July 20, 2016

Ameriprise Financial Advises Clients to Sell OppenheimerFunds Muni Bond Funds with Puerto Rico Debt

According to Bloomberg.com, in the wake of Puerto Rico’s default on July 1 of $911 million of bond payments it owes creditors—including $779 million of general obligation bonds—Ameriprise Financial Inc. (AMP) is recommending that clients sell their OppenheimerFunds (OPY) municipal bond funds that are holding any of the island’s debt. In a report this week, Ameriprise senior research analyst Jeffrey Lindell said that with the acceleration of Puerto Rico bond defaults—as the island tries to lower its $70 billion debt via bondholder losses—mutual funds holding these bonds could end up having to “cut dividend rates.” He also wrote that as Puerto Rico bonds respond to “speculation and news,” the mutual funds’ net asset value could turn “volatile.”

In its recent article, Bloomberg provided data from Morningstar Inc., which reports that as of the end of March, Oppenheimer held $3.5 billion of Puerto Rico securities in 19 funds, which is more than anyone else. Now, Ameriprise wants clients to look at investment options that are not as risky as the funds holding Puerto Rico municipal bonds. The firm is suggesting that clients sell investments involving 16 Oppenheimer muni funds. Included in the recommendation to sell are a number of state specific municipal bond funds, including the:
· Oppenheimer Rochester Virginia Municipal (ORVAX)
· Oppenheimer Rochester Pennsylvania Municipal (OVPAX)
· Oppenheimer Rochester Maryland Municipal (ORMDX)
· Oppenheimer Rochester North Carolina Municipal (OPNCX) and
· Oppenheimer Rochester Arizona Municipal (ORAZX)

Several days after the July 1 default, credit rating agency Standard & Poor’s (SP) reduced the U.S. territory’s credit rating to “default” status. The default was not the first time Puerto Rico was unable to cover debt payments that were due—although it was the first default involving Puerto Rico’s general obligation debt, which was supposed to have a constitutional guarantee.

It was in May that NY City Council Speaker Melissa Mark-Viverito asked the SEC to investigate whether OppenheimerFunds played a part in causing Puerto Rico’s financial crisis to worsen. Mark-Viverito believes that banks, hedge funds, and other investors who bought into Puerto Rico utility debt and general obligation bonds contributed to the territory’s debt woes.

Continue reading "Ameriprise Financial Advises Clients to Sell OppenheimerFunds Muni Bond Funds with Puerto Rico Debt" »

July 13, 2016

Ex-Prudential Financial and MetLife Broker is Barred over Deceptive MetLife Variable Anuuity Sales

FINRA has banned Winston Wade Turner from the securities industry. The former Prudential (PRU) and MetLife (MET) broker is accused of engaging in deceptive variable annuities sales. Turner was fired from Pruco Securities, a Prudential subsidiary, in 2015. The cause of his firing was deceptive sales practices.

Now, FINRA has barred him for a number of causes, including giving false information to clients about variable annuity sales, the fraudulent misrepresentation and omission of key facts to customers about the sales, providing false information in VA-related documents, and not giving testimony to the self-regulatory organization during its probe into this matter.

According to the SRO, Turner fraudulently misrepresented and omitted material facts about VA sales and concealed that he had persuaded a lot of customers to give up existing variable annuities or other investments so that they would buy the newer VAs that he was selling. He is accused of persuading at least 12 clients to trade their existing investments for this purpose, costing them over $150K in surrender charges.

Continue reading "Ex-Prudential Financial and MetLife Broker is Barred over Deceptive MetLife Variable Anuuity Sales" »

June 30, 2016

Financial Representative News: Ex-LPL Financial Broker Gets Suspension and Fine & Former Ex-GL Capital Partners CEO is Sentenced to Prison

Ex-LPL Financial Supervisor Settles with FINRA
Peter Neuberg, a former LPL Financial (LPLA) supervisor and broker, will pay a $15K fine and serve a six-month suspension to settle claims accusing him of not reasonably supervising a registered representative. According to an enforcement document signed by the Financial Industry Regulatory Authority, Neuberg stopped looking at paperwork that the representative prepared. This made it possible for the broker to modify documents about customer accounts and reuse signatures from forms that had been completed. Neuberg is settling without admitting or denying FINRA’s findings.

