The National Association of Securities Dealers found that the two former executives failed to take reasonable steps to make sure that Joseph was in compliance with industry standards. He settled with NASD and the Securities and Exchange Commission in 2005.
A lower FINRA panel had also ruled against two men. Pasternak was suspended from supervisory positions for two years and John was barred from supervisory roles. Both men were each ordered to pay $100,000.
Now, however, NAC is disagreeing with the lower panel, claiming that FINRA failed to establish that Joseph Leighton violated regulatory and market standards. The council also found that John Leighton did enforce Knight’s compliance procedures and that there was evidence that does not support allegations accusing Pasternak of not responding properly to “red flags” that surfaced over the way that Joseph handled his institutional client orders. However, institutional clients have come forward to testify that the pricing they received was fair. Also, in 2008, a federal judge threw out similar charges that the SEC filed against Pasternak and Joseph Leighton.
“This is another case at FINRA of the soldiers getting punished while the officers in charge ultimately get a walk,” said Shepherd Smith Edwards and Kantas founder and securities fraud lawyer William Shepherd. “The primary regulator of brokerage firms may have recently changed its name to the ‘Financial Industry Regulatory Authority’ but it remains a ‘National Association of Securities Dealers’ - a non-profit private corporation (similar to a country club) with a vested interest in seeing to it that favored members do not have to answer for misdeeds. After all, a precedent of fines or sanctions for the bosses might affect the treatment of other bosses in the future.”
Related Web Resources:
COMPLIANCE WATCH: Complying As Your Brother's Keeper, The Wall Street Journal, March 5, 2010
If you buy an unauthorized annuity, you may pay an inadequate return or put your money at risk. You can also become the victim of Texas securities fraud.
What is an Annuity?
This financial insurance contract can grow in value and provide constant income over an extended time period. They are good for growing your retirement, saving for your children’s schooling, setting up a trust fund, or bequeathing money to loved ones. Texas Department of Insurance regulates annuities and keeps an update list of companies and agents that are allowed to sell them in the state.
Three Kinds of Annuities:
Variable Annuities: Higher risk than fixed annuities, variable annuities rely on the stock market’s performance. They usually invest in different financial instruments, including money market funds, equity indexes, mutual funds, and government securities. These annuities let buyers decide how to distribute their accumulated value within the contract’s selected investments.
This kind of annuity doesn’t come with any guarantee of earnings and you can lose your original investment. Because variable annuities rely so much on the stock market, the Securities and Exchange Commission considers them securities.
Fixed Annuities: The most conservative type of annuity. They make earnings at an annually set current interest rate. Although the rate can change, a guaranteed minimum rate must be established. These annuity contracts usually invest in non-stock market, conservative investments. Buyers usually don’t have any say in how the funds are managed.
Equity-Indexed Annuities: EIA’s have traits that can be found in both variable annuities and fixed annuities. They pose a greater risk than fixed annuities and are less risky than variable annuities. Their returns are affected by changes in money, bond, and stock markets, and they come with a guaranteed minimum interest rate.
It is important to remember that annuities are not the best investment for everyone—especially if your financial goals are in the short-term. Your agent should apprise you of any risks and make sure that if you do choose to buy annuities, that they are the right choice for you.
Related Web Resources:
Understanding Annuities, Texas Department of Insurance
SEC Tips for Preventing Annuities Fraud, SEC.gov
]]> Our Texas securities fraud lawyers represent investors throughout the state who have lost money because they were the victim of annuities fraud. ]]>
Over three years, Munsch made over 500 trades in accounts owned by three Missouri investors. He has admitted that during some of the transactions, he was the only one to benefit. One investor, Marie Ganninger, says that she started investing with the former Stifel broker after her husband passed away. She chose to go with Munsch because he was the broker of one of her relatives. She will be getting back the commissions she paid.
The state of Missouri went after Stifel for failing to properly supervise Munsch and neglecting to notice or take action when he made unsuitable recommendations and excessive trades.
In 2007, the former Stifel broker entered into a consent order. He was ordered to pay $50,000 in investor restitution for broker misconduct, and his license was suspended. He retired and can no longer work as a broker in Missouri.
Please do not despair if you lost money because of broker fraud. There are legal remedies available that can allow you to recoup your investment losses.
