Posts Tagged ‘Investment Fraud’

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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High Frequency Trading Securities Fraud Class Action Filed Against “Flash Boys” Exchanges and Major Brokerages

May 22nd, 2014
English: A view from the Member's Gallery insi...

English: A view from the Member’s Gallery inside the NYSE (Photo credit: Wikipedia)

Many large brokerages, high speed trading firms, and U.S. stock exchanges were named as defendants in a securities fraud class action lawsuit filed by Providence, Rhode Island on April 18, 2014.  The Defendants in the high frequency trading securities fraud class action are accused of various types of conduct, including insider trading and manipulating trading within the U.S. securities markets.  The manipulation is alleged to have been achieved via high frequency trading based upon access to market information not available to the general investing public and other illegal conduct.

A few of the defendants targeted in the lawsuit include NASDAQ Stock Market, LLC, New York Stock Exchange LLC, Chicago Board Options Exchange Inc., BATS Global Markets, Inc. stock exchanges, a number of large brokerage firms, including Citigroup, Inc., Goldman Sachs Group, Inc., Morgan Stanley & Co. LLC and a number of high speed trading firms or “Flash Trading” firms.

Investors who purchased stock in the United States are being represented in a securities fraud class action.  The transactions at issue in the class complaint occurred from April of 2009 forward.  The complaint alleges the Defendants’ actions resulted in billions of dollars in damages to the investor class.  The securities fraud misconduct alleged against the class defendants includes:  contemporaneous trading, front-running, spoofing, and rebate arbitrage.  The lawsuit further explains that using certain devices and manipulations, the defendants were able to pursue false schemes and fraudulent courses of business that were intended to defraud investors who were trading securities.

Securities regulators, including the S.E.C., Justice Department and Commodities Exchange Commission are reviewing the high frequency trading industry independently of the Providence Class action filing last month.

The Providence high frequency trading class action and the ongoing regulator investigations into the high frequency trading industries potential for fraud and market manipulation will hopefully further uncover and bring to light trading and market practices by large market players that at best involve questionable conduct.  Securities regulators should act quickly to investigate and protect the general investing public from any questionable or illegal conduct by the trading and investment industry.

With billions of dollars in losses alleged and allegations of billions of dollars in gains by the Defendants, can a Hollywood movie be far off?   Stay tuned.

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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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SEC Brings Investment Fraud Action Against Former LPL Employee

July 9th, 2013
Seal of the U.S. Securities and Exchange Commi...

Seal of the U.S. Securities and Exchange Commission. (Photo credit: Wikipedia)

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

Recently, accusations have been brought against a financial advisor affiliated with the LPL for committing investment fraud through the misuse of both his position and the trust of his clients in defrauding them.

The Securities and Exchange Commission (SEC) has alleged that Blake Richards, previously registered as a representative with LPL Financial and based in Georgia, misappropriated potentially more than $2 million sourced from no fewer than seven investors over the past five years.

Over the course of the past several years, while employed at LPL, Richards “had little to no commission production and few clients of his own.” Nonetheless, some of the clients that Richards did have were registered under a co-worker’s accounts because Richards himself lacked both insurance and the other licenses required for the legal assistance of his clients’ brokerage and business needs.

The SEC explains in its complaint that Mr. Richards engaged in investment fraud by telling investors that he was going to place their investment into assets with fixed income and variable annuities, in addition to other kinds of investment products. Allegedly, Mr. Richards’ clients had been told that they should write checks payable to either one of two different companies that he controlled: “BMO Investments” or “Blake Richards Investments.” Then instead of using the money to invest as he had promised, he then misappropriated the funds for himself according to the SEC complaint.

With at least two elderly investors involved, the largest portion of the funds comprised savings for retirement and/or proceeds from life insurance collected on spouses who were deceased. Moreover, it is alleged that Mr. Richards utilized account statements that were fictitious and prepared using letterhead from LPL Financial in order to cover up the scheme. Allegedly, Mr. Richards also misrepresented his title to investors as “Accredited Asset Management Specialist”, a College for Financial Planning professional designation.

