. The pump-and-dump scheme let the fraudsters obtain control of “penny stocks" that weren’t traded on major exchanges.

If convicted, Rad end up behind bars for five years. He faces a $250,000 fine.

Another man charged over his involvement in the pump-and-dump scheme, James Bragg, has pleaded guilty to hiring botnet operators and taking part in massive email campaigns to inflate the stocks’ value. He also has admitted to bringing in spammers and hackers.

If you were the victim of a pump-and-dump scam or any other type of securities fraud, our Texas securities fraud lawyers want to talk to you.

Related Blog Posts:
Organizer of international securities fraud ring charged in stock manipulation conspiracy using hackers and botnet operators, Justice.gov, March 21, 2011

Texas ringleader of pump-and-dump scam arrested, SC Magazine, March 22, 2011

US man arrested in hacker stock fraud scheme, AFP/Google, March 22, 2011

More Blog Posts:
Alleged Pump and Dump Stock Manipulation Scam Leads to Indictment of Six, Including a Securities Attorney, Institutional Investors Securities Blog, February 27, 2011

Dallas-Based Southwest Securities Settles for $500,000 FINRA Charges It Improperly Used Paid Consultants, Stockbroker Fraud Blog, March 17, 2011

Texas Securities Fraud: SEC Halts Alleged Ponzi Scheme in the Dallas-Fort Worth Area, Stockbroker Fraud Blog, March 2, 2011

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Posted In: Pump and Dump Scams , Texas Securities Fraud

March 21, 2011

FINRA Chief Ketchum Says Securities Regulators Worried Whether Investors Betting on High-Yield Corporate Bonds Really Know What They Are Getting Into

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At a Financial Industry Regulatory Authority fixed income conference earlier this month, FINRA CEO and Chairman Rick Ketchum says securities regulators are questioning whether investors looking at risky investment, including high-yield corporate bonds, fully understand what they are getting into when they delve into the high-yield market. Last year, approximately $200 billion in high-yield debt were sold—a significant increase from the $49 billion that were sold in 2008. Also, during the first six weeks of 2010, about $6.7 billion in junk bond mutual funds were sold.

However, with all this activity in the past year, Ketchum says regulators are asking if registrants are fully familiar with the risks and complexities of the products they are selling and whether clients’ understand the risks involved. For example, he asked, “In a lower interest rate environment, are investors chasing yield, or being led to chase yield?”

As a result of such concerns, FINRA, for its compliance programs, is focusing on the areas of commodity-based exchange-traded funds, municipal securities, disclosure practices, and investor suitability. Ketchum says to expect several formal actions that will tackle “deficient procedures for disclosing material information” and other actions related to “failure to deliver official statements during the primary offering disclosure period” and insufficient “time-of-trade disclosures of material information.”

Ketchum also says that in addition to taking a closer look at municipal bond underwriters to ensure the fairness of new-issue pricing practices and fees, regulators will be checking for any inappropriate efforts by ratings agency officials to favorably affect how municipal securities issues are rated.

Our securities fraud lawyers represent clients who were inappropriately advised about where to put their funds and as a result sustained significant investment losses.

Related Web Resources:
FINRA

FINRA looks into muni-bond practices, Chicago Breaking Business News/Reuters, March 7, 2011

Continue reading "FINRA Chief Ketchum Says Securities Regulators Worried Whether Investors Betting on High-Yield Corporate Bonds Really Know What They Are Getting Into" »

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Posted In: FINRA , Securities Fraud

March 17, 2011

Dallas-Based Southwest Securities Settles for $500,000 FINRA Charges It Improperly Used Paid Consultants

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Southwest Securities Inc., a Dallas-based financial firm, has consented to a $500,000 fine imposed by Financial Industry Regulatory Authority. The SRO claims that the broker-dealer paid consultants to solicit municipal securities business—a violation Municipal Securities Rulemaking Board Rule G-38—and did not comply with a number of the board’s other requirements. FINRA says that the Texas broker-dealer’s alleged misconduct threatened the municipal securities market’s integrity.

Under Rule G-38, municipal securities dealers are not allowed to pay persons not affiliated with the company for the purposes of soliciting business for it. Southwest Securities, however, allegedly worked with these consultants to obtain 24 municipal securities underwritings and roles as financial adviser to Texas municipalities. The consultants were paid over $200,000 and promised a percent of earnings from any municipal securities business solicited. The broker-dealer also allegedly issued $26,000 in one-time payments to three individuals for their involvement in obtaining this type of business for the firm.