The purported supervisory failures would have taken place from September ’11 to June ’12. The broker, whom Neuberg supervised, falsified documents to expedite transactions to accommodate certain customers. Neuberg is accused of not properly training the broker.

Ex-GL Capital Partners CEO Gets Nine Years in Prison
In other news, Daniel Thibeault, the former CEO of GL Capital Partners, is sentenced to nine years behind bars for misappropriating at least $15M. He must pay $15.3M in restitution for the criminal charges. He also is contending with civil charges brought by the Securities and Exchange Commission.

Continue reading "Financial Representative News: Ex-LPL Financial Broker Gets Suspension and Fine & Former Ex-GL Capital Partners CEO is Sentenced to Prison" »

June 23, 2016

Merrill Lynch to Pay $425M to the SEC and $5M to FINRA for Misusing Customer Funds and Misleading Investors About Structured Notes

Merrill Lynch will pay $415M to resolve civil charges accusing the firm of misusing customer funds and not safeguarding customer securities from creditor claims. According to the Securities and Exchange Commission, the firm violated the regulator's Customer Protection Rule by using customer funds inappropriately instead of depositing them in a reserve account.

Instead, said the SEC, Merrill Lynch took part in complex options trades that artificially lowered how much in customer funds needed to be in the reserve account. This liberated billions of dollars a week from ’09 to ’12. The firm used the funds for its own trades. If Merrill had failed with these trades there would have been a substantial shortfall in the reserve account.

Merrill Lynch, which is owned by Bank of America (BAC), has admitted wrongdoing as part of the settlement.

The SEC said that the firm violated the Customer Protection Rule when it didn’t abide by the requirement that customer securities that had been fully paid for be kept in lien-free accounts and protected from third parties claims in the event that Merrill Lynch were to collapse. Such a failure would have exposed customers to great risk and there would have been uncertainty as to whether they’d be able to get their securities back.
Also, contends the Commission, from ’09 to ’15, Merrill held up to $58B of customer securities a day in a clearing account that was subject to a general lien to be handled by its clearing bank.

Continue reading "Merrill Lynch to Pay $425M to the SEC and $5M to FINRA for Misusing Customer Funds and Misleading Investors About Structured Notes " »

June 13, 2016

Ex-NBA and NFL Players Win $819K Arbitration Award in FINRA Arbitration Case Against Morgan Stanley Smith Barney

A Financial Industry Regulatory Authority arbitration panel has awarded former NBA basketball player Keyon Dooling and ex-NFL athlete John St. Clair $819,000 in damages in their securities case against Morgan Stanley (MS). The two men accused the firm of negligent supervision of a former broker whom they blame for their investment losses.

The rogue broker, Aaron Parthemer, has since been barred from the securities industry. It was Parthemer who recommended that the former professional athletes put money into two businesses. Dooling invested $700K in apparel company Global Village Concerns and Miami Beach night spot Club Play. St. Clair invested $200,000 in Global Village Concerns. According to the ex-pro athletes’ securities fraud lawyers, the two investments proved worthless.

Now, the FINRA arbitration panel says that Morgan Stanley must pay Dooling and his spouse over $608K while St. Clair and his wife are to get over $200K. Meantime, Morgan Stanley disagrees with the panel’s ruling, contending that that it was Parthemer who failed to let the firm know that he was engaged in external investment activities. This was the alleged reason that FINRA barred him from the industry.

For instance, Parthemer is accused of lending $400K to three clients without getting his firm’s consent, giving former employers Wells Fargo (WFC) and Morgan Stanley, as well as FINRA, false information, presenting private securities transactions that went undisclosed and involved clients that invested over $3M, running a nightclub, operating a marketing firm, and winning a contract to promote a tequila brand.