Stifel to return $78,000 to investors, pay $130,000 in penalties, St. Louis Business, March 11, 2010
Consent order in the matter of Girard Augustus Munsch, Jr., State of Missouri
]]> It is important explore your legal options with an experienced securities fraud lawyer. Our stockbroker fraud law firm is here to make sure that investors get their money back. Contact Shepherd Smith Edwards and Kantas, LLP today.]]>The SEC claims Morton told investors he would use their funds to trade in foreign currencies and that profits would be distributed pro rata among them. The federal agency says that Morton, who describes himself as an intuitive consultant and trained Remote Viewer, lied to these investors about having a successful track record for being able to predict when the market will rise and crash. He also allegedly lied about how their money would be used, fund liquidity, and that profits were audited and certified.
Morton allegedly invested only half of the investors’ money in foreign currency trading firms. He is accused of diverting the rest, including at least $240,000 into his Prophecy Research Institute, a nonprofit religious group. Morton also allegedly commingled investors’ funds among the different entity accounts. The SEC contends that the defendant did not seek accreditation status from Delphi Investment Group investors.
Morton, Vajra Productions LLC, Magic Eight Ball Distributing, Inc., 27 Investments LLC, and Delphi Investment Group are the defendants in the SEC’s investment fraud lawsuit. Morton’s wife, Melissa, and Prophecy Research Institute are named relief defendants. The Mortons controls the entity defendants.
Federal regulators continue to warn investors that they must make sure that anyone they entrust with investing their funds is properly licensed. Unfortunately, many people are misled into investing in securities scams that end up costing them their hard-earned money and financial security.
Related Web Resources:
Investment 'Psychic' Accused of Financial Fraud, ABC News, March 8, 2010
Read the SEC Complaint, SEC.gov
]]> Our stockbroker fraud lawyers are here to help our clients recoup their investment losses. ]]>Pyramid schemes and ponzi scams are often employed to commit affinity fraud. In these schemes funds from new investors are used to falsify profits to current investors. This lulls them into believing their investments are turning a profit. as new investors are deceived into believing their investments will also soon grow in value. Inevitably, when there are no more new investors to sign up, the scheme falls apart and investors usually later learn the fraudster has stolen their funds.
However, affinity fraud can often involve abusing trust to lure victims into simply investing into high-risk and/or high-commission investments to generate commissions and fees, or buying and selling ("churning") invesements to gain multiple comissions.
Affinity fraud is based on the special trust within a group and, because those targeted tend to be close-knit, victims are often slow to detect the fraud. Furthermore, affinity fraud victims are often persuaded by the fraudster to attempt to resolve the dispute quietly rather than seeking legal assistance, preferably someone who is a stockbroker fraud lawyer.
Our securities fraud law firm offers free confidential consultations to determine whether someone has been the victim of affinity fraud. It is essential that legal help be sought before trying to resolve affinaty fraud claims privately. Victims can often fall prey again to the fraudster by destroying their legal rights to recovery,
As well, contacting authorities without legal advise can actually harm the victims ability to recover their losses. For example, contacting the SEC Complaint Center or state securities regulators without proper proof, can cause the situation to worsen and remaining funds to disappear as a long arduous investigation is contemplated.
Unfortunately, many people are unaware that affinity fraud even exists. The desire to make money on the advice of a “trusted” community member can be too hard to resist. Unfortunately, this can result in huge financial losses for those involved.
The US Securities and Exchange Commission offers good guidance as to avoid affinity fraud:
• Even if you trust the person touting the investment opportunity, it is a good idea to do your own due diligence. The person bringing you the deal may not even realize that an investment scam is involved.
• Be wary of investments that promise guaranteed returns or amazing profits. Remember that there are always risks involved when you invest.
• Make sure that any investments that you buy into are documented in writing. Consider it a possible red flag if you are told to keep the opportunity to yourself.
• Don’t feel pressured into investing. Question all “once-in-a-lifetime” investments.
• Be careful of investment opportunities sent to you by strangers via the Internet.
Related Web Resources:
Investor.gov
According to Massachusetts Secretary of State William Galvin, who had sought to make the investment firm repurchase up to $55.5 million in ARS that were sold in the state, 85% of Oppenheimer’s Massachusetts customer accounts will be completely redeemed over one year.
Galvin contends in his complaint that Oppenheimer misrepresented ARS and the ARS market when marketing to clients. He says that although company’s employees sold their ARS when they found out that the market was collapsing, they failed to notify investors about the unfolding crisis.