Other violations, allegedly included:
• Failing to properly submit MSRB forms.
• Inaccurate reporting to over 300 municipal securities transactions.
• Inadequate supervisory systems and procedure, which should have been revised to meet a MSRB Rule G-38 amendment that doesn’t allow unaffiliated individuals to receive payment soliciting municipal securities business.
• Engaging in prohibited municipal securities business—a violation of MSRB Rule G-37

By settling, the Southwest Securities is not denying or admitting the Texas securities charges.


Related Web Resources:
Southwest Securities to Pay $500K, Settling Charges Firm Improperly Used Paid Consultants, BNA Broker/Dealer Compliance Report, March 9, 2011

Dallas broker pays $500,000 to settle bond query, Dallas News, March 7, 2011

FFINRA Fines Southwest Securities $500,000 for Paying Former Texas Municipal Issuer Officials and Others to Solicit Municipal Securities Business on its Behalf, FINRA, March 7, 2011


Continue reading "Dallas-Based Southwest Securities Settles for $500,000 FINRA Charges It Improperly Used Paid Consultants" »

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Posted In: Southwest Securities , Texas Securities Fraud

March 16, 2011

Morgan Keegan & Co. Inc. Must Pay $250K to Couple that Lost Investments in Hedge Fund with Ties to Bernard L. Madoff Investment Securities

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Financial Industry Regulatory Authority says that Morgan Keegan & Co, Inc. must pay over $250,000 in punitive and compensatory damages to Jeffrey and Marisel Lieberman. The couple suffered financial losses after investing in Greenwich Sentry LLP, a hedge fund whose assets were funneled to Bernard L. Madoff Investment Securities. FINRA contends that the brokerage firm failed to due enough due diligence on the Madoff feeder fund, and was “grossly negligent.”

The Lieberman, who are accusing the Regions Financial unit of fraudulent misrepresentation, negligence breach of fiduciary duty, and violations of Florida and Tennessee statutes, claim that Morgan Keegan and Julio Almeyda, one of its registered representatives, invested $200,000 of their money with Greenwich Sentry. The fund ended up filing for bankruptcy last November.

Per Morgan Keegan’s internal compliance rules, investors should only be allowed to place money in hedge funds if “speculation” is one among their main objectives when opening an account. “Speculation” was the last objective on the couple’s list. FINRA says that not only must the broker-dealer repay the couple’s entire loss of $200,000, but also they must also give them 6% annual interest from when the investment was made, $50,000 in punitive damages, and $14,000 in expert witness fees.

Meantime, the FINRA panel cleared Almeyda of wrongdoing, finding that he did not know that Morgan Keegan had not provided sufficient due diligence nor was he aware that he had given the Lieberman’s false and misleading information about their investments' risks.

Over the last year, Morgan Keegan has found itself dealing with hundreds of arbitration cases nvolving mutual fund investors alleging securities fraud related to the significant losses they sustained during the subprime mortgage crisis.


Related Web Resources:
Morgan Keegan Fined $250,000 Over Madoff Fund, Money News, March 7, 2011

Investors Succeed in Due Diligence Case Against Brokerage Over Madoff-Related Losses, BNA Securities, March 9, 2011


More Blog Posts:
Morgan Keegan to Pay $9.2M to Investors in Texas Securities Fraud Case Involving Risky Bond Funds, Stockbroker Fraud Blog, October 6, 2010

Morgan Keegan & Co., Inc., Morgan Asset Management, and Two Employees Face Subprime Mortgage Securities Fraud Charges by SEC, Stockbroker Fraud Blog, April 8, 2010

Morgan Keegan Ordered by FINRA Panel to Pay Investor $2.5 Million for Bond Fund Losses, Stockbroker Fraud Blog, February 23, 2010


Continue reading "Morgan Keegan & Co. Inc. Must Pay $250K to Couple that Lost Investments in Hedge Fund with Ties to Bernard L. Madoff Investment Securities" »

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Posted In: Financial Firms , Madoff Ponzi Scheme , Morgan Keegan , Mortgage Backed Securities , Regions Financial Corporation , Securities Fraud

March 15, 2011

SEC Needs to Keep a Closer Eye on FINRA, Says Report

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According to the Boston Consulting Group, the US Securities and Exchange Commission should step up its oversight efforts over the Financial Industry Regulatory Authority. The BCG released its findings following a six-month review of the SEC’s internal operations, an examination that was ordered under the new Dodd-Frank law. The consulting group’s job was to examine the SEC’s structure, internal operations, personnel, resources, relationships with self-regulatory organizations, and technology.

