In a recent New York Times editorial, Goldman Sachs exec Greg Smith voiced his opinion on the real impetus behind stockbroker malpractice: the avarice of brokerage firms. According to Smith, the greed of investment banking firms is so great that it impels them to put extreme pressure on stockbrokers to sell with the best interest of the firm in mind — without regard for the financial wellbeing of clients. As stated by Mr. Smith:”My clients have a total asset base of more than a trillion dollars. I have always taken a lot of pride in advising my clients to do what I believe is right for them, even if it means less money for the firm. This view is becoming increasingly
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unpopular at Goldman Sachs. Another sign that it was time to leave.”
Smith is not alone in his opinion, which is seconded by others in the world of finance, including Rall Capital Management’s Bob Rall, a fee-only advisor, and Russell G. Thornton, a VP at Wealthcare Capital. According to Rall, wirehouse firms do not focus on yield to the client (YTC). Instead, they focus on selling their proprietary investment products. And when a broker focuses on his or her own interests and the interests of brokerage firms rather than on client interests, the result is often a breach of fiduciary duty and stockbroker malpractice.
What Is a Wirehouse Broker?
A wirehouse broker works for a wirehouse brokerage firm (a national firm that has numerous branches). Ordinarily, wirehouse brokers are full-service stockbrokers who offer clients an array of services, from researching investment opportunities to buying and selling products. They are supposed to function as fiduciaries, not as sales reps for their firms.
Because wirehouse brokers have access to the numerous resources of the major brokerage house for which they work, including the house’s own investment products, they have long been considered superior to independent brokers—that is, until the financial debacle of 2007-08, which was precipitated by stockbroker fraud and the unethical practices of firms in pushing their proprietary investment products above more suitable client options.
Does Your Broker Put Your Financial Wellbeing First?
Today more than ever, investors must carefully examine the performance of their financial advisors in order to avoid investment loss.
Is your broker behaving more like a sales rep for a brokerage house than a fiduciary who is committed to your financial wellbeing? Is your broker aggressively pushing a firm’s proprietary products? Or is he or she offering sound investment advice based upon research and your unique needs and financial situation?
If you believe you have suffered investment loss due to a breach of fiduciary duty on the part of your broker, contact a stockbroker fraud lawyer today at Carlson Law, (619) 544-9300.
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According to an article published by Reuters on June 2, 2011, Goldman Sachs has been subpoenaed by the Manhattan District Attorney’s Office for information regarding its role in events which precipitated the recent worldwide financial crisis. Earlier this year, the Wall Street Journal reported that the U.S. Department of Justice also plans to subpoena Goldman Sachs.
Both federal and New York prosecutors want more information about documents discovered through a U.S. Senate subcommittee probe regarding the part Wall Street played in the collapse of the housing market. According to the subcommittee report, as the market began to drop in late 2006 and 2007, Goldman Sachs offloaded much of its subprime mortgage risk to innocent clients. The firm also purportedly took its time fulfilling customer requests to close out their failing accounts.
Last year, the Securities and Exchange Commission (SEC) filed a civil fraud suit against Goldman Sachs for its failure to disclose information linking it to complex mortgage securities. While the firm settled the charges, it refused to respond to the charges.
Are these current subpoenas a serious problem for Goldman Sachs? Financial experts disagree. Dick Bove, a Rochdale Securities analyst, says authorities are simply looking for someone to punish and Goldman Sachs seems like a likely candidate. Still, according to reporter Brad Hintz, any legal action against Goldman Sachs—whether successful or not—is bound to hurt the firm. Hintz advises that the company “make amends.” Other analysts maintain that the investigations will prove fruitless and have little impact on the company.
Meanwhile, Goldman Sachs has issued a public statement that it will “cooperate fully” with the Manhattan DA.
If you experienced financial loss during the recent financial crisis due to stockbroker malpractice, contact a stockbroker attorney at Carlson Law today at 619-544-9300 for a free consultation.
Tags: financial loss, Goldman Sachs, investment loss, investment recovery, mortgage securities, New York County District Attorney, Stock Fraud Attorney, stockbroker attorney, stockbroker malpractice, subprime mortgage, U.S. Securities and Exchange Commission, Wall Street
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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.
Tags: Broker Fraud, Fiduciary Duty Breach, financial loss, Investment Fraud, investment loss, investment recovery, limited partnerships, Negligent Misrepresentation, private securities, San Diego, Securities Arbitration, Securities Attorney, Securities Fraud Attorney San Diego, securities lawsuit
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Recently, many investors have experienced significant financial loss in their securities accounts because of the inappropriate and improper trading of exchange traded funds (ETFs) by their stockbrokers.
A number of leveraged and inverse ETFs, including some funds by Direxion and Proshares, had risk associated that may not have been fully disclosed to some investors. Although these ETFs were built to seek out multiples of the exchange that they were created to track, many were also structured to reset daily. The result is radical disparities in their performance in the long term compared to the index that they were intended to follow.
Often, stockbrokers did not tell their clients about the extremely risky nature of holding these types of funds for any period of time, a risk that the Financial Industry Regulatory Agency (FINRA) clearly recognizes. In a June 2009 Regulatory Notice (09-31), FINRA underscored the high-risk character of these ETFs, asserting their unsuitability for many investors that intend to hold them for longer than one trading session, especially if the markets are volatile.
Have you incurred financial loss due to your broker’s advice on leveraged or inverse ETFs and/or the amount of time you were advised to hold those funds? Contact Carlson Law to discuss your potential claim with an experienced securities attorney today at 619-544-9300 or www.securities-fraud-attorney-san-diego.com
Tags: ETFs, financial loss, FINRA, high-risk securities, inverse ETF; Direxion, investment loss, investment recovery, leveraged ETF, Proshares, Securities Attorney, Securities Fraud, Securities Fraud Attorney San Diego
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