Galvin will submit a cease-and-desist order and findings against the broker-dealer over its unethical and dishonest conduct and the failure to properly supervise agents when they marketed and sold ARS. The redemptions will take place in three steps.
Oppenheimer also recently settled its ARS case filed by New York State Attorney General Andrew Cuomo on behalf of investors in his state, as well as throughout the US, for $31 million.
Related Web Resources:
Oppenheimer Settles Massachusetts Auction-Rate Case (Update3), BusinessWeek, February 24, 2010
Oppenheimer, Cuomo reach $31M agreement, LegalNewsline.com
William Francis Galvin, Secretary of the Commonwealth of Massachusetts
]]> If you are an investor whose funds were frozen when the ARS market collapsed, contact our securities fraud law firm today.]]>Judge Victor Morrero rejected Citibank’s claim that the U.S. District Court for the Southern District of New York lacked jurisdiction over the case because the financial losses happened in Norway. The plaintiffs had argued that their securities fraud claims are a result of Citigroup’s conduct in New York.
In their securities fraud complaint, the plaintiffs are claiming that Citigroup sold fund-linked securities as if they were conservative, safe investments. In fact, the notes, which were tied to the Citi Tender Option Bond Fund, are very high risk.
The municipalities bought the derivatives through Terra.
In the months following their purchase, the notes would go on to significantly drop in value. Terra went bankrupt and the municipalities had to reduce funding that was intended for hospitals, libraries, schools, and social services. One of the plaintiffs, the municipality of Narvik, was forced to turn off street and road lights at night. This is an area experiences limited daylight hours during the winter. The other municipalities that are plaintiffs of this securities fraud lawsuit are Bremanger, Hemnes, Hattfjelldal, Rana, Kvinesdal, and Vik.
The plaintiffs' securities fraud lawyer says that the judge’s ruling affirms foreign plaintiffs’ right to sue Citigroup for alleged fraud that occurred in NY over notes that were marketed abroad. Citigroup, which had pushed to have the case heard in Norway or England, denies any wrongdoing. The investment bank says it will vigorously defend against the charges.
Related Web Resources:
Citigroup Must Defend Norwegians’ Lawsuit Over Notes, BusinessWeek, February 17, 2010
Citigroup Must Defend Suit Over Derivatives Sales In Norway, Wall Street Journal, February 17, 2010
]]> For your free case evaluation, contact our securities fraud law firm today.]]>However, the SEC’s brief argues that the defendants’ challenge is based on the question of whether the Bond Market Association's Municipal Swap Index is an index of securities. The SEC argued that regardless of what you call the Municipal Swap Index, this “linguistic exercise” doesn’t make a difference to what the Index actually is, the manner in which it is calculated, and the connection between the bonds and interest rates that comprise the Index. The SEC notes that interest rates are securities.
The SEC asked the court to not dismiss the case over lack of subject matter jurisdiction and pointed to the ruling made in SEC v. Rorech. In that enforcement case, the U.S. District Court for the Southern District of New York refused to decide during the pleading phase whether credit default swaps are security-based swap agreements.
Related Web Resources:
Read the SEC Complaint (PDF)
Swap Transactions, All Business
]]> Our securities fraud lawyers represent claimants and plaintiffs that have been the victims of stockbroker fraud. Contact Shepherd Smith Edwards, and Kantas, LLP today.]]>Clause, who bought the bonds, was planning to sell them to Sterling Financial Investment Group Inc. The resale plan didn’t work out, and he sold them to another buyer at cost.
Clause then sued ICM and Sterling for breach of contract, violations of federal and state securities laws, and negligence.
In addition to the $25,000 compensatory damages award, NASD charged Clause $22,000 in arbitration fees. They awarded his lawyer $70,000 in legal fees.
ICM and Sterling asked that the Texas securities fraud award be vacated by the district court. A magistrate judge vacated, claiming that the NASD panel went beyond its authority when it violated Texas law and directly issued an award to Clause’s lawyer.
Clause and IMS appealed, claiming that the judge made a mistake when vacating the entire award on the basis of the awarded attorney’s fee. Meantime, Sterling and ICM contended that the attorney’s fee violated Texas law and that it conflicted with the contingency fee arrangement between clause and his attorney, which the NASD panel is not allowed to override. ICM and Sterling said the legal fee award was unreasonable.
