April 1, 2008

UBS Securities, Bank of America, and Merrill Lynch Among Firms Subpoenaed In Massachusetts Auction-Rate Market Sales Probe

Massachusetts Secretary of the Commonwealth William Galvin is subpoenaing Merrill Lynch, Pierce, Fenner, & Smith Inc., UBS Securities, and Bank of America Investments because it wants information about the companies’ involvement in selling auction-rate market securities to retail investors. The companies are all registered Massachusetts broker dealers. Galvin issued the subpoenas on behalf of the Massachusetts Securities Division.

The division wants to determine whether the firms followed proper procedures in letting Massachusetts investors know of the possibilities that their investments could become illiquid. The state is also trying to determine what role big investment banks played in causing the auctions to fail and whether the investments sold to retail investors were suitable.

Many of the investors that bought auction market securities cannot get their money because the securities are frozen. Small business owners and individual investors have been especially hurt by the failures in the auction market because of the subprime mortgage collapse.

Galvin says he is not investigating why the securities are frozen but whether the investment firms were in compliance with their sales practices and in disclosing the necessary information to investors.

In February, Galvin subpoenaed Calamos Financial Services, Blackrock Financial Management, Pioneer Investment Management, Nuveen Asset Management, MFS Investment Management, John Hancock Advisers, Allianz Global Investors, Evergreen Investment Management, and Eaton Vance for information about the asset management companies’ dealings with closed-end funds following the auction failures in the auction-rate securities market.

The stockbroker fraud law firm of Shepherd Smith and Edwards is committed to helping investors recover losses brought about by securities fraud. Contact Shepherd Smith and Edwards today to request your free consultation.


Related Web Resources:

Galvin issues subpoenas in debt securities probe, Boston.com, March 28, 2008

Another Kick in the ARS, CFO.com, February 22, 2008

Massachusetts Securities Division

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Posted In: Auction-Rate Securities , Bank of America , Merrill Lynch , UBS

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January 24, 2008

Deutsche Bank Trust Company, Goldman Sachs Group, and Bank of America Corporation are Among the 21 Lenders Named in Cleveland, Ohio Lawsuit

The city of Cleveland, Ohio is suing 21 financial institutions for hundreds of millions of dollars in damages caused by subprime lending and securitization. The defendants named in the lawsuit are:

• Deutsche Bank Trust Company
• Ameriquest Mortgage Company
• Bank of America Corporation
• The Bear Stearns Companies
• Citigroup, Inc.
• Countrywide Financial Corp.
• Credit Suisse (USA)
• Fremont General Corporation
• GMAC-RFC
• Goldman Sachs Group
• Greenwich Capital Markets, Inc.
• HSBC Holdings, PLC
• Indymac Bancorp., Inc.
• J.P. Morgan Chase Co.
• Lehman Brothers Holdings, Inc.
• Merrill Lynch & Co., Inc.
• Morgan Stanley
• Novastar Financial Inc.
• Option One Mortgage Corporation
• Washington Mutual Inc.
• Wells Fargo & Co.

The city of Cleveland says that the defendants issued loans to people who would never have been able to pay them back and that the foreclosures were inevitable. The lawsuit says that not only did the financial institutions issue loans to ill-qualified borrowers, but they securitized the loans and used the profits to fund more subprime mortgages, make more money, and secure more borrowers.

In the past two years, Cleveland has experienced over 7,000 foreclosures. Entire city blocks have been vacated and violent crime and arson incidents have increased. 1,000 abandoned homes have been torn down. Cleveland is calling the “propagation of subprime mortgages… and the corresponding foreclosures... a public nuisance as defined by Ohio common law.

As a result, the city of Cleveland’s population was 444,000 last year—way down from its nearly one million residents in 1950. The decrease in population size has negatively affected the city’s budget.

The stockbroker law firm of Shepherd Smith and Edwards represents investors who have lost money due to the misconduct or negligent actions of broker-dealers and other financial institutions. Contact Shepherd Smith and Edwards today and one of our stockbroker fraud lawyers will be happy to offer you a free consultation.

Related Web Resources:

Cleveland Sues 21 Lenders Over Subprime Mortgages, Herald-Tribune, January 12, 2008

Read the Complaint (PDF)

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Posted In: Ameriprise - Securities America , Bank of America , Credit Suisse , Deutsche Bank , Financial Firms , J P Morgan - Chase , Lehman Brothers , Merrill Lynch , Morgan Stanley , Wells Fargo

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October 9, 2007

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

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

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

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

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

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

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


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

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July 11, 2007

Schwab to Distribute $3.5 Billion to Its Shareholders by Buying Back Over 100 Million Shares

After sale if its U.S. Trust subsidiary to Bank of America for $3.3 billion, Charles Schwab Corporation has decided to distribute even more than the proceeds of that sale to its shareholders by buying back shares and paying a special dividend.

Under the plan, San Francisco-based Schwab will pay up to $22.50 per share for 84 million shares of its own stock -- 10 percent above the previous closing price. It will guarantee selling stockholders at least $19.50 per share, and also purchase up to 18 million additional shares from its founder. Charles Schwab will himslef receive over $400 million and will maintain his stake at its current level of 18%, which would be valued at over $4.5 billion.

The auction, which covers about 7 percent of Schwab's outstanding shares has already begun and is to be completed by July 31. In addition to $2.3 billion to buy the stock, in August Schwab will also pay $1.2 billion to shareholders through a $1 per share special dividend.

The U.S. Trust sale caused speculation that Schwab may buy one or more of its online competitors, such as E-Trade Financial Corp. or TD Ameritrade Holding Corp. Schwab repeatedly said it was not interested in any such takeover. Some of the speculation came from those wanting their shares in the other companies to be purchased. Two hedge funds publicly urged TD Ameritrade to seek a sale to E-Trade or Schwab.

