Archive for the ‘Broker Fraud’ Category

FAQs About Mutual Funds

May 13th, 2011

How do you buy mutual funds?
To purchases shares (portions) in a mutual fund, investors may go through stockbrokers, banks, insurance agents and other investment professionals. They can even buy portions from the fund directly.
When you buy shares, you pay the current net asset value (NAV) for each share. You also pay any sales charge (sales load).

Are mutual funds easy to sell?
Yes, any mutual fund will buy back your shares during regular business hours. Within seven days, you’ll receive the NAV for each share sold minus any sales load.

Are mutual funds a risk-free investment?
No. Just as individual stocks fluctuate in value, so does the portion price of mutual funds. Therefore, the value of your investment will sometimes be more, sometimes less than its original price.

How do you choose the mutual fund that’s right for you?
To determine if you should invest in a mutual fund, acquaint yourself with the major types that are available.

Mutual funds may be categorized by their asset types. Most are either bond funds, stock (equity) funds or money market funds. However, numerous variations exist within these three categories. In fact, some mutual funds combine several types of investments. An asset allocation fund, for instance, is a type of mutual fund that combines all three asset classes—funds, stocks and money markets. Some mutual funds, funds of funds, invest in other mutual funds rather than in individual securities.

Mutual funds may also be categorized according to the investment strategy that they follow. Funds that attempt to reduce tax liability, for example, are called tax-efficient funds. Some mutual funds are managed actively while others try to imitate an index.

Every mutual fund has its own rewards and risks. In general, the greater the potential return, the greater the risk of loss.

When you’re looking for a mutual fund, be sure to shop around, comparing mutual funds of the same type with each other. If you find a mutual fund that interests you, carefully examine its prospectus. Think about the goals, risks, and expenses involved in investing. Is the mutual fund’s aim in keeping with your own? Are the risks acceptable to you?

If you feel overwhelmed by your investment options, do what many other investors do: consult a financial expert. If you were advised to invest in funds that were higher risk than was explained to you by your financial advisor, you may have a claim to recover your losses. Contact Carlson Law for a free consultation.

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Before you Invest in a Mutual Fund, Learn the Basics. Fees, Costs and Undisclosed Risk Can Make Mutual Funds Unsuitable for Investors.

May 13th, 2011

Mutual Funds 101
Mutual funds are sold by companies that pool money (capital) from many investors. This capital is then invested in bonds, stocks and/or other securities. Investors in the fund all have shares, and these shares represent a part of the fund’s holdings.

If you’re interested in making an investment, a mutual fund may or may not be the right choice for you. Like all investments, they come with many different levels of risk. They aren’t insured or guaranteed by financial institutions or government agencies, even those sold by banks. However, because mutual funds are often a mix of various bonds and/or stocks, the risk is some mutual funds is “spread out” or diversified. That said, some mutual funds are not diversified, and it is important to understand that a mutual fund investment can be very high risk, or very low risk, depending upon the holdings and the goals of the fund. Each fund must be looked at individually to determine if it is appropriate for the investor, in the same manner as any individual stock or other investment.

Mutual funds are managed by professional fund managers. These managers invest the money investors contribute into individual stocks, bonds and other securities. And because mutual funds buy and sell securities in large amounts at one time, they usually incur fewer fees, thus operating in a cost-efficient manner. However, it is very important to carefully examine prior to purchase all of the fees and costs associated with the fund you are purchasing as they can vary greatly and take a significant bite out of your return.

If you feel your financial advisor placed you in inappropriate mutual fund investments and/or failed to disclose the fees and costs associated with investment or that the underlying holdings of the fund were beyond your tolerance for risk, you may have a case. Call Carlson Law at 858-544-9300 for a free consultation.

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Promoting Real Estate Loans to Fund Private Placement and Limited Partnership Investments

May 11th, 2011

Making financial investments with money from a loan on your home is generally a poor, high risk activity. And it’s a particularly poor idea when the investment is a private placement that’s speculative and unable to be liquidated easily or traded publically. Brokerage houses that encourage clients to take out extra mortgages or home equity loans in order to buy risky investments in limited partnership and private placements are often held liable for their customers’ financial loss.

In 2009, the Ameritas Investment Corporation was fined $100,000 by the Financial Industry Regulatory Authority (FINRA) for not supervising one of its brokers whose deceptive financial recommendations to customers included home refinancing to purchase securities. The broker was fined $60,000 by FINRA, and her license was suspended for five years.

If your broker encouraged you to take out real estate loans in order to invest in any private securities, limited partnerships or other investments, you should seek the advice of a securities attorney. Contact Carlson Law for a free consultation.

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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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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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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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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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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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