December 22, 2011

Wells Fargo-Sponsored Survey Finds that Sense of Security About Retiring Doesn't Necessarily Come with Affluence

According to a recent Wells Fargo & Co-sponsored survey, 23% of the 800 Americans with at $100,000 in investable assets who participated reported that they don’t feel confident that they will have enough money saved by the time they retire. 75% said they felt sure that they would have enough. The ones most likely to feel confident are the ones with a written a financial plan, trust that the stock market will take care of their investments, are married, have at least $250,000 in investable assets, and/or are male. Those who felt unsure about their finances for when they retire included those who are single, female, belong to the 40-59 age group, and/or have under $250,000 in investable assets.

Some of the Other Findings from the Survey:
• 48% of those in the 25 to 49 age range want to keep working during their retirement years.
• More men (42%) than women (34%) wanted to keep working even after hitting retirement age.
• Approximately three-quarters of those that are currently working believe that having a specific amount of money matters more than what age they are when they retire.
• Women without a written financial plan and/or with investable assets of over $100,000 but under $250,000 are more likely to believe that they won’t have enough money when they retire regardless of what they do now.
• Nearly 2 in 5 Affluent Americans feel like they should significantly reduce their spending now to save up for retirement
• One-third of those surveyed worry that they won’t be able to leave their children an inheritance because their savings will have to go toward their retirement
• Four in 10 prefer to enjoy life now rather than worry: These people are usually already retired (54%), seniors belonging to 60-75 age group (51%), Democrats (47%), and parents with kids that are already legal adults (44%)
• Parents with kids under 18 (71%), adults belonging to the 40-49 age group (62%), women (65%), and seniors age 50-59 (64%) are the ones most likely to worry about what will happen when they retire.

Unfortunately, there appears to a nationwide rise in investment fraud targeting baby boomers, many who are just (or on the verge of) retiring. The Wall Street Journal reports that many of these older investors found themselves placing their money in high-risk bets to compensate for the losses they suffered during the recently financial crisis.

There are approximately 77 million baby boomers currently live in the US. Of the 3,475 enforcement actions involving fraud in 2010, 1,241 affected investors were 50 years of age or older. According to securities regulators, this number is expected to hit a record figure this year. Enforcement actions involved free-lunch seminars, variable annuities, or the misuse of professional credentials. Common types of senior investment fraud included Ponzi scams, self-directed IRA’s containing bogus investments in gold, real estate, and oil wells, and promissory notes.

Our elder financial fraud lawyers at Shepherd Smith Edwards and Kantas, LLP represent seniors throughout the US. We know the toll that losing your savings can take on you and your family.
Retirement Fears Jump the Wealth Gap to Strike Many Affluent Americans, Wells Fargo Retirement Study Finds, Wells Fargo, December 14, 2011

Boomers Wearing Bull's-Eyes, Wall Street Journal, December 14, 2011


More Blog Posts:
Well Fargo Advisers to Pay $2 Million to Settle Claims that Broker Sold Unsuitable Reverse Convertible Securities to Seniors, Stockbroker Fraud Blog, December 17, 2011

Texas Securities Fraud Over Sale of Allegedly Bogus Annuities to Elderly Seniors, Stockbroker Fraud Blog, December 14, 2011

LPL Financial Ordered to Pay $100K for Lack of Adequate Oversight that Resulted in Unsuitable Investments for Clients, Stockbroker Fraud Blog, November 29, 2011

Continue reading "Wells Fargo-Sponsored Survey Finds that Sense of Security About Retiring Doesn't Necessarily Come with Affluence" »

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Posted In: Financial Firms , Senior Investors , Wells Fargo

December 17, 2011

Well Fargo Advisers to Pay $2 Million to Settle Claims that Broker Sold Unsuitable Reverse Convertible Securities to Seniors

To settle Financial Industry Regulatory Authority securities fraud allegations against one of its brokers, Wells Fargo Advisers will pay a $2M fine, as well as repay an unspecified amount to elderly clients that were defrauded. Over 21 senior investors were reportedly targeted by Alfred Chi Chen, who sold them reverse convertible notes even though the majority of them were retired and/or had never invested in this type of complex instrument. A number of investors were in their 80’s and 90’s.

FINRA says that Chen made over $1M in commissions even as the investors sustained losses. He also is accused of not giving discounts on Unit Investment Trust (UIT) transactions even when clients were eligible. As part of its settlement, Wells Fargo will pay restitution to those that should have but did not get the discounts and those that were sold unsuitable investments.

FINRA Executive Vice President and Chief of Enforcement Brad Bennett said that Wells Fargo did not review the reverse convertible transactions to make sure that they were suitable and that investors were harmed as a result. The SRO also determined that Wells Fargo did not give certain clients that were eligible breakpoint and rollover and exchange discounts when they bought UITs because the financial firm’s procedures and systems were not sufficient to properly monitor unsuitable reverse convertibles and ensure that clients got the discounts for which they were eligible. (Discounts should be offered on UIT sales when purchases go beyond certain thresholds or involve termination or redemption proceeds from another UIT during the initial offering period.)

By agreeing to settle, Wells Fargo is not admitting to or denying FINRA’s allegations.

The SRO has filed a separate complaint against Chen, who allegedly exposed clients to risks that were not in line with their investment profiles. As of June 2008, 172 of the accounts he worked with held reverse convertibles. 148 accounts had concentrations over the 50% of their total holdings. 46 accounts had concentrations of over 90%.

Reverse Convertibles
These interest-bearing notes involve repayment of principal connected to an underlying asset’s performance. The specific terms of reverse convertibles may vary. An investor risks loss if the underlying asset’s value drops under a certain maturity level or during the reverse convertible’s term.

It is important for many elderly investors that their investments not expose them to too much risk. For an elderly senior to lose his/her life savings because a financial firm or broker behaved irresponsibly, committed securities fraud, or made an avoidable mistake is unacceptable.

Wells to pay $2M to settle claims broker sold unsuitable investments to seniors, Investment News, December 15, 2011

Wells Fargo Fined by Finra Selling Structured Notes to Aged, Bloomberg, December 15, 2011


More Blog Posts:
Broker-Dealers are Making Reverse Convertible Sales That are Harming Investors, Says SEC, Stockbroker Fraud Blog, July 28, 2011

RBC Wealth Management Unit Ferris Baker Watts to Pay Investors Restitution Over Reverse Convertible Notes Allegations, Says FINRA, Stockbroker Fraud Blog, October 23, 2010

Wells Fargo Settles for $148M Municipal Bond Bid-Rigging Charges Against Wachovia Bank, Institutional Investors Securities Blog, December 8, 2011

Continue reading "Well Fargo Advisers to Pay $2 Million to Settle Claims that Broker Sold Unsuitable Reverse Convertible Securities to Seniors" »

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Posted In: FINRA , Financial Firms , Reverse Convertibles , Senior Investors , Wells Fargo

December 14, 2011

Texas Securities Fraud Over Sale of Allegedly Bogus Annuities to Elderly Seniors

Two men are accused of Texas securities fraud involving the sale of bogus annuities to the elderly. The authorities arrested Leon Randy Sinclair III, a 53-year-old Houston man, on charges of theft by deception, misapplication of fiduciary property, and money laundering. Sinclair and his San Antonio-based business partner, Luther Pierce Hendon, allegedly transferred money from the investment policies into their own bank accounts.

