Posts Tagged ‘financial loss’

Limiting Investment Losses in Unregistered Securities- Are You an Accredited Investor?

May 28th, 2014
Investment

Investment (Photo credit: LendingMemo)

How does an investor limit the risk of possible investment losses in unregistered securities? The Securities Act of 1933 requires that securities offered or sold to the public in the US must be registered by filing a registration statement with the SEC. The Securities Act was created to protect investors from the fraudulent buying and selling of securities, manipulation and misrepresentation. There are, however, numerous exemptions to the rule requiring registration of securities with the SEC prior to being offered for sale. Three such exemptions to SEC registration are contained in Regulation D. The exemptions are somewhat complex, but qualifying as an “accredited investor” is important to all three. Generally, to qualify as an accredited investor you must be “a natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase, excluding the value of the primary residence of such person.” Such investors are generally considered under the exemptions to have the ability and insight to determine the risk involved, evaluate the consequences and be able to endure greater financial risk than the average investor.

Private placements are one investment opportunity often sold to accredited investors. A private placement is a private non-public offering of a company’s securities. These placements are usually illiquid as they are not publicly traded, and can therefore be difficult to sell if necessary. To sell securities as a private placement there must be a formal document (private placement memorandum) that explains the investment opportunity and the risks of possible investment loss along with limited information concerning the issuer and management. It may be difficult to predict how the private placement will fare over time because many of these private placement securities are issued by companies that are not obligated to file financial reports.

Limited partnerships are another investment product often sold to accredited investors under Regulation D exemptions to SEC registration. In a limited partnership there are both general and limited partners. Limited partners are generally involved only as investors. Limited partners share in both the profits and losses; however they do not participate in the daily running of the business. The liability for the partnership’s debt is contingent on the amount of capital or property contributed to the partnership. If the company is sued or files bankruptcy, limited partners are not responsible for the debts or liabilities.
When considering investing as an accredited investor in a limited partnership or private placement you must take into consideration that your money may be tied up for a long period of time and that fraud and sales abuses involving inaccurate statements are not uncommon. Also you should discuss with your financial advisor, and confirm in writing, the exit options from these types of investments, the level of risk involved, exactly how they operate under the agreements, as they can differ greatly, and if the investment risk is suitable for you considering your total investments. Your financial advisor should be knowledgeable and have read the issued information on the investment. However, you must still consider that investing in unregistered securities is risky and you could lose some or even all of your money.

If you feel you’ve been a victim investment fraud or negligence, contact Carlson Law Firm at 619-544-9300 or find us on the web at www.securities-fraud-attorney-san-diego.com

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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.

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“Buckets of Money” Claims Lead To Hefty Fines

July 11th, 2013
English: Certified Financial Planner, author, ...

Certified Financial Planner, author, radio and television personality, and inventor of the Buckets of Money strategy Ray Lucia at Sean Hannity’s Freedom Concert in San Diego, California, August 28, 2010. Photo by Andi Hazelwood. (Photo credit: Wikipedia)

Mr. Raymond Lucia Sr., a financial advice author and syndicated radio personality, has been fined $50,000 related to SEC allegations.  The SEC alleged Mr. Lucia provided investors with misleading information regarding his wealth-management strategy, Buckets of Money (BOM).

Mr. Lucia currently hosts the weekday “Ray Lucia Show” which promotes investment strategies that focus on retirees. The SEC alleged that slideshows and other media used by Mr. Lucia to demonstrate the BOM strategy used misleading data to illustrate how a series of fictional portfolios would have performed during various markets over time.

According to an initial decision issued on Monday of this week by an administrative judge, Mr. Lucia made false claims that this “time-tested” investment strategy—geared towards providing retirees with inflation-adjusted income—had been “backtested” empirically during bear markets. The administrative judge further barred Mr. Lucia from any association with any investment broker or adviser and ordered Mr. Lucia’s San Diego-based law firm, Raymond J. Lucia Companies Inc., to pay $250,000. The firm’s investment adviser registration was also revoked.

Mr. Lucia was initially accused by the SEC last September of promoting the misleading “Buckets of Money” strategy at a series of investment seminars. These seminars were hosted by Mr. Lucia and his company and were put on for potential clients. According to the SEC’s September order instituting administrative and cease-and-desist proceedings, the backtesting on the “Buckets of Money” strategy evidenced by Mr. Lucia was insufficient.  Further, the SEC alleged that Mr. Lucia made misrepresentations and omissions related to investment-adviser fees, returns on real estate investment trusts, and inflation rates.