BCG notes that with FINRA now providing the majority of market surveillance for most US equity trading, the SEC’s scrutiny of the SRO is now more important than ever. BCG also believes that the SEC should keep a closer watch on FINRA’s member regulation and enforcement units.

Currently, the SEC’s Office of Compliance Inspections and Examinations employs about 50 people tasked with inspecting 12 SROs. Still, BCG says that these SROs are under no obligation to regularly disclose information about their regulatory operations to the SEC. BCG believes that this disclosure of data should become a formal requirement. Also, even though there are over 100 staff attorneys at the SEC’s Division of Trading and Markets looking at SRO filings, the consulting group believes these employees could stand to deepen their understanding of the markets.

SEC Chairman Mary Schapiro says that BCG’s analysis confirms her worries that the SEC does not have all the resources required to do everything it is expected to accomplish. BCG found that the SEC would need about 400 more employees to successfully manage its workload.

The SEC will set up several working groups each focused tackling the report’s different recommendations.

Securities Fraud
Our stockbroker fraud law firm represents individuals and institutional investors that have lost money as a result of securities fraud. Contact Shepherd Smith Edwards & Kantas LTD LLP to ask for your free consultation.

Related Web Resources:
SEC should step up scrutiny of Finra: Report, Investment News, March 11, 2011

Audit: SEC staffing too small to fulfill law

FINRA

SEC

Boston Consulting Group

Office of Compliance Inspections and Examinations

Division of Trading and Markets

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

Posted In: FINRA , SEC Enforcement

March 12, 2011

FINRA Orders Charles Schwab to Pay $18M to Fair Fund for YieldPlus Investors

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The Financial Industry Regulation Authority wants Charles Schwab & Company, Inc. to pay $18 million to a Fair Fund set up by the SEC to payback investors of the Schwab YieldPlus Funds. FINRA found that even after changes to the fund’s portfolio resulted in it being affected by the mortgage-backed securities market crisis, Schwab did not change its marketing of the fund and instead provided inaccurate material.

The FINRA order was announced just as the Securities and Exchange Commission revealed that $119 million settlement was reached with Charles Schwab & Co., Inc. and Charles Schwab Investment Management for their alleged misleading of Schwab YieldPlus Fund investors and failure prevent nonpublic information from being misused. According to the SEC, investors were not adequately told about the risks associated with the Schwab fund. Instead, they were provide with allegedly misleading statements, such as those claiming that investing in the ultra-short bond funds was only slightly riskier than investing in a money market fund. Read our earlier stockbroker fraud blog post for more information.

Schwab has said that it is still facing about 20 individual securities arbitration claims asking for $3 million in damages related to the YieldPlus Fund. Last year, it resolved federal and California state law claims—for $200 million and $35 million, respectively, over the fund.

In other recent Charles Schwab Corp. news, FINRA has announced that it isn’t going to recommend disciplinary action over the firm’s auction-rate securities sales to clients. Charles Schwab had received two Wells notices in 2009 indicating that regulators were recommending enforcement actions.



Related Web Resources:
UPDATE: Finra Won't Discipline Schwab For Auction-Rate Securities-Filing, The Wall Street Journal, February 25, 2011

SEC Reaches $119 Million Settlement with Charles Schwab, The Blog of Legal Times, January 11, 2011

FINRA Orders Schwab to Pay $18 Million to Investors for Improper Marketing of YieldPlus Bond Fund, FINRA, January 11, 2011


More Blog Posts:
Schwab Settles for $119M SEC Charges It Allegedly Misled YieldPlus Fund Investors, Stockbroker Fraud Blog, January 17, 2011

Class Members of Charles Schwab Corporation Securities Litigation Can Still Opt Out to File Individual Securities Claim, Stockbroker Fraud Blog, December 6, 2010

Charles Schwab & Co. Defendant in Class-Action Securities Fraud Lawsuit Filed on Behalf of Schwab Total Bond Market Fund Investors Over CMOs and Mortgage-Backed Securities, Stockbroker Fraud Blog, September 7, 2010


Continue reading "FINRA Orders Charles Schwab to Pay $18M to Fair Fund for YieldPlus Investors" »

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Posted In: Charles Schwab , FINRA , Financial Firms , SEC Enforcement

March 11, 2011

Wall Street Targeting Older Investors With Structured Product Sales, Reports AARP

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Unfortunately, there are elderly investors who end up suffering financial losses because a broker placed their money in investments that are unsuitable for their needs. Many of these investors don't realize that they may have grounds for a securities fraud claim.