Dozens of elderly persons were reportedly bilked out of their life savings while the two men allegedly stole millions of dollars. The elderly clients were sold charitable gift annuities that they thought would go toward their savings for the future. Unfortunately, per the criminal complaints filed against Hendon and Sinclair, the money they were investing actually went to the two men.

Annuities
An annuity is a contract with an insurance company that allows the participant to fulfill his/her long-term goals and retirement objectives. In exchange for either a number of payments or a lump-sum amount, the insurer starts paying you periodically either right away or sometime in the future.

Usually, an annuity offers tax-deferred earnings growth and a death benefit that will pay a designated beneficiary a specific minimum figure. Three kinds of annuities are:

Indexed Annuities: The insurer credits you with a return determined by changes in an index.

Fixed Annuities: The insurer agrees to pay you a minimum interest rate while your account grows. The insurance company also is to pay specific, periodic payments into your account.

Variable Annuities: You can opt to invest your payments in different kinds of investments. The Securities and Exchange Commission regulates this type of annuity.

Annuity Fraud
Annuity fraud occurs when the agent that is selling misrepresents/fails to disclose key facts about the investment.

Unfortunately, the elderly are among the favorite targets for many of those intentionally seeking to commit annuities fraud. This type of investment is very appealing to people wanting to retire early or who are in search of a fixed income. It is easy for an elderly investor to mistakenly think that this type of investment is safe when, in fact, certain kinds of annuities are incredibly risky.

According to MetLife Inc. in June, older Americans are bilked of $2.9 billion annually by relatives, businesses, and strangers. At Shepherd Smith Edwards and Kantas, LTD, LLP, our Houston stockbroker fraud lawyers work hard to help our clients that have been the victim of elder financial abuse recoup their losses.

We know how hard you’ve worked to save for your future, as well as provide some financial security for your family. Losing your retirement and/or life savings can take a devastating toll on a bilked investor. Serious emotional and health complications can result, in addition to the financial troubles that can arise. There may be a way to recoup your losses.

Houstonian accused of selling bogus annuities to elderly, Chron.com, December 14, 2011

Annuities, SEC.gov


More Blog Posts:
Texas Securities Fraud: Unregistered Adviser Confesses to Selling Almost $400K in Promissory Notes and Investments Despite Cease and Desist Order, Stockbroker Fraud Blog, December 5, 2011

Texas Securities Fraud: Raymond James Financial Services Pays Elderly Senior Investor About $1.8M Following Loss of Appeal, Stockbroker Fraud Blog, December 2, 2011

Former Texan and First Capital Savings and Loan To Pay $4.5M for Alleged Foreign Currency Ponzi Scheme, Stockbroker Fraud Blog, November 11, 2011

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

Posted In: Annuities , Annuities and Insurance , Senior Investors , Texas Securities Fraud , Variable Annuities

November 29, 2011

LPL Financial Ordered to Pay $100K for Lack of Adequate Oversight that Resulted in Unsuitable Investments for Clients

LPL Financial must pay $100K for its improper supervision of a broker. The Oregon Division of Financial and Corporate Securities, which fined the financial firm, reports that LPL Financial has put in place better oversight procedures since the violation was discovered. LPL Financial is a LPL Investment Holdings Inc. division.

According to the state’s securities division, Jack Kleck, an LPL Financial branch manager, sold risky gas and oil partnership-related investments to almost 36 residents. A lot of these clients were elderly seniors for whom these investments were unsuitable (considering their investment goals and age). Some even lacked the mental capacity to make such investment choices.

LPL Financial is accused of committing securities law violations, including not making sure that company procedures and policy were enforced and inadequately supervising Kleck, whose securities license was taken away in 2007. He was ordered to pay a $30,000 fine.

Among the steps that LPL has taken to set up better supervisory and compliance practices are having more employees focus on these responsibilities, improving branch office exams, and increasing the pre-sale evaluation of transactions.

Our securities fraud lawyers are talking to people who sustained losses because of Kleck or another LPL Financial representative. Contact Shepherd Smith Edwards and Kantas LLP today.

Unfortunately, elderly seniors and persons who are mentally impaired are easy targets for securities fraud. These investors may not fully understand what they are getting into and they can place their trust in the wrong registered representative. Often, the risks resulting from stockbroker fraud are too much for these clients, who may want to be conservative about their investment goals in order to ensure that they have enough money to support themselves. At this point in their lives, they cannot afford any huge losses.

It is the responsibility of financial firms to properly supervise their employees so that securities fraud doesn’t take place. They must also have the proper supervisory and compliance procedures in place so that employees can execute them.

Our senior investor fraud lawyers know how devastating it can be to find out the nest egg you’ve spent your whole life growing is now gone because someone made investments on your behalf that were inappropriate.

Examples of Financial Scams that Commonly Target Seniors:
• Investment scams
• Reverse mortgage schemes
• Ponzi scams
• Internet fraud

Ways to Avoid Financial Fraud:
• Don’t sign up right way. Take the time to think about the investment and whether it would benefit you.
• Do research on the broker and the financial firm to make they are legitimate. Have they been accused of securities fraud before?
• Consult with a family member or a friend about the investment.
• Make sure you know what you are getting involved in. If you don't understand any details, ask and make sure you get answers.

Oregon fines LPL Financial $100,000 for failing to properly supervise rural broker-dealer, Oregon Live, November 22, 2011

Shepherd Smith Edwards & Kantas Investigates Claims Against LPL Financial in Light of $100k Fine for Supervisory Oversight, Globe Newswire, November 30, 2011


More Blog Posts:
LPL Financial Management and Private Equity Backers TPG and Hellman & Friedman Could Make Over $450M from IPO, Stockbroker Fraud Blog, November 19, 2010

Linsco Private Ledger Clients File FINRA Arbitration Claims Accusing Former Financial Adviser Raymond Londo of Running Multi-Million Dollar Ponzi Scam, Stockbroker Fraud Blog, April 13, 2011

Wells Investment Securities Agrees to $300,000 Fine by FINRA for Alleged Use of Misleading Marketing Materials for REIT Offerings, Institutional Investor Securities Blog, November 23, 2011


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

Posted In: Financial Firms , Inadequate Supervision , LPL Financial , Securities Fraud , Senior Investors

November 15, 2011

AARP Offers Older Investors 5 Warning Signs for Avoiding the Next Major Ponzi Scam

The AARP has issued a fraud protection bulletin warning investors how to avoid becoming the victim of whoever happens to be peddling the next Ponzi scheme. Unfortunately, older investors are among the favorite prey of financial fraudsters. According Investor Protection Trusts CEO Don Blandin, one in five people in the 65 and over age group have already been exploited. Millions more are at risk.

To help investors, AARP has put out a description of five red flags warning of a possible financial scam:

1) The broker-adviser tells you that you wouldn’t be able to access your money during a “lock-up” period.

