Stock Broker Fraud Blog

The Financial Industry Regulatory Authority announced that 16 current and-ex State Farm VP Management Corp. registered representatives have settled charges of alleged misconduct regarding FINRA’s Continuing Education Requirements for taking tests. FINRA says that the representatives have agreed to fines ranging from $5,000 to $10,000 and suspensions from 30 days up to six months in length. One person agreed to a ban from working as a principal.

FINRA says that 9 of the 16 representatives were supervisors that allowed or directed subordinates to take State Farm's 'Firm Element' proficiency test for them. One supervisor told a subordinate to take the test for other reps. The other six registered representatives that settled were the ones that took the test for others.

The SRO says State Farm did not know about the misconduct and self-reported after it discovered that there were irregularities taking place in one of its regions. State Farm began investigating the incidents. It then expanded its probe nationally and reported its findings to FINRA.

The Firm Element portion of the mandatory two-part test, which is administered by FINRA, other SROs, and the Securities Industry/Regulatory Council on Continuing Education, requires that firms give registered employees who deal with clients, and their supervisors, the proper training that covers the areas of new products, risk disclosure, sales practices, and new regulatory requirements and concerns.

State Farm’s 2005 Firm Element test, according to FINRA, requires each test-taker to log onto an "internal, computer-based system" by inputting their user ID and password. The subordinates that engaged in the alleged misconduct are accused of using their supervisors’ user names and passwords to take the test for them.

By admitting to the charges and settling them, the respondents are not admitting to or denying the allegations.

The investment fraud law firm of Shepherd Smith and Edwards represents investors that have lost money because of the negligence or misconduct of a securities industry member. Contact Shepherd Smith and Edwards today.

Related Web Resources:

FINRA Fines, Suspends 16 State Farm Representatives for Test-Taking Irregularities in the Firm’s Continuing Education Program, Business Wire, March 6, 2008

FINRA and the Securities Industry Continuing Education Program, FINRA

State Farm Companies

The Financial Industry Regulatory Authority (FINRA) conjures thoughts of jack-booted cops looking to “perp-walk” those who take advantage investors. Yet, FINRA is just the new name of the National Association of Securities Dealers. The NASD was, and FINRA is, a non-profit organization of all securities dealers, with a structure similar to a country club, which fines or expels those who embarrass its membership.

Yet, even FINRA is critical of its members for mishandling auction rate securities (ARS). For example, in a press release, FINRA acknowledges that “Investors who purchase ARS are typically seeking a cash-like investment that pays a higher yield than money market mutual funds or certificates of deposit.” This confirms, despite objections by firms, that investors believed they were getting liquid instruments, not 20 to 30 year obligations or even “no maturity” preferred shares

"If you need your money in a hurry, loss of liquidity is a financial hardship," states John Gannon, FINRA's Senior Vice President for Investor Education. "We want investors who have been affected by the recent auction failures to know what options are available to them."

FINRA then mentions alternatives for “ARS investors who cannot liquidate their holdings because of failed auctions,” including (1) continue to hold; (2) sell in the secondary market; (3) borrow on margin; and, (4) liquidate other investments.

After stating that most ARS investors sought liquidity, it is strange that FINRA would recommend holding the securities. Importantly, recommending the holding of such securities to one who needs liquidity, violates FINRA’s own Rules of Fair Practice regarding unsuitability! While investors can not sell until there is a market, liquidation when possible may indeed be the only option for victims.

Selling in the secondary market, when possible, is the second option and should strongly be considered by ARS holders! The law holds that victims can recover losses from those who misrepresent securities to them, but the law also says victims must “mitigate” losses as soon as possible. As with any other investment, if you would not buy an investment at a price, you should not hold it for the same reason. Also, When others think the market can only get better with time it is usually best to run for the hills!

FINRA is not enthusiastic about “borrowing on margin,” stating that “[s]ome firms are offering to lend customers money to help them meet their cash flow needs. Be aware that the interest rate charged on these loans may exceed the yield you're getting on the underlying security. Also, borrowing against a tax-exempt security may cause you to lose the ability to deduct some or all of the margin loan interest from your taxes.”

