Posts Tagged ‘Financial services’

FINRA Fines Firms for Failing to Deliver Prospectuses

January 21st, 2013
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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.

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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)

Principal Protected Notes, Lehman Brothers and UBS Financial Services Arbitrations

June 14th, 2011
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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.

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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 (2)