2) You feel pressure to invest now due to limited space or for some other reason. Give yourself time to do your own due diligence, make sure that the investment is legitimate, or seek the advice of others.

3) Sales pitches with a news hook. The North American Securities Administrators Association reports that in the last year alone, the leading financial frauds involved precious metal investments and distressed real estate, both involved topics that made headlines.

4) Investors that are being targeted belong to a group whose members may be possibly cognitively impaired, including elderly seniors that live alone (in particular, women).

5) Questionable marketing tactics, such as direct mail, telemarketing, and affinity pitches.

In the AARP’s bulletin, Louis Straney, a securities fraud expert who wrote the Investor’s Guide to Loss Recovery, says that it always a good idea to talk to a third party when considering an investment proposal. He also warns that just because the party making the proposal has a fancy office doesn’t mean that the investment is a legitimate one. He also recommends inquiring about an investment adviser’s qualifications and background.

According to a Special Report from InvestorProtection.org, financial abuse fraud is the 21st century crime. Sometimes the victims are part of a fraud scam targeting multiple seniors. On other occasions, incidents of financial abuse involve one particular target. One need only look at the case of socialite Brooke Astor. While she suffered from Alzheimer’s her son sought to steal her $187 million fortune. That said, one doesn’t have to be as rich as Astor to be targeted. Elderly seniors are defrauded of almost $3 billion a year and this doesn’t include the cases that go unreported.

Throughout the US, our stockbroker fraud lawyers represent elderly investors that have lost money because of broker or investment adviser misconduct. For many elderly people, the loss of their investments is the depletion of their live savings and the end to the security they sought to provide for themselves. Financial fraud of the elderly is a crime and it is also elder abuse.

There may be a way to recover your losses. Contact our stockbroker fraud law firm. Our AARP securities lawyers are dedicated to helping investors get their money back.

Fraud Protection: Avoid the Next Madoff, AARP, November 8, 2011

The Crime of the 21st Century, Investor Protection

Seniors, FBI


More Blog Posts:
Two Texas Men Sentenced For $100 Million Life Settlement Scam that Bilked Over 800 Investors, Stockbroker Fraud Blog, October 4, 2011

Elder Investors Suffering From Alzheimer’s Make Perfect Targets for Securities Fraud, Stockbroker Fraud Blog, September 8, 2011

Wedbush Securities Ordered by FINRA to Pay $2.8M in Senior Financial Fraud Case Over Variable Annuities, Stockbroker Fraud Blog, August 31, 2011

SEC Issues Emergency Order to Stop $26M “Green” Ponzi Scam, Institutional Investors Securities Blog, October 13, 2011

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

Posted In: Securities Fraud , Senior Investors

October 4, 2011

Two Texas Men Sentenced For $100 Million Life Settlement Scam that Bilked Over 800 Investors

Adley Abdulwahab and Christian Allmendinger, both principals of A&O Resource Management Ltd., must now serve decades prison for their involvement in a $100M life settlement scheme. Both defendants are from Houston, Texas. The Texas State Securities Board, the SEC, the IRS, the U.S. Postal Inspection Service, the FBI, and the Virginia Corporation Commission all investigated this life settlement scam. Over 800 investors in the US and Canada were defrauded

Allmendinger, who is vice-president and co-founder of A & O, was orderd to serve 45 years in prison, while Abdulwahab, who is part owner of A & O and a hedge fund manager is to serve 60 years. Both men were indicted on 18 counts. Also pleading guilty to the life settlement scheme was ex-A & O president David White and four others.

According to the US Justice Department, investors, who wanted conservative investments, were misled into thinking that investing in A & O was a no-risk, safe bet when in fact, it was a “sham.” Among the victims were hundreds of retirees who lost their savings because they invested in A & O. Almendinger and Abdulwahab used investors’ money to pay for expensive cars, luxury homes, and extravagant jewelry.

Abdulwahab and Allmendinger both marketed A & O life settlement investment products to investors. Per the court, the principals misrepresented A & O’s prior success to investors, while also exaggerating its size as a business. Abdulwahab also not only lied about his credentials but also did not disclose that he had pleaded guilty to a Texas felony charge of forgery of a commercial instrument.

When state regulators started looking into A & O’s financial instruments, the fraudsters made up a bogus sales transaction to “sell” the company to shell corporate entity Blue Dymond and Physician’s Trust, also a shell corporate entity. While the sale ended Allmendinger’s ties with the life settlement scam, Abdullah and his co-fraudsters still secretly controlled and continued the financial scheme until September 2009. The majority of the investors were seniors and most of them lost everything they’d invested. For many, this was their entire retirement.

It is unfortunate when an investor loses money because he/she was the victim of financial fraud. Recently, the North American Securities Administrators Association added securitized life settlement contracts on its list of practices and products that are a threat to investors. In many instances, schemes involve “worthless paper” that doesn’t keep up enough assets so that there is a guaranteed fixed return in a fixed time period.

Texas Fund Managers Sentenced Over Life-Settlement Scheme, The Wall Street Journal, September 28, 2011

Life settlements just one more potential scam in recent troubled times, San Diego Source, September 6, 2011

Principals Of A&O Entities Sentenced In Virginia For $100 Million Fraud Scheme, Justice.gov, September 28, 2011


Financial Scammers Are Now Using YouTube, Facebook, LinkedIn, Twitter, and Other Websites to Target Investors, Warns Texas Securities Commissioner, Stockbroker Fraud Blog, September 22, 2011

Ex-UBS Financial Adviser Pleads Guilty to Defrauding Private Fund Investors, Stockbroker Fraud Blog, July 13, 2011

AIG Trying to Get More Investors to Buy Life Settlements, Institutional Investors Securities Blog, April 26, 2011


Continue reading "Two Texas Men Sentenced For $100 Million Life Settlement Scam that Bilked Over 800 Investors" »

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

Posted In: Life Settlements , Senior Investors , Texas Securities Fraud

September 8, 2011

Elder Investors Suffering From Alzheimer’s Make Perfect Targets for Securities Fraud

According to MetLife Mature Market Institute, some 1 million seniors are victims of financial exploitation each year—that’s 1 out of every 5 elderly persons. Because the number of seniors in the 65 and over age group growing, the number of elder fraud victims is also expected to rise. Elderly persons suffering from Alzheimer’s are especially vulnerable to financial fraud.

Already, approximately 5.4 million people who have this mental disease. By 2050, that number is expected to hit 16 million. Alzheimer’s patients tend to experience memory loss, confusion, difficulty working with numbers or making plans, disorientation, problems with comprehension and processing, cognitive difficulties, forgetfulness, and loss of judgment---all symptoms that can make it easy for someone to take advantage of them. It doesn’t help that Alzheimer’s patients may have lost the ability to understand the risks that they are taking or how this may impact their financial future.

Financial advisors, caregivers, family, friends, and strangers are among those that have been known to commit elder financial fraud. Trusted professionals (financial professionals, lawyers, and fiduciary agents) are considered the largest perpetrator group. It is also important to note though that there are those financial advisers with no intention of taking advantage of an elderly investor that may not even realize that their client is suffering from Alzheimer’s and may not be able to make his/her decisions.