We also note that margining illiquid and troubled securities is in itself quite dangerous, and that firms are charging lucrative interest rates to those who are victims of that firm’s own bad acts concerning ARS securities.

FINRA adds: “You might also consider selling other securities in your portfolio. When weighing this option, be sure to consider factors such as the total transaction costs you would incur, whether the sale would trigger adverse tax consequences and how the liquidation would impact the balance of your portfolio.” FINRA fails to mention that selling other securities at depressed prices can create even greater damages than in the ARS which are the source of the problem.

Moreover, FINRA fails to mention that anyone with legal problems should contact an attorney, before making statements to brokerage firms or regulators who share such information with brokerage firms. Ever heard this? “You have a right to an attorney” and “anything you say can and will he held against you in a court of law.” Did you wonder why the person then keeps talking? Sending a complaint to a firm or a regulator without an attorney is - well - exactly the same thing!

The securities law firm of Shepherd, Smith, Edwards and Kantas has for decades handled claims by investors worldwide against brokerage and other financial firms. We are currently working on claims for both institutional and individual investors whose funds are now locked into ARS securities. Contact us to arrange a free, no obligation consultation with one of our attorneys regarding your situation or if you wish to receive our weekly newsletter regarding ARS securities.

LINK TO ARTICLE ON ARS SECURITIES: (Our firm does not endorse the opinions or statements of of the article's author.)

ARC and ARP Securities: How Wall Street Brokerage Firms May Have Defrauded Their Clients Out of Billions Overnight Trading, February 24, 2008 (Author’s name withheld by request)

The Financial Industry Regulatory Authority (FINRA) announced today that five major brokerage firms have agreed to pay fines totaling $2.4 million for supervision violations and improper mutual fund sales to thousands of investors. These firms must take remedial steps to prevent such actions in the future and pay amounts estimated to exceed $25 million to their clients because of such practices.

According to FINRA, the violations include sales by these firms of load securities, meaning clients were required to pay commissions, when these investors were eligible to make fund exchanges without paying commissions. FINRA’s press release states that “Class B and Class C mutual fund shares and failure to have supervisory systems designed to provide all eligible investors with the opportunity to purchase Class A mutual fund shares at net asset value (NAV) through NAV transfer programs.”

Prudential Securities must pay an $800,000 fine, UBS Financial Services, Inc. was fined $750,000 and Pruco Securities was hit for $100,000 for improper sales of Class B and Class C mutual fund shares. These firms also agreed to remediation plans that will address over 27,000 fund transactions in the accounts of 5,300 households. Merrill Lynch, Prudential Securities, UBS and Wells Fargo must take steps regarding customers who qualified for but did not receive the benefit of NAV transfer programs. It is estimated that total remediation to fhese firms' customers will exceed $25 million.

FINRA also fined Prudential Securities, UBS, and Merrill Lynch $250,000 each for failure to reasonable supervise and offer opportunities for investors to obtain sales charge waivers through NAV transfer programs. As a result of inadequate supervisory systems FINRA found that customers of Merrill Lynch, Wells Fargo, UBS and Prudential Securities eligible for the NAV programs incurred front-end sales loads or purchased other share classes that unnecessarily subjected them to higher fees and sales charges.

FINRA found that Wells Fargo Investments failed to have reasonable supervisory systems and procedures relating to NAV transfer programs but did not impose a fine because the firm made changes before FINRA's inquiry into the practices. FINRA said the firm had initiated a review of its mutual fund sales and acted promptly and in good faith to correct its system and procedures and had reimbursed its customers over $612,000.

"Firms have an obligation to consider all relevant factors when recommending mutual fund investments, to ensure that they recommend the share class that is most advantageous to the customer," said Susan L. Merrill, Executive Vice President and Chief of Enforcement at FINRA. "The supervisory problems here led not only to the sales of inappropriate mutual fund share classes, but to the failure to identify special sales charge waiver programs on mutual fund purchases. We are pleased that through these settlements, millions of dollars will be returned to customers."

The securities law firm of Shepherd, Smith, Edwards and Kantas has represented thousands of institutional and individual investors nationwide with substantial claims for losses caused by wrongdoing of stockbrokers and their firms. Contact us today if you, your firm or someone you know could be the victim to arrange a free, confidential conference with one of our securities attorneys.

