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High net-worth investors will enjoy lower fees—that is, if the Securities and Exchange Commission’s (SEC’s) proposed changes to performance based fees proceed as planned.
The SEC intends to increase the dollar thresholds investors must meet before financial professional can charge them performance based fees. Currently, the thresholds are determined under two provisos of Rule 205-3 of the Investment Advisers Act: (1) brokers must have a reasonable belief that the client has a net worth of more than $1.5M, or (2) they must manage a minimum of $750,000 worth of investments for the client.
According to investment recovery lawyer Daniel Carlson of Carlson Law Firm, APC the current Act contains inherent risks for the average investor because it could encourage brokers to take big risks in order to make bigger fees: “If a high-risk investment fails, brokers don’t experience the financial consequences personally, but investors, particularly retirees, can end up losing everything.”
The SEC says it will issue an order revising the test for allowing performance fees to (1) a reasonable belief that the investor has $2 million in net worth or (2) $1 million of assets under management. In addition, the SEC order will exclude an investors primary residence from consideration in the 2 million dollars net worth evaluation, add a method for factoring inflation into the dollar amount tests.
If you are a high net-worth investor and have been exposed to unsuitable risk, you may have a claim for recovery of your losses. Contact Carlson Law at 619-544-9300 for a free consultation.
Tags: 1940 Investment Advisers Act, accredited investor, Broker, broker fees, Dodd-Frank, Fee, financial loss, high-risk investment, Investing, Investment, investment recovery lawyer, Investor, Securities Fraud Attorney San Diego, U.S. Securities and Exchange Commission
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According to a June 6, 2011 article by James Vicini for Reuters (“Halliburton securities fraud lawsuit reinstated”) the U.S. Supreme Court has reinstated a securities fraud class-action lawsuit filed against Halliburton in 2001 by pension and mutual fund investors on behalf of all buyers of Halliburton stock between June 1999 and December 2001.
Claimants in the case charge that Halliburton fraudulently overstated its engineering and construction revenues as well as the positive impact its merger with Dresser Industries would have on the company. At the same time, claimants allege, Halliburton misled investors regarding the company’s liabilities due to asbestos.
Because of these misrepresentations, claimants argue, Halliburton stock was artificially inflated and, when the company revealed the true state of its affairs, its stock fell dramatically, causing financial loss to investors.
The lawsuit had formerly been thrown out of court by a Texas federal judge who ruled that evidence of loss causation, a link between the claimants’ losses and the company’s actions, was insufficient. And an appeals court upheld that decision.
Their rulings created confusion among appeals courts regarding the necessity of claimants to prove loss causation early in the litigation process.
The Supreme Court disagreed with the judge and the appeals court, ruling that stock fraud plaintiffs do not have to prove loss causation simply in order to pursue a class-action lawsuit. That’s good news not only for claimants in the Erica P. John Fund v. Halliburton case, but also for injured investors throughout the nation who’ve had their suits quickly dismissed due to insufficient initial proof of loss causation.
Tags: Class action, class action securities fraud, financial loss, Halliburton, Lawsuit, loss causation, Reuters, Securities Fraud, Stock Fraud, Supreme Court of the United States
Posted in Fiduciary Duty Breach, Investment Fraud, Negligent Misrepresentation, Securities Fraud, Securities Law, Securities Litigation, Stock Loss | Comments (1)
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Often, investment advisors, stockbrokers and brokerages who unsuitably push Reg. D Private Placements on investors claim that any financial losses investors subsequently experience occur despite their due diligence. However, these private investments pay high fees that can induce some financial professionals to look the other way, focusing on the fifteen percent fee rather than the best interests of their clients in recommending these high-risk investments without the required due diligence having been performed. With the smell of large commissions and enormous fees in the air, it’s probably easy for brokers to rationalize away all of the drawbacks, risks, and any lack of appropriate due diligence for private placement investments.
Luckily for investors the Financial Industry Regulatory Authority (FINRA) has decided to come down hard on the sales of Reg. D Private Placements. At a yearly meeting of the agency, FINRA CEO and Chair Richard Ketchum explained that in the future brokers who promote and sell private placements must “push and pull” for the necessary due diligence information in order to avoid liability and assure that they’re making sound investment recommendations for their clients. That means doing a lot more than reading basic investment documents and attending “canned” meetings if questions needed to be asked.
