Posts Tagged ‘Broker Fraud’

Reverse Convertible Note Investments

July 18th, 2013
Stock Market

Stock Market (Photo credit: Ahmad Nawawi)

Daniel Carlson is a lawyer in San Diego focused on securities litigation who specializes in recovering investment losses for his clients.

A reverse exchangeable security (also known as a “reverse convertible”) is a type of structured investment product. These are complex investments that involve features, terms, and risks that are very difficult for investors to understand.

Firms that offer reverse convertible investments have been put on notice by FINRA of the high risk in these products in order to ensure that the promotional materials and public communications employed regarding these products are both fair and balanced. It is important that these materials do not understate the reality of the risks associated with reverse convertible investments. Moreover, member firms must also remember to make sure that their registered financial representatives comprehend the terms, costs, and risks associated with reverse convertible investments. With this understanding, these representatives should perform adequate analyses on each customer’s suitability prior to a recommendation and explain thoroughly all risks and returns involved.

Prior to a recommendation involving either the purchase or sale of a given security, financial firms must form a reasonable basis upon which to determine that the products not only suitable for at least some investors, but also suitable for each specific customer to whom the adviser recommends that particular product. The suitability of a reverse convertible investment must be reviewed carefully. This requires firms to comprehend and explain the risks, terms, costs, and conditions of these structured products. Firms must grasp a reverse convertible’s terms and features in a comprehensive manner. These include the reverse convertible’s payout structure, the volatility of the reference asset, the product’s credit, market and other risks, call features, and the conditions under which the investor would or would not receive a full return of principal.

Given that each reverse convertible is unique, firms have to perform this suitability analysis for each reverse convertible investment that they recommend.

A firm’s consideration of product benefits to a specific customer (like the promise of a certain coupon rate, for example) must consider the risk to the investor. Investment firms and advisors are required to deal fairly with customers when recommending investments or accepting orders for new financial products. Firms must make every effort to communicate clearly to customers any pertinent information regarding these products.

If you think that you have been the victim of investment fraud, related to reverse convertible investments or another form of securities fraud, contact Daniel Carlson at the Carlson Law Firm today for a free consultation at 619-544-9300. Also, be sure to follow my firm on LinkedIn and Twitter.

Tags: , , , ,
Posted in Negligent Misrepresentation | Comments (0)

LPL Ordered to Pay $2.5 Million for Non-Traded REIT Sales

February 28th, 2013

Daniel Carlson is a securities litigation attorney in San Diego who specializes in recovering investment losses for his clients.

English: Seal of the Commonwealth of Massachusetts

English: Seal of the Commonwealth of Massachusetts (Photo credit: Wikipedia)

In late December of last year, securities regulators for the Commonwealth of Massachusetts filed an administrative lawsuit accusing LPL Financial, LLC of violating securities laws in regards to their sale of non-traded REITs (Real Estate Investment Trusts). After an investigation of 587 transactions valued at $28 million dollars, agents found that LPL violated prospectus requirements in 569 of those transactions. The lawsuit demanded that LPL make full restitution to all Massachusetts investors who invested in the non-traded REITs.
On February 6th, 2013, the lawsuit settled when Massachusetts’ regulators ordered LPL Financial to pay up to $2 million dollars to investors and another $500,000 in fines. Massachusetts residents will be allowed to surrender their non-traded REIT’s back to LPL at the investors’ original purchase price, which was around $10 dollars a share.
REITs investments vary, many invest in commercial real estate such as strip malls and hotels. They are often promoted to investors with the sales pitch that the properties will increase in value. Of course, this may or may not happen. Many REITs are publicly traded, meaning that an investor can easily sell the interest if the investor needs to for any reason. A large problem for many investors with non-traded REIT’s, which do not trade on securities exchanges, is that they can be very difficult to sell and get out of. In addition, investors can continue being forced to contribute to the non-traded REIT for things like maintenance and repairs, depending on the language of the individual investment agreement. There are many non-traded REITs who stopped distributions long ago and left investors holding an interest that has little value as malls and hotels closed.
Not surprisingly, non-traded REIT’s generate higher fees and commissions for brokers. This can act as an incentive to unscrupulous agents to sell them to unsuspecting investors, especially seniors.
TIME IS OF THE ESSENCE
While the above action only applies to residents of Massachusetts, LPL sold the non-traded REITs nationwide. Residents of other states, including California, would be well advised to seek legal consultation on their non-traded REITs sold by LPL and other advisors. Since many of the LPL REITs were sold beginning in 2006, it is important to pursue your claim as soon as possible. .
If you think that you have been the victim of investment fraud in regards to non-traded REITs sold by LPL or other companies, contact Daniel Carlson at the Carlson Law Firm today for a free consultation at 619-544-9300.