The Financial Industry Regulatory Authority is charging stockbroker John Mullins with misappropriating nearly $400,000 from an elderly widow and her charitable foundation. Esther Weil, a 97-year-old widow, died earlier this month. She was living in a nursing home. Mullins was her stockbroker for over 20 years.

Mullins allegedly tried to conceal his status with his elderly client’s charitable foundation. John and his wife Kathleen were the trustees of Weil’s nonprofit foundation—a relationship that is prohibited by Morgan Stanley’s firm policies. Morgan Stanley employed the Mullins from 2002-2006. The company fired them after it was discovered that they were violating company policies.

John is accused of allegedly misappropriating funds from his employer for improper expenses, making misstatements on his firm’s yearly compliance questionnaires and Form U4, and accepting an unauthorized $100,000 loan from a client.

Mullins’ wife Kathleen also accepted a loan from the elderly woman and made misstatements on Form U4 and compliance questionnaires. The couple has been charged with failure to adhere to high standards of commercial honor and just and equitable principles of trade.

According to New Jersey Regulators, John Mullins converted $375,000 of Weil’s assets for his personal use when she became seriously ill in 2006. He also allegedly withdrew $14,000 from her Morgan Stanley account.

John also allegedly used Esther’s debit card to buy a $3,700 50-inch plasma television, bought $11,000 in Four Seasons Hotel and Resort Gift Certificates, and spent $4,000 to pay for a London vacation. He also may have charged the charitable foundation thousands of dollars for personal expenses.

The New Jersey Securities Bureau has charged the couple them with alleged misconduct. They are barred from working in New Jersey’s securities industry.

Shepherd Smith and Edwards has helped many stockbroker fraud victims throughout the U.S. recover their losses caused by the misconduct of brokers or advisers. One of our stockbroker fraud lawyers can speak with you today.

Related Web Resources:

Read the FINRA complaint, FINRA (PDF)

Margate couple sanctioned by state, Press of Atlantic City.com, February 15, 2008

Investors' Watchdog

The Financial Industry Regulatory Authority (FINRA), the Securities and Exchange Commission (SEC), and the North American Securities Administrators Association (NASAA) have announced a new group initiative to protect senior investors from becoming the victims of investment scams.

SEC, NASAA, and FINRA will work with investment advisers and broker-dealer companies to identify effective compliance and supervisory practices involving senior investors. Areas of exploration will include:

• Opening accounts
• Training company employees
• Marketing practices
• Advertising practices
• Review of products and accounts
• Fulfilling the evolving needs of aging investors
• Regularly reviewing products

Discoveries will be published so that all firms can learn how to implement the most effective and cutting edge practices to better serve senior investors and combat senior investment fraud.

These latest steps are part of a broader initiative, started by SEC, FINRA (previously NYSE and NASD), and NASAA in 2006 to protect elderly investors from fraud. Efforts have included enforcing securities laws, targeted exams, and actively educating elderly investors.

Since 2006, there have been a number of enforcement actions brought against firms and their employees who have taken advantage of senior investors. Our stockbroker fraud law firm is committed to helping elderly investors recoup their losses. We have helped thousands of fraud victims recover their money.

Contact Shepherd Smith and Edwards today.

Related Web Resources:

SEC, NASAA and FINRA Announce New Steps to Help Protect Senior Investors, February 8, 2008

Protecting Senior Investors: Report of Examinations of Securities Firms Providing "Free Lunch" Sales Seminars, SEC.gov (PDF)

Thanks to the consolidation of NYSE and NASD into the Financial Industry Regulatory Authority (FINRA), security firms registered in the United States will now content with fewer regulatory tests. FINRA officials announced the decrease in the number of examinations.

Currently, a lot of firms are required to take a sales practice test and a financial examination with different regulators. Next year, however, the firms will be required to take just one examination that evaluates both finances and sales practices.

FINRA officials will oversee this new test. Brokers will also be given exams on price verification, valuations, proper disclosure procedures, and fees received.