The AARP says that for many elderly Americans, the prospect of running out of money is scarier to them than the thought of dying—especially for those who are too old or sick to go back to work and rebuild their nest eggs. Although broker-dealers and investment advisers know how important it is for older investors to make sure that their money is placed in investments that are low risk, this isn’t always what happens, such as with structured products.

While highly profitable for sellers, structured products aren't always a great benefit to buyers who could stand to lose everything on an illiquid investment that has limited potential gain. Already, investors have lost about $164 billion in such risky investment. Yet structured product sales continue to grow.

This isn’t surprising considering that, according to securities arbitration consultant Louis Straney, sales commissions on structured products are at 3- to 10%. Last year alone, Wall Street sold $51.86 billion in structured products to US customers.

AARP says that for many investment banks and financial firms, older Americans are among their favorites as buyers for these loosely regulated instruments. Not only do many elderly investors have the money, but also, the pitch, “low risk to principal, and high yield,” is exactly what many retirees want. Unfortunately, many elderly investors may not fully understand exactly what they are investing in, opting instead to place their trust in brokers and financial advisers.

Losing one’s savings or retirement is no joke for the elderly, who now must worry about how to support themselves and pay for nursing and medical care. Also, financial worries can also take a physical and emotional toll on elderly victims.

Our securities fraud lawyers represent investors who have lost money because they were advised to place their funds in investments that were inappropriate for their needs and goals. We also work with senior financial fraud victims.

Related Web Resources:
How Safe Are Your Savings?, AARP, March/April 2011

Running Out of Money Worse Than Death, AARP, July 1, 2010

Fraud Target: Senior Citizens, FBI

Financial Planning for Seniors, ElderlyCare


More Blog Posts:
Increase of Structured Notes with Derivatives Sales Seduces Retirees, Reports Bloomberg, Stockbroker Fraud Blog, September 25, 2010

Structured Notes Becoming New “Investment Bubble” on Wall Street, says Institutional Risk Analytics Director, Stockbroker Fraud Blog, August 12, 2010

Brokers Renew Push for Investors to Buy Structured Products, Stockbroker Fraud Blog, June 12, 2009

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Posted In: Senior Investors , Structured Products

March 8, 2011

Texas Congressmen Seek Answers from SEC Chairwoman Regarding Conflict of Interest Related to Madoff Debacle

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Texas Congressman Jeb Hensarling is one of four Republican members of the House Financial Services Committee wanting to know more about Securities and Exchange Commission Chairwoman Mary Schapiro’s role in managing the conflict of interest presented by appointing David M. Becker as the SEC’s general counsel. Becker, who is no longer in this post, is with someone with a financial interest in a Bernard Madoff investment account. As a senior policy director for the SEC involved in dealing with Madoff Ponzi scam, he played a role determining how victims would be compensated.

Becker’s ties with Madoff didn’t come to light until trustee Irving H. Picard sued him and his two brothers to get back more than $1million of the $2 million they had inherited from their late mother’s Madoff investment. The former SEC general counsel claims that he told Schapiro and the chief ethics officer of his Madoff-related financial interest. Now, however, SEC inspector general H. David Kotz says he wants to probe possible conflicts of interest related to Becker’s role with the SEC as someone who stood to benefit from decisions involving Madoff Ponzi scam victims. According to the New York Times, two unnamed sources say while the SEC agreed to return to investors only the funds they had placed in their Madoff accounts, Becker had pushed for allowing the victims to keep some of their investment gains.

Lawmakers say they want details of Schapiro’s talks with Becker about his Madoff ties. They also want to know whether she followed all the steps delineated in government ethics rules. Also getting into the mix is Texas Representative and Republican Randy Neugebauer, who is quoted in the New York Times as stating that he believes the SEC should be held to the same high standard of “transparency and disclosure” as it holds other companies.