Presently, Mr. Lucia is reviewing the opinion within the SEC’s case and is considering an appeal according to Wrenn Chais, Mr. Lucia’s attorney with Locke Lorde LLP in Los Angeles. “While we respect the commission and its regulatory processes,” said Wrenn, “we respectfully disagree with the majority of the findings of the opinion and the penalties assessed.”

The Carlson Law Firm is investigating potential claims related to this decision. Please feel free to contact our office if you feel you may have a claim at 619-544-9300.

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

 

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Crowdfunding: The Good, The Bad, And The Fraudulent

July 2nd, 2013
Official photographic portrait of US President...

Official photographic portrait of US President Barack Obama (born 4 August 1961; assumed office 20 January 2009) (Photo credit: Wikipedia)

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

Signed in April 2012 by President Barack Obama, the JOBS Act creates crowd-sourced funding (“crowdfunding”) as an industry.  The act enables small businesses the opportunity to increase their ability to raise venture funds and sell small amounts of stock to many investors on a national level.  Oversimplified, “crowdfunding” allows the sale of small amounts of shares to many investors through many different platforms and social media.  The regulatory framework for this new investment vehicle is in development, and may not provide the same protection the public has been used to receiving.

This new investment sourcing vehicle is designed to help small businesses and startups and effectively removes many SEC rules and regulations in soliciting invest dollars.  In the past many small businesses have felt they were unfairly subjected to SEC rules and regulations that were not applicable to charities and non-profit organizations.  In a nutshell, previous SEC rules for private investing provided 1) strict rules regarding advertising for investors, 2) limited shareholder numbers, and 3) those looking to become potential investors in many non-publically traded businesses were required to have either an annual income larger than $200,000 or liquid net wealth totaling over $1 million.  Since the JOBS Act, small businesses will be allowed to use crowdfunding, selling small amounts of shares to many investors through many different platforms and media with a murky regulatory framework.

The relatively new investment vehicle of crowdfunding allows potential fraudsters the opportunity to take relatively small amounts of money from a large number of people.  Most investments that are crowdfunded do not require a minimum investment.  In addition, the majority of legal requirements to become an investor in such high risk investments have also been removed and the regulatory framework for this investment device going forward is still unclear.

Back in the 1920’s, business ventures would engage the public by offering to sell stakes in new and upcoming ventures, such as transportation infrastructure or newly invented consumer goods. Eventually, the stock crash of 1929 led to new regulations and standards that changed the way business were funded, including the sale of stock. Through his support of this crowdfunding innovation, President Obama has essentially laid the groundwork for anyone and everyone to invest money in startups and small businesses.  This also opens the door to many types of potential investor fraud and abuse.  The SEC will provide details to regulate the debt and equity crowdfunding provisions of the bill, however at this point they are still unclear.  Financial Industry Regulatory Authority (FINRA) is also planning to provide rules for member firms engaged in crowdfunding.  But as usual, the investor needs to beware of deals that sound too good to be true, and be aware of new ways their investment dollars are being sought.

If you think that you have been the victim of investment fraud, via crowdfunding or otherwise, contact Daniel Carlson at the Carlson Law Firm today for a free consultation at 619-544-9300.

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Attention Facebook IPO Stock Fraud Victims: Private Arbitration May Be an Option

June 18th, 2012

In the Initial Public Offering (IPO) class action suits of the 1990s, individual shareholders claimed that underwriters pushed them to buy tech stocks, driving up prices for the benefit of institutional clients who then dumped their holdings when prices were high, netting huge profits which they shared with investment banks and leaving lone investors with deflated stocks and hefty financial losses.

It took until 2009 for the IPO class action suit to be settled for $586 million.

 

Have Individual Investors Been Screwed Over Once Again? Probably.

Facebook logo Español: Logotipo de Facebook Fr...

Facebook logo Español: Logotipo de Facebook Français : Logo de Facebook Tiếng Việt: Logo Facebook (Photo credit: Wikipedia)

What did Wall Street learn from the IPO debacle of the ‘90s? Not much, apparently.

Instead of maintaining an even playing field for all investors, class action suits recently filed allege that Defendants involved in the Facebook IPO favored certain institutional players and “preferred investors,” with underwriters privately providing them with information regarding the earnings stream for Facebook —information that differed from that published in Facebook’s prospectus and available to the general investor.