FINRA officials also are in the process of creating streamlined standards that incorporates the best rules from the rulebooks of both NASD and NYSE. The FINRA rulebook will include revised and improved rules. New rules may be a combination of principle-based rules and prescriptive ones.

Also next year, FINRA will take a closer look at possible areas of conflict with hedge funds, money laundering, data security, fixed income reporting practices, supervisory controls, general suitability reviews, outsourcing practices, and subprime mortgage securitization-related matters.

The consolidation of NASD and NYSE into FINRA became final on July 27.

If you are the victim of securities fraud, it is important that you speak with a securities fraud attorney right away. Our attorneys at Shepherd Smith and Edwards are dedicated to helping people like you recover your losses. We have successfully handled many cases in state and federal courts and in arbitration.

Contact Shepherd Smith and Edwards today to receive your free consultation with one of our experienced securities fraud attorneys. We represent clients throughout the United States and abroad.

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SIFMA’s Annual Meeting, CCHWallstreet.com, December 5, 2007

FINRA

Oppenheimer & Co. says it will pay a $1 million fine to settle charges by the Financial Industry Regulatory Authority that it turned in false information regarding mutual fund breakpoints. The company also has agreed to submit to having an independent consultant conduct an audit regarding how Oppenheimer handles regulatory inquiries. By agreeing to the settlement terms, Oppenheimer is not agreeing to or denying FINRA’s allegations.

Background
FINRA says it initially asked Oppenheimer for the information in March 2003 when the self-regulatory organization (then the NASD) looked at over 2000 broker-dealers who had sold front-end loan funds over a two-year period.

FINRA’s request was based on the discovery that nearly one in three mutual fund transactions in front-end loans seemed to qualify for a discount but did not get one.

FINRA says that in June and November 2003, Oppenheimer turned in data that was not complete or accurate after FINRA’s request that brokers assess their breakpoint practices. The term breakpoint refers to discounts or other benefits clients can obtain if they buy a certain number of funds at the same time.

The first time FINRA received the data, FINRA says it knew the information was “flawed” and notified Oppenheimer immediately.

The second assessment also contained “obvious deficiencies,” says FINRA. Linked accounts were not identified, ineligible transactions were included, overcharged trades were not properly identified, and correct discount information was left out.

When a broker-dealer engages in inappropriate actions, investors, unfortunately, can incur financial losses. The best chance an investor has of recouping their lost investment(s) is to retain the services of an experienced stockbroker fraud lawyer who can help you.

Contact Shepherd Smith and Edwards today and ask for your free consultation with one of our experienced stockbroker fraud attorneys.

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FINRA Fines Oppenheimer $1 Million, Associated Press/Forbes, October 30, 2007

Oppenheimer & Co Inc.

Mutual Fund Breakpoints: A Break Worth Taking, FINRA, January 14, 2003

The Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC) have introduced an initiative that will assist broker-dealer chief compliance officers in maintaining compliance controls that work, creating effective communications about compliance risks, and implementing solid compliance programs at brokerage firms.

Regional and national seminars will be designed to focus on increased compliance practices at brokerage firms to increase investor protection. FINRA and SEC said that this new initiative is similar to the SEC’s current CCOutreach Program for investment company chief compliance officers and investment advisers.

A national compliance seminar is tentatively scheduled for March 2008 at the SEC headquarters in Washington D.C. Regional seminars will be held in cities across the United States.

Potential topics include sales practices, debt securities issues, new products, CCOs and compliance programs within the organization, The CCO’s Role in Businesses that are constantly changing, business continuity / pandemic planning, trading issues, conflicts of interest, protecting customer data and non-public information, annual compliance report, regulatory compliance examinations, and Reg NMS.

The plan is sponsored by FINRA, the Division of Market Regulation, and the SEC’s Office of Compliance Inspections and Examinations.

SEC Chairman Christopher called the initiative an opportunity for regulators and broker-dealers to learn from each other the best ways to ensure that security laws are abided by.

Even when there are investor protections in place, there are still incidents that occur where an investor loses money because of broker misconduct. If you are a victim of investor fraud, you should speak with an experienced stockbroker fraud attorney who can help you.