Shepherd Smith Edwards and Kantas founder and Texas securities fraud lawyer William Shepherd also wants to know, “Why was Ms. Schapiro not questioned about her own role as the former head regulator at the NASD – now known as the Financial Industry Regulatory Authority (FINRA)? She held that position for almost a decade just prior to her appointment as SEC Chairwoman. As Madoff defrauded thousands of investors, FINRA/NASD has the primary duty to regulate securities dealers, including the Madoff securities firm, which reportedly had a substantial role in activities related to Madoff’s advisory firm, as it perpetrated the massive Ponzi scheme.”


Related Web Resources:
S.E.C. Chairwoman Under Fire Over Ethics Issues, The New York Times, March 8, 2011

SEC’s Top Lawyer Becker Sued for Inheriting Madoff Ponzi Profits, Bloomberg, February 23, 2011


More Blog Posts:
Texas Securities Commissioner Not Convinced SEC Has Reformed Itself Since Madoff Ponzi Scam, Stockbroker Fraud Blog, December 5, 2009

SEC, NASD, FINRA & SIPC: New SEC Report Card on Madoff Catastrophy Further Reveals How Investor Protection Is Severely Flawed!, Stockbroker Fraud Blog, September 3, 2009

Madoff Investors Who Were Victims of “Ponzi” Scam Contact Securities Fraud Law Firm Shepherd Smith Edwards & Kantas LTD LLP to Explore Recovery Options, Stockbroker Fraud Blog, December 17, 2008

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

Posted In: Madoff Ponzi Scheme , Ponzi Scams , SEC Enforcement , Texas Securities Fraud

March 7, 2011

SROs Immune from Broker-Dealer’s Lawsuit Over Bylaw Changes Related to Creation of FINRA, Says Appeals Court

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Recently, the U.S. Court of Appeals for the Second Circuit dismissed Standard Investment Chartered Inc.’s lawsuit against the Financial Industry Regulatory Authority, New York Stock Exchange Group Inc., and NASD over alleged misstatements in a proxy to obtain member approval for bylaw changes that ultimately resulted in the creation of FINRA. In a per curiam decision, the court held that self-regulatory organizations and their officers are immune from lawsuits over bylaw amendments because these are “inextricable” from the SRO’s regulatory roles.

The plaintiff, broker-dealer and former NASD member Standard Investment Chartered Inc., claims that NASD and certain officials issued material misrepresentations in the proxy statement that solicited approval of bylaw amendments so that the merger between NASD and parts of NYSE Regulation Inc. that became FINRA would take place. The broker-dealer contends that the proxy statement misrepresented that $35,000 was the most that the Internal Revenue Service had authorized NASD to pay members over the union.

Last March, the U.S. District Court for the Southern District of New York dismissed Standard Investment Chartered Inc.’s lawsuit, as well as a similar claim submitted by NASD member Benchmark Financial Services Inc. The court said that the union between the SROs was “entitled to absolute immunity” because it was part of their delegated regulatory functions. Standard Investment Chartered appealed the ruling.

Now, the Second Circuit has affirmed the district court’s ruling. The court also noted that NASD can’t change its bylaws without Securities and Exchange Commission approval.

Other defendants in the lawsuit include Securities and Exchange Commission chairman Mary Schapiro, who was NASD’s CEO when the regulatory body merged with NYSE, Pershing LLC Chairman Richard Brueckner, and FINRA senior vice president Howard Schloss.

Related Web Resources:
Appeals Court Upholds Lower Court Ruling on Finra Damage Suits, Bloomberg, February 23, 2011

Court Finds SROs Immune From Lawsuit Over Bylaw Changes to Effect FINRA Creation, BNA - Securities Law Daily, February 23, 2011

Standard Investment Chartered Inc. v. NASD

Continue reading "SROs Immune from Broker-Dealer’s Lawsuit Over Bylaw Changes Related to Creation of FINRA, Says Appeals Court" »

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

Posted In: Benchmark Financial Services Inc. , FINRA , Financial Firms , Miscellaneous , Standard Investment Chartered Inc.

March 4, 2011

Ameriprise Financial Inc. to Pay $27M to Settle Securities Lawsuits of Securities America Clients Bilked in Ponzi Scams

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To settle securities fraud complaints by investors that bought private placements in Provident Royalties and Medical Capital through its independent-brokerage unit Securities America, Ameriprise Financial Inc. will pay $27 million. It was just two weeks ago that Securities America agreed to pay $21 million to settle the same class of approximately 2,000 investors who lost about $300 million through Ponzi scams. Unfortunately, private placements, which should be restricted to rich “accredited “ investors, were offered to a wider range of investors that likely did not fully understand the risks involved.

