September 28, 2009

UBS Securities, Citigroup Global Markets, and Deutsche Bank Securities Agree to FINRA Sanction Over Vonage IPO

Citigroup Global Markets, Deutsche Bank Securities, and UBS Securities have agreed to pay fines for Financial Industry Regulatory Authority sanctions over their handling of Vonage LLC stock's initial public offering in 2006. FINRA says that the firms’ failure to adequately supervise communications with customers cost investors hundreds of thousands of dollars. By agreeing to settle, none of the broker-dealers are agreeing to or denying wrongdoing.

The three firms acted as the Vonage offering’s lead underwriters. A “directed share program” was included. Clients used accounts with the broker-dealers to purchase about 4.2 million shares.

An external company designed and administered a Web site for DSP participants that the firms’ clients used to communicate about the IPO. According to the SRO, however, inadequate supervision and the failure to follow procedures regarding outside sourcing and directed share programs resulted in the broker-dealers being unable to respond appropriately or take effective action when certain clients obtained misinformation about their orders.

By the time customers were finally notified that shares were allocated to them, the Vonage stock price had dropped significantly compared to the offering price. In addition to paying the higher price, investors sustained financial losses when the stocks were sold.

UBS, Citigroup, and Deutsche Bank have agreed to fines totaling $845,000. UBS will pay a $150,000 fine and a maximum of $118,000 to 26 clients who are potentially eligible. In addition to its $175,000 fine, Citigroup will pay 284 potentially eligible customers a maximum of $250,000. Deutsche Bank will pay 59 potentially eligible clients a maximum of $52,000, plus its $100,000. Customers are to be compensated the difference between Vonage stock’s price when clients found out they had been allocated shares and the $17/share IPO price that they paid.


Related Web Resources:
FINRA Fines Citigroup Global Markets, UBS and Deutsche Bank $425,000, Orders Customer Restitution for Supervisory Failures in Vonage IPO, FINRA, September 22, 2009

Citi, UBS, Deutsche Fined Over Vonage IPO

Continue reading "UBS Securities, Citigroup Global Markets, and Deutsche Bank Securities Agree to FINRA Sanction Over Vonage IPO" »

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Posted In: Broker Fraud , Citigroup , Deutsche Bank , Financial Firms , UBS

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March 5, 2009

Wells Fargo, Goldman Sachs, JP Morgan Chase, Citigroup, UBS Securities, Bank of America, Moody’s Investment Services, and Fitch Ratings are Among Defendants Sued On Behalf of Wells Fargo Certificate Investors for Alleged Securities Fraud Violations

The Boilermaker-Blacksmith National Pension Trust is suing a number of investment banks, credit rating agencies, and underwriters, including Wells Fargo, WFASC, Morgan Stanley & Co., Credit Suisse Securities (USA) LLC, Barclays Capital Inc., Bear Stearns & Co., Countrywide Securities Corp., Deutsche Bank Securities Inc., JPMorgan Chase Inc., Bank of America Corp., Citigroup Global Markets Inc., McGraw-Hill Cos., Moody's Investor Services Inc., and Fitch Ratings Inc., over allegations that they made false statements in the prospectus and registration statement for certificates that were collateralized by Wells Fargo Bank, NA. The lawsuit, filed on behalf of thousands of investors that bought the certificates from Wells Fargo Asset Securities Corp., accuses the defendants of violating the 1933 Securities Act by engaging in these alleged actions.

According to the securities fraud lawsuit, the defendants concealed from investors that Wells Fargo revised its underwriting practices in 2005 and became involved in high risk subprime mortgage lending. The complaint contends that WFASC and a number of defendants submitted to the Securities and Exchange Commision prospectus and registration statements representing that the mortgages were backed by certificates that were subject to specific underwriting guidelines for evaluating a borrower's creditworthiness. The plaintiffs contend that these prospectuses and registration statements were false because they neglected to reveal that the Wells Fargo-originated certificates were not in accordance with the credit, underwriting, and appraisal standards that Wells Fargo, per the companies, had supposedly used to approve mortgages.

The lawsuit also claims that because Wells Fargo decided to enter the subprime mortgage mortgage market in 2005, the investment bank had to take significant write-downs in 2008 because of its massive exposure to the subprime market and the WFASC certificates that these mortgages backed dropped significantly in value. The Boiler-Blaksmith fund reports that it lost about $5 million, which is more than half of what it invested.