This, however, doesn’t mean that all financial advisers shouldn’t take the necessary precautions to make sure that a client is understands the types of investments he/she is making, this risks involved, and how this may impact his/her future. As a matter of fact, the Financial Industry Regulatory Authority and the Alzheimer’s Association have started working together to make sure that members of the financial industry know how deal investors who may be suffering from this disease.

More Key Findings from MMI and its study with the National Committee for the Prevention of Elder Abuse (NCPEA):

• Elder financial fraud results in more than $2.6 billion in losses year.
• “Typical” elder fraud victims are usually between the ages of 70-99, female, Caucasian, cognitively impaired, frail, and/or isolated/lonely.
• In addition to financial losses, elder fraud victims are prone to health problems, loss of independence, credit issues, and depression.
• Retirement funds and life savings make elderly seniors ideal targets for financial scammers.

Earlier this year, Rep. Joe Baca, D-Calif. introduced the Preventing Affinity Scams for Seniors Act of 2011. Under the new bill, financial institutions would have to train employees, offer special services for older clients, and report signs of possible elder financial fraud.

Related Web Resources:
$2.6 Billion in Financial Abuse of the Elderly, Alzheimer's Weekly

Met Life Study (PDF)

Broken Trust: Elders, Family & Finances, MetLife

Preventing Affinity Scams for Seniors Act of 2011


More Blog Posts:
Wedbush Securities Ordered by FINRA to Pay $2.8M in Senior Financial Fraud Case Over Variable Annuities, Stockbroker Fraud Blog, August 31, 2011

SEC Charges Filed in $22M Ponzi Scam that Targeted Florida Teachers and Retirees, Stockbroker Fraud Blog, August 29, 2011

Citigroup Global Markets Fined $500,000 by FINRA for Inadequate Supervision of Broker Accused of Bilking Sick and Elderly Investors, Stockbroker Fraud Blog, August 16, 2011

Continue reading "Elder Investors Suffering From Alzheimer’s Make Perfect Targets for Securities Fraud" »

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

Posted In: Senior Investors

August 31, 2011

Wedbush Securities Ordered by FINRA to Pay $2.8M in Senior Financial Fraud Case Over Variable Annuities

A FINRA arbitration panel has fined Wedbush Securities Incorporated, founder Edward Wedbush, and broker Debbie Michelle Saleh to pay $2,865,885 in damages. The victim of this securities case was Rick Cooper, an elderly investor. His securities claim alleged breach of fiduciary duty, fraud, negligent misrepresentation, failure to supervise, intentional misrepresentation and omissions, unauthorized transaction, unsuitable transactions, emotional abuse, elder abuse, and churning related to transactions of unspecified variable annuities.

Cooper’s securities fraud lawyers claim that Saleh sent him bogus monthly account statements, forged his signature, and conducted transactions that he hadn’t authorized, including the buying and selling of annuities and other financial products that were not suitable for him.

While Cooper’s account balances went down to one-third of $1.86 million, Saleh is accused of making money from fees and commissions that she charged him. The FINRA panel found that Saleh purposely misrepresented information about Cooper’s investments and she did make unauthorized transactions. The panel believes that Saleh of acting intentionally to defraud her clients. They said her actions either bordered on or actually were acts of “criminal misconduct.”

Of the $2.9 million, Saleh must pay $500,000 plus $1 million in punitive damages. Wedbush and its founder have to pay $500,000. Saleh, Wedbush, and Edward Wedbush also have to pay 10% annual interest on the damages, Cooper’s legal fees, and his other costs. Wedbush has to pay 100% of the arbitration forum fees, which is about $33,300. Two years ago, Saleh, who is no longer with Wedbush, has been permanently barred from the securities by FINRA.

Cooper is not the only person to file a securities claim against Saleh accusing her of misconduct. She is at the center of 4 investigations and 10 client complaints.

Wedbush has been named in at least 53 regulatory events and 52 arbitrations. Failure to supervise was a common complaint.


Failure to Supervise
Our securities fraud lawyers cannot stress how important it is for broker-dealers and investment advisers to properly supervise their brokers, advisers, other employees, and independent contractors. Not only must appropriate supervision take place, but also procedures of supervision have to be designed, implemented, and executed. Also, an employee assigned a supervisory role must complete specialized training to receiver a supervisor license from the National Association of Securities Dealers (NASD).

In the event that the broker engages in any type of misconduct or other wrongdoing, his/her supervisor and the financial firm can be held liable for allowing the alleged acts to take place—even if the employee that actually engaged in the wrongdoing isn’t found liable. You will want to work with a securities fraud law firm that knows how to prove that failure to supervise occurred.

FINRA Panel Orders Wedbush, Former Broker to Pay Investor $2.9M, OnWallStreet.com, August 31, 2011

FINRA Arbitrators Award Millions in Elder Abuse Case, Forbes, September 1, 2011


More Blog Posts:
FINRA Panel Orders Wedbush Securities to Pay $233,000 in Securities Fraud Damages, Stockbroker Fraud Blog, March 28, 2011

Wedbush Ordered By FINRA Panel To Pay $3.5M to Trader Over Withheld Compensation, Institutional Investor Securities Blog, July 16, 2011

SEC Charges Filed in $22M Ponzi Scam that Targeted Florida Teachers and Retirees, Stockbroker Fraud Blog, August 29, 2011

Continue reading "Wedbush Securities Ordered by FINRA to Pay $2.8M in Senior Financial Fraud Case Over Variable Annuities " »

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

Posted In: FINRA , Financial Firms , Senior Investors , Wedbush Securities

August 29, 2011

SEC Charges Filed in $22M Ponzi Scam that Targeted Florida Teachers and Retirees

The Securities and Exchange Commission has filed securities charges against James Davis Risher and Daniel Joseph Sebastian. The two men are accused of running a Ponzi scam that raised over $22 million from over 100 investors. Many of the victims were Florida retirees and teachers that entrusted the two men with their life savings.

Charges against Sebastian and Risher include two counts of fraud in the sale or offer of securities, unregistered securities sales, fraud related to the sale or purchase of securities, investment adviser fraud, and violations of aiding and abetting. This would include alleged violations of the Securities Act of 1933, the Investment Advisers Act of 1940, and the Securities Exchange Act of 1934.

According to the SEC, the two men ran a bogus private equity fund and lured people in by promising 14-124% investment gains. The fake account was called "The Preservation of Principal Fund." Investors fake bogus account statements claiming high returns. Also, money being brought in from new investors was used to pay the older investors. The names that Sebastian and Risher used to market the fund were Safe Harbor Private Equity Fund, Preservation of Principal Fund, and Managed Capital Fund.

From January 2007 through July 2010, Sebastian allegedly gave out materials to potential investors. $100,000 was the supposed minimum that one could invest. Even though only $3.8 million of the money they raised was actually invested, the two men allegedly paid themselves more than $16 million in bogus performance and management fees.

RIsher, who is accused of spending over $140,000 of the money on designer jewelry, cars, and artwork, allegedly told investors that he was experienced in wealth and asset management and trading equities when, in fact, he did not have this experience and had spent 11 years of the last two decades behind bars.