Tags: , , , , , , , , ,
Posted in Investment Fraud | Comments (0)

FINRA Fines Firms for Failing to Deliver Prospectuses

January 21st, 2013
Logo

Logo (Photo credit: Wikipedia)

On January 2, the Financial Industry Regulatory Authority announced fines totaling over $700,000  against five companies for failure in delivering prospectuses for mutual funds to clients.  The FINRA fines were implemented against LPL Financial, State Farm Management Corp., Scottrade Inc., T. Rowe Price Investment Services, Inc., and Deutsche Bank Securities, Inc.

By law, securities companies are required to deliver prospectuses to their clients so that the clients have an opportunity to review the investment portfolios and past performances of the funds.

The sanctions are the result of a FINRA review period from January 2009 through June 2011. LPL, who over that time period was required to deliver 3.4 million prospectuses to clients, blamed the problem on its brokers but admitted that there were no procedures in place to make sure the documents had been delivered.

FINRA alleged that State Farm, who was responsible for delivering 154,129 prospectuses, also failed due to inadequate supervision of its brokers.

As is the norm in these types of settlements, none of the firms involved admitted guilt in any of FINRA findings.  Of the five firms involved, only LPL released a statement.  Spokesman Betsy Weinberger said that LPL has instituted an automatic prospectus delivery program which she claims would assure that prospectuses are delivered in a timely manner.  None of the other firms released a statement.

At the Carlson Law Firm, we have experienced investment recovery lawyers to help investors when they have been harmed by the deceptive practices of the securities industry.  If you believe you have suffered financial losses through negligence or willful misconduct, contact us online or call (619) 544-9300.

Tags: , , , , , , ,
Posted in Investment Fraud | Comments (0)

Principal Protected Notes, Lehman Brothers and UBS Financial Services Arbitrations

June 14th, 2011
Head office of Lehman Brothers in Frankfurt, G...