Contact Shepherd Smith and Edwards today to schedule your free case evaluation.

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Regulators roll out CCOutreach Program, Investment News, November 7, 2007

Broker-Dealer CCOutreach Program, SEC.gov

FINRA enforcement chief Susan Merrill announced at a Practising Law Institute Gathering on “Coping with Dealer/Broker Regulation and Enforcement” that the Financial Industry Regulatory Authority rulebook, which consolidates NASD and NYSE Rules might not be completed until the end of 2008 or even into 2009.
Merrill said that the consolidation is causing FINRA to ponder whether different kinds of firms should be regulated differently and whether it makes sense to use principle-based standards more frequently.

Merrill says that different groups, including employees previously with NYSE and NASE, are looking at the different rules and trying to figure out how to best merge the two systems.

Established in July, FINRA consolidates the risk assessment, regulatory, arbitration, and enforcement functions of NYSE and NASD.

Prior to the merger, the close to 300 NYSE member organizations had also belonged to NASD’s 5100 membership. FINRA now regulates both memberships. Organizations that belonged to both legacy organizations must comply with NYSE rules and members that belonged to NASD only must follow NASD’s rulebook until the new consolidated rulebook is complete.

Merrill says that FINRA’s current targeted sweeps into certain practice areas confirms that organization’s enforcement priorities continue to focus on stopping brokers that use “professional designations” to defraud or mislead investors, the use of “educational” seminars to target senior investors, as well as the sale of life settlements and the collateralized mortgage obligations targeting seniors.

If you are the victim of investor fraud, do not hesitate to contact the securities litigation firm of Shepherd Smith and Edwards today. We have helped thousands of investors recover their losses. Your first consultation with us is free.

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FINRA Announces Rule Book Delay, CCH Wall Street, October 29, 2007

FINRA

Practising Law Institute

FINRA (Financial Industry Regulatory Authority) is warning investors to look out for “pump-and-dump” scams focusing on energy stocks. FINRA says that these scams involve energy stocks that are thinly traded issues from companies that are not well known.

In the alert that it issued on October 23, FINRA says that the purpose of the scams is to increase a stock’s price using misleading or false statements that create a demand for a company’s shares. The people who “pumped” the stock then sell their shares when the stock price is high enough. Investors are then left with stock that are worthless.

In one scam, investors were encouraged to invest in a Texas energy company involved in a business deal with a $23 million Chinese oil monopoly. The backers of the scheme told investors that they would receive huge returns if they invested immediately.

Another scheme promised investors that a $5,000 could be converted into $26,500 within four months.

Pump-and-dump scammers are sending their pitches to investors via e-mail, text message, and cell phone. One fax promised an unrealistic and fast investment return. FINRA is urging investors to ignore e-mails and faxes that are unsolicited.

FINRA is also urging investors to be wary of offers that seem too good to be true. It also suggests that investors research any firm that they are considering investing in and get more information about the source that is soliciting investments.

The SEC is also cautioning investors to be wary of scams promoting gas and oil investments.

If you are the victim of a pump-and-dump scheme or any other kind of investment fraud scam, you should contact Shepherd Smith and Edwards right away. We are one of the country’s premier securities fraud law firms. We are committed to helping investors recover their lost investments. Contact us online to request your free consultation.

Related Web Resources:

FINRA Identifies Energy Stocks as Latest “Pump and Dump” Scheme, FINRA, October 23, 2007

Investors warned over pump-and-dump energy scams, Reuters, October 23, 2007

A recent study conducted by the Public Investors Arbitration Bar Association indicates that securities arbitrators frequently agree to erase past settlements that were paid to investors from brokers’ records. Removing brokers’ settlement payments from their histories could cause future investors to not find out about the brokers’ past misconduct.

The study reveals that 99% of the time, FINRA arbitrators are the ones who suggest expunging these records. Over 70% of these decisions were made without hearings, even though there are new rules in place that say that a record can only be expunged if the complaint is false, erroneous, or did not involve the broker that was accused.

FINRA disagrees with the study results and claims expungements have dropped dramatically since the new rules were put in place in 2004.