In its annual report, Ameriprise revealed that Securities America clients sustained nearly $400 million in financial losses from the private placements. The financial planning and wealth management firm has about $40 million in reserves. Aside from the class action lawsuits, Securities America and Ameriprise face lawsuits in Massachusetts and a “significant” number of individual securities claims in arbitration.

To avail of the class-action settlements, an investor would have to drop his/her arbitration case. However, as the proposed settlements are greater than Securities America’s “net worth,” claimants may not get all of the money that they are owed. According to Shepherd Smith Edwards and Kantas Founder and Securities Fraud Lawyer William Shepherd, “With the class legal fees and expenses not yet revealed, this is—at best—nine cents on the dollar for the victims. This would actually be a bit better than most securities class action cases, in which the average paid to victims is closer to seven percent of their losses. Our firm represents securities fraud victims one at a time. These are investors who have losses substantial enough to support their own case. While they have to ‘opt-out’ of the class action in order to file their individual claims, gambling 7% of losses to seek a far higher recovery is often a wise decision.”

Related Web Resources:
Ameriprise settles investor suit for $27 million: lawyer, Reuters, March 3, 2011

Lawsuits suck air out of Securities America's cash cushion, Investment News, March 1, 2011

Texas Securities Fraud: Three FINRA Cases Against Securities America Over Sale of Private Placements Halted, Stockbroker Fraud Blog, February 22, 2011

Securities America Inc. to Pay $1.2M in Compensatory and Punitive Damages Over Allegedly Fraudulent Medical Capital Notes, Stockbroker Fraud Blog, January 6, 2011


Continue reading "Ameriprise Financial Inc. to Pay $27M to Settle Securities Lawsuits of Securities America Clients Bilked in Ponzi Scams" »

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

Posted In: Ameriprise - Securities America , Financial Firms

March 2, 2011

Texas Securities Fraud: SEC Halts Alleged Ponzi Scheme in the Dallas-Fort Worth Area

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A judge has granted the US Securities and Exchange Commission’s request to stop an alleged Ponzi scam in the Dallas-Fort Worth area. Accused of masterminding this Texas securities fraud is 31-year-old Christopher Love Blackwell. The SEC claims that the hedge fund trader almost $3 million of investor funds on business and personal expenses.

Per the SEC, since 2007 Blackwell has offered and sold several fraudulent investments that have included hedge funds, fixed-income trading programs, movie distribution investment contracts, and related advisory services. However, instead of buying or trading actual securities, Blackwell used $720,000 to pay for travel, entertainment, child support, office equipment, utilities, food, supplies, office rent, and motor vehicles. He allegedly directed over $900,000 to himself, friends, family, and associates and used more than $1 million for questionable business activities. He spent another $500,000 on Ponzi payments.

The investigation into Blackwell’s activities began because of his large cash transactions and wire transfers. An undercover agent that he thought was a potential investor recorded Blackwell promising risk-free returns of 25-30% a month. He also made false claims that the profits were possible because of his extensive experience a trader, connections he made while working for The Bank of Madrid and Goldman Sachs, and the Master’s degree and Ph.D. he earned from prestigious universities. None of these “facts” are true.

A judge granted the SEC’s request to freeze Blackwell’s assets and temporarily restrain him from further violating antifraud provisions. A request for emergency relief was also granted.

Unfortunately, it is the investors who suffer financial losses as a result of investment fraud.

Related Web Resources:
Hedge Fund Fraud: Texas Traders Assets Frozen, February 25, 2011

SEC Looking for Alleged Ponzi Man, Courthouse News, February 25, 2011


More Blog Posts:
Ex-Wextrust Capital COO Pleads Guilty to Role in $255M Affinity Fraud Scam, Stockbroker Fraud Blog, February 27, 2011

Ex-Triton Financial CEO Accused of Using NFL Contacts to Commit $50M Texas Securities Fraud, Stockbroker Fraud Blog, February 17, 2011

Continue reading "Texas Securities Fraud: SEC Halts Alleged Ponzi Scheme in the Dallas-Fort Worth Area " »

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

Posted In: Ponzi Scams , SEC Enforcement , Texas Securities Fraud

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