Arbitration

Published on: August 12, 2013

15 Brokerage Firms Subpoenaed Over Alternative Investment Sales

Reportedly, 15 brokerage firms have been subpoenaed by the Commonwealth of Massachusetts as part of an investigation into sales of alternative investments to senior citizens.

15 Brokerage Firms Subpoenaed Over Alternative Investment Sales

The following firms have reportedly been subpoenaed: Merrill Lynch, Morgan Stanley, UBS Securities LLC, Charles Schwab & Co. Inc., Fidelity Brokerage Services LLC, Wells Fargo Advisors, ING Financial Partners Inc., TD Ameritrade Inc., LPL Financial LLC, MML Investor Services LLC, Commonwealth Financial Network, Investors Capital Corp., WFG Investments Inc. and Signator Investors Inc.

According to securities arbitration lawyers, the state sent subpoenas to the firms on July 10, 2013, requesting information regarding the sale of certain products to Massachusetts residents 65 or older over the last year. Nontraditional investments include private placements, hedge funds, oil and gas partnerships, tenant-in-common offerings, and structured products.

Published on: August 8, 2013

GenSpring Clients Could Recover Losses

by InvestorLawyers

Securities fraud attorneys are currently investigating claims on behalf of investors who suffered significant losses in their accounts with GenSpring Family Offices LLC, a firm owned by a wholly-owned SunTrust subsidiary. Reportedly, arbitration cases have already been filed on behalf of ultra-high-net-worth investors which allege mishandling of investment accounts by GenSpring.

GenSpring Clients Could Recover Losses

In one case, the investors’ trust interviewed multiple money managers and investment firms including Credit Sussie, CitiGroup, Deutsche Bank, LaSalle Bank and Goldman Sachs. All of these firms recommended diversification across traditional asset classes, such as bonds and equities, as well as selective investments in alternative products for special situations.

However, the claim asserts that GenSpring stood out because of its unique approach which would provide better downside protection and better returns through the use of Multi-Strategy Hedge Funds, such as Silver Creek Funds, instead of the bond or fixed income portion of client portfolios. Allegedly, GenSpring officials claimed that their approach, which had been tested thoroughly, would behave like traditional bonds in terms of asset class correlation and volatility while providing returns across all market cycles that were superior to traditional bonds. The trust invested approximately $10 million and stated its primary goal as capital preservation.

Published on: August 1, 2013

100 Percent Principal Protected Note Investors Could Recover Losses

by InvestorLawyers

Investment fraud lawyers are currently investigating claims on behalf of customers of UBS Financial Services who were sold 100 Percent Principal Protected Notes. 100 Percent Principal Protected Notes were bonds or structured notes issued by Lehman Brothers Inc. Lehman Brothers declared bankruptcy in September of 2008, resulting in disastrous losses for many investors.

100 Percent Principal Protected Note Investors Could Recover Losses

Recently, a Financial Industry Regulatory Authority arbitration claim was filed on behalf of a Texas investor against UBS Financial Services. According to the Statement of Claim, UBS Financial Services allegedly sold the investor, who was a brokerage customer of the firm at the time, $300,000 of the 100 Percent Principal Protected Notes.

According to the claim’s allegations, UBS was aware of the deteriorating financial condition of Lehman Brothers, but concealed its views from brokerage customers who owned the notes. Furthermore, UBS customers were allegedly kept unaware that the Lehman Brothers notes could quite possibly default and become worthless. In addition, the claim alleges that the sales of Lehman notes were halted twice by UBS Financial Services because of concerns regarding credit risk, but UBS did not disclose these halts to thousands of its customers who were already invested in Lehman notes.

Published on: July 30, 2013

Investors Could Recover ATP Oil and Gas Note Losses

by InvestorLawyers

Securities fraud attorneys are currently investigating claims on behalf of investors who suffered significant losses in ATP Oil and Gas 11.875 Percent Senior Second Lien Exchange Notes. The investigation is regarding whether customers received unsuitable recommendations of the ATP Notes from their full service brokerage firm or advisor.

