Archive for May, 2011

AG Edwards & Sons Pays $775,000 to Settle Improper Conduct Charges

May 11th, 2011
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In early May 2011 Robin Carnahan, Missouri’s Secretary of State, announced that A.G. Edwards & Sons LLC will pay $755,000 in order to settle charges that they improperly handled annuity sales. The investment firm, now a part of Wells Fargo Advisors, purportedly sold variable annuities to elderly customers sans proper documentation.

The State of Missouri Investigates AG Edwards
An investigation by the Securities Division of the State of Missouri into the conduct of AG Edwards began after a client reported “irregularities” following the liquidation of his variable annuity.

Upon investigation, it was discovered that the firm sold variable annuities to elderly investors without maintaining proper records of the transactions. Because proper documentation was lacking, the annuity sales were not in compliance with the company’s own policies and Missouri state law.

Investors Are Compensated
Approximately 31 investors were impacted by this lack of due diligence on the part of the brokerage firm. In compensation, AG Edwards will pay them $381,993. They will also pay for the costs of the investigation and contribute $375,000 to the Missouri State Investor Education and Protection Fund.

In an April 2011 press release, Carnahan said she appreciated AG Edwards’ willingness to cooperate with state officials. Moreover, she urged those who fear for the safety of their investments to seek help.

California Law Protects Elderly Investors
Did you know that California law requires brokers to provide compelling reasons for the exchange or sale of variable annuities belonging to clients 65 or over? If you feel that your variable annuities have been mishandled by a broker, contact Carlson Law.

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Posted in Broker Fraud, Fiduciary Duty Breach, Investment Fraud, Negligent Misrepresentation, Securities Fraud, Securities Law, Securities Litigation | Comments (2)

Improper Leveraged and Inverse ETF Trading Spells Big Financial Loss for Investors

May 9th, 2011

Recently, many investors have experienced significant financial loss in their securities accounts because of the inappropriate and improper trading of exchange traded funds (ETFs) by their stockbrokers.

A number of leveraged and inverse ETFs, including some funds by Direxion and Proshares, had risk associated that may not have been fully disclosed to some investors. Although these ETFs were built to seek out multiples of the exchange that they were created to track, many were also structured to reset daily. The result is radical disparities in their performance in the long term compared to the index that they were intended to follow.

Often, stockbrokers did not tell their clients about the extremely risky nature of holding these types of funds for any period of time, a risk that the Financial Industry Regulatory Agency (FINRA) clearly recognizes. In a June 2009 Regulatory Notice (09-31), FINRA underscored the high-risk character of these ETFs, asserting their unsuitability for many investors that intend to hold them for longer than one trading session, especially if the markets are volatile.

Have you incurred financial loss due to your broker’s advice on leveraged or inverse ETFs and/or the amount of time you were advised to hold those funds? Contact Carlson Law to discuss your potential claim with an experienced securities attorney today at 619-544-9300 or www.securities-fraud-attorney-san-diego.com

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Posted in Broker Fraud, Fiduciary Duty Breach, Investment Fraud, Negligent Misrepresentation, Securities Arbitration, Securities Fraud, Securities Law, Securities Litigation, Stock Fraud, Stock Loss | Comments (1)

Court to Freezes Assets of 20/20 Trading Co. Inc. & 20/20 Precious Metals Inc.

May 9th, 2011
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According to claims by the Commodity Futures Trading Commission (CFTC), 20/20 Precious Metals, Inc. and 20/20 Trading Company, Inc. have defrauded clients of approximately $4 million through commodity options fraud as well as other violations. Prompted by the CFTC’s charges, the U.S. District Court of California (Central District) has frozen the companies’ records and assets.

Sharief McDowell, Todd Krejci and Bharat Adatia have also been named as defendants. As agents of 20/20 Precious Metals, they allegedly unlawfully offered, entered and/or confirmed leveraged palladium and copper transactions. They also purportedly committed fraud through leveraged metals transactions as agents of 20/20 Trading.

Furthermore, the CFTC claims that for a period of three years, 20/20 Trading, Adatia and McDowell made fraudulent solicitations to prospective clients in order to buy and sell commodity options through the company. These clients were not made aware that the likelihood of profit from these options was slim to nil.

Clients of the companies lost almost 3.8M, 63 percent of which went to commissions for 20/20 Trading. Nearly 50 percent of clients who opened accounts with 20/20 Trading using IRAs lost more than $1.9M.

In 2009, after learning that the National Futures Association was investigating possible violations of NFA rules by 20/20 Trading, Adatia shut the company down and founded 20/20 Precious Metals. According to the NFA, Precious Metals pocketed more than $400,000 in commissions from the customer deposits of a little more than $1M.

If you believe that you were a victim of investment fraud or negligence as a client of 20/20 Trading Co. or 20/20 Precious Metals, contact Carlson Law at 619/544-9300. We may be able to recover some or all of your financial loss.