Meantime, Sebastian allegedly approached former customers that he worked with when he was an insurance broker. In addition to seniors and teachers, he also targeted church members, as well as investors outside Florida and in Canada.

The SEC is accusing the two men of making misrepresentations and omissions to clients about the fund’s investment strategy, returns, risks involved, audited financial statements, and Risher’s criminal past. Sebastian allegedly even told investors that they couldn't lose their principal investments and gave some of them written guarantees that any losses would be reimbursed.

The FBI, the IRS, the Florida Department of Law Enforcement, the US Postal Inspection Service, and the State of Florida Office of Financial Regulation all investigated this Florida financial scam. In the related criminal case, Risher has pleaded guilty to money laundering and mail fraud. He faces up to 50 years in prison. However, because he cooperated with federal authorities on this case, his punishment may not be so severe.

Risher also has prior criminal convictions for securities fraud, mail fraud, and money laundering. In 1990, he pleaded guilty to violating Georgia’s securities act, as well as multiple counts of theft.


Related Web Resources:
SEC Charges Two Florida Men in Ponzi Scheme Defrauding Teachers and Retirees, SEC, August 29, 2011

James Risher pleads guilty in $21 million Florida Ponzi scheme, WTSP, August 30, 2011

Two named in $22 mil. ponzi scheme case, News Chief, August 31, 2011


More Blog Posts:
Texas Securities Fraud: Ex-Triton Financial CEO Convicted of Ponzi Scam that Bilked Ex-Heisman Trophy Winner Ty Detmer, Other Former NFL Players, and Hundreds of Other Investors of of Millions, Stockbroker Fraud Blog, August 22, 2011

Even as Ponzi Schemers Serve Time Behind Bars, Investors Are Left Coping with Millions in Financial Losses, Stockbroker Fraud Blog, January 25, 2011

Madoff Trustee Files Securities Lawsuit Against Safra National Bank of New York Seeking to Recover Almost $111.7M for Ponzi Scam Investors, Stockbroker Fraud Blog, May 12, 2011

Continue reading "SEC Charges Filed in $22M Ponzi Scam that Targeted Florida Teachers and Retirees" »

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

Posted In: Ponzi Scams , Securities Fraud , Senior Investors

August 16, 2011

Citigroup Global Markets Fined $500,000 by FINRA for Inadequate Supervision of Broker Accused of Bilking Sick and Elderly Investors

Two months after a federal grand jury indicted Tamara Lanz Moon for misappropriating more than $800,000 in clients’ money, the Financial Industry Regulatory Authority (FINRA) has fined Citigroup Global Markets $500,000 for failing to properly supervise her. Moon is charged with six counts of mail fraud. The acts of broker misconduct allegedly took place between 2001 and 2008, when the 43-year-old broker was employed by Citigroup Global Markets as a registered sales assistant with Series 7 and 63 licenses.

Court documents report that Moon targeted at least 22 Citigroup clients who were sick, elderly, or for some reason couldn’t properly monitor their accounts. Her alleged victims included an elderly client suffering from Parkinson’s disease. Moon also allegedly forged signatures, changed account documents, opened accounts with deceased clients’ social security numbers, created bogus letters of authorization, revised customer addresses, and made unauthorized trades. She was fired in 2008 after Citigroup finally discovered her alleged misconduct. FINRA would go on to permanently barred her from the industry. Moon, who was arrested by the FBI following recent indictment, is out on bail.

According to FINRA, Citigroup failed to investigate or detect a number of “red flags” that should have let the financial firm know that Moon was improperly handing client funds. The SRO is also accusing FINRA of failing to put into place reasonable controls and systems related to the supervisory review of client accounts, which allowed Moon to falsify records, and neglecting to identify suspicious activity related to disbursements and transfers in the accounts that she was using to misappropriate clients’ money.

FINRA says that Moon was able to use Citigroup’s “lax supervisory practices” to bilk the financial firm’s “most vulnerable” clients. The SRO says that Citigroup could have and should have stopped her.

Among the warning signs that Citigroup is accused of not responding to:
• Address discrepancies in exception reports regarding an elderly widow whom Moon bilked of almost $80,000. When Moon explained to Citigroup that the inaccuracy occurred because the client had moved to Arizona, Citigroup accepted the reason she provided, which allowed her to keep misappropriating client money.

• Even after Citigroup was told that one customer had died, Moon was still able to create an account in that person’s name and that dead client’s widow. She then transferred money from the deceased client’s bogus account to the widow’s fraudulent account, wrote checks from the widow’s account, and transferred several thousand dollars to her personal account.

• Even though Moon set up a fraudulent account in her dad’s name, transferred $150,000 of a customer’s account into the bogus account, and took $90,000 of that money that she moved into one of her accounts, Citigroup didn’t detect her misconduct. FINRA says that this because Citigroup’s review of customer account records was deficient.

By agreeing to settle, Citigroup is not denying or admitting to the securities charges.

FINRA Fines Citigroup $500,000 for Failing to Supervise Sales Assistant Who Misappropriated Customer Funds, FINRA, August 9, 2011

Citigroup Global Markets Fined $500,000 in FINRA Failure to Supervise Case, Forbes, August 10, 2011

Citigroup Aide Stole From Widows, Father, Finra Says, Bloomberg, August 25, 2009


More Blog Posts:
Citigroup Global Markets Sales Assistant Accused of Stealing from Clients is Banned by FINRA from the Securities Industry, Stockbroker Fraud Blog, September 4, 2009

Texas Securities Fraud: Insurance Agent Could Get 100 Years Behind Bars for Using Fraudulent Annuities to Bilk Elderly Seniors of Over $5M, Stockbroker Fraud Blog, August 9, 2011

Citigroup Ordered by FINRA to Pay $54.1M to Two Investors Over Municipal Bond Fund Losses, Stockbroker Fraud Blog, April 13, 2011

Federal Judge to Approve Citigroup’s $75M Securities Settlement with SEC Over Bank’s Subprime Mortgage Debt Reporting to Investors, Stockbroker Fraud Blog, September 29, 2010

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Posted In: Citigroup , FINRA , Financial Firms , Securities Fraud , Senior Investors

August 9, 2011

Texas Securities Fraud: Insurance Agent Could Get 100 Years Behind Bars for Using Fraudulent Annuities to Bilk Elderly Seniors of Over $5M

A 76-year-old Amarillo insurance agent has pleaded guilty to 15 counts of Texas securities fraud over the sale of bogus investments and unregistered securities that resulted in over $5 million in losses for primarily elderly investors. The Texas State Securities Board won’t sentence John F. Langford until next month, but he faces up to 100 years in prison for running this Ponzi scam.

Meantime, Langford’s business partner, Jimmy Don King, has been indicted on 10 criminal counts, including selling securities despite not having a license, selling unregistered securities, and acting as an agent/dealer but without the appropriate registration. King was the voice and face of Langford & Associates’ commercials on TV and commercials guaranteeing “not to make you poor.” (Langford also did business as Langford Funding and Langford Investments.)

