February 25, 2015

Morgan Stanley, DOJ Arrive at $2.6B Mortgage Bond Settlement

Morgan Stanley (MS) has reached an agreement in principal with the U.S. Department of Justice to resolve claims related to its sale of mortgage bonds. The government probe looked into allegations that the financial firm misrepresented the quality of home loans that were packaged into bonds.

The broker-dealer, however, still needs to negotiate with the DOJ about other terms, including what would be included in a signed statement of facts. The settlement doesn’t resolve probes by state litigators.

Morgan Stanley’s financial agreement is much smaller than what other firms have paid when settling with the Justice Department. Citigroup Inc. (C) paid $7 billion, J.P. Morgan Chase & Co. (JPM) paid $13 billion, and Bank of America Corp. (BAC) paid $16.65 billion.

According to The Wall Street Journal, Goldman Sachs Group (GS) is expected to be the next firm to settle with the government over mortgage bond claims. Earlier this week, that firm disclosed in a filing that the U .S. Attorney’s Office for the Eastern District of California sent notice that the government had “preliminarily” found that Goldman Sachs violated federal law pertaining to mortgage bond sales.

The bank said that it is estimating at least $2.5 billion in legal losses but that this doesn’t factor in future claims that may arise from future federal probes into misconduct over residential mortgage-backed securities (RMBSs).


U.S. Attorney General Eric holder recently said that federal prosecutors have 90-days to determine whether they can bring mortgage bond cases against individuals for parts they may have played in the 2008 financial crisis.

Earlier this month the DOJ, 19 states, and the District Columbia reached a $1.375 billion settlement with Standard & Poor’s Financial Services LLC and McGraw Hill Financial Inc. The agreement resolves claims that the credit rating agency schemed to bilk investors in Collateralized Debt Obligations (CDOs) and RMBS (S).

The RMBS lawsuits contend that investors suffered substantial losses because S & P put out inflated ratings that did not accurately reflect the true credit risks of the securities. The credit rater is also accused of falsely representing that it was putting out objective ratings that were not influenced by its business ties with the investment banks that issued the securities.

Unfortunately, many investor suffered substantial losses during the financial crisis. In many instances, financial firms are being blamed for putting their own interests before investors.

Contact our mortgage-backed securities lawyer if you suspect you were the victim of financial fraud.

Morgan Stanley to Pay $2.6 Billion to Settle Mortgage Cases, The Wall Street Journal, February 25, 2015


More Blog Posts:
Morgan Stanley to Pay a $280,000 Fine to CFTC for Records and Supervision Failures Involving SureInvestment and $35M Ponzi Scam, Stockbroker Fraud Blog, September 16, 2014

Morgan Stanley Must Pay Connecticut Regulators $5M for Supervisory Violations, Stockbroker Fraud Blog, June 18, 2014

US Probing Whether Morgan Stanley Data Breach Was Linked to Fired Financial Adviser, Institutional Investor Securities Blog, February 18, 2015


February 24, 2015

401K Fees in the Spotlight, With $62M Lockheed Settlement & Edison Class Action Case Before the Supreme Court

Lockheed Martin Corp. has agreed to pay $62 million to settle a lawsuit accusing its employee 401(k) retirement plan of charging excessive fees to participants. As part of the settlement, the defense company will take part in monthly assessments of its plan, offer participants low-cost funds, and get bids from at least three outside companies that know how to deal with administrative matters involving big company retirement plans.

There are 100,000 participants and $27 billion of assets in Lockheed’s retirement plan. The civil case accused the company of not acting wisely when managing the retirement savings of employees, charging high fund fees, keeping a significant quantity of participants’ savings in low-yield funds, and paying record-keeping fees that were excessive.

Lockheed denied the allegations. Even though it is settling, the company is not admitting wrongdoing.

The Employee Retirement Income Security Act states that companies that sponsor 401(k) plans have a fiduciary obligation to act in employees’ best interests. There are currently over a dozen settled or pending cases contending that certain U.S. companies have not. Allegations have included the failure to watch out for excessive fees, directing employee savings into investment products overseen by affiliate companies, and perferencing costly retail mutual funds over less expensive options.