In addition to the SEC’s preliminary injunction request, a permanent injunction is also being sought, along with the disgorgement of Richards’ wrongful gains—with interest prior to the judgment—and civil penalties.

If you think that you have been the victim of investment 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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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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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.

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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.

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Ray Lucia San Diego Investment Advisor charged by SEC – Buckets of Money?

September 14th, 2012

The Securities and Exchange Commission today accused local San Diego radio talk show host and bestselling author Ray Lucia of misleading potential investors in regards to his investment strategy called “Buckets of Money.”

Seal of the U.S. Securities and Exchange Commi...

Seal of the U.S. Securities and Exchange Commission. (Photo credit: Wikipedia)

The SEC alleges that Lucia misled potential investors when he told them that his method had been “back-checked” using historical data from past bear markets and that the investors money would be safe and grow.  According to the SEC, the investment program failed to account for fees and included artificially lowered inflation rates.   When historically accurate rates of inflation were used, a 1973 investor would have run out of money by 1989, the SEC said, a far cry from the return claimed by Lucia.

The SEC said Lucia and his company “have admitted during the SEC’s investigation that the only testing that actually performed were some calculations that Lucia made in the 1990’s – copies of which no longer exist – and two two-page spreadsheets.”  Lucia was aware that using the undervalued inflation rate would “make the results look more favorable for the Buckets of Money Strategy,” according to the SEC.

In addition to barring Lucia from making misleading claims, the SEC’s Order instituting Administrative and Cease-and-Desist Proceedings seeks financial penalties and “other remedial actions.”

Lucia quickly posted a passionate defense to the SEC allegations on his website on Wednesday afternoon, stressing that the investigation was a civil matter and not a criminal case and that it involved something he had not used in over two years.  “I want to assure you that I intend to vigorously defend this absolutely meritless lawsuit and will seek an early trial,” said Lucia.

Despite the allegations, Lucia’s website is promoting a seminar to be held at The Hilton San Diego Resort & Spa on September 22nd, which will be co-hosted by actor and financial columnist Ben Stein, and former San Diego Mayor and current talk show host Roger Hedgecock.

Carlson Law Firm is reviewing potential claims against Ray Lucia and his affiliates.  To speak with an attorney regarding your, please call Carlson Law Firm 619-544-9300  for a free consultation.

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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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Will the SEC File Investment Fraud Charges Against Credit-Rating Companies?

July 5th, 2011
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According to the Wall Street Journal, in May 2011 the Securities and Exchange Commission (SEC) acknowledged that credit-rating agencies, desirous of pleasing the companies they rate, are sometimes less than objective in their evaluations. To mitigate this problem, the SEC has proposed that credit-rating firms operate under stricter guidelines.
This month, the Journal reports that the SEC is currently contemplating civil fraud charges against some of these credit-reporting firms for their part in the development of mortgage-bond deals that precipitated the recent financial crisis.
During its investigation, the SEC is examining the research done by Standard & Poor, Moody’s Investors Services, and other ratings agencies into the subprime mortgages (and additional loans) that underpinned recent ill-fated mortgage-bond deals. Was the research adequate? Or was it so slipshod as to constitute negligence or fraud?
Although a Standard & Poor spokesperson declined knowledge of any SEC investigation, she maintained that the ratings firm would cooperate with any request made by the SEC.
The SEC’s inquiry into ratings firms is part of its larger investigation into Wall Street’s culpability in the recent financial crisis. The investigation may or may not result in investment fraud charges being brought against the companies under scrutiny.

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Posted in Fiduciary Duty Breach, Investment Fraud, Negligent Misrepresentation, Securities Arbitration, Securities Fraud, Securities Law, Securities Litigation, Stock Loss | Comments (0)