The two men came under suspicion after an elderly woman sued them for securities fraud. She said that they persuaded her to invest $941,756 in private annuities. Later, a court found that the woman who suffered from dementia had been incompetent and therefore wasn't fit to make a decision about whether investing in bogus annuities that weren’t going to be due until her 90’s—a decade from when she signed on—was a good decision to make.

Many investors gave Langford their life savings in exchange for the promise of windfalls over several years. While private annuities were supposed to pay out up to 8%, promissory notes were supposed to pay out 9%. Langford paid King 5% of the investments. Investors’ money were used to pay for principal payments to prior investors, interest, as well as Langford’s personal expenses.

According to state documents that were confiscated from his office, the insurance firm had a negative cash flow. Between 2005 and 2007 Langford's property business never made over $10,000. Documents showed that he owed investors over $1 million.

Because Langford filed for Chapter 7 bankruptcy protection two years ago, many investors have had to file their claims in bankruptcy court. Claims there have totaled approximately $7 million.

Investment Fraud Against Seniors
Unfortunately there are professionals out there determined to bilk investors of their life savings. Elderly seniors, who may not be as alert or as informed as younger investors, are a prime target of financial scammers wishing to make a quick buck without regard to how victims are impacted.

According to the American Association of Retired Persons, persons over the age of 50 are easy targets for financial abuse because they:

• Expect that they will be dealt with honestly
• Are less likely to act when defrauded
• Are not as familiar with their rights in regard to the marketplace
• May have certain health issues, such as Alzheimer’s and Dementia that can allow them to be more easily duped than other people

Our Texas stockbroker fraud lawyers have seen the devastation that can be wreaked on the lives of elderly investors who’ve watched their retirement money disappear because they trusted people who purposely scammed them. There may be a way to recoup your investment losses.


Related Web Resources:
Insurance agent to face 99 years in prison for selling phony annuities, Investment News, July 29, 2011

Langford signs confessions in fraud cases, Amarillo Globe-News, July 26, 2011

Elder Abuse: Financial Scams Against Seniors, Nolo

Fraud Target: Senior Citizens, FBI

For Seniors, SEC

American Association of Retired Persons (AARP)


More Blog Posts:
Accused Texas Ponzi Scammer May Have Defrauded Investors of $2M, Stockbroker Fraud Blog, August 3, 2011

Basketball Benefactor Accused of Texas Securities Fraud and Ponzi Scam that Targeted High-Profile Coaches Found Dead, Stockbroker Fraud Blog, July 19, 2011

Madoff Trustee Files Securities Lawsuit Against Safra National Bank of New York Seeking to Recover Almost $111.7M for Ponzi Scam Investors, Institutional Investors Securities Fraud, May 12, 2011


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Posted In: Ponzi Scams , Senior Investors , Texas Securities Fraud

March 26, 2011

Prison Term for Broker Accused of Investment Fraud Affirmed by 7th Circuit Even Though Sentence Exceeds Guidelines

The U.S. Court of Appeals for the Seventh Circuit has affirmed broker Scott Schlueter’s 48-month prison sentence even though it exceeds sentencing guidelines. Schlueter is accused of conducting an investment scam that resulted in over $300,000 in financial losses for investors, who also happened to be friends of his.

Schlueter has admitted that rather than placing investors’ money in no-risk investments, he kept the funds while paying out interest from time to time. He has pleaded guilty to securities fraud, wire fraud, and mail fraud.

Although sentencing guidelines call for 33 to 41 months behind bars, the district court judge sentenced Schlueter to 48 months. The judge contends that the serious impact of the rogue broker’s actions was not accounted for in the sentencing guideline range and that an above-range sentence was “more than adequate” considering that Schlueter not just bilked investors of money they needed during “critical stages of their lives,” but he also took advantage of his friendships with investors to defraud them.

For example, one 75-year-old man ended up having to go back to work. Another investor, a widow, had to get a second job after she lost her insurance money.

Schlueter, who argued that he should only sentenced for two year because he had a tough childhood and suffered from alcoholism, contested the above-range sentenced. The appeals court, however, turned down his request down and affirmed the four-year sentence.

Related Web Resources:
United States v. Schlueter, Leagle.com, March 10, 2011

7th Cir. Affirms Broker Sentence Even Though It Exceeds Guidelines, BNA, March 16, 2011


More Blog Posts:
Wall Street Targeting Older Investors With Structured Product Sales, Reports AARP, Stockbroker Fraud Blog, March 11, 2011

Increase of Structured Notes with Derivatives Sales Seduces Retirees, Reports Bloomberg, Stockbroker Fraud Blog, September 25, 2010

Combatting Elder Financial Fraud: SEC, NASAA, & FINRA Update Their Best Practices to Protect Senior Investor, Stockbroker Fraud Blog, August 29, 2010

Continue reading "Prison Term for Broker Accused of Investment Fraud Affirmed by 7th Circuit Even Though Sentence Exceeds Guidelines " »

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Posted In: Securities Fraud , Senior Investors

March 11, 2011

Wall Street Targeting Older Investors With Structured Product Sales, Reports AARP

Unfortunately, there are elderly investors who end up suffering financial losses because a broker placed their money in investments that are unsuitable for their needs. Many of these investors don't realize that they may have grounds for a securities fraud claim.

The AARP says that for many elderly Americans, the prospect of running out of money is scarier to them than the thought of dying—especially for those who are too old or sick to go back to work and rebuild their nest eggs. Although broker-dealers and investment advisers know how important it is for older investors to make sure that their money is placed in investments that are low risk, this isn’t always what happens, such as with structured products.

While highly profitable for sellers, structured products aren't always a great benefit to buyers who could stand to lose everything on an illiquid investment that has limited potential gain. Already, investors have lost about $164 billion in such risky investment. Yet structured product sales continue to grow.

This isn’t surprising considering that, according to securities arbitration consultant Louis Straney, sales commissions on structured products are at 3- to 10%. Last year alone, Wall Street sold $51.86 billion in structured products to US customers.

AARP says that for many investment banks and financial firms, older Americans are among their favorites as buyers for these loosely regulated instruments. Not only do many elderly investors have the money, but also, the pitch, “low risk to principal, and high yield,” is exactly what many retirees want. Unfortunately, many elderly investors may not fully understand exactly what they are investing in, opting instead to place their trust in brokers and financial advisers.

Losing one’s savings or retirement is no joke for the elderly, who now must worry about how to support themselves and pay for nursing and medical care. Also, financial worries can also take a physical and emotional toll on elderly victims.

Our securities fraud lawyers represent investors who have lost money because they were advised to place their funds in investments that were inappropriate for their needs and goals. We also work with senior financial fraud victims.