According to a number of securities litigation lawyers, FINRA officers, and regulators, arbitrators are not the only ones at fault. 93% of the time, the people filing complaints are small investors that agree to not contest an expungement as part of their settlements.

Melanie Senter Lubin, Maryland’s securities commissioner, says that most claimants are more focused on receiving compensation from brokers that they believe misled or defrauded them than they are about preserving the integrity of the brokers’ disclosure system.

The study examined 200 cases from 2006. In these cases, parties reached settlements based on the claims’ merits and without hearings. FINRA says that these cases are just a small percentage of the cases that were settled last year and that the study had been selective when citing statistics.

Public Investors Arbitration Bar Association President David B. Caruso says that the specific cases that were chosen for the study were the ones that regulators had expressed concern over because no arbitrators had been involved in the hearings. Caruso also said that even though investors wanting settlements could be held partially responsible for the expungements, it was up to arbitrators to figure out whether the settlements should be expunged from broker's records.

In one case, Karsner & Associates broker Joseph Karsner IV allegedly recommended that investors make investments that were not suitable but did not properly notify them of the risks. Karsner’s lawyer has denied the allegations. Settlements were reached between Karsner and the investors that complained. Arbitrators consented to 18 expungements for Karsner.

If you are an investors that has lost money because of the misconduct of a broker or a brokerage firm, Shepherd Smith and Edwards would like to offer you a free consultation. Our securities litigation lawyers are dedicated to helping investors that have been the victim of broker misconduct recover their losses. We have helped thousands of investors throughout the United States.

Contact Shepherd Smith and Edwards today.

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Brokers' Settlement Records Often Wiped Clean, Washington Post, September 25, 2007

Public Investors Arbitration Bar Association

FINRA

The National Association of Securities Dealers (NASD) recently absorbed the regulatory unit of the New York Stock Exchange (NYSE) and changed its name to the Financial Industry Regulatory Authority (FINRA). Yet nothing has really changed. The primary regulator of securities brokerage firms industry is run solely by … brokerage firms.

There are a number of industry associations which oversee that industry. Yet, no other has the power of the FINRA. The Securities and Exchange Commission (SEC) is charged with the responsibility of policing the securities industry. (The last SEC commissioner appointed by a Democrat left this week leaving only Republican appointees and the Director is a former Republican Congressman, but that is another story.)

In any event, the SEC, the nation’s securities police force, delegates to the securities industry the power to police itself. There is now only FINRA, the rent-a-cop group in charge of that duty. FINRA is run by seven directors. Almost unbelievably, all of the directors of FINRA are representatives of brokerage firms. None are “public” directors.

To make matters worse, FINRA – the brokerage industry - not only regulates itself, it also administers the only justice system available to investors, the single securities arbitration forum. When they open accounts, investors are almost always required to sign documents stating that they agree to arbitrate any dispute they have with the brokerage firm and/or its broker. Investors therefore can NOT file a case in court.

Thus, the same industry that solely decides whether its members have broken the rules is the same industry which runs its own “court” system if clients of that industry are defrauded, et cetera. The situation is made even worse when we learn that every contending candidate for President in both parties are getting major contributions from the securities industry.

In the securities industry the fox is not only in charge of the henhouse, the fox actually owns the henhouse. Oh, and I should add that those candidates, and others in both parties, all agree the requirements to prove securities fraud must be lowered (on everyone) so that foreign companies will list their securities here. If you are an investor … good luck!

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 might assist you with a claim contact us to arrange a free consultation with one of our attorneys.

Morgan Stanley says it will pay $12.5 million as part of a settlement to resolve charges that the company neglected to produce e-mails that had been lost during the September 11, 2001 terrorist attacks in New York.

The Financial Industry Regulatory Authority (FINRA) announced the settlement on Thursday. Morgan Stanley will pay $9.5 million to a fund designated for thousands of investors that have filed arbitration complaints. The remaining $3.5 million is a fine. The settlement also resolves charges that Morgan Stanley did not provide other documents required for certain arbitration cases.

Morgan Stanley will retain an independent consultant to make sure that retail brokerage clients in arbitration get specific materials that they need. By agreeing to the settlement, Morgan Stanley is not admitting to any wrongdoing.