Schwab’s chief financial officer said "We have conducted a thorough review of alternatives for deploying both the proceeds from the sale of U.S. Trust and our other available financial resources, and we believe this plan is an efficient means of achieving an appropriate level and mix of capital for Schwab."

Since Charles Schwab again assumed control of the firm three years ago, his shares and the other shareholders have tripled in value. The company lowered its commissions, stepped-up its "no-nonsense" investment advice and earned a record $1.2 billion last year.

Shepherd Smith and Edwards represents clients that are the victims of securities fraud. If you have lost money because of misconduct by someone in the securities industry, hiring an experienced law firm can increase the chances of recovering your losses. Contact Shepherd Smith and Edwards today.
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Posted In: Bank of America , Broker-Dealers , Charles Schwab

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June 21, 2007

Merrill Lynch Seizes $400 Million of Assets from a Bear Stearns Managed 'Subprime' Hedge Fund for Failing to Meet Margin Calls

A hedge fund managed by Bear Stearns that takes both bullish and bearish positions in subprime loans has been hit heavily by conditions in that market. Some of the fund's assets were held at Merrill Lynch, on margin. When the equity in the fund dropped, Merrill issued margin calls.

The hedge fund reportedly began with about $600 million in investor capital, $40 million of that from Bear Stearns and its executives, then borrowed $6 billion from Wall Street lenders, including Merrill, Goldman Sachs, Bank of America and Deutsche Bank.

As the fund's assets lost market value, the Bear Stearns managers scrambled to sell hundreds of millions of dollars in assets to satisfy demands for cash and assets from creditors to stave off liquidation of the fund. The managers auctioned almost $4 billion in mortgage bonds, and attempted to present a 30-day plan to sell more assets, but was unable to persuade Merrill to refrain from seizing assets.

An auction was then held by Merrill to liquidate these assets and the fund's fate remains in peril. It the hedge fund is dissolved it would become the second blowup of hedge funds dealing in the high risk home loans, known as "subprime" mortgages. UBS AG shut down Dillon Read Capital Management after bad trades in subprime-mortgage loans led to a $124 million loss.

Wall Street is concerned that the asset liquidations could cause values on other subprime pools to spiral downward causing additional pressure to liquidate other simliar portfolios. Sub-prime mortgages react to market conditions different than high-quality and liquid mortgage-backed bonds, and are more akin to "junk" corporate bonds in fluctuation and liquidity.

Shepherd Smith and Edwards is a securities law firm which represents investors nationwide in claims against investment firms. To learn whether our firm can assist you or your firm, contact us to arrange a free confidential consultation with one of our attorneys.

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Posted In: Bank of America , Bear Stearns , Deutsche Bank , Goldman Sachs , Hedge Funds , Morgan Stanley

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February 13, 2007

According to NASD, Banc of America Investment Services Inc. Agrees To Pay $3 Million For Failing To Comply With Anti-Money Laundering Requirements

Banc of America Investment Services (BAI) Inc. says that it will pay $3 million in disciplinary charges for its alleged violation of anti-money laundering (AM) requirements.

The NASD says that BAI failed to acquire customer information for a number of high-risk accounts. It is also accusing BAI of failing to communicate sufficiently with its parent bank to make sure that BAI’S independent SAR (suspicious activity report) filing obligations were fulfilled. In addition, the NASD says that BAI did not properly investigate or pursue certain red flags, especially when its own clearing company had made repeated requests for additional information pertaining to certain account holders.

The NASD claims that BAI did not get the mandated additional information from customers who had 34 accounts involving trust and private investment corporations that were affiliated with one family and domiciled in the Isle of Man. The offshore accounts, collectively containing assets worth $79 Million to $93 Million, participated in multimillion-dollar wire transfers internationally.

The NASD says that, under terrorist financing and anti-money laundering laws, firms are supposed to take the appropriate steps to address high risks related to customers and transactions. When the 34 accounts were opened in 2003, the NASD says that even though BAI had set up AML procedures for high-risk customer accounts, such as asking for additional information (i.e., the names of the beneficial owners) before conducting major transactions for the accounts, BAI did not ask for the names of the beneficial owners of the 34 accounts, nor did it restrict these accounts’ activities from August 2003 to October 2004. As a result, the NASD says that BAI let the accounts “engage in large wire transactions,” and did not obtain the names even after a BAI attorney, a BAI risk committee, and BAI’s clearing firm insisted that the names needed to be secured.

Individuals at BAI were overheard worrying that if they asked for the names of the beneficial owners, the account holders might move the accounts elsewhere. The NASD is accusing BAI of not having a proper compliance program set up to report suspicious transactions.

At Shepherd, Smith, and Edwards, our lawyers and legal staff collectively have over 100 years of experience working in securities regulation and the securities industry. A number of our attorneys have served as compliance directors and vice presidents of brokerage firms. Our law firm is dedicated to helping U.S. investors, as well as international investors, recover losses they have incurred because of the inappropriate or illegal actions of stockbrokers or their firms. Contact Shepherd, Smith, and Edwards today for your free consultation.

NASD Fines Firm $3M for AML Violations, CCH Wallstreet, February 1, 2007

NASD Fines Banc of America Investment Services, Inc. $3 Million for Failing to Comply With Anti-Money Laundering Rules in Connection With High Risk Accounts, NASD Press Room, January 29, 2007

Related Web Resources:

Banc of America Investment Services Inc.

Anti-Money Laundering Requirements (PDF)

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