Related Web Resources:
How Safe Are Your Savings?, AARP, March/April 2011

Running Out of Money Worse Than Death, AARP, July 1, 2010

Fraud Target: Senior Citizens, FBI

Financial Planning for Seniors, ElderlyCare


More Blog Posts:
Increase of Structured Notes with Derivatives Sales Seduces Retirees, Reports Bloomberg, Stockbroker Fraud Blog, September 25, 2010

Structured Notes Becoming New “Investment Bubble” on Wall Street, says Institutional Risk Analytics Director, Stockbroker Fraud Blog, August 12, 2010

Brokers Renew Push for Investors to Buy Structured Products, Stockbroker Fraud Blog, June 12, 2009

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

Posted In: Senior Investors , Structured Products

October 23, 2010

RBC Wealth Management Unit Ferris Baker Watts to Pay Investors Restitution Over Reverse Convertible Notes Allegations, Says FINRA

The Financial Industry Regulatory Authority and the RBC Wealth Management-acquired Ferris, Baker Watts LLC have agreed to settle charges that the latter engaged in the unsuitable sales of reverse convertibles to elderly clients in the 85 and over group, well as in the inadequate supervision of such notes to retail customers. By agreeing to settle, the investment firm is not agreeing with or denying the allegations.

The alleged misconduct took place prior to RBC acquiring Ferris, Baker Watts. As part of the settlement, the brokerage firm will pay close to $190,000 in restitution to 57 account holders for financial losses related to their purchase of reverse convertibles.

FINRA says that between January 2006 and July 2008, Ferris, Baker Watts allegedly sold reverse convertible notes to about 2,000 retail investors while failing to properly supervise and guide its supervising managers and brokers on how to determine whether their recommendations of the notes were suitable for clients. The investment firm is also accused of not having a system in place that could effectively monitor, detect, and handle possible reverse convertible over-concentrations.

In its release announcing the settlement, FINRA cites one example involving Ferris, Baker Watts selling five reverse convertibles in the amount of $10,000 each to an 86-year-old retired social worker. These notes represented between 15% to 25% of her investment portfolio at different times. FINRA says that for another client, the investment firm sold five notes to a 20-year-old who was making under $25,000 a year. This investment was 51% of the client’s retirement account.

Related Web Resources:
FINRA Orders Ferris, Baker Watts to Pay Nearly $700,000 for Inappropriate Sales of Reverse Convertible Notes, FINRA, October 20, 2010


Finra fines RBC Wealth unit over brokers' sales of 'unsuitable' investments, Investment News, October 20, 2010

Continue reading "RBC Wealth Management Unit Ferris Baker Watts to Pay Investors Restitution Over Reverse Convertible Notes Allegations, Says FINRA " »

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Posted In: FINRA , Ferris, Baker Watts, Inc. , Financial Firms , RBC Capital Markets Corp. , Reverse Convertibles , Senior Investors

September 25, 2010

Increase of Structured Notes with Derivatives Sales Seduces Retirees, Reports Bloomberg

According to Bloomberg, the sale of structured notes (also known as principal protected notes, or PPN) that come with derivatives to thousands of individual investors has driven up their sale by 58% to $31.9 billion through August. Unfortunately, investors are often lured into making such purchases without fully comprehending the risks, and this can result in significant losses. This year, the US Securities and Exchange Commission’s enforcement division began a group concentrated on investigating structured products.

Banks create structured notes products by bundling privately negotiated over-the-counter derivatives with bonds. Because the Commodity Futures Modernization Act excludes most trades between institutions from oversight, banks can sell OTC derivatives to individuals as long as they are put together with bonds into hybrid securities. Individual investors, even though they lack the background and knowledge to fully understand the risks involved, are targeted for these notes to increase banks’ profit margins. Also, because structured notes aren’t standardized, brokers are paid more to sell structured notes than they are for selling some of the other financial products.

Structured notes have grown in popularity since the Federal Reserve has maintained its target rate for overnight loans between banks at 0% to .25%. With US interest rates close to 0%, investors are buying up the bonds. Reverse convertible notes has paid 13% interest on average in 2010.

Granted, investors can obtain higher returns if their bets work out, and principal-protected notes and some of the other products are not as risky as stocks because sellers guarantee that investors won’t suffer losses if the market falls. However, because there are variables outside the scope of interest rate movements, investors can lose money. Institutional Risk Analytics Managing Director Christopher Whalen has said that structured notes will likely become the next investment bubble.

Retirees Duped by Derivatives With Structured Notes Sale Surge, Bloomberg, September 22, 2010

Structured Notes Becoming New “Investment Bubble” on Wall Street, says Institutional Risk Analytics Director, Stockbrokerfraudblog.com, August 12, 2010

Shepherd Smith Edwards & Kantas LTD LLP Investigates Claims for Purchasers of Structured Notes, GlobalNewswire, August 11, 2010

Continue reading "Increase of Structured Notes with Derivatives Sales Seduces Retirees, Reports Bloomberg" »

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Posted In: Reverse Convertibles , Senior Investors , Structured Products

August 29, 2010

Combatting Elder Financial Fraud: SEC, NASAA, & FINRA Update Their Best Practices to Protect Senior Investors

The Financial Industry Regulatory Authority, the Securities and Exchange Commission, and the North American Securities Administrators Association have updated their 2008 report regarding financial firms’ best practices when serving elderly investors. The security regulators remain committed to making sure that seniors are given a “fair market” with responsible sales practices and suitable products. The 2008 report, called “Protecting Senior Investors: Compliance, Supervisory and Other Practices Used by Financial Services Firms in Serving Senior Investors,” gave investment firms steps they could take to improve their procedures and policies when working with senior clients.

The 2010 addendum concentrates on several categories, including:
• Effective communication.
• Better employee training regarding issues that specifically affect seniors.
• Establishing internal processes to deal with issues that arise.
• Surveillance, supervision, and compliance reviews that focus on seniors.
• Making sure investments offered to elderly investors are appropriate for them.

The SEC is also tackling regulatory measures related to financial products that target retirees and seniors. Last month, the SEC put out a staff report suggesting that Congress define life settlements as securities to make sure that investors receive protection under federal securities law. Also, in an attempt to enhance target date fund disclosures, the SEC recently proposed rule amendments.

Regulators report that there are nearly 40 million people in the US that belong to the age 65 and older age group. By 2050 that number is expected to hit 89 million.

It is important that the necessary steps are taken protect seniors from elder financial fraud. With their retirement funds, elderly seniors are at risk of becoming the target of securities fraud. As MetLife (MET) Mature Market Institute notes, elder financial abuse “has been called the ‘crime of the 21st century.” She noted for every dollar lost, the victims often suffer related financial losses resulting from health issues and stress.

Related Web Resources:
Protecting the Elderly From Financial Fraud, Minyanville, June 16, 2010

SEC, NASAA, FINRA Update Best Practices for Serving Seniors, Wealth Manager, August 13, 2010

Read the 2008 Report (PDF)

Continue reading "Combatting Elder Financial Fraud: SEC, NASAA, & FINRA Update Their Best Practices to Protect Senior Investors" »

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Posted In: FINRA , NASAA , SEC , Senior Investors

August 8, 2010

CIT Group Inc, Prudential Financial Inc., and GMAC Inc. Looked to Retirees for Debt Financing When They Lost Access to Credit Markets

As the credit markets started to close for over a dozen companies, including Prudential Financial, CIT Group, and GMAC Inc., the firms began to get their funding for debt financing from retirees—reports Bloomberg in an August 2009 article. For example, between December 2007 and 2008, CIT sold $827 million of debentures created specifically for individuals at a time when the credit market was experiencing “disruptions,” the global economy was falling apart, and the company’s credit ratings were experiencing downgrades. One analyst, David Hendler, says that the financial firms engaged in a “pump-and-dump scheme in a bear market” and that they chose to “offload risk” without having to field too many questions.