Reportedly, a class action lawsuit was filed on May 24, 2013, on behalf of investors who acquired ATP Notes that can be traced to the company’s exchange of $1.6 billion in notes that occurred on December 16, 2010. According to the complaint, the company allegedly concealed two moratoriums while issuing the ATP Notes. These moratoriums were issued by the U.S. Department of Interior and regarded deep water drilling. Reportedly, the drilling devastated the revenues of the company, which filed for bankruptcy on August 17, 2012.

According to stock fraud lawyers, ATP Oil and Gas 11.875 Percent Senior Second Lien Exchange Notes were speculative investments that carried a very high risk. As a result, they were not suitable for investors with conservative portfolios, low risk tolerances or those seeking fixed income.

Published on: July 25, 2013

Wells Fargo Ordered to Pay Investor $2.8 Million

by InvestorLawyers

Securities fraud attorneys are currently investigating claims on behalf of Wells Fargo Advisors LLC customers in light of a recent arbitration award regarding the firm’s alleged failure to detect theft and fraudulent transactions in a customer’s account. On July 3, 2013, a Financial Industry Regulatory Authority arbitration panel ordered Wells Fargo to pay an investor $2.8 million for the alleged failures.

Wells Fargo Ordered to Pay Investor $2.8 Million

The case was filed by a family limited partnership, College Health and Investment Ltd., in 2010. According to stock fraud lawyers, many wealthy families use family limited partnerships as an estate planning tool to minimize certain tax liabilities and preserve assets.

Reportedly, College Health filed a lawsuit in 2010 against Esther Spero. Spero allegedly forged the signatures of the family limited partnership’s employees who had authorization to transfer funds so that she could make transfers out of the accounts for her personal use. A $21 million judgement was entered in October, 2010, against Spero. Allegedly, Spero operated the scheme through multiple entities, including Wells Fargo.

Published on: July 23, 2013

Scottrade Fined for Alleged Failure to Supervise $8.4 Million in Sales of Unregistered Stock

by InvestorLawyers

Investment fraud lawyers are currently investigating claims on behalf of the customers of James W. Margulies and Scottrade Inc. in light of a recent Financial Industry Regulatory Authority decision. Reportedly, Scottrade has agreed to pay a fine of $100,000 to FINRA for failing to supervise Margulies, the former Industrial Enterprises of America Inc. chief financial officer, general counsel and board member.

Scottrade Fined for Failure to Supervise 8.4 Million in Sales of Unregistered Stock

Reportedly, Margulies was allowed to improperly sell unregistered stock to investors between February 2005 and October 2007. Securities arbitration lawyers say he reportedly sold $8.4 million worth of unregistered stock. According to FINRA, “Scottrade failed to conduct an independent inquiry to determine whether the shares deposited were freely tradable.”

According to investment fraud lawyers, Margulies was convicted in 2011 of stealing more than $20 million from investors and looting over $90 million in illegally-issued securities by the Manhattan district attorney. He reportedly used more than $7 million of that money for luxury items such as jewelry for his wife, a vacation club membership, expensive homes and travel on a private jet.

Published on: July 18, 2013

UBS Allegedly Made Unsuitable Recommendation of Lehman Structured Products

by InvestorLawyers

Investment fraud lawyers are currently investigating claims on behalf of investors who suffered significant losses as a result of the unsuitable recommendation of Lehman structured products. Recently, a securities arbitration claim was filed on behalf of a couple who did business with UBS Financial Services Inc. The FINRA arbitration was filed against UBS Financial Services and alleges the improper and unsuitable sale of Lehman structured products.

UBS Allegedly Made Unsuitable Recommendation of Lehman Structured Products

According to the Statement of Claim, the couple was nearing retirement and, therefore, wanted to preserve and protect their savings. Allegedly, they were presented with a written financial plan by UBS Financial Services that recommended an allocation of 52 percent equities and 46 percent fixed income for their “moderate” objectives and risk tolerance.