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If You Bought Desert Capital REIT, Contact Carlson Law Today

May 6th, 2011
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Desert Capital REIT, a non-traded realty investment trust founded in 2004, was created to fund short-term, high-interest rate mortgage loans. During the real estate boom, brokerage houses sometimes committed broker fraud by marketing these “hard money” loans as safe investments. Because they could earn as much as 13.4 percent interest, the REIT appealed to investors. But safe? In fact, these types of investments are illiquid and can be among the riskiest real estate investments you can make.

When the real estate market plummeted, investors were stunned by the annihilation of the REIT’s market value. Losses were hefty. In 2007, Desert Capital lost $21M. In 2009, it lost $11M. And it the third quarter of 2010, it lost a staggering $26M. By the time that the company announced the likelihood of its imminent liquidation, investors were left with virtually worthless non-dividend-paying, illiquid investments they couldn’t trade on any exchange.

The Securities and Exchange Commission (SEC) is currently investigating Desert Capital and its relationship with CM Capital and CM Securities, brokerage firms that not only shared Desert Capital CEO Todd Parriott, but also marketed the REIT.

Do you hold investments in Desert Capital?  Did you purcuase on the advice of CM Capital or CM Securities? If so, contact Carlson Law at 619-544-9300 for a free consultation. We may be able to help you recover your investment loss.

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House Republicans Seek to Rollback Investor Protection

May 6th, 2011
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House Republicans have begun legislation that would rollback pieces of the financial reform law known as Dodd-Frank. According to an Investment News article by Mark Schoeff (“Sen. Durbin Says Dodd-Frank Rollback Would Kneecap Regulators”), Assistant Majority Leader Dick Durbin intends to defeat or delay the legislation.

Hobbling Dodd-Frank means less investor protection against investment loss and securities fraud. Durbin, who chairs a Senate Appropriations Subcommittee on Financial Services and General Government, says it would also leave the U.S. vulnerable to another financial crisis.

In order to pay for implementation of Dodd-Frank, the U.S. Securities and Exchange Commission (SEC) received a funding increase of $74 million through September 2011—hardly enough to cover the costs. To compound the SEC’s funding predicament, the Republican House majority recently endorsed a $212 cut in the SEC’s budget for 2012.

Mary Schapiro, SEC Chairman, warned senators that such cuts would cripple the agency’s efforts to regulate financial organizations that pay more for their business’s technology operations than the SEC spends on its entire budget.

For Wall Street lobbyists and the firms that employ them, Republican efforts to derail Dodd-Frank and ax the SEC budget are good news. For American investors, it could mean another wave of investment loss.

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Is Your “Senior Specialist” a Con Artist?

May 6th, 2011

Elder abuse isn’t just physical and/or emotional. It can also be financial. If you’re an older American, protect yourself from financial loss by being aware of scams and scammers in your community.

Today, investment advisors who claim to be “senior specialists” can pose a threat to your security. Although some of these “specialists” have completed educational courses and exams, others have little or no training. Can they reduce your taxes just because you’re a senior citizen? Can they protect you from normal market risks? Or get you out of probate costs? The answer is no—on all three counts. As with most scams, if it sounds too good to be true, it probably is.

If you’re 55 or older, a so-called “senior specialist” may invite you to a free dinner and seminar. If you attend, be on your guard. You’ll probably be pressured to contact the presenter after the presentation. Very often seniors are advised to liquidate their portfolios and buy financial products from the “specialist,” who then receives a high commission. Unfortunately the products that are often sold, such as variable annuities and equity indexed annuities, have long holding periods and early withdrawal penalties, which can make them particularly unsuitable for older people.

If you’re approached by anyone claiming to be a “senior specialist,” check his or her credentials with your state securities regulator. The specialist may be an unregistered investment advisor. To learn how to contact the regulator where you live, go to http://www.nasaa.org/QuickLinks/ContactYourRegulator.cfm. To check a broker’s complaint and disciplinary record, visit “FINRA Broker Check” at http://www.finra.org/Investors/ToolsCalculators/BrokerCheck/.

If you think you’ve been the victim of investment fraud at the hands of a “senior specialist,” contact Carlson Law today at 619-544-9300. We may be able to help you recover your financial loss.

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FINRA Tells Morgan Keegan to Pay Up

May 6th, 2011

An arbitration panel of the Financial Industry Regulatory Authority (FINRA) has ordered the investment banking firm of Morgan Keegan to pay investors $881,000 in compensation for the financial loss clients sustained due to the company’s proprietary funds, which were concentrated in risky subprime mortgage assets.

 The firm, which is a subsidiary of Regions Financial Corporation, cost clients approximately $2 billion in these, as well as other, high-risk funds: RMK High Income, RMK Multi-Sector High Income, RMK Advantage Income, RMK Select Intermediate Bond and RMK Strategic Income Fund.

 Claimants alleged a variety of broker misbehaviors, including general negligence, negligent misrepresentation, negligent omission, breach of fiduciary duty and failure to supervise. They also claimed vicarious liability and breach of contract. They further maintained that Morgan Keegan violated not only FINRA rules but also the Securities and Exchange Act in its dealings with clients.