Related Web Resources:
Read the Complaint

The Boilermakers National Funds

Continue reading "Wells Fargo, Goldman Sachs, JP Morgan Chase, Citigroup, UBS Securities, Bank of America, Moody’s Investment Services, and Fitch Ratings are Among Defendants Sued On Behalf of Wells Fargo Certificate Investors for Alleged Securities Fraud Violations" »

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November 19, 2008

NASAA Says Investors with Frozen Auction-Rate Securities Should Ask Investment Firms About Buyback Opportunities

The North American Securities Administrators Association is reminding investors to ask the investment firms that sold them any now-frozen auction-rate securities about repurchase opportunities. Following the ARS market collapse, securities regulators in 12 US states joined together to form a multi-state Task Force dedicated to finding out whether Wall Street investment firms had misled investors when persuading them to invest in the ARS market.

As part of their settlement agreements reached with the firms in question, 11 major Wall Street investment banks have said they will buy back over $51 billion in ARS from charities, retail investors, and small companies. However, these repurchase offers may not be available indefinitely.

NASAA President Fred Joseph says the best way to avail of any redemption offers is to contact the investment firms as soon as possible. So far, 11 firms have agreed in principle to buy back over $50 billion in ARS. NASAA says additional repurchase opportunities are expected to become available in the coming months.

Investment Firms with ARS Hotlines:

Bank of America 1-866-638-4183
Deutsche Bank 1-866-926-1437
Citi 1-866-720-4802
JP Morgan 1-866-450-8470
Goldman Sachs 1-888-350-2857
Merrill Lynch 1-888-706-1381
UBS 1-800-253-1974
Morgan Stanley 1-800-566-2273
Wachovia 1-866-283-794

Meantime, more investigations are under way into the sales practices of US firms that marketed and sold auction-rate securities to investors. Unfortunately, many investors who were told ARS were liquid investments are now dealing with frozen securities and cannot access their funds.

If you invested in the auction-rate securities industry and your ARS became frozen during the market’s collapse, you may be the victim of securities fraud.


Related Web Resources:
State Securities Regulators Remind Auction Rate Securities Investors to Contact Firms About Buyback Offers, NASAA, November 17, 2008

Small firms caught in ARS buyback vise, November 16, 2008

Continue reading "NASAA Says Investors with Frozen Auction-Rate Securities Should Ask Investment Firms About Buyback Opportunities" »

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

Posted In: Auction-Rate Securities , Bank of America , Citigroup , Deutsche Bank , Financial Firms , Goldman Sachs , J P Morgan - Chase , Merrill Lynch , Morgan Stanley , NASAA , UBS , Wachovia

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July 9, 2008

Deutsche Bank Securities Unit Must Defend Itself Against Xethanol Corp. Lawsuit Related to Auction-Rate Securities Losses

This week, U.S. District Judge Alvin K. Hellerstein announced that the securities arm of Deutsche Bank AG will have to defend itself against a lawsuit alleging that it lost almost $1.6 million in auction-rate securities.

Xethanol Corp., which filed the securities lawsuit, alleges that Deutsche Bank Securities let the alternative-energy company buy the securities even though it didn’t fulfill the requirements for the transaction to take place as a private investment. Xethanol says it ended up selling its positions in two auction-rate securities at a $1.59 million loss last September. The company claims it acquired the positions for $13.3 million last June.

However, Deutsche Bank Securities says it never interacted directly with Xethanol. A third-party broker bought the securities from Deutsche Bank before selling them to Xethanol. The broker is not named as a defendant in the case.

Hellerstein’s order allows for one claim of selling unregistered securities, which violated securities laws, to move forward against Deutsche Bank Securities. The federal judge, however, dismissed the claims of common law fraud and the claim that the firm's securities unit issued misleading and false statements related to the sale of auction-rate securities.

Our stockbroker fraud law firm is committed to helping individual and institutional investors recover losses that occur because of the inappropriate actions of investment firms and their employees. Contact Shepherd Smith Edwards and Kantas, LLP today, and ask for your free consultation.

Related Web Resources:

Deutsche Bank Securities

Xethanol Corporation

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Posted In: Auction-Rate Securities , Deutsche Bank

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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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December 12, 2007

Bear Stearns, Deutsche Bank, and Merrill Lynch Among the Wall Street Firms Subpoenaed by New York Prosecutors

New York Attorney General Andrew Cuomo is subpoenaing several Wall Street firms, including Deutsche Bank AG, Merrill Lynch & Co, and Bear Stearns, for information about packaging and selling debt connect to high-risk mortgages.

Prosecutors want to look at the way investment banks review the quality of mortgages before turning them into packaged products that can be sold to investors. They also want to find out how debt is being turned into securities and learn more about the credit-rating firm-bank relationship.