Continue reading " Ex-NBA and NFL Players Win $819K Arbitration Award in FINRA Arbitration Case Against Morgan Stanley Smith Barney" »

June 9, 2016

Oppenheimer to Pay $2.9M for Unsuitable Non-Traditional Exchange-Traded Fund Sales

FINRA is fining Oppenheimer & Co. Inc. (OPY) $2.2M for the sale of non-traditional exchange-traded funds, including inverse, leveraged, and inverse-leveraged ETFs, to retail customers without proper supervision and for suggesting them to clients even though they were not appropriate investments for them. The self-regulatory organization is also making the firm pay over $716,000 to the customers who were impacted.

FINRA said that even though Oppenheimer put into place policies barring representatives from both selling non-traditional ETFs to retail customers and executing non-traditional ETF purchases that were unsolicited for said customers unless they met certain requirements—including liquid assets greater than $50OK—the firm did not do a reasonable job of making sure that these policies were properly enforced. (The firm had put them into effect after FINRA issued a notice advising brokerage firms of the risks involved in non-traditional ETFs.) Because of this, Oppenheimer continued to market non-traditional ETFs to retail customers and effect transactions that were unsolicited for those who failed to meet the requirements.

Continue reading "Oppenheimer to Pay $2.9M for Unsuitable Non-Traditional Exchange-Traded Fund Sales" »

June 8, 2016

Morgan Stanley and E*Trade Securities Face Penalties for Inadequate Customer Information Protection

The Securities and Exchange Commission says that Morgan Stanley Smith Barney LLC (MS) will pay a $1M penalty to resolve charges involving its purported failure to protect customer data. Some of this information was hacked and violators attempted to sell the data online.

According to the regulator, the firm did not put into place written policies and procedures that were designed in a manner reasonable enough to protect customer information. Because of this, said the SEC, from ’11 to ’14, former Morgan Stanley employee Galen J. Marsh was able to access without permission information regarding approximately 730,000 accounts and move them to his own server. This made it possible for third parties to access and hack the information from there.

The Commission said that Morgan Stanley had two internal portals that made it possible for employees such as Marsh to access confidential customer account information and it was for these internal applications that the firm lacked the needed authorization modules that would have restricted which employees could see this information. This deficiency existed for over a decade.

It was just last week that the Financial Industry Regulatory Authority said that it was censuring and fining E*Trade Securities LLC for supervisory violations related to customer order information protection and for not performing sufficient review of the quality of customer order executions. As a firm that offers online services for securities investing and trading to retail customers, E*Trade is supposed to evaluate the competing markets that it routes customer orders to, including exchange and non-exchange market centers. Firms such as E*Trade are also supposed to conduct periodic and stringent reviews of the quality of customer order executions to see if there are any differences among the markets, which is why the firm set up a Best Execution Committee to do this job.

Continue reading "Morgan Stanley and E*Trade Securities Face Penalties for Inadequate Customer Information Protection" »

June 3, 2016

Securities Cases: Stephens Inc. to Pay $900K Fine, FINRA Bans Ex-Wells Fargo Broker, And Former State Street Executive is Accused of Charging Hidden Fees

SEC Files Fraud Charges Against Former State Street Executive
The U.S. Securities and Exchange Commission is filing fraud charges against ex-State Street Corp. (STT) executive Ross McClellan. According to the regulator, McLellan was one of a number of people who purposely charged hidden markups on certain transactions to customers, making the bank $20M in extra revenue.

Addressing the charges, McLellan’s lawyer claims that his client did not commit any securities law violations and that all banks charge client markups on bond transactions to make money. The attorney also noted that it was State Street and not the bank that profited from the charges.

The U.S. Department of Justice has charged McLellan with securities fraud, conspiracy, and wire fraud.