This week, the U.S. Supreme Court heard arguments in Tibble v. Edison, a class action securities case also alleging excessive investment fees, this time charged to participants of Edison International’s 401(k) plan. The complaint claims that the company breached its duty to act in employees’ best interests over six fund options. Pricier mutual fund options were purportedly selected even though nearly identical funds that charged lower fees could have been picked instead.

Edison contends that based on ERISA’s statute of limitations, participants of a 401(k) plan may only sue over funds that have been in a plan for no more than six years. The company argued that it therefore should not be held liable for three of the funds at issue, which have been part of the 401(K) plan since 1999. The 401k excessive fees lawsuit was filed just eight years ago.

A district court and an appeals court sided with Edison. The plaintiffs appealed.

After listening to oral arguments, the Supreme Court justices suggested that they will make 401(k) plans monitor the investment options they offer on a periodic basis. They also indicated that they would revive claims contending that Edison’s 401(k) plan should have transferred investors from the three funds’ retail class shares into institutional class shares that were identical but came with lower fees.

Please contact our securities fraud lawyers today if you suspect you were the victim of financial fraud.


Lockheed Martin to pay $62 million to settle 401k lawsuit
, Fortune, February 20, 2015

Employee Retirement Income Security Act, Department of Labor

Supreme Court to hear case that could impact your 401(k) fees, CNN, February 24, 2015

More Blog Posts:
SEC Examines Whether Banks Are Complying With Capital Rules, Institutional Investor Securities Blog, February 20, 2015

DOJ Investigating UBS Over Losses Related To Firm’s V10 Enhanced FX Carry Strategy, Stockbroker Fraud Blog, February 17, 2015

EU Fines ICAP $17M for Helping Traders Manipulate Yen Libor, Institutional Investor Securities Blog, February 17, 2015

February 20, 2015

SEC Cases: Brothers-In-Law Charged in Louisiana Insider Trading Scam, NY-Based Broker-Dealer Accused of CDO Liquidation-Related Fraud, & Colorado Ponzi Scam is Halted

The Securities and Exchange Commission is charging former VP of The Shaw Group’s construction operations Scott Zeringue and his brother-in-law Jesse Roberts III with insider trading. Zeringue has already agreed to settle the regulator’s charges by consenting to pay disgorgement of ill-gotten gains plus a penalty.

The SEC says that the insider trading took place in 2012 when Zeringue, while working at The Shaw Group, became privy to confidential data about the company’s upcoming acquisition by Chicago Bridge & Iron Company. Prior to the announcement of the deal, he bought 125 shares of Shaw stock and asked Roberts to buy for him, too. Roberts went on to tip others and they collectively made close to $1 million in illicit profits.

Meantime, parallel criminal charges have been filed against Roberts. Zeringue has already pleaded guilty to the criminal charges against him.

In another SEC case, the regulator is charging VCAP Securities and its CEO Brett Thomas Graham with improperly arranging for a third party brokerage firm to secretly bid at certain auctions that they conducted for their affiliated investment adviser. The auctions were for liquidating collateralized debt obligations. The brokerage firm was supposed to help them acquire bonds to benefit certain funds.

However, engagement deals with CDO trustees did not allow VCAP and its affiliates to bid while also acting as auction liquidation agent. Because the brokerage firm had access to confidential data regarding bidding, Graham was able to make sure that the third-party firm won the bonds at prices just a little higher than what other bidders made. The affiliate investment adviser would then buy the bonds from the bidder right away.

The Commission said that Graham and the firm made material misrepresentations to the different CDO trustees. They also falsely represented that they would not bid in auctions or wrongly use confidential bidding data. Trustees were given documents that failed to disclose that the affiliate investment adviser was the winning bidder. As a result, the investment adviser was able to get 23 bonds. VCAP and Graham will pay close to $1.5 million to settle SEC charges.

In federal court, the SEC announced an emergency asset freeze and fraud charges against a Colorado-based Ponzi and pyramid scam that promised 700% returns. The scheme purportedly raised $3.8 milion from investors in less than a year.

According to the Commission, Kristine L. Johnson and Troy A. Barnes touted what they called a “3-D matrix “and “triple algorithm.” They got investors to purchase positions in Work With Troy Barnes Incorporated. Web promotions and internet videos were used to solicit participants.