Image via Wikipedia

A recent class action suit against Lehman Brothers as well as an enforcement proceeding against UBS Financial Services by New Hampshire has encouraged investors to hire investment recovery litigators and pursue claims against firms selling Lehman Brothers principal protected notes in an attempt to recoup their financial losses. According to New Hampshire’s claim, UBS engaged in broker malpractice by failing to disclose the risky nature of principal protected notes (PPNs). As a result, New Hampshire investors lost 2.5 million.
Principal Protected Notes
Principal protected notes (PPNs) are structured investments that have been around for years. Like all structured investments, PPNs connect CDs and fixed income notes to the performance of currencies, commodities, equities and/or other assets. Structures investment products are legitimate investments, and principal protected notes are a legitimate form of them.
Structured investments may have partial or full principal protection. Some pay a variable sum at their maturity. Others pay by coupons that are connected to a particular index or security. Given their risk and return reports, structured investments in general are appropriate for the portfolios of many investors.
In short, they are unsecured promissory notes connect to referenced securities, and as such they are not without risks. Unfortunately, according to claimants, investment firms committed broker malpractice by marketing these products to customers as safe investment alternatives.
Marketing of PPNs to Retail Investors
Beginning in 2005, PPNs became a particularly popular type of structured investment for retail customers. Noting their increased sales to non-institutional customers, the Financial Industry Regulatory Authority (FINRA) expressed concern that brokers were committing a breach of fiduciary duty by marketing principal protected notes to retail customers as “conservative” investments with “predictable current income.” In fact, the agency issued a notice to brokerage firms in September of 2005 that clear guidance regarding the risks involved in these financial products should be given to retail customers.
PPNs, Lehman Brothers & Bankruptcy
When PPNs mature, investors typically receive a return on the principal from the borrower. In this case, the borrower was Lehman Brothers. Unfortunately for investors, when Lehman Brothers filed for bankruptcy, even the principal on these notes became unprotected. Lehman’s PPN obligations on the notes were unsecured–and behind secured notes in the creditor bankruptcy line up.
The Case Against Lehman Brothers
Unsurprisingly, investors are now seeking to recover their financial losses. Although the specific allegations of claimants vary, all assert that Lehman Brothers, selling brokerages like UBS Financial Services and others, committed broker malpractice by falsely marketing PPNs as conservative investment product alternatives.
Specifically, claimants allege, these PPN products were depicted as 100 percent principal protected if investors held them to maturity.
Brokers also presented the PPNs as principal protected if the indices underlying them held their value. Furthermore, firms and brokers did not warn customers of the risks involved in investing in PPNs, nor did they warn them about what would happen if the underlying backer of the notes, Lehman Brothers, defaulted. Customers were also not made aware of the Lehman Brothers’ decline and that its fall could affect their investment’s value, making it in effect worthless.
It’s also been alleged that firms continued to push PPNs after Bear Stearns collapse, a failure which should have been a clear indicator or “red flag” of the risks involved in investing in banks that hold large numbers of subprime mortgages. It’s also been alleged that firms pushed PPNs on retail customers at a time when they themselves were reducing their PPN holdings. The accuracy or falsity of these claims has yet to be determined. But if firms did indeed recommend PPNs while reducing their own holdings, litigators are likely to claim broker fraud rather than simply failure to disclose.
Did your financial advisor mislead you into investing in PPNs, causing you to suffer financial loss as a result? If so, you need the advice of an investment recovery counsel. Contact Carlson Law in San Diego at 619-544-9300 today for a free consultation.

Tags: , , , , , , , , , , , , , , , , , , , , , ,
Posted in Broker Fraud, Fiduciary Duty Breach, Investment Fraud, Negligent Misrepresentation, Securities Arbitration, Securities Fraud, Securities Law, Securities Litigation, Stock Fraud, Stock Loss | Comments (2)

Citigroup Must Pay Claimants $54M in Damages in MAT/ASTA Investment Fund FINRA Arbitration

May 17th, 2011

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

Is Your Broker Guilty of “Switching” Mutual Funds to Generate Fees?

May 13th, 2011
Mutual fund

Image via Wikipedia

Ordinarily, mutual funds are long-term investments. And ordinarily, brokers who switch shares among funds with comparable investment goals have committed a violation if the switch serves little or no legitimate financial purpose other than earning him or her a fee. Such switching not only increases the fees investors pay, but it also puts them at risk of increased tax liability.

Often, investors are unaware that their broker has increased their investment costs and risks by “switching” their mutual funds. Mutual funds are intended to be held for a substantial length of time, not traded like individual stocks. To do so results in considerable charges that don’t apply to common stocks. Furthermore, the majority of mutual funds, by their very nature, may already be diversified and do not need to be traded unless there’s been a major change in the allocation of their assets or the fund manager’s market focus is narrow to the extent that it increases investor risk.

Mutual fund switch transactions are a violation of FINRA acceptable sales practices. If you believe you may have experienced financial loss due broker switching, contact an investment recovery lawyer at Carlson Law. Your broker’s misconduct may constitute a viable claim on your part for damages.

Enhanced by Zemanta

Tags: , , , , , , , , , , , , , , ,
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)

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.

Tags: , , , , , , , , , , , , , ,
Posted in Broker Fraud, Fiduciary Duty Breach, Investment Fraud, Negligent Misrepresentation, Securities Arbitration, Securities Fraud, Securities Law, Securities Litigation, Stock Fraud, Stock Loss | Comments (8)

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.

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , ,
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.

Enhanced by Zemanta

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

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.

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