Ex-Wells Fargo Broker to Be Barred
Christopher John Pierce, a former Wells Fargo & Co. (WFC) broker, will be barred from working with any FINRA-registered firm and associating with any member of the self-regulatory organization. Pierce agreed to the bar after he was accused of stealing money from the accounts of banking customers.

Continue reading "Securities Cases: Stephens Inc. to Pay $900K Fine, FINRA Bans Ex-Wells Fargo Broker, And Former State Street Executive is Accused of Charging Hidden Fees" »

May 24, 2016

FINRA Bars Broker From Industry For Allegedly Bilking Older Woman He Met at Church

Former Thrivent Investment Management Inc. broker Miguel Angel Hernandez is now barred from the brokerage industry. According to the Financial Industry Regulatory Authority Inc., he defrauded an older woman whom he met at church. He allegedly took $25K in '10 but paid her back in '15 after the misconduct was exposed.

Hernandez is accused of telling the customer that he needed the money to pay for expenses related to his tax business even though he doesn’t own that type of business. Instead, he allegedly used her funds for his own spending.

Hernandez purportedly promised the woman a 2% stake in this supposed business in five years in addition to quarterly payments of nearly $1100 for 3-to-10 years. Even though he is settling, Hernandez is not denying or admitting to the charges.

In other elder fraud news, U.S. Senator Susan Collins (R-Maine) is asking state securities regulators to help her move forward a bill that would make it easier for professional industry members to report when they suspect an older person is being financially exploited. Collins chairs the Senate Aging Committee. She made her request at a recent North American Securities Administrators Association conference.

If passed, the legislation would implement protections so that financial abuse could be reported across the states. While the bill already has several bipartisan cosponsors, it needs additional support to make it through the Senate Banking Committee and the Senate.

Older investors suffer $2.9B in losses yearly as victims of financial scams, and state regulators are ramping up their efforts to combat this type of elder abuse. Sometimes the fraudster is a member of the securities industry. There are also family members, caregivers, and friends that have been known to bilk senior investors.

If you or someone you love is a senior investor and you suspect that he/she is the victim of fraud, contact our elder financial fraud law firm today.


Former Thrivent broker barred from securities business for defrauding woman he met at church: Finra, InvestmentNews, May 17, 2016

FINRA

Senate Aging Committee

May 16, 2016

Oppenheimer Shuts Down Its Commodity Strategy Total Return Fund

After nearly twenty years, Oppenheimer (OPY) is liquidating its Commodity Strategy Total Return Fund (QRAAX) in mid-July. The reason for the shut down is underperformance.

According to the company’s website, the Oppenheimer Commodity Strategy Total Return Fund lost 49% since it was created in 1997, and average yearly returns have consistently declined by the double digits. The Wall Street Journal reported that the commodity fund has lost money annually since hitting an 8.5% return in 2010. It’s also been up 7.19% since the beginning of 2016. However InvestmentNews reports, the fund’s performance has been poor over the last five years. The Oppenheimer fund’s assets under management is down to $269M from over $2B in 2011.

While Oppenheimer said that it continues to believe in the value of its investment strategy, the firm is now saying that investors would benefit more from a multi-asset portfolio. The Commodity Strategy Total Return Fund is most heavily involved in energy, with agriculture and precious industrial metals also big presences. The decline in their prices have played a factor in the fund’s decline.

Oppenheimer has also been in the spotlight of late because a lawmaker has asked the SEC to look into OppenheimerFunds and whether the firm has complied with securities laws when dealing with Puerto Rico bond investments. NY City Council Speaker Melissa Mark-Viverto believes that the firm helped to make the U.S. territory’s financial crisis worse. OppenheimerFunds is heavily invested in Puerto Rico. The Island owes more than $70B in debt.