The two reportedly claimed their program wasn’t a pyramid scam, yet the company did not have legitimate business operations. Instead, earlier investors were paid “returns,” which was really money from newer investors. Barnes and Johnson would take money out for their own spending.

SEC Order in the Colorado Ponzi Scam (PDF)

The SEC Order Alleging CDO-Liquidation-Related Fraud (PDF)

The SEC Complaint in the Louisiana Insider Trading Case (PDF)


More Blog Posts:

U.S. Bank National Association Must Pay $18M to Peregrine Customers, Says Court, Stockbroker Fraud Blog, February 18, 2015

DOJ Investigating UBS Over Losses Related To Firm’s V10 Enhanced FX Carry Strategy, Stockbroker Fraud Blog, February 17, 2015

US Probing Whether Morgan Stanley Data Breach Was Linked to Fired Financial Adviser, Institutional Investor Securities Blog, February 18, 2015

February 18, 2015

U.S. Bank National Association Must Pay $18M to Peregrine Customers, Says Court

A district court issued a Consent Order placing a permanent injunction against the U.S. Bank National Association and mandating that the bank return $18 million to customers of Peregrine Financial Group, Inc. customers.

US Bank has offices in Iowa where Peregrine, a non-bank, nonclearing FCM (Futures Commission Merchant), and its owner Russell Wasendorf were based. Peregrine was also The bank was the depository for the non-bank and it held an account for customer-segregated funds that Wasendorf accessed when bilking over 24,000 clients. Some $215M was misappropriated.

In July 2012, the Commodity Futures Trading Commission put out a civil action against Peregrine and Wasendorf. The latter has pled guilty to criminal charges and received a 50-year sentence. He also has to pay over $215M in restitution.

The CFTC’s action is related to the period of 6/08 through 7/12 when Wasendorf took out and moved about $36M from the US Bank account to entities and persons that were not customers of Peregrine. The U.S. bank received fees from the account.

Per the order, US banks cannot commit future violations of the Commodity Exchange Act and CFTC Regulations. They don’t let depository institutions hold, get rid of, or use money that belong to futures commission merchant customers as if the funds belonged to anyone else.

The $18 million will go to Peregrine’s trustee, who can then give the money back to the customers who were affected.

CFTC Enforcement Director Aitan Goelman noted that while it was Wasendorf who stole the money from customers of Peregrine, this does not exempt the bank from its own duty to keep the money of Peregrine customers safe.

Shepherd Smith Edwards and Kantas, LTD LLP is a securities fraud law firm.

Federal Court Orders U.S. Bank National Association to Pay $18 Million to Peregrine Customers, CFTC, February 4, 2015


More Blog Posts:
CFTC, FINRA, and SEC Fight Investor Fraud Together, Stockbroker Fraud Blog, December 5, 2014

Money Manager Paul Greenwood Gets 10 Years in Prison for $1.3B Investment Fraud, Institutional Investor Securities Blog, December 4, 2014

John Carris Investments Expelled by FINRA
, Stockbroker Fraud Blog, February 9, 2015

February 17, 2015

DOJ Investigating UBS Over Losses Related To Firm’s V10 Enhanced FX Carry Strategy

UBS Group AG (UBS) is under scrutiny over losses related to its V10 Enhanced FX Carry Strategy. The complex financial product was sold to fund managers, businesses, and individual investors and touted as a high-yielding foreign-exchange investment that employed computer algorithms to reduce risks during volatile times.

Unfortunately, according to Bloomberg, in 2010 during the start of the debt crisis, the index to which the notes were tied lost 26% over two years. Now, sources tell Bloomberg, the U.S. Department of Justice is looking at whether traders shortchanged investors by charging them too much for executing the currency trades for the strategy.

The V10 Enhanced FX Carry Strategy created sales commissions while offering an opportunity to profit from these sales and purchases of underlying currencies. Investors bought notes tied to the V10 index, which is calculated by ranking currencies from the Group of 10 nations daily according to one-month interest rates. UBS would then bet on the three highest-yielding currencies advancing and the three lowest declining. During a rise in volatility over a predetermined level, positions would be switched. Now, investigators with the DOJ are looking at instant messages, talking to traders, and examining documents issued to customers to figure out whether UBS represented how much profit it was taking on the trades.

One investor, Walter Michaelson, claims that UBS sold him the complex financial product that he never requested nor were ever properly explained to him. He said that he and UBS agreed that he would place a $1 million home-equity loan with another bank but that the paperwork was modified after he signed so that he got a business loan instead of a personal loan. This allowed UBS to take collateral assets the equivalent of five times more than his home’s value. He was required to pay back the loan by August 2010.

According to Michaelson’s complaint, the bank’s employees said the V10 notes would garner him yearly returns of 7-15% while keeping his capital preserved. When UBS contacted him to request that he invest more in V10, he found that his investment had gone up $70K. Michaelson decided to close his position and take the funds. That was when he discovered that he had lost $127,000.

Michaelson said that because of UBS-related dealings, including those involving V10, he lost $350K. Meantime, the bank says it will mount a vigorous defense against his claims. Also under scrutiny by the DOJ for a purportedly similar strategy is Barclays (BARC)

In November, UBS, JPMorgan Chase & Co. (JPM), HSBC Holdings (HSBC), Royal Bank of Scotland Plc (RBS), Bank of America Corp. (BAC), and Citigroup (C) settled with regulators for $4.43 billion for failing to stop traders from attempting to manipulate the foreign exchange market.

UBS Client Claims Losses on Currency Product Probed by US, Bloomberg, February 16, 2015

Regulators fine global banks $4.3 billion in currency investigation, Reuters, November 12, 2014


More Blog Posts:
Jury Says Ex-Envoy Involved in Stanford Ponzi Scam Must Pay $750K, Stockbroker Fraud Blog, February 16, 2015

EU Fines ICAP $17M for Helping Traders Manipulate Yen Libor, Institutional Investor Securities Blog, February 17, 2015

UBS Under Scrutiny in New Tax Evasion Probe, Institutional Investor Securities Blog, February 4, 2015

February 16, 2015

Jury Says Ex-Envoy Involved in Stanford Ponzi Scam Must Pay $750K

A federal jury has decided that ex-U.S. Ambassador to Ecuador Peter Romero would not be allowed to keep over $758K in expenses, fees, and interest he earned while lending his legal counsel and credibility to Allen Stanford. Instead, he will pay that sum to the court appointed receiver.

Stanford was convicted in 2012 of fraud and money laundering, perpetuating a global multibillion-dollar scam in the process. His Houston-based empire was shut down in 2009 when the U.S. Securities and Exchange Commission accused him of running his $7 billion Stanford Ponzi scam that bilked thousands of investors. The scheme involved the sale of CDs from his bank in Antigua.

Receiver Paul Janvey contends that Romero and certain other consultants did not ask the most basic questions about Stanford’s bogus banking empire. Romero was invited to serve on Stanford’s International Advisory Board after sitting next to him at an inaugural ball for President George W. Bush in 2001.

Romero received $1 million in fees for his role as consultant-fixer over issues involving business and politics in Central America. During testimony, he claimed that he had no idea Stanford was committing fraud and said that he too was deceived.

He is not the only one that Janvey is going after. Ex-Texas Lt. Governor Ben Barnes was purportedly paid $5 million, while ex-Houston Mayor Lee Brown was paid under $300K. Both will be allowed to keep all of the money if they can persuade a jury that their work with Stanford was conducted in good faith and that the services provided were the reasonable equivalent in value to how much they were paid.

Unfortunately it is investors who lose out when they become the victims of a Ponzi scam. Please contact Shepherd Smith Edwards and Kantas, LTD LLP today. Our Texas securities fraud lawyers are here to help investors recoup their losses.

Ex-envoy who aided Ponzi schemer Stanford must pay $758,000, Dallas jury decides, The Dallas Morning News, February 13, 2015

Former U.S. diplomat implicated in Stanford Ponzi scheme, CNBC, January 22, 2015

Texas jury rules U.S. ex-diplomat must repay over $700,000 in Ponzi scheme, Reuters,


More Blog Posts:
Ex-California Insurer Charged with Running $11M Ponzi Scam, Stockbroker Fraud Blog, December 8, 2014

SEC to Dismiss Lawsuit Against SIPC Over Payments to Stanford Ponzi Scam Victims, Stockbroker Fraud Blog, September 11, 2014

Madoff Ponzi Scam Victims Recover Over $10 Billion, Institutional Investor Securities Blog, December 5, 2014

February 14, 2015

SEC Cases: Insider Trading Charges Filed Against Georgia Resident, Mutual Fund Adviser Accused of Improper Asset Handling, & Two-Ex CFOs Agree to Give Back Bonuses Because of Accounting Fraud

Atlanta, GA Man Accused of Making $740,000 for Insider Trading
The Securities and Exchange Commission is filing charges against a Georgia man who is accused of insider trading and making about $740,000 in illicit profits. Charles L. Hill allegedly traded in Radiant Systems stock based on the confidential insider data a friend gave him about an upcoming tender offer to purchase the company. The friend was a friend of a Radiant Systems executive.

In 2011, Hill bought about 100,000 shares valued at close to $2.2 million on the final day of trading prior to the public announcement of the acquisition. That was his first time buying stock of Radiant Systems, and before that it had been years since he’d purchased equity securities.

Mutual Fund Adviser Settles SEC Case with $50K Penalty
In another SEC case, Walter Island Capital LLC will pay $50,000 as a penalty to resolve charges accusing the firm of improperly handling fund assets. The mutual fund adviser, which works with several alternative mutual funds, purportedly maintained millions of dollars of the funds’ cash collateral at brokerage firm counterparties instead of at a custodial bank.

The Commission said that an investment company that maintains securities in a qualified bank’s custody has to do the same with other cash assets. The SEC said that Walter Island Company failed to make sure that about $247 million in cash collateral was maintained at such a bank. The mutual fund adviser is settling without denying or admitting to the charges.

Two-Ex CFOs Return Stock Sale Profits, Bonuses In the Wake of Accounting Fraud
On Tuesday, the SEC announced that two ex-Saba Software CFOs have agreed to return close to $500K in stock sale profits and bonuses that they were given while the company was committing accounting fraud.

The William Slater and Peter E. Williams III are not charged with the company’s misconduct. However, the Sarbanes-Oxley Act requires that they reimburse the company for both the stock sale profits and bonuses.

From December 2008 to January 2012, Slater was CFO until October 2011, when Williams was in the position until January. During that time Saba Software overstated pre-tax earnings and issued material misstatements about revenue recognition practices. In 2014, the software company and two ex-executives were charged with accounting fraud involving falsified timesheets so that quarterly financial targets were hit. Slater made over $333K in stock sale profits and bonuses, while Williams made close to $142K.

Our securities fraud lawyers at Shepherd, Smith, Edwards, and Kantas, LTD LLP are here to help investors get their money back.

The Insider Trading Case against Hill (PDF)

The SEC Order Against Walter Island Capital
(PDF)

The SEC Order Against Slater, Williams (PDF)


More Blog Posts:
SEC Claims Investment Adviser Paid for Fraud Settlement With Client Monies, Stockbroker Fraud Blog, February 10, 2015

Sun Antonio Spurs Star Tim Duncan Files Texas Investment Adviser Fraud Case
, Stockbroker Fraud Case, January 31, 2015

Investment Adviser, Ameriprise Financial Services Sued by Hanson McClain Over Client Information, Institutional Investor Fraud Blog, January 12, 2015

February 13, 2015

Securities Fraud Cases: NY Hedge Fund Manager Bilks Investors of Over $800K, Maize Fund Scam Leads to Restitution, Madoff Ponzi Scheme Victims Get $355M, and Kentucky Scheme Ends with Probation, Compensation

SEC Says New York Hedge Fund Manager Stole From Investors
The U.S. Securities and Exchange Commission says that Moazzam Malik, a purported hedge fund manager in NYC, stole money from investors. Malik allegedly falsely claimed to be running a hedge fund holding about $100 million in assets under management. He is accused of touting high returns.

Malik raised over $840,000, but his fund, which didn’t make actual investments, never held over $90,177 in assets. Instead, he kept taking out money and spending the funds. He refused to give investors back their money, even pretending to be a fund employee and sending out an e-mail saying that he had passed away. Mailk purportedly kept soliciting investors even as he received redemption requests.


Maize Fund Investment Scam Leads to $6.7M Restitution
The U.S. Commodity Futures Trading Commission has gotten a federal court order demanding that Scott M. Ross and his Maze Asset Management LLC, Maize Capital Management, LLC and his Maize Capital Management LLC pay $5.4 million in restitution and a $1.3 million civil penalty for his Maize Fund investment scam. Ross is serving time behind bars for his involvement in two other financial scams.

Ross and his companies are accused of making false statements to prospective customers, putting out bogus account statements reflecting trading profits when there were none, mishandling client funds, and not properly registering as a Commodity Pool Operator with the CFTC. The regulator’s complaint charged Ross and the companies with violating core anti-fraud Commodity Exchange Act provisions related to their solicitation and managing of the Maize Fund, which is a pooled foreign exchange account.


Madoff Ponzi Scam Victims Get Back Another $355M
According to the Securities Investor Protection Corporation, about $355 million will be returned to the victims of the Bernard Madoff Ponzi scam. Along with a $497 million settlement reached with federal funds Primeo Fund and Herald Fund, some $10.5 billion has been recovered in the liquidation proceedings for the scheme that bilked inventors of billions of dollars.

This is Madoff trustee Irving Picard’s fifth distribution of recovered moneys to Madoff customers. He is in charge of the Securities Investor Protection Act liquidation of Bernard L. Madoff Securities LLC.

$1.3M Restitution in Kentucky Securities Fraud Case
The Department of Financial Institutions says that Pamela Jean Williams and Richard Dow Williams must pay over $1.3 million in securities fraud restitution to five victims. If they don't pay, then their sentences of one year and three years, respectively, would go from probation to time behind bars.

The Williamses were charged on multiple counts of selling unregistered securities, fraudulent securities practices, and omitting or misrepresenting material facts about a gas well investment. Each pleaded guilty to one consolidated fraud charge and has agreed to pay restitution.

Fraudulent Hedge Fund Manager Moazzam Malik Fakes Own Death, ValueWalk, February 16, 2015

Federal Court Orders Scott M. Ross and his Companies to Pay More than $6.7 Million in Restitution and a Civil Monetary Penalty for Defrauding Investors in His Commodity Pools, Mishandling Customer Funds, and Failing to Properly Register as a Commodity Pool Operator, CFTC, February 13, 2015

Madoff's Victims Are Repaid Another $355 Million, Trustee Says, NPR, February 9, 2015


More Blog Posts:
Sun Antonio Spurs Star Tim Duncan Files Texas Investment Adviser Fraud Case, Stockbroker Fraud Case, January 31, 2015

Standard & Poor’s Settles Inflated Ratings Case for $1.5 Billion, Institutional Investor Securities Blog, February 3, 2015

SEC Subjects Credit Rating Agencies, Asset-Backed Securities Issuers to Tighter Rules, Stockbroker Fraud Blog, August 28, 2014

Magoffin man, woman ordered to pay more than $1.3 Million in securities fraud case, Floydcountytimes, February 12, 2015

February 10, 2015

SEC Claims Investment Adviser Paid for Fraud Settlement With Client Monies

The U.S. Securities and Exchange Commission is accusing investment adviser Jacob Cooper and his Total Wealth Management firm of using client funds to pay for a settlement in a fraud case. Now, in the wake of the allegations, the RIA is facing new securities charges.

According to the regulator, Total Wealth Management found clients via a weekly radio show, of which Cooper was the host, and also through free lunches.The SEC contends that Cooper and his firm misused investor money and bilked clients via “administrative” fees that went unexplained. The fees ranged from $3,500 to $7,500/per account. The regulator says that to resolve an SEC administrative action from last year, the investment adviser allegedly borrowed $150K in client funds.

The action accused Cooper of pooling about 75% of clients’ $100 million in assets, placing them in a private fund, and then investing that in unaffiliated funds, which gave clients an undisclosed revenue-sharing fee. In its most recent complaint, the SEC said that Cooper also used investor money to cover the legal fees on a class action that clients brought. These clients were unable to end their relationship with the RIA or take out their money. Following the class action securities case, Cooper sent out an email notifying clients that because of this litigation, all of them would now have to contend with fee increases.

The SEC said that using client money to defend oneself in a case brought by one’s own customer investors is a conflict of interest. It wants to freeze Total Wealth Management’s assets and appoint a receiver. The regulator also wants to assess civil penalties against Cooper and his firm.