This past summer, mortgage-backed securities affected by growing default and delinquency rates had high debt ratings despite the backing of loans issued to lenders.

Two hedge funds run by Bear Stearns fell apart—instigating the credit markets crisis. The collapse cost investors some $1.6 billion. The collapse cost Merrill Lynch, a big investor in the fund and other subprime mortgage securities close, to $8 billion.

The investigation will look at the way relationships among third-party due-diligence firms, mortgage companies, credit-rating firms, and securities firms and their connection to the firms’ involvement with the subprime mortgage crisis. Underwriting standards will also be reviewed.

Last month, NY Attorney General Cuomo sent subpoenas to investment banks as part of his investigation into U.S. mortgage loans. Fannie Mae and Freddie Mac were among those subpoenaed.

If you are an investor who has lost money because of the misconduct of anyone in the securities industry, contact Shepherd Smith and Edwards right away. One of our securities fraud attorneys would be happy to speak with you during a free consultation. Shepherd Smith and Edwards has helped thousands of investors recover their losses.


Related Web Resources:

Wall St. firms get subprime subpoenas, CNN.com, December 5, 2007

New York State Attorney General Andrew Cuomo

Merrill Lynch

Bear Stearns

Deutsche Bank

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Posted In: Bear Stearns , Deutsche Bank , Merrill Lynch

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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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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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May 7, 2007

A Warning on Risk in Securities backed by Commercial Mortgages

In the wake of the collapse of the subprime residential mortgage market, the leading bond rating agencies are beginning to crack down on what they see as risky lending practices in commercial real estate as well.

Like residential loans, commercial mortgages are pooled and packaged into bonds that are sliced up into portions carrying different degrees of risk. According to Moody’s, there were $769.6 billion in commercial mortgage-backed securities at the end of last year, representing 26.1 percent of all outstanding commercial mortgages, including apartment buildings.

The agencies that rate these securities have issued warnings in the past, but last month they sounded a new note of urgency, saying that for the first time they would adjust their ratings to reflect their concerns.

“Underwriting has gotten so frothy that we have to take a stand,” said Jim Duca, a group managing director at Moody’s Investors Service. “The industry was heading to Niagara Falls.”

Standard & Poor’s said that in the first quarter of this year, the delinquency rate for such bonds reached its highest level since its delinquency index was created in 1999.

Fitch also predicted a 15 percent increase in defaults of loans being currently written and bond analysts agree that a large number of the loans issued recently could result in large problems down the road.

As was the case in the overheated residential mortgage market, many loans for commercial transactions were designed to be borrower-friendly, including interest-only payments for the first 10 years with balloon payments at the end of the term. The agencies point out that, unlike the vast majority of residential loans, commercial lenders are not requiring landlords to set aside adequate reserves to cover taxes, insurance and other costs. Many lenders are prone to accept overly optimistic projections by borrowers, including occupancy and rental rate growth.

While the agencies are just starting to reflect their new credit-tightening standards, their warnings are already having repercussions in the bond market. Investors are demanding higher rates of return, making the bonds costlier for the dealers, said Rob Brennan, the global head of real estate financing for Credit Suisse. “The fact is that the marketplace forces the change immediately,” he said.

Many investors who own these commercial mortgages and mortgage backed securities have experienced default losses. As recent credit rating warnings have caused interest rates to rise on newer loans this has also caused the value of loans and securities held by these investors to fall in value, in some cases precipitously.
Last month, a new $4.2 billion commercial-mortgage-backed security offered by GE Capital had to be restructured after investors complained. Five loans totaling $226.7 million were removed from the offering, and the investment-grade portion of another loan was further trimmed by $50 million. Most of the loans removed from the offering were originated by Deutsche Bank, which also provided $6 billion in debt financing for the purchase nearly all the Manhattan portions of a portfolio. Deutsche Bank declined a request for comment on the restructuring of the GE Capital bond.

Brenan, a securitization industry veteran, said the changes were necessary even though they would result in higher costs to the investment banks. “We’re trading some short-term pain for long-term gain,” he said. “If we do this right, we’ll stop a level of excess from getting out of hand. We want to avoid the kind of train wreck that the subprime market experienced.”


At Shepherd, Smith, and Edwards our attorneys and staff have more than 100 years of collective past experience in securities regulation and the securities industry. We represent institutional and individual clients who have sustained significant losses in their investments. Phone toll free at (800) 259-9010 or contact us online at Shepherd, Smith, and Edwards to schedule a free consultation with one of our attorneys.


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Posted In: Credit Suisse , Deutsche Bank , Mortgage Backed Securities

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