Unsurprisingly, a steadily increasing number of lawsuits are being filed against Facebook and the banks that underwrote its IPO, with claims likely to top $100 million.

 

Should Individual Investors Pursue Separate Suits? It Depends.

If you’re an investor who has suffered financial loss due to the alleged Facebook IPO stock fraud, you may want to join a class action, or you may be able to pursue an individual claim depending on the facts on your case.  If you bought the Facebook IPO from Morgan Stanley, J.P. Morgan, Goldman Sachs, Bank of America or one of the “preferred investors” allegedly tipped about Facebook lower revenue streams, a FINRA arbitration may be your best bet to recover your losses.

 

Contact Carlson Law to evaluate your claim.

Carlson Law is reviewing claims for investors and closely following the SEC, Financial Industry Regulatory Authority, Commonwealth of Massachusetts, and congressional panels reviewing what happened in the IPO.

If you lost money due to Facebook IPO alleged stock fraud, contact Carlson Law today at 619-544-9300 to review your claim and advise you about your best opportunities for recovery.

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McClellan Offers $1 M Settlement in Deloitte Insider Trading Case

February 7th, 2012

Annabel McClellan, the wife of Arnold McClellan, who was formerly the head of Deloitte Tax LP’s Mergers and Acquisitions, has settled a lawsuit

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alleging that she provided confidential information regarding mergers to family members.  If the judge accepts Annabel’s $1M settlement, the Securities and Exchange Commission (SEC) has agreed to drop comparable charges against her husband.

According to the Commission, Annabel gave confidential insider information to her sister, Miranda Sanders, and Miranda’s husband James, on at least seven occasions. The Sanders used the information to make trades that earned them millions of dollars. The SEC claims that James Sanders, who is the proprietor of a financial firm, not only used the tips for his own advantage but also to the benefit of his partners and customers, who also made millions. The SEC further alleges that James took positions with companies in the U.S. that Annabel told him were targeted for acquisition. According to Annabel, her husband was unaware that she was providing confidential information to her sister and brother-in-law.

By settling the lawsuit, Annabel is neither admitting nor denying the charges against her. However, she has pled guilty to lying to the SEC during their investigation of the insider trading scam.

Annabel and Arnold McClellan were first charged by the SEC in 2010 after investigations were conducted simultaneously by the SEC, the Department of Justice (DOJ), the Federal Bureau of Investigation (FBI), and the Financial Services Authority (FSA).

Insider trading is breach of fiduciary duty on the part of a financial officer.
As such, it negatively affects the stock market in various ways. Most obviously, it hurts investor confidence. When a company’s confidential information is used for the benefit of a few, it may also harm the company, ultimately causing financial loss. When insider trader occurs, who is held responsible for this breach of trust? All of the parties involved. That includes the individual who passes the tip along and the person who receives it, as well as anyone who trades based upon illegally obtained insider information.

Are you are aware of an insider trading situation that has been detrimental to your financial welfare? If you feel that you are, contact a securities litigation attorney immediately. For a free consultation, contact security lawyer Dan Carlson of Carlson Law in San Diego today.

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Variable Annuity Contract Thief Gets 10-Year Sentence – Hartford and Nationwide Life Insurance Companies

January 25th, 2012

In October 2011, a former Agent for Hartford and Nationwide Life Insurance companies pled guilty to charges of theft and received a 10-year prison sentence. By Matthew J. Ryan’s own admission, he exploited weaknesses in the insurance companies’ practices and procedures in order to steal from the variable annuity contracts Hartford and Nationwide issued to his clients.

Ryan created fake companies and bogus “transfer forms” which he had his clients sign. The bogus forms gave Ryan the ability to divert funds from his customers’ variable annuities and, ultimately, into his own accounts. Hartford and Nationwide honored thousands of Ryan’s transfer requests, despite the fact that the fraudulent documents were obviously illegitimate. The fraudulent documentation was not detected until 2010. By that time, however,  the former
agent had diverted an excess of $3M over a period of five years.

Two additional insurance companies have settled claims made by Ryan’s fixed variable annuity customers. Currently, combined suits of more than $3M against Nationwide and Hartford are pending.

