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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.
Tags: A.G. Edwards & Sons LLC, annuity sales, Broker Fraud, Carlson Law, compensation, elderly investors, financial loss, Investment Fraud, investment loss, Securities Fraud Attorney San Diego, securities lawsuit, variable annuities, variable annuity, Wells Fargo Advisors
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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.
Tags: Broker Fraud, Desert Capital, investment loss, real estate investment, REIT
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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.
Tags: Broker Fraud, investment loss
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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.
Tags: breach of fiduciary duty, Broker Fraud, failure to supervise, financial loss, investment loss, Morgan Keegan, Negligent Misrepresentation, Regions Financial Corporation, RMK Advantage Income, RMK High Income, RMK Multi-Sector High Income, RMK Select Intermediate Bond, RMK Strategic Income Fund, Securities Fraud Attorney San Diego
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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.
Tags: Broker Fraud, CDO, Investment Fraud, securities fraud attorneys
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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.
- 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.
- Next, look at the information from state securities regulators at the North American Securities Administrators Association.
- 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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