Oppenheimer Shuts Down Its Commodity Strategy Total Return Fund, The Wall Street Journal, May 11, 2016

NY City Council Speaker Wants SEC to Investigate Oppenheimer Funds Over Puerto Rico Debt Crisis, Stockbroker Fraud Blog, May 9, 2016

May 9, 2016

NY City Council Speaker Wants SEC to Investigate Oppenheimer Funds Over Puerto Rico Debt Crisis

According to InvestmentNews, New York City Council Speaker Melissa Mark-Viverito is asking the U.S. Securities and Exchange Commission (“SEC”) to conduct a probe into OppenheimerFunds, Inc. (“OPY”) and its impact on Puerto Rico’s financial woes. Speaker Mark-Viverito believes that the asset-management company played a part in making Puerto Rico’s financial crisis worse by investing even more in the island’s debt. She claims that just in the last eight months, OppenheimerFunds has added $500 million to investments it made in Puerto Rican debt.

Right now, the U.S. territory owes over $70 billion in debt, which it is struggling to pay. It recently defaulted on over $370 million of a bond payment that was due this month. Another $2 billion is due in July, including around $700 million in general obligation debt.

To satisfy investor redemptions, OppenheimerFunds has sold its non-Puerto Rico bonds, which would have raised the current allocation of the asset manager’s funds to the Commonwealth. In a letter to the SEC, Mark-Viverito, who was born in Puerto Rico, urged the agency to look into whether Oppenheimer has complied with all regulations and securities laws when handling its Puerto Rican bond investments. She believes banks, hedge funds, and other investors in the territory’s general-obligation bonds and utility debt are to blame for the island’s financial woes.

Continue reading "NY City Council Speaker Wants SEC to Investigate Oppenheimer Funds Over Puerto Rico Debt Crisis" »

May 6, 2016

Deutsche Bank Settles Silver Price Rigging Case

Deutsche Bank AG (DB) has settled a private lawsuit accusing the German bank of manipulating silver futures prices. The terms of the payment amount were not disclosed.

It was in 2014 that silver futures trades sued Deutsche Bank (DB), Bank of Nova Scotia (BNS), and HSBC Holdings Plc (HSBC), accusing the firms of unlawfully manipulating the price of metal and its derivatives. They claimed that the banks, which are the largest silver bullion banks in the world, abused their power so they could dictate the price of silver. The banks would hold secret meetings daily and allegedly manipulate the price so they could illegitimately profit during trading. Meantime, other investors utilizing the silver benchmark in billions of dollars of transactions purportedly were harmed.

Deutsche Bank has admitted to manipulating gold and silver prices. It promised to provide any evidence it might have about other banks’ and their involvement, including electronic communications.

Claims have previously brought against financial firms over alleged gold price rigging. In 2014, Barclays Plc (BARC) was fined $43.8M for internal control failures that let a trader rig gold prices.

Continue reading "Deutsche Bank Settles Silver Price Rigging Case" »

May 5, 2016

MetLife Securities Ordered to Pay $25M FINRA Sanction Related to Variable Annuities

The Financial Industry Regulatory Authority said that MetLife Securities Inc. (MSI) would pay a $20M fine as well as $5M to customers for negligent and material misrepresentations that it purportedly made related to variable annuity replacement applications. According to the self-regulatory organization, these alleged omissions and misrepresentations were on tens of thousands of applications, and they made each replacement variable annuity seem of greater benefit to the customer despite the fact that the variable annuities that were recommended were usually more costly than the ones that the customers already owned. MetLife Securities made at least $152M in gross dealer commissions over six years through its variable annuity replacement business.

Based on a sample of transactions that were randomly examined, FINRA said that from ’09 through ’14, MetLife Securities omitted or misrepresented at least one material fact connected to the guarantees and costs of existing variable annuity contracts in 72% of the 35,500 replacement applications that it approved. Among the alleged misrepresentations:

· Existing variable were costing customers more than the variable annuities they were recommending, when the opposite was true.

· Customers were not told that the variable annuity replacements promised to them would lessen or get rid of key features that their current variable annuity possessed.

· In disclosures, the value of customers’ existing death benefits was understated.