Court of Appeals ruled that even though Texas statute must directly authorize any fee awards, the party that is told to pay the fee cannot challenge the payment’s propriety. The court called the award error harmless and “immaterial to the party” that is ordered to pay it. The court also noted that ICM/Sterling did not challenge the evidence that supported the fee award.
Related Web Resources:
Institutional Capital Management Inc. v. Claus
On December 13, 2007, two days after finding out about the ARS risks, Shulman, who supervised the ARS trading desk, sold $1.45 million in personal holdings of student loan ARS to the desk. He was suspended in July 2008.
Shulman has not denied or admitted to the document’s findings. However, as part of the agreement with Cuomo, he is subject to a retroactive 30-month suspension from working as a registered broker-dealer.
In the wake of the ARS market collapse in February 2008 that left so many investors, who were misled into believing their investments were as liquid as cash, with frozen securities, Cuomo remains committed to investigating broker-dealers’ auction-rate securities marketing and sales practices. Many of the investment firms that sold the ARS did so despite allegedly knowing that the securities were in danger of failing.
Since August 2008, Cuomo has gotten 12 financial service firms to agree to repurchase $61 billion of ARS at par. As part of their securities fraud settlements, the broker-dealers are paying $597.3 million in penalties.
Related Web Resources:
Former UBS Muni Chief Settles Probe for $2.75 Million, BusinessWeek, February 18, 2010
Attorney General Cuomo Announces $2.75 Million Insider Trading Settlement with Former UBS Top Executive David Shulman, Office of the NY Attorney General, February 18, 2010
]]> Our stockbroker fraud lawyers continue to work with investors to recoup their ARS losses. ]]>Stein’s arbitration claim is just one of over 400 securities claims that have been filed against Morgan Keegan over its bond funds that had invested in subprime-related securities, such as CDO’s (collateralized debt obligations). When the US housing market collapsed, the funds went down in value by up to 82%.
Stein contends that Morgan Keegan did not reveal the kinds of risks involved in investing in the bond funds. He and his companies claim that Morgan Keegan artificially increased the fund assets’ value so that the funds would appear more stable and investors wouldn’t be able to see the actual risks involved.
At least 80 of the securities cases have been heard, and claimants have so far been awarded $10.1 million. Morgan Keegan says that while it has settled a number of securities claims over the bond funds, claimants have dropped 114 other cases.
Stein and his two companies are pursuing a securities claim against Regions Financial and Morgan Asset Management, Inc. They are claiming fraudulent pricing and valuation of funds.
Our securities fraud law firm represents clients that sustained financial losses as a result of investing in Morgan Keegan bond funds. Please contact us for your free case evaluation.
Related Web Resources:
Morgan Keegan Must Pay Investor, Wall Street Journal, February 22, 2010
• In exchange for promissory notes, the pool would lend money to third parties
• When issuers of the promissory notes defaulted, the pool sustained losses
• Even after one note went into default, FFI charged a monthly management fee to participants
• FFI redeemed its interest in the pool
• FFI wrote off notes but did not give participants specifics about the write-offs
The NFA also accused FFI of not filing an annual financial statement, disclosure document, or exemption notice for the fund. Meantime, Rice has also agreed to a withdraw himself as an NFA member for five years. If he decides to reapply for membership, he has to pay a $10,000 fine.
Our Texas securities fraud lawyers represent clients with claims against investment advisors and stockbrokers. The most common reasons why an investor would file a securities claim or lawsuit are:
• Misrepresentations
• Omissions
• Unauthorized trading
• Overconcentration
• Registration violations
• Churning
• Margin account abuse
• Failure to execute trades
• Negligence
• Breach of fiduciary duty
• Failure to supervise
• Breach of contract
• Breach of promise
Your first consultation with our Dallas securities fraud law firm is free.
Related Web Resources:
Read the Complaint (PDF)
Read the Decision (PDF)
]]>FINRA found that not only did H & R Block fail to properly monitor customer accounts for possible RCN over-concentrations, but they also failed to detect and respond to these possible over-concentrations. This is FINRA's first enforcement action over RCN sales.
Reverse Convertible Notes
An RCN is usually an issuer’s high-yield short-term note that is a put option connected to the performance of an unrelated asset (such as an index or a common stock). Upon maturity of the RCN the investor should either get a predetermined amount of shares of the linked equity or the full principal investment. The higher the coupon rate, the greater the expected volatility and the chances that shares will be paid. Risks that accompany RCNs include inflation risk, issuer default, and the underlying asset risks. Most RCNs require an initial investment of $1,000/unit. The majority of maturity dates run from 3 -12 months.