In the past 5 years, Morgan Stanley has agreed to pay over $29 million related to withholding e-mails. The company’s e-mail servers were destroyed in New York on September 11, 2001. The World Trade Center was the headquarters for the company’s brokerage business.

Although millions of e-mails were thought lost, these e-mails had apparently been backed up on employees’ computers and other servers. In December 2006, the NASD filed a complaint against Morgan Stanley for issuing a false claim when it said it was not able to produce the e-mails.

In February 2006, Morgan Stanley said it would resolve SEC charges that the firm did not provide e-mails that were necessary for analyst research and initial public offerings by paying $15 million. Morgan Stanley and four other firms were each fined $1.6 million in December 2002 for destroying e-mails.

In 2005, a Florida state court jury told Morgan Stanley that it had to pay $1.58 billion to Ronald Perelman, a billionaire investor, because of a failed merger. E-mails that had gone missing had reappeared in this case, which resulted in the verdict. The award was thrown out, and Perelman is appealing.

FINRA says that until March 2005, Morgan Stanley had told regulators and arbitration claimants under false pretenses that the firms did not have any e-mails from before October 2001. Documents, however, show that Morgan Stanley did not look through its restored e-mails before March 2005. Until that time, Morgan Stanley had destroyed millions of e-mails by letting users delete them or overriding files.

Thousands of investors may have suffered financial losses because the e-mails were supposedly destroyed. It is not clear whether investors will want to revisit their cases.

If you are an investor that has lost money because of the fraudulent actions of a firm or individual in the securities industry, do not hesitate to contact Shepherd Smith and Edwards today. We have helped thousands of people like you recover financial losses through negotiation, arbitration, mediation, and litigation.

Morgan Stanley to Pay $12.5 Million in Compensation and Fines, Reuters, September 27, 2007

Related Resources:

Morgan Stanley

Arbitration Discovery Fund - Morgan Stanley & Co., FINRA

FINRA, SEC, and state regulators are saying that the “free lunch” investment seminars for senior citizens are actually high-pressure sales pitches, involving fraud and misleading claims about financial products that are not suitable for its elderly audience. A report of these findings will be issued to the public this week.

Alabama, California, North Carolina, Florida, Texas, Arizona and South Carolina are the U.S. states with the largest numbers of retirees. All seven states were included in the probe. The investigation took place from April 2006 to 2007 and concentrated on 110 investment firms and branch offices that held “free lunch” seminars for seniors.
The report blames investment firms for failing to properly supervise the employees that conducted the senior seminars.

The law states that sales pitches and materials at the seminars have to be approved by investment firm supervisors or brokerages. SEC Chairman Christopher Cox affirmed his agency’s commitment to stop anyone attempting to take advantage of senior investors.

Findings from the year long investigation included the following:

• “Free lunch” seminars were promoted as workshops or sessions where no products would be sold. However, sales presentations too place, and attendees were pressured to make investments or open accounts. Follow up sales calls were then conducted. The seminars took place at upscale locations, such as restaurants, hotels, and golf courses.

• More than half of the 110 firms and offices investigated seemed to provide weak supervision to the employees that were overseeing the seminars. Seminar materials were not reviewed properly.

• Misleading and exaggerated claims were heard at many of the seminars.
• Unsuitable recommendations were found at 23 of the inspections.

Senior investors make up 30% of fraud victims. Since 2005, the SEC has brought more than 40 cases involving senior fraud schemes. FINRA has also filed cases against employees and brokerage firms involved in senior investment scams.

FINRA is also investigating a number of other senior-related areas, including pitches persuading seniors to retire early and cash out their 401(K)’s, high-risk mortgage securities investments, collateralized mortgage obligations sales, and life settlements.

If you are a senior investor—or any kind of investor—that has lost money because you were the victim of an investment scam, contact Shepherd Smith and Edwards. You did not work your entire life to have your retirement pulled from under you. We have helped many investors get their money back.

Your first consultation with us is free. Contact Shepherd Smith and Edwards today.

Probe of Seminar for Seniors Finds Fraud, ABC News, September 10, 2007

Seniors — Beware of Investment Seminars No Free Lunches, SEC.gov