Continue reading "MetLife Securities Ordered to Pay $25M FINRA Sanction Related to Variable Annuities" »

May 3, 2016

Puerto Rico Misses Most of Its $422M Debt Payment

Puerto Rico Governor Alejandro García Padilla announced this week that the U.S. territory would not be paying most of the $422 million in debt that was due on Monday. However, it did pay $23 million in interest. As the Puerto Rican government had swapped $33 million of debt for new debt that matured at a later date, the principal it missed on its Government Development Bank-issued bonds was $367 million.

This was a significant development in the stand-off between the Commonwealth and Washington DC, as well as investors in Puerto Rican debt. Moreover, there are much more significant sums due this summer and, if this week’s failure to pay is an indication, investors could be in trouble.

Puerto Rico currently owes more than $70 billion to bond holders. Over $2 billion in bond payments are due this summer, including $805 million in Puerto Rico general obligation bonds. In the wake of this latest default there is growing concern that there will be more defaults in the future.

One significant Puerto Rico bond issuer, the Puerto Rico Government Development Bank (“GDB”), says it has arrived at a tentative deal with a group of hedge funds holding $900 million of the bank’s debt in which the funds would agree to a possible reduction on the dollar of their original securities’ face value. This group of institutional investors, which is being called the “Ad Hoc Group of bondholders," include Claren Road Asset Management, Avenue Capital Management, Fir Tree Partners, Brigade Capital Management, Solus Alternative Asset Management, and Fore Research Management. The GDB arrived at a similar deal with credit unions that are holding about $33 million in debt. Regardless, according to Bloomberg, analysts at Moody’s Investors Service said that even if creditors agree to a non-payment, it would still be a default.

Mutual funds, bond insurers, hedge funds, and individual investors are among those still holding the Commonwealth’s debt. Many of them got involved with Puerto Rico closed-end bond funds because of the high yields and tax benefits. When the securities plunged in value a few years ago, thousands of investors lost a significant portion of their savings. Retail investors, retirees, and small business owners were hit especially hard.

Continue reading "Puerto Rico Misses Most of Its $422M Debt Payment" »

April 30, 2016

Oppenheimer Still Has Substantial Funds in Puerto Rico Municipal Bond Debt

According to InvestmentNews, even with Puerto Rico heading toward default on its $72 billion in municipal debt, there are a number of funds that continue to hold the U.S. Territory’s bonds in their portfolios, such as the:

· U.S. Oppenheimer Rochester Maryland Municipal (ORMDX)—Morningstar said that as of the conclusion of February the fund had 48.2% of assets in Puerto Rican debt.

· Oppenheimer’s (OPY) Virginia municipal bond fund (ORVAX) reportedly had 40.8% of its assets in the U.S. territory.

· Eaton Vance Oregon Municipal Income (ETORX) had 9.31% of its portfolio in Puerto Rico bonds.

· MainStay Tax-Free Bond (MKINX) had 8.8%.

InvestmentNews also reports that during a conference call on April 7, management for Oppenheimer Rochester said that about half of its funds’ holdings were in COFINA bonds or general obligation bonds, both from Puerto Rico.

Continue reading "Oppenheimer Still Has Substantial Funds in Puerto Rico Municipal Bond Debt " »

April 27, 2016

Broker News: J.P. Morgan Firms to Pay $1M Fine, FINRA Bans Broker For Money Laundering, and Former Maine Broker Gets 3-Years in Prison for Fraud

Two J.P. Morgan Firms Fined over Deficiencies
J.P. Morgan Securities and J.P. Morgan Clearing Corp. have been fined $775K and $250K respectively for several deficiencies. J.P. Morgan Securities is a broker-dealer of the bank JPMorgan Chase (JPM). .J.P. Morgan Clearing is the custodian, clearing, lending, and settlement arm of the bank. The fines were imposed by FINRA.