 The panel found Morgan Keegan liable on a number of the claims and ordered them to pay compensatory damages to Kathy and Palmer Albertine ($33,382), Jon Albright ($105,844), Sam and Susan Davis ($254,642) and Kendall and Peter Tashie ($458,625). FINRA also ordered the firm to pay $26,850 in arbitration forum fees, $28,500 in fees for the claimants’ expert witness and $600 in nonrefundable filing fees.

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Posted in Broker Fraud, Fiduciary Duty Breach, Investment Fraud, Negligent Misrepresentation, Securities Arbitration, Securities Fraud, Securities Law, Securities Litigation, Stock Fraud, Stock Loss | Comments (0)

Ameriprise Puts Securities America Up for Sale

May 6th, 2011

After filing its first quarter financials, the parent company of Securities America, Ameriprise, announced plans to sell the embattled firm. Securities America, which is in the process of negotiating settlement of a class action suit filed against it for investment fraud, allegedly sold clients hundreds of millions of fraudulent Medical Capital and Provident Royalties securities.

An April 25, 2011, article in Investment News (“Ameriprise Shopping Securities America”) describes Securities America as financially strong. A follow-up article on the 26th, however, puts that somewhat into question as it announced a whopping $115 million first quarter loss. Nevertheless, Ameriprise asserts that Securities America can operate without disruption thanks to its parent company’s sound financial backing.

Can Ameriprise find a buyer for Securities America? According to Ameriprise management, it’s in the process of “identifying” one now. The sale, it claims, would let the company “focus on growth opportunities” while Ameriprise focuses on “Ameriprise branded-advisor business.” The company also claims that the sale would not affect settlement of the current securities lawsuit.

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Senate Panel Chair Accuses Goldman Sachs CEO of Perjuring Himself before Congress

May 5th, 2011
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Should Lloyd Blenkfein, the CEO of Goldman Sachs, be brought up on perjury charges? U.S. Senator Carl Levin, head of the Senate panel investigating investment fraud, obviously thinks so. Furthermore, Levin doubts the veracity of other investment professionals who testified before Congress during the 2010 financial crisis.

In an April 2011 Bloomberg.com article titled “Goldman Sachs Misled Congress, Duped Clients, Levin Says,” the Senate Democrat is quoted as saying that the company “misled their clients.” And according to Levin, they “misled the Congress,” too, when Blankfein denied that Goldman Sachs pursued its own financial gain in clear disregard of its clients’ potential (and, as it turns out, actual) investment loss.

It its defense, Goldman Sachs claims that it did not hold an overwhelming net short position. Senate findings, however, contradict that assertion. In at least in one case, that of Hudson Mezzanine Funding 2006-1, the investment firm purportedly told clients that its financial interests were in keeping with theirs—despite the fact that it held 100 percent of the short side. Senior Republican Tom Coburn, who is also on the panel, called such breaches of fiduciary duty not only unethical, but also a threat to our country and its financial institutions.

In general, the Senate panel report points the finger at banks on Wall Street for the financial crisis of 2010. It particularly castigates investment banks like Deutsche Bank AG and Goldman Sachs for purportedly pushing CDOs that even their own traders thought unsound. Levin wants the SEC as well as the Justice Department to determine whether Goldman Sachs is guilty of securities fraud by not disclosing their financial gain if the CDOs they sold fell in value. The report also criticizes credit-rating agencies, Washington regulators and poor lending standards for their role in bank failures.

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Wells Fargo/Wachovia Respond to Broker Fraud Charges with Payouts to Investors

May 5th, 2011
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According to articles by analysts Liz Skinner (Investment News), Jean Eaglesham and Dan Fitzpatrick (Wall Street Journal), Wells Fargo & Co. has consented to dish out a whopping $11.2 million to investors. What’s the reasoning behind this generous payout? The financial giant is hoping to lay rest to charges by the Securities and Exchange Commission (SEC) that its Wachovia Capital Markets LLC affiliate engaged in investment fraud by price gouging customers.

According to SEC charges, Wachovia engaged in broker fraud when they fleeced investors by grossly overcharging them for collateralized debt obligations (CDOs). CDOs, which are mortgage-backed securities, were sold by Wachovia at a rate 70 percent higher than their own estimate of their mark-to-market value. Although several individuals were the victims of this flagrant swindle, the primary injured party was the Zuni Tribe of American Indians.

And Wells Fargo may not be the only culprit on Wall Street that dealt in overpriced CDOs. Wall Street investment firms have sold $1 trillion worth of CDOs. Were those sales examples of investment fraud, too? The SEC is looking into it by subpoenaing records from JP Morgan, UBS, Deutsch Bank and Citigroup—and arranging preemptive settlement discussions with suspect firms.

Recently, firms on Wall Street have been hard hit by SEC actions and lawsuits filed by securities fraud attorneys—and for good reason. Their promotion and sale of trillions of dollars in complex, illiquid securities backed by risky subprime mortgages was a major precipitating factor in the recent banking crisis.

At Carlson Law, we believe that these SEC investigations foreshadow future arbitration awards against firms that sold CDOs. For further questions and information, contact our securities fraud attorney in San Diego today.

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