However, securities arbitration lawyers say the claim alleges that UBS disregarded the recommended allocation and concentrated the couple’s accounts in structured products and notes and equities for the “fixed income” portion. These investments allegedly included Lehman structured products, which UBS was aware carried significant default risk.

Published on: July 11, 2013

Steadfast Income REIT Investors Could Recover Losses

by InvestorLawyers

Investment fraud lawyers are currently investigating claims on behalf of Steadfast Income REIT investors. On June 28, 2013, Steadfast Income REIT Inc. was issued a cease-and-desist order by the Ohio Division of Securities for the announcement of price changes for the REIT 59 days before they took effect.

According to the order, “Steadfast’s decision to publicly announce an offering price increase 59 days prior to implementation of the price increase created a sale period that may have artificially increased investor demand for its securities.” The cease-and-desist order only orders a halt in the valuation price and does not stop sales of the Steadfast Income REIT.

On July 12, 2012, an estimated per share value of $10.24 was disclosed for the Steadfast Income REIT. However, securities arbitration lawyers say that the REIT continued to sell at the lower, $10 per share value until September 10, 2012. Reportedly, the announcement of a future valuation change harms shareholders by undercutting the investment’s current value.

Published on: July 10, 2013

UPS Employees with Leveraged, Concentrated Positions Could Recover Losses

by InvestorLawyers

Investment fraud lawyers are currently investigating claims on behalf of UPS employees who suffered significant losses as a result of their concentrated position in UPS stock. A recent securities arbitration claim was filed with the Financial Industry Regulatory Authority’s Office of Dispute Resolution on behalf of one investor against Wells Fargo Advisors, seeking damages of $4,000,000.

The claim alleges that the claimant, a 40-year employee of UPS, acquired more than 234,000 shares of UPS stock through the company’s Employee Stock Purchase Plan and Manager’s Incentive Program. A Hypothecation Loan was allegedly opened to facilitate the purchase of the stock, which was used as collateral for the loan. Reportedly, the investor reached a Note and Security Agreement with Wells Fargo when he moved his hypo loan to the firm.

Allegedly, Wells Fargo did not recommend a risk management strategy, such as a protective put and/or collar in order to protect the investor’s leveraged, concentrated position. Meanwhile, Wells Fargo used the UPS stock as collateral for loans to the investor. When UPS’ stock suffered a significant decline that dropped its value well below the loan-to-value ratio, the collateral call on the loan could have been prevented by a protective put option or collar. However, Wells Fargo allegedly facilitated borrowing against the investor’s concentrated stock position, while it was unprotected by a risk management strategy, in an effort to make money.

Published on: July 9, 2013

Clients of Barry George Hartman, Rocky Mountain Financial, Could Recover Losses for Alleged Unsuitable Recommendations of REITs

by InvestorLawyers

Securities fraud attorneys are currently investigating claims on behalf of investors who suffered significant losses as a result of doing business with Rocky Mountain Financial LLC, FSC Securities Corporation and Barry George Hartman. Some of Hartman’s clients have alleged that he made unsuitable recommendations of high-risk securities, such as AIG stock, and committed sales practice violations regarding non-traded REITs, or Real Estate Investment Trusts.

According to stock fraud lawyers, some non-traded REITs may have carried a high commission, which in the past has motivated brokers to recommend the product to investors despite the investment’s unsuitability. The commission on a non-traded REIT is often as high as 15 percent. Many non-traded REITs carry a relatively high dividend or high interest, making them attractive to investors. However, non-traded REITs are inherently risky and illiquid, which causes them to be unsuitable for many investors.

Financial Industry Regulatory Authority rules have established that firms have an obligation to fully disclose all the risks of a given investment when making recommendations, and those recommendations must be suitable for the individual investor receiving the recommendation given his or her age, investment objectives and risