Archive for the ‘Stock Fraud’ Category

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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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)

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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Variable Annuity Exchanges & Replacements: Annuity Loss – Annuity Fraud – Did You Get Shafted by Your Broker?

May 11th, 2011

There is a continuing problem for investors relating to the improper sale or switching by investment advisors of variable annuities that can be annuity fraud and result is annuity losses. Many older investors have been counseled by their brokers to replace their old variable annuity contracts with new ones. In many cases it may be unsuitable and result in the creation of fees and commissions for the advisor, surrender charges for the investor and new long term non-liquid investment. Furthermore, adding insult to injury, in some cases advisors have neglected to exercise due diligence by assuring that the exchange of those annuities was tax free under Internal Revenue Code (Section 1035).

If done properly, exchanging variable annuities should be tax free.
In a tax-free 1035 exchange, the owner of a variable annuity replaces the current contract with a new contract. No tax is paid on the investment gains or income from the old variable annuity. If, however, an investor gives up his or her old annuity for cash and then uses that money to buy a new annuity, he or she will have to pay taxes on the old annuity.

Variable annuities can be fraught with hidden costs.
An additional problem with variable annuities is that exchanging and replacing them often results in surrender charges. Customers must pay these charges when annuities are surrendered before the end of their given surrender period. Usually, that’s six to eight years from the purchase date. Because surrender charges reduce the amount of money available for reinvestment in a new annuity, they also lower an investor’s potential return. And if that weren’t bad enough, the new replacement annuity has a new surrender period, so funds are ordinarily locked into place for another six to eight years.

In general, seniors shouldn’t invest in them.
Because of the risks, high fees and surrender charges associated with variable annuities, they’re poor financial choices for most investors over 65. In fact, California law requires that selling agents prove that an annuity replacement is of “substantial benefit” to their senior clients.

FINRA oversight of variable annuities is increasing.
The Financial Industry Regulatory Authority (FINRA) has recently implemented new rules regarding broker recommendations to purchase and exchange variable annuities, making variable annuities one of the few securities products with its own suitability requirements. These new rules require that brokerage firms put supervisory procedures into practice for the detection and prevention of “inappropriate exchanges.”

Should you contact a securities attorney?
If you’re an older investor whose financial advisor has advised to exchange or replace variable annuities, resulting in a loss in your annuity either fraom annuity fraud or simple negligence, call Carlson Law for a free consultation at 619-544-9300. Furthermore, if your broker failed to facilitate a tax-free 1035 exchange of variable annuities, contact our firm. Your broker may be liable for any or all fees, taxes and financial loss you incurred as a result.

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Posted in Fiduciary Duty Breach, Investment Fraud, Negligent Misrepresentation, Securities Arbitration, Securities Fraud, Securities Law, Securities Litigation, Stock Fraud, Stock Loss | Comments (4)

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

May 5th, 2011
Carl Levin

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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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MEDICAL CAPITAL INVESTOR AWARDED $400,000 BY FINRA ARBITRATOR

April 29th, 2011
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In 2010 Peak Securities, a brokerage house that promoted and sold Medical Capital securities, was found guilty of fraud, negligence, breach of contract, and breach of fiduciary duty by a Financial Industry Regulatory Authority (FINRA) mediator. In this award against brokers selling fraudulent Medical Capital investments, an investor who experienced financial loss due to Medical Capital securities received a $400,000.00 award.

 

Hundreds of investors who bought fraudulent Medical Capital notes through brokerage firms have filed arbitration claims against those firms.  And in our opinion, this judgment for a Medical Capital investor will be the first of many.

The SEC exposes Medical Capital fraud.

The heart of a 2010 Securities and Exchange Commission (SEC) complaint concerning investment fraud focused on Medical Capital.

Medical Capital professed to supply financial backing to providers of healthcare. According to company execs, they bought the accounts receivables of these providers and made loans to them. The accounts receivables were supposedly sold as notes to investors via private placements, also known as Regulation D offerings.

But it appears to have been a Ponzi scheme.

Medical Capital spent millions of investor dollars on administrative costs. Executives also spent millions on a Hollywood film, a yacht, and other extravagant items. And they failed to make interest and principal payments in a timely manner. They even pretended that no previous notes had been defaulted on.

But that’s not all.

According to the SEC receiver, hundreds of millions in medical receivables that had been packaged as Regulation D offerings were either overvalued or fictional. That’s right! Some had never even existed.

It’s been estimated that 20,000 investors bought $2.2 billion worth of Medical Capital notes, approximately $1 billion of which are in default. And that means massive losses for investors.

Comparable cases are pending.

In early 2010, another brokerage firm dealing in Medical Capital notes was sued, this time by the Massachusetts Securities Division of the Office of the Secretary of the Commonwealth. According to the lawsuit, Securities America, Inc. committed wide scale fraud–hundreds of millions of dollars worth of it—by marketing Medical Capital notes. The state alleges that the firm not only failed to perform with due diligence, but it also failed to disclose obvious risks to its investors, despite the urgings of its own president and a third party.

At Carlson Law, we believe that the arbitration award against Peak Securities foreshadows future arbitration awards against Securities America and the other brokerage firms that sold Medical Capital as well as other fraudulent and/or high-risk private placements such as Provident and DBSI.  For further questions and information, contact our securities fraud attorney in San Diego today.

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Trusting Your Financial Advisor – Do You Really Know Who is Handling Your Life Savings?

April 15th, 2011

There are over 210 possible different credentials available to financial advisors.  Very few of those credentials are regulated and some mean little or nothing.  It is important for every investor to do their homework and really get to know their financial advisor, their credentials, licensing and experience.  Simply because your advisor has many credentials or friends have recommended them is not enough.

While the CFP (Certified Financial Planner) and CFA (Certified Financial Advisor) designations require course work, exams and continuing education many certifications in the financial industry do not.   So what should an investor do in order to select a financial advisor? There are a number of things that can be done.

  1. Everyone can go and look up the record of the advisor they are considering using on the Financial Industry Regulatory Authority’s BrokerCheck service.  The BrokerCheck service will give you important information about the advisor you are considering; such as if that advisor has had prior complaints, been sued before, where he or she has worked in the past and for how long,  the reason they left a prior employer, in addition to information about licensing and credentials.
  2. Next, look at the information from state securities regulators at the North American Securities Administrators Association.
  3. Also, review the National Association of Insurance Commissioners website regarding the advisor you are considering using.

A good question to ask a prospective advisor regarding their credentials is what percentage of people who apply for the credential obtain it?  Also, feel free to ask about the qualifications of the instructors for the credential program touted.  As an investor interviewing a financial advisor, you should be careful if the advisor is put off or unable to answer such simple questions.

If you have already fallen victim to an unqualified investment advisor and suspect an incidence of investment fraud, please call the Carlson Law Firm at (619) 544-9300 or contact a San Diego securities fraud attorney today.

 

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