Are you a former client of Mathew J. Ryan? Do you believe that your variable annuity contract assets have been or are being illegally diverted or invested unsuitably? If the answer to any of
these questions is yes, contact investment fraud lawyer Daniel Carlson at Carlson Law in San Diego for a free consultation. As an experienced investment recovery attorney, Mr. Carlson may be able to help you recoup all or part of financial loss.

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Posted in Broker Fraud, Fiduciary Duty Breach, Investment Fraud, Securities Arbitration, Securities Fraud, Securities Litigation, Stock Loss | Comments (1)

FINRA REACTS TO SEC CHARGES THAT IT MISHANDLED DOCUMENTS

December 7th, 2011
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According to the October 11 issue of Investment News, the Securities and Exchange Commission (SEC) has filed a complaint against the Financial Industry Regulatory Authority (FINRA), alleging that requested staff meeting minutes were altered by a FINRA director before they were delivered to the SEC in August 2008. The alterations, according to the SEC, rendered the meeting notes incorrect and incomplete.

Although FINRA currently serves as a self-regulatory organization (SRO) for stockbrokers, it has recently aspired to assuming that role for financial advisors, too. Given the SEC’s complaint, however, those aspirations are in jeopardy.

Ironically, it was FINRA, not the SEC, that first brought the problem of the tampered documents to light. After reporting the problem to the SEC, FINRA appointed a new director in its Kansas office where the tampering occurred. The SRO has also updated its protocols for the handling of documents and instituted extensive ethics training for its employees.

But for the SEC, these measures aren’t enough. The commission has ordered that FINRA hire an independent consultant to review the SRO’s training and in-house procedures, and to make recommendations for improvement. The goal? Ensuring that in future the SEC consistently receives reliable and accurate paperwork from FINRA.

Within 30 days of receiving the consultant’s findings and recommendations, FINRA’s board must either implement the suggestions for improvement or protest them. Alternatives to any recommendations that FINRA finds impractical or cumbersome must then be determined and agreed upon by both the board and the consulting agent.

In settling the charges made against it by the SEC, FINRA is neither denying nor admitting them. As an SRO that ensures the compliance of brokers with SEC regulations, however, FINRA recognizes that its own employees must comply with any and all requests made by the SEC.

At Carlson Law, our securities fraud attorneys represent those who have suffered financial loss due to stockbroker misconduct. To learn more about issues in finance today that may affect your wellbeing, check out other blogs at Carlson Law.

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Ambac & Others Agree to Pay $33M to Settle Fraud Allegations Surrounding Bond/Insurance Litigation

June 20th, 2011

Ambac Financial Group Inc., as well as several of its banking underwriters and insurers, has agreed to pay a total of $33M in order to settle claims of investment fraud. According to investors who experienced significant financial loss, the parties involved hid risks from investors about the mortgage debt it guaranteed.

The primary claimants in the case are the Arkansas Teachers Retirement System, the Public Employees’ Retirement System of Mississippi and the Public School Teachers’ Pension and Retirement Fund of Chicago. These claimants allege securities fraud in regard to Ambac bonds and stocks purchased from October 25, 2006 to April 22, 2008.

According to the suit, Ambac gave out misleading information regarding the safety of the bonds it insured in order to inflate the value of the securities. Claimants further allege that Ambac, which insured instruments related to high-risk mortgages, hid its involvement in the subprime loan disaster, an involvement that became clear when the housing market collapsed in 2008. According to the suit, Ambac falsely claimed that it insured the “safest” transactions, when in reality it guaranteed billions of high-risk residential mortgage debt and collateralized debt obligations that were high risk in pursuit of big profit.

Once a federal court has approved the settlement proposal, Ambac will pay claimants 2.5M. Citigroup, Goldman Sachs, Merrill Lynch, HSBC Holding and Wachovia (now a part of Wells Fargo) will pay a combined total of $5.9 million. The four insurance companies involved will pay a total of $24.5M.

If you believe that you’ve been a victim of securities fraud, contact an investment recovery lawyer. Like the claimants in the Ambac case, you could recoup some or all of your financial loss through securities arbitration or litigation. Contact Carlson Law today at 619-544-9300 for a free consultation.

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Posted in Fiduciary Duty Breach, Investment Fraud, Negligent Misrepresentation, Securities Fraud, Securities Law, Securities Litigation | Comments (1)

Performance Fee Thresholds for Investors to be Raised by the SEC

June 9th, 2011
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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.

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