FINRA has issued an Investor Alert called Reverse Convertibles - Complex Investment Vehicles to help consumers better understand RCNs. It also put out Regulatory Notice 10-09 to remind broker-dealers of their sales practice obligations when selling RCNs to retail investors.
Please contact our stockbroker fraud law firm to discuss your H & R RCN investments. Shepherd Smith Edwards & Kantas LLP has successfully helped thousands of clients recover their investment losses.
Related Web Resources:
Shepherd Smith Edwards & Kantas LLP Investigates Claims for Clients of H&R Block Financial Advisors in Light of Regulatory Fines for Inadequate Supervision of Reverse Convertible Notes, News Blaze, February 18, 2010
FINRA fines, suspends Andrew MacGill over sale of revertibles, Bizjournals, February 15, 2010
]]>According to FINRA, between January 2004 and December 2007, H&R Block sold RCNs without a system of procedures in place to properly monitor whether possible over-concentrations in RCNs were taking place in customer accounts. FINRA says that the brokerage firm relied on an automated surveillance system to monitor client accounts and review securities transactions for unsuitability but that the system was not set up to monitor RCN placement in customer accounts or RCN transactions. This caused H & R Block to miss signs of when there were potentially unsuitable levels of RCN in client accounts. Furthermore, FINRA says that the firm failed to provide guidance to its supervisors regarding the assessment of suitability standards related to their agents' recommendation of RCNs to the firm’s clients.
This is FINRA’s first enforcement action over RCN sales.
Reverse Convertible Notes
Reverse convertible notes offer a high coupon in return for the risk of getting shares valued at under the initial principal. Richard Ketchum, FINRA chief executive and chairman, has noted that it is not recommended for a client to place a significant chunk of one’s life savings into these kind of high risk, complex investments.
FINRA has issued Notice to Members 10-09 cautioning the entire brokerage community about their sales practice obligations to the investing public when it comes to RCNs and other risky “Complex Investment Vehicles.”
If you think you might have sustained investment losses because of unsuitable reverse convertible notes, contact our securities fraud law firm immediately.
Related Web Resources:
Regulator fines H&R Block $200K for poor controls, MarketWatch, February 16, 2010
Regulatory Notice 10-09, FINRA
FINRA Fines H&R Block Financial Advisors $200,000 for Inadequate Supervision of Reverse Convertible Notes Sales, FINRA/Business Wire, February 16, 2010
]]>If approved, the settlement would conclude two SEC securities lawsuits against Bank of America over the Merrill Lynch merger. One complaint involves the investment bank’s alleged failure to reveal, prior to a 2008 shareholder meeting to vote on the acquisition, that financial losses were in the billions and rising at Merrill. The second lawsuit is over what the bank did and did not disclose about the billions of dollars in bonuses paid to Merrill Lynch employees right before the $50 billion merger was completed.
Under the proposed SEC settlement, the $150 million would go to Bank of America shareholders who suffered financial losses because of the investment bank’s alleged disclosure violations. Also, for three years BofA would have to maintain and implement a number of remedial measures, including hiring an independent auditor to look at its internal disclosure controls, hiring a disclosure counsel to work on bank disclosures, making sure that BofA’s chief financial officers and chief executive certify yearly and merger proxy statements, and allowing shareholders to have an advisory say-on-pay vote regarding executive compensation.
Earlier this month, New York Attorney General Andrew Cuomo filed a separate securities fraud lawsuit against Kenneth D. Lewis, who formerly served as BofA’s chief executive, Joe Price, the bank’s former chief financial officer, and Bank of America for allegedly concealing Merrill Lynch's losses. The complaint alleges that BofA general counsel Timothy Mayopoulos was let go because he wanted to disclose the losses at Merrill Lynch before the deal was finalized.
Related Web Resources:
Bank of America Still Dealing With Fallout From Merrill Deal, Fox Business, February 5, 2010
Cuomo Sues Bank of America, Even as It Settles With S.E.C., NY Times, February 4, 2010
US judge has questions on $150 mln SEC-BofA accord, Reuters, February 16, 2010
]]> Our securities fraud lawyers represent investors throughout the US. ]]>