According to the self-regulatory organization, the firms committed a number of breaches that violated FINRA and SEC rules. The alleged violations by the brokerage firm mostly affect clients of J.P. Morgan Private Bank and JPMS Heritage Private Client Services, which are two JPMS Global Wealth Management businesses.

From 9/07 to 2014, JPMS purportedly did not send letters to clients confirming modifications to their investment goals within 30 days of the changes. JPMS also allegedly did not collect and check the outside brokerage account statements of nearly 2,000 representatives from ’12 – ’13. Morgan Clearing Corp. is accused of, from ’11-’13, not sending out yearly privacy notices to hundreds of thousands of account holders at the broker-dealers where it provides clearing and custody.


Broker Banned by FINRA for Money Laundering
The Financial Industry Regulatory Authority said that it is barring James Van Doren. The broker was sentenced to 15 months behind bars for a money laundering scam.

According to FINRA, Van Doren took part in unethical behavior by helping to make it possible for a childhood friend and business associate to avoid certain legal duties. The former broker invested in a number of real estate deals with the friend’s company and helped conceal assets when the company couldn’t fulfill its duties.

He also accepted $244K from the friend to hide the assets that his creditors were looking for. He eventually returned most of the funds to the friend while keeping some for financial losses he sustained.

Continue reading "Broker News: J.P. Morgan Firms to Pay $1M Fine, FINRA Bans Broker For Money Laundering, and Former Maine Broker Gets 3-Years in Prison for Fraud " »

April 26, 2016

Judge Dismisses Scottsdale Capital Advisor’s Lawsuit Challenging FINRA’s Enforcement Authority

U.S. District Judge Deborah K. Chasanow has dismissed Scottsdale Capital Advisors’ securities case claiming that the Financial Industry Regulatory Authority did not have legal authority to enforce securities laws. The self-regulatory organization had filed an administrative case against the financial firm, accusing it of selling unregistered penny stock shares.

In March, Scottsdale filed its complaint, contending that the claims brought by the regulator came out of violations of the Securities Act of 1933, which it believes that the Securities and Exchange Commission, and not FINRA, has purview over when it comes to enforcing it the act. However, Scottsdale also said that both the SEC and FINRA did not have the “realm of expertise” to make a ruling in the SRO’s case against it.

Judge Chasanow dismissed Scottsdale’s lawsuit citing lack of subject matter jurisdiction. She said that the allegations brought by FINRA as they pertain to the penny stock trades should not be in heard in federal court.

Continue reading " Judge Dismisses Scottsdale Capital Advisor’s Lawsuit Challenging FINRA’s Enforcement Authority " »

April 19, 2016

Former UBS Puerto Rico Employees Brought $25M Lawsuit Against the Firm

Over the last two years, more than 1,000 investors have sued UBS Puerto Rico (UBS-PR) in FINRA arbitration or other forums over mounting losses from the collapse of the Puerto Rico bond market. However, investors are not the only ones suing UBS-PR over its sale of risky bonds. Siblings Jorge and Teresa Bravo have sued UBS for $10 million in FINRA arbitration along with UBS-PR customers.

The Bravos, both ex-senior VPs at the brokerage firm, said management fooled not just customers but also UBS employees. They said they were coerced and threatened into selling Puerto Rico close-end bond funds and they were mistreated before being forced out.

Along with the Bravos, seven former UBS Puerto Rico employees have filed claims against UBS-PR seeking $25 million from their former employer. That group of former UBS-PR brokers claim UBS management made misleading statements to them, as well as customers, about the closed-end mutual funds. The brokers also said management pressured brokers at the firm to sell these Puerto Rico securities. News of the seven former brokers’ lawsuit broke last year around the time that Reuters disclosed the existence of a UBS letter noting that the collateral value of closed-end funds would be reduced to zero—an indication of their riskiness.

At Shepherd Smith Edwards and Kantas, LTD LLP, our Puerto Rico bond fraud lawyers have been working with investors to recoup their money. Too many investors lost much of the money they invested with UBS-PR and other brokerage firms on the island when these securities began to fail three years ago. Our securities lawyers on the island and the U.S. mainland are representing clients who have FINRA arbitration claims.