Although the retail bond market usually lets companies sell debt at lower yields than what institutional investors call for, the notes can trade at higher relative yields when a company starts to lose its fortune. There is also a lack of liquidity that occurs. This can make it hard for senior investors—especially if their savings are tied into the smaller issues. It didn’t help that late last year CIT, a 101-year-old commercial lender, filed for Chapter 11 bankruptcy after a US bailout and debt exchange offer failed and its funding dried up.

Also, while some debentures—specifically, CTI InterNotes—came with “survivor’s options” that lets an issuer repurchase them at par after the owner passes away, the Internote issuers are entitled to limit how much can be exercised each year through the option to the greater of 2% of the outstanding principal amount or $2 million. Ex-US Securities and Exchange Commission head Arthur Levitt has described this type of financing as an “affinity-type” approach that focuses on the elderly.

The Financial Industry Regulatory Authority has been investigating whether the risks were adequately disclosed to investors or whether securities fraud occurred.

Related Web Resources:
CIT Debt Sold to Widows Has Fine Print Pimco Resists, Bloomberg.com, August 21, 2009

CIT Files Its Bankruptcy Plan, The Wall Street Journal, November 3, 2009

Continue reading "CIT Group Inc, Prudential Financial Inc., and GMAC Inc. Looked to Retirees for Debt Financing When They Lost Access to Credit Markets" »

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Posted In: CIT Group , Commercial Lenders , GMAC , Prudential FInancial , Senior Investors

November 23, 2009

Fighting Senior Investment Fraud: Panel Calls for SEC, Labor Department, and Treasury Department to Work Together

Participants at an AARP/National Consumer League panel called on federal regulators from the US Labor Department, Treasury Department, and the Securities and Exchange Commission to work together when combating elder financial fraud.

North Carolina deputy securities administrator David Massey said not only must federal regulators from the different departments identify common interests and ways to work together, but also they must examine all regulatory gaps. He cited the fact that the 1996 National Securities Markets Improvement Act limits state regulatory authority over certain private offerings (Rule 506 offerings under Regulation D of the 1933 Securities Act).

Meantime, senior policy advisor Jeff Cruz encouraged the different federal arms to work together to combat fraud related to 401K retirement plans. He says that the recent change from benefit pension plans that were professionally managed to defined contribution plans is making retirees and seniors more vulnerable to financial fraud. He also recommended that the Department of Labor audit 401K plans.

Cruz and a number of senators have introduced two bills to protect older investors from fraud: S. 1661 and S. 906 have been called the 2009 Senior Investment Protection Act. The bills would require US states to adopt National Association of Insurance Commissioners and NASAA rules on senior certifications and professional designations use.

NASAA’s model rule has been adopted by 18 states. The NAIC rule has been adopted by 17 states.

Senior Financial Fraud
Protecting elderly investors from becoming the victim of financial fraud is extremely important. Our stockbroker fraud lawyers are committed to helping our senior investor clients recoup their losses.

Related Web Resources:
AARP

National Consumers League

State Securities Regulators Voice Strong Support For S. 906, the “Senior Investment Protection Act of 2009" target="_blank">/a>, NASAA, May 4, 2009

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Posted In: Senior Investors

November 9, 2009

SEC to Continue Fight Against Senior Investment Fraud in 2010

The Securities and Exchange Commission is stepping up its efforts to combat senior investment fraud. In 2010, the SEC plans to focus on issues related to retirement investments, including product development, disclosures, and marketing issues.

The need to better regulate the retirement products arena and actively take action against securities fraud that targets elderly people has increased now that some 55 million senior investors are involved in defined contribution plans. The SEC is currently taking a closer look at life settlements (also called viatical settlements) and target date funds.

Viatical settlements involve transactions made by chronically ill or older people who sell their life insurance policy benefits to investors. In turn, these investors pay the premiums and collect the payout upon the seller’s death. According to the Senate Special Committee on Aging, the life settlement industry has doubled in value in the last 3 years and will likely exceed $150 billion in a few decades.

At this time, the SEC has limited authority over life settlement securities, which fall under its purview when they are solid in capital markets but also are sold in private offerings. On October 22, SEC Chairperson Mary Shapiro spoke at an American Association of Retired Persons forum. She called the life settlement market one of “emerging interest” and said its products could become Wall Street’s “next big securitized products.” The SEC has established a task force to determine whether this area of the market is regulated enough.

Shapiro expressed concern that many seniors may not comprehend the consequences of selling their life insurance policies to investors. She noted that tax benefits and the ability to get life insurance later on can be lost.

Shapiro says the commission is looking at target date funds and a target date’s use in the fund’s name. Target date funds are vehicles for college savings and retirement plans that move toward more conservative holdings as a specific date approaches. The SEC is taking a closer look at marketing and advertising collaterals to figure out if investors are getting accurate information about these products. Shapiro noted that some target-date funds lost up to 40% of their value when the economy collapsed last year.

Related Web Resources:
Schapiro: Settlements Need Watching

AARP

SEC

Continue reading "SEC to Continue Fight Against Senior Investment Fraud in 2010" »

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Posted In: SEC Enforcement , Senior Investors , Viaticals

October 20, 2009

Elder Securities Fraud: FINRA Bars Former Broker From Industry

The Financial Industry Regulatory Authority has barred former broker Sergio M. Del Toro from the industry for allegedly defrauding an elderly investor, age 90, of over half a million dollars. Del Toro has agreed to the bar but is not admitting to or denying wrongdoing.

FINRA says that between 2004 and 2006, Del Toro recommended that the elderly investor, who died in 2006, invest $511,000 in 3rd Dimensions Inc, a speculative, development-stage company. FINRA is accusing Del Toro of promising to buy back at $400,000 the securities that the senior investor had bought for $351,000 if the latter was dissatisfied. The elderly client bought additional stock at Del Toro's suggestion. The former broker received about $76,650 in commissions.

FINRA claims that not only did the client pay $3-$4 for 3rd Dimension stock, which was not appropriate given the investor’s financial situation and age, but also, Del Toro allegedly did not have any reasonable grounds for valuing the stock at those prices when he sold them to his client.

FINRA claims Del Toro knew 3rd Dimension was making little if no revenue at the time and did not notify the two broker-dealers that he was registered with about his activities.

Elder Financial Fraud
Unfortunately, elderly senior investors can be easy prey for brokers that are willing to take advantage of them. It can be devastating to have your life savings (that you worked so hard for and hoped could cover your retirement or be passed on to your children and grandchildren) stolen from you by a financial professional.

Elder investment fraud is a crime. It is also a form of elder abuse when the victim is an older senior investor.

Related Web Resources:
FINRA Bars Former New York Broker for Defrauding Elderly Investor of More Than $500,000, FINRA, October 8, 2009

Elder Financial Abuse, National Committee for the Prevention of Elder Abuse


Continue reading "Elder Securities Fraud: FINRA Bars Former Broker From Industry " »

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

Posted In: Broker Fraud , Securities Fraud , Senior Investors

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