Our investment adviser fraud lawyers represent investors in getting their losses back.

SEC says RIA used client money to pay settlement, Investment News, February 5, 2015


More Blog Posts:
Sun Antonio Spurs Star Tim Duncan Files Texas Investment Adviser Fraud Case, Stockbroker Fraud Case, January 31, 2015

Investment Adviser Fraud Cases Lead to Civil Charges, Criminal Convictions, and Investor Losses, Stockbroker Fraud Blog, January 21, 2015

Hanson McClain Sues Investment Adviser, Ameriprise Financial Services Over Client Information, Institutional Investor Fraud Blog, January 12, 2015

February 9, 2015

John Carris Investments Expelled by FINRA

A FINRA panel has expelled John Carris Investments LLC, along with Chief Executive Officer George Carris from the securities industry. Bot are accused of suitability violations and fraud.

According to the panel, Carris and JCI were reckless when selling shares of stock and promissory notes. They purportedly left out material facts and used misleading statements. Both have been barred for manipulating Fibrocell’s stock price via the unfunded purchases of big stock blocks and engaging in trading that was pre-arranged through matched limit orders.

The FINRA panel said that JCI and Carris acted fraudulently when they did not reveal the poor financial state of parent company Invictus Capital yet sold the latter’s stock and notes. Material facts were purportedly left out of offering documents. Rather than shutting down operations when it ran out of net capital compliance, JCI kept selling Bridge Offering notes to investors and using money from the sales to remedy its net cap deficiency, all the while not telling customers that was were the money went. Offering sales were also used by Carris to cover his personal spending.

Carris and his firm are accused of keeping inaccurate records and books, not remitting payroll taxes for employees, failing to put into place anti-money laundering procedures and policies, and not setting up and enforcing a reasonable supervisory system.

Registered representative Andrew Tkatchenko was suspended for two years for recommending the stock and promissory notes without having reasonable grounds. Jason Barter, the head trader, received an 18-month suspension for his involvement. Both also must pay fines.

Contact our FINRA arbitration fraud lawyers today.

FINRA Hearing Panel Expels John Carris Investments and Bars CEO George Carris for Fraud, FINRA, January 14, 2015


More Blog Posts:
Oppenheimer to Pay $20M Settlement to the SEC and FinCEN Over Penny Stock Violations, Stockbroker Fraud Blog, January 28, 2015

Libor Manipulation Cases Get the Green Light from U.S. Courts, Institutional Investor Securities Blog, January 30, 2015

PFS Investments, Ex-Broker Under Investigation for Securities Fraud that Bilked At Least Twenty Customers, Stockbroker Fraud Blog, January 30, 2015

February 7, 2015

UBS Financial Puerto Rico’s Chairman Told Brokers to Sell More Bond Funds in 2011

Reuters is reporting that in 2011, before the prices of UBS Financial Services Inc. of Puerto Rico’s (UBS) proprietary bond funds dropped, the firm’s chairman, Miguel Ferrer, told brokers to either start selling more UBS Puerto Rico bond funds or find a new job. He spoke after the brokerage firm’s representatives began to express reservations about selling the bond funds to their customers because of, among other issues, the high risks that were involved.

According to Reuters, sources in the know said that when UBS asked their brokers about their reluctance to sell the funds, they gave Mr. Ferrer and UBS nearly two dozen reasons, including concerns with low liquidity, excessive leverage, instability, oversupply, and because of the concentration of Puerto Rican government debt, which UBS had underwritten.

UBS has come under fire not just for pushing its own funds to clients for whom they were not appropriate, but also for improperly directing some of them to borrow money from another UBS unit to purchase more fund shares. The Federal Bureau of Investigation, along with the Securities and Exchange Commission, are reportedly looking into the allegations.

Since the fall of 2013, a number of the funds have lost half to almost two-thirds of their value. Hundreds of investors have come forward to file Puerto Rico municipal bond fraud claims against UBS Puerto Rico, seeking to get their money back.

Ferrer’s comments pushing the funds was recorded and you can hear some of what he said by clicking on the link from Reuters below. The audio of Ferrer speaking could benefit investors with securities arbitration claims. Those investors are reportedly already seeking over $900M in damages.

When asked to confirm the recording’s authenticity, UBS would not. Ferrer, however, said he would provide a translation through his attorneys (seemingly confirming it is him on the tapes) and that he reminded the financial advisers during and after the meeting that it was their responsibility to recommend only the financial instruments that were suitable for each customer.

Claimants say that UBS Puerto Rico marketed the Puerto Rico bond funds as providing tax benefits and garnering high yields but failed to notify investors about the significant risks. Investors are also accusing the firm of placing its financial interests first by guiding customers to funds with UBS-underwritten bonds. Many of these investors were retirees.

Meantime, the firm maintains that it thought the funds were solid investments that would benefit investors. However, that has not proven to be the case for many. For example, Mabel Ladicani, 88, and her daughter are among the claimants. The two of them said that without their request, UBS moved their money into debt funds that were higher risk than where they were previously invested. Shortly after the move, these risky investments financially devastated Mrs. Ladicani and her daughter.

In Puerto Rico and the United States, the law firm of Shepherd, Smith, Edwards & Kantas is representing investors in Puerto Rico bond and bond fund cases with claims against UBS Puerto Rico and other financial firms that inappropriately sold the products to customers. Contact Shepherd Smith Edwards and Kantas, LTD LLP today for a free, no obligation consultation.


Recording shows how UBS drove reluctant brokers to sell high-risk Puerto Rico funds, Reuters, February 6, 2015

An Audio of Ferrer's Recording, mp4/Reuters


More Blog Posts:
Beneficiaries of Puerto Rico Trust File Securities Fraud Lawsuit Seeking Over $4.5M From UBS Financial Services, Stockbroker Fraud Blog, January 5, 2015

UBS Settles SEC Dark Pool Case for $14M, Stockbroker Fraud Blog, January 16, 2015

UBS Under Scrutiny in New Tax Evasion Probe, Institutional Investor Securities Blog, February 4, 2015

February 6, 2015

U.S. Department of Labor’s Fiduciary Rule for Retirement Advisers Hits Another Snag

Just as the Department of Labor appeared poised to push out its proposal to impose a fiduciary standard on retirement advisers, financial industry members have once more stepped forward to try to implement certain changes.

Last month, financial industry trade groups met with White House aide Valerie Jarrett to express their worries. The groups are concerned that certain restrictions will limit how much compensation brokers that sell investments for IRAs would be able to get for their services. They believe that this will stop representatives from dealing with investors who have middle-range incomes.

Meantime, the DOL contends that the proposed rules are needed to protect retirees and workers from getting advice that may be tainted by conflicts of interest. For example, a broker might be tempted to sell a retirement investment product that comes with a high-fee, which could hurt a client’s savings.

The DOL had withdrawn its original version of the proposed rule in 2011. Now, the Obama Administration seems ready to back what would be the re-proposed version.

A memo leaked from the head of Obama’s Council of Economic Advisers indicates this support. It claims that excessive trading and expensive investments could cost investors anywhere from $8B to $17 billion annually.

Once the DOL sends the proposal to the Office of Management and Budget for examination, that office will have up three months to determine the regulatory impact. If OMB approves the proposal then the Labor department would put it out for the public to issue comment.

Financial industry players want the DOL to work with the SEC on any making of fiduciary rules.

Investors often depend on their retirement funds at a time in their lives when they no longer have a regular source of income. To sustain losses, especially because of excessive fees, can be costly both financially and emotionally, affecting not just an investor’s quality of living but also his/her ability to get medical and nursing care when older. At Shepherd Smith Edwards and Kantas, our retirement adviser fraud lawyers are here to help investors recoup their losses.

DOL fiduciary rule stalls again as brokerage industry makes last-minute push against it, Investment News, February 6, 2015

Definition of the Term “Fiduciary” Proposed Rule, United States Department of Labor


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Sun Antonio Spurs Star Tim Duncan Files Texas Investment Adviser Fraud Case, Stockbroker Fraud Blog, January 31, 2015

Investment Adviser Fraud Cases Lead to Civil Charges, Criminal Convictions, and Investor Losses, Stockbroker Fraud Blog, January 21, 2015

Hanson McClain Sues Investment Adviser, Ameriprise Financial Services Over Client Information, Institutional Investor Securities Blog, January 12, 2015