Continue reading "Former UBS Puerto Rico Employees Brought $25M Lawsuit Against the Firm" »

March 28, 2016

UBS Ordered to Pay Investors Over $47K in Puerto Rico Bond Fraud Case

UBS Group AG (UBS) must pay Obdulio Melendez Ramos, Carlos L. Merced, and Ramon Velez Garcia over $470K for losses they sustained from investing in Puerto Rico bonds/bond funds that lost value. The three men filed their case with the Financial Industry Regulatory Authority. They contend their accounts were over-concentrated in risky Puerto Rico bonds/bond funds. Ramos, Garcia, and Merced had alleged negligent supervision and fraud.

Addressing the panel’s ruling, a spokesperson for UBS called the decision “disappointing” and said that he disagreed with the outcome. In an emailed statement, Gregg Rosenberg contended that that there were specific circumstances involved with this case and its outcome was not a indicative of how other arbitrators might rule in similar cases. However, according to a recent supplement for the firm’s fourth quarter earnings results, since August 2013 drops in Puerto Rico municipal bond prices, as well as in the prices of related proprietary funds UBS manages and distributes, have led to customer complaints, regulatory inquiries, and arbitrations filed against the firm.

Claimed damages against UBS are estimated to total $1.5B. The vast majority of those claims are still outstanding.

Many investors have accused UBS Puerto Rico of inappropriately persuading them to invest in the island’s municipal bonds even though these investments were not appropriate for them. UBS brokers even purportedly encouraged some investors to borrow so that they could become more heavily invested in the bonds. When Puerto Rico bond prices plunged, it was the investors, many of whom were retirees, that suffered.

Continue reading "UBS Ordered to Pay Investors Over $47K in Puerto Rico Bond Fraud Case" »

March 24, 2016

Elder Investors: Morgan Stanley Must Pay Home Shopping Network’s Estate Over $34M, Broker Accused of Making Over $1.7M From Churning at Craig Scott Capital, and $10M Ponzi Scam Involving Jamaican Businesses Targets Older Investors

FINRA Panel Awards Estate Over $34M from Morgan Stanley in the Wake of Churning Allegations
A Financial Industry Regulatory Authority arbitration panel awarded the estate of Home Shopping Network Roy M. Speer over $34M in its case against Morgan Stanley (MS). The panel ruled that the firm, branch manager Terry McCoy, and broker Ami Forte were jointly liable for breach of fiduciary duty, negligence, unauthorized trading, constructive fraud, unjust enrichment, and negligent supervision. The alleged negligence would have occurred from 1/09 to 6/12 and involved investments in the financial services and banking sectors.

According to Mrs. Speer’s lawyer, in six of Mr. Speer’s accounts, about 12,000 transactions took place, most of them involving municipal bond trading and corporate trading. Many of these trades were unauthorized.

The arbitrators awarded $32.8M in compensatory damages to Speer’s widow, Lynnda Speer, and $1.5M for the costs involved in the arbitration process. The panel said that Morgan Stanley violated a law in Florida that prohibits the exploitation of vulnerable adults. Mr. Speer had dementia. Forte, who was his broker, is said to have been in a relationship with him.


Former Craig Scott Capital Broker Accused of Elder Financial Fraud
FINRA is accusing broker Edward Beyn of making over $1.7M in commissions and fees by engaging in excessive trading in client accounts while he was a registered representative at Craig Scott Capital. He is now with Rothschild Liberman. Beyn is accused of churning nine accounts of six customers, all of them over the age of 60, from 3/12 through 5/15. They all sustained losses.

Continue reading "Elder Investors: Morgan Stanley Must Pay Home Shopping Network’s Estate Over $34M, Broker Accused of Making Over $1.7M From Churning at Craig Scott Capital, and $10M Ponzi Scam Involving Jamaican Businesses Targets Older Investors" »