At Carlson Law we pursue brokerage firms and financial professionals who recommend inappropriate, high-risk private placements to clients. For elderly investors, conservative investors, and those with a net worth of less than $1 million or a yearly income of less than $200,000, private placements may be per se inappropriate investments. If you’ve suffered financial loss due to stockbroker malpractice, contact Carlson Law in San Diego today at 619-544-9300.
Tags: Brokerage firm, Due diligence, Finance, Financial Industry Regulatory Authority, financial loss, financial losses, FINRA, inappropriate investments, Investment, investment attorney, Investor, Private placement, private placements, Reg. D Private Placements, San Diego, stockbroker malpractice
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If you’ve invested in mutual funds, you should know that taxes can affect your investment, sometimes significantly reducing your net returns. To completely avoid federal taxes, consider investments such as tax free municipal bonds. Also be aware that some mutual fund investments are more tax efficient than others. Below is some basic information regarding mutual fund fees, expenses and income taxation, check with your professional tax preparer regarding your specific tax situation.
What other costs are associated with mutual funds?
In addition to taxes, mutual fund fees and ongoing fund expenses related to holding mutual funds affect your net returns. For instance, when you sell, buy, and exchange shares, you will likely pay sales loads and transaction fees. Additionally, as a mutual fund holder you must pay ongoing expenses, i.e. management fees and 12b-1 fees.
When you’re considering purchasing a mutual fund, be sure to consult the fee table located at the front of its prospectus. This table compares the costs of different funds. And be aware that just because high fees are associated with a fund doesn’t necessarily mean that it’s a high-performing investment product.
Nontaxable capital returns
You can receive a return on a mutual fund without having to pay taxes on it. Usually, this happens when the return recovers some or all of your cost basis in the fund. Because they’re not strictly earnings, these returns are tax-free. You must, however, report them on your tax return.
Taxable dividend income
Many mutual funds pay dividends on a yearly, monthly, or quarterly basis to shareholders on a pro-rata basis. These dividends must be reported on your tax return for the year they were distributed.
Mutual fund dividends earned by individual shareholders often, but not always, qualify for taxation at capital gains rates. For instance, corporate stock dividends that a mutual fund receives and passes to shareholders usually qualifies for taxation at capital gains rates. If, however, mutual fund dividends are the result of other some other type of earning, such as interest, they’re taxed like ordinary income. Furthermore, special holding period requirements often must be met in order for dividends to qualify for long-term capital gain tax treatment.
Short-term capital gains
For tax purposes, short-term capital gain distributions are usually treated like dividends.
Long-term capital gains
Fund shareholders receive long-term capital gain distributions on a pro-rata basis. They must report these earning on their tax returns as long-term capital gains no matter how long they have held them.
Selling shares
When you sell shares in a mutual fund, usually you must pay tax on any capital gains earned. The taxable amount is ordinarily equal to the difference between the sale price and the original share purchase price. The tax owed on a gain depends on the rate at which the gain is taxed, which depends on how long you held the shares before selling them. In general, if you hold shares over a year before you sell them, any gain realized is considered long-term capital gain. On the other hand, if you sell after less than a year, any gains you earn will be considered short-term gain and taxed accordingly.
Tags: Capital gain, capital gains, Capital gains tax, Dividend, dividends, fees, Investment, investment product, Investor, long-term capital gains, mutual fund, Mutual fund fees and expenses, mutual fund investments, mutual funds, short-term capital gains, Tax, taxes
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According to an article published by Reuters on June 2, 2011, Goldman Sachs has been subpoenaed by the Manhattan District Attorney’s Office for information regarding its role in events which precipitated the recent worldwide financial crisis. Earlier this year, the Wall Street Journal reported that the U.S. Department of Justice also plans to subpoena Goldman Sachs.
Both federal and New York prosecutors want more information about documents discovered through a U.S. Senate subcommittee probe regarding the part Wall Street played in the collapse of the housing market. According to the subcommittee report, as the market began to drop in late 2006 and 2007, Goldman Sachs offloaded much of its subprime mortgage risk to innocent clients. The firm also purportedly took its time fulfilling customer requests to close out their failing accounts.
Last year, the Securities and Exchange Commission (SEC) filed a civil fraud suit against Goldman Sachs for its failure to disclose information linking it to complex mortgage securities. While the firm settled the charges, it refused to respond to the charges.
Are these current subpoenas a serious problem for Goldman Sachs? Financial experts disagree. Dick Bove, a Rochdale Securities analyst, says authorities are simply looking for someone to punish and Goldman Sachs seems like a likely candidate. Still, according to reporter Brad Hintz, any legal action against Goldman Sachs—whether successful or not—is bound to hurt the firm. Hintz advises that the company “make amends.” Other analysts maintain that the investigations will prove fruitless and have little impact on the company.
Meanwhile, Goldman Sachs has issued a public statement that it will “cooperate fully” with the Manhattan DA.
If you experienced financial loss during the recent financial crisis due to stockbroker malpractice, contact a stockbroker attorney at Carlson Law today at 619-544-9300 for a free consultation.
Tags: financial loss, Goldman Sachs, investment loss, investment recovery, mortgage securities, New York County District Attorney, Stock Fraud Attorney, stockbroker attorney, stockbroker malpractice, subprime mortgage, U.S. Securities and Exchange Commission, Wall Street
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Although it’s been three years since financial misconduct on Wall Street rocked the nation, investors still have opportunity to recoup some or all of their financial loss.
If you suffered financial loss during the recent crisis, your broker, brokerage or financial advisor may be legally responsible for that loss. A variety of legal actions can be brought against financial professioals for malpractice, such as negligent investment misrepresentation for making inappropriate investment product recommendations, intentinal securities fraud and inapropriate account turnover/excessive trading or “churning” to name only a few examples.
“Each state has different statutes of limitations for different kinds of claims,” explains Daniel Carlson of Carlson Law, a securities litigation firm in San Diego. “Your ability to file for damages depends on where you live and the kind of claims you have. While one state may have a three-year statute of limitations for all claims, others may have deadlines as long as 10 years for claims like breach of fiduciary duty. And in some states, the ‘discovery rule’ applies to fraud. That means the statute of limitations’ clock doesn’t start ticking until an investor ‘discovers’ he or she has been defrauded.”
Defrauded investors may also be able to file claims in more than one state. “It depends upon where you live, where you transacted business with your broker and whether the account agreement has a ‘choice of law’ provision indicating the state law that applies in the event of any claims,” Carlson says.
“And of course there’s more than one way to file a claim,” he adds. “If there are several options available, a good litigator will choose the state and the claims that give their clients the best chance of success.”
Did you experience financial loss due to your financial advisor’s misconduct? Did your broker lie to you about an investment? Did he or she give you advice inappropriate to your financial goals? Don’t wait any longer to fight for the compensation you deserve. Remember, legal deadlines do exist, and your time could be running out.
To discuss your options, contact Carlson Law at 619-544-9300 for a free consultation with an experienced investment recovery lawyer.
“Even if claims seem to have exceeded the applicable statute of limitations, defrauded investors should still contact an attorney,” Carlson advises. “By using all the legal means at their disposal, securities fraud attorneys can sometimes still recover client losses through arbitration even after a statute of limitations has expired.”
Tags: breach of fiduciary duty, broker malpractice, churning, claims, damages, Dan Carlson, financial advisors, financial loss, fraud, investment recovery lawyer, Investor, Law, San Diego, securities fraud attorney, securities litigation firm, statutes of limitations, Wall Street
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In 2009, the Securities and Exchange Commission (SEC) began a civil fraud investigation of over a dozen banking firms that traded and sold mortgage-backed collateralized debt obligations (CDOs). This investigation has engendered subsequent probes into the behavior of Wall Street firms.
Did Wall Street bankers defraud investors by selling them CDOs in order to make a profit for themselves—and a few special clients—when the mortgage market collapsed? Federal prosecutors believe so. In fact, in the spring of 2010, they launched a criminal investigation into the matter, and it’s still ongoing.
Investigators allege that a number of major Wall Street banks (including Citigroup, Deutsche Bank, Goldman Sachs, J.P. Morgan Chase, Morgan Stanley and UBS) created CDOs in order to sell and then bet against (short) them in the event of a crash. These CDOs include Baldwin 2006-I and AB Spoke, which Morgan Stanley sold investors, and Carina, Cetus and Virgo, which Citigroup, Deutsche and UBS may have sold for fraudulent purposes.
New York’s Attorney General Andrew Cuomo has also begun an investigation into the behavior of Wall Street banks regarding CDOs. Investigators allege that Citigroup, Credit Agricole, Credit Suisse, Deutsche Bank, Goldman Sachs, Merrill Lynch, Morgan Stanley and UBS gave credit rating agencies misleading data in order to inflate CDO ratings. These agencies in turn have been harshly criticized and even sued for assigning high scores to numerous toxic CDOs.
Furthermore, the U.S. Attorney’s Office of Manhattan and the SEC are collaborating to determine if Wall Street banks misrepresented CDOs to their clients, failing to disclose pertinent facts when trading, marketing and selling them to clients.
Since hearings in Congress revealed that fraudulent conduct on Wall Street precipitated the nation into financial crisis, prosecutors have taken legal action against two traders for Bear Stearns without success. However, legislators are calling for more prosecutions, and criminal probes into Wall Street’s activities widening.
The SEC has subpoenaed Citigroup, Deutsche Bank, J.P. Morgan Chase and UBS, asking that they turn over a wide range of paperwork, including prospectuses and offering documents (final copies as well as drafts) and lists of investors associated with mortgage-related transactions. The SEC has also filed an action in federal court against Goldman Sachs, claiming that a trader on behalf of the company created an investment product designed to fail so that one of the company’s pet hedge-fund clients could bet against it and profit at the expense of less favored Goldman investors. Goldman is purportedly seeking to settle the case out of court.
From 2005 to 2007, diverse Wall Street banks issued CDOs totaling $1.08 trillion. The research firm Thomson Reuters reports that Citigroup, Deutsche Banks and Merrill Lynch issued the greatest dollar amount. J.P. Morgan, Morgan Stanley, UBS and Goldman were numbers five, seven, ten and 14 on the list, respectively.
If you believe that you’ve suffered financial loss due to CDO fraud, contact Carlson Law at 619-544-9300 for a free consultation today. The investment recovery litigators at Carlson Law are dedicated to getting justice for securities fraud victims.
Tags: CDOs, Collateralized debt obligation, Deutsche Bank, financial loss, fraud, Goldman Sachs, investment loss, investment recovery litigators, JPMorgan Chase, Merrill Lynch, Morgan Stanley, Securities Fraud, Stock Fraud Attorney, UBS, Wall Street, Wall Street banks, Wall Street firms
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Morgan Keegan & Company, Inc., a financial services division of Regions Financial Corporation, has been the subject of numerous regulatory investigations in the last few years.
Originally founded by Allen B. Morgan, Jr., James Keegan and two other businessmen in 1969, Morgan Keegan didn’t grow on a large scale until the 1980s when it began acquiring other brokerage houses, beginning with the Mississippi-based Geary & Patterson. By 1990, it had purchased a total of four investment houses, and it was hungry for more. From 1992 to 1997, it bought seven additional firms as well as a sports agency, Athletic Resource Management.
Morgan Keegan itself was purchased in 2001 by Regions Financial. Regions incorporated its brokerage unit into the firm, creating a division specializing in asset management, investment banking and securities brokerage.
In April 2011, the Financial Industry Regulatory Authority (FINRA) as well as various state regulatory agencies and the Securities and Exchange Commission (SEC) filed civil suits against Morgan Keegan.
According to many investor complaints filed with FINRA, State and SEC suits and investigations, from 2004 to 2007, the company marketed Select Intermediate Bond Funds and Select High Income Funds as low-risk securities to investors who had requested safe, short-term corporate commercial paper investments. Furthermore, Morgan Keegan did not inform clients that most of their assets (over 50 percent) were invested in sub-prime, illiquid, untested investment structures, such as mortgage-backed securities and collateralized debt obligations (CDOs).
When the mortgage market collapsed in 2007, investors lost big. According to the SEC, the company and two of its top execs, Thomas Weller and James Kelsoe, purposely hid the plummeting value of their risky investments through 262 so-called “price adjustments.”
The result of Morgan Keegan’s blatantly behavior was predictably catastrophic for their clients. Thousands of investors, hoping to recoup their financial loss, have filed or will file arbitration claims against Morgan Keegan with FINRA.
Unfortunately, although regulators unanimously agree that Morgan Keegan committed acts of egregious fraud that financially harmed clients, investor claimants in FINRA proceedings, generally individual or family trust investors, have thus far experienced very mixed success in recovering their losses. Why? They’ve consistently been denied access to documents necessary to their cases by FINRA arbitration panels.
Despite the fact that Morgan Keegan has publically admitted it’s been the subject of multiple regulatory investigations, the thousands and thousands of documents relating to these investigations have been denied to claimants and their counsel because many arbitrators have refused to order that Morgan Keegan produce this potentially damning paperwork. Consequently, time and time again, arbitration panels have rendered decisions on claims without having all the relevant facts.
Clearly, this must change if investors are to receive just compensation for their financial loss. And with persistent, long-term petitioning by defrauded investors and their lawyers, no doubt it will change.
If you feel you have been a victim of investment fraud or negligence, contact Carlson Law in San Diego. Carlson Law specializes in investment recovery litigation and arbitration. Call 619-544-9300 now for a free consultation.
Tags: Business, CDOs, collateralized debt obligations, Financial Industry Regulatory Authority, financial loss, FINRA, Hedge fund, Investment, investment recovery litigation, Morgan Keegan, Morgan Keegan & Company, mortgage-backed securities, Negligent Misrepresentation, Regions Financial Corporation, San Diego, SEC, Securities Fraud Attorney San Diego, Select High Income Fund, Select Intermediate Bond Fund, U.S. Securities and Exchange Commission
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In April 2011, Citigroup Global Markets, Inc. was ordered by a Financial Industry Regulatory Authority (FINRA) panel to pay damages of more than $54M for its misconduct in managing and promoting a wide range of investment products, including MAT/ASTA municipal bond hedge funds.
The three claimants will receive 100 percent of the compensatory damages they sought, which total $34,058,948, as well as 8 percent interest and $17,000,000 in punitive damages. Furthermore, Citigroup must pay claimants’ attorney fees, expert witness fees, hearing session fees and the nonrefundable portion of the claimants’ filing fee.
The settlement process focused on the company’s poor handling of MAT/ASTA municipal arbitrage funds, including MAT Two, MAT Three and MAT Five; MAT Finance; ASTA Three and ASTA Five; and ASTA Finance. Without regard to their high-risk nature, the funds were promoted as alternatives to municipal bond portfolios. Furthermore, Citibank falsely characterized them as having strong risk-control features. FINRA found that Citibank not only falsely marketed MAT/ASTA funds, but that it also seriously mismanaged them.
If you believe that Citigroup Global Markets mishandled your investments but have yet to file a claim, don’t delay. Contact an experienced investment recovery lawyer in San Diego at Carlson Law today. It may not be too late to recoup your financial loss and stand up for your rights as an investor.
Tags: ASTA Finance, ASTA Five, ASTA Three, Broker Fraud, Citigroup, Citigroup Global Markets, Fiduciary Duty Breach, Financial Industry Regulatory Authority, FINRA, Fraud Attorney, Investment Fraud, investment loss, MAT Finance, MAT Five, MAT Three, MAT Two, MAT/ASTA municipal bond hedge fu, municipal arbitrage funds, Negligent Misrepresentation, San Diego, Securities Attorney, Securities Fraud Attorney San Diego, Stock Loss
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According to a May 5, 2011 Investment News article, Wells Fargo took as many as 153 days to deliver prospectuses to more than 900,000 clients who purchased mutual funds in 2009. (Securities law requires that prospectuses be delivered to purchasers within three days of the buy.) For dragging their feet, the company has been fined $1M by the Financial Industry Regulatory Authority (FINRA).
Wells Fargo also allegedly failed to take action to remedy the situation after learning that up to 9 percent of its customers had not received prospectuses within the requisite three days.
FINRA enforcement chief Brad Bennett stressed the importance of prospectuses to customers, as they contain important data regarding a fund’s costs, plans, performance history and risks. By failing to deliver prospectuses in a timely manner, said Bennett, Well Fargo deprived its customers of key information.
According to the article, Wells Fargo further broke FINRA rules by failing to report client complaints. Neither did the company disclose all arbitration claims that involved its representatives within the required 30 days.
Were you one of Wells Fargo’s more than 900,000 unlucky customers? If you suffered financial loss as a result of the company’s misconduct, contact an investment recovery attorney at Carlson Law.
Tags: financial loss, FINRA, investment recovery attorney, mutual fund, mutual funds, prospectus, Securities Fraud Attorney San Diego, securities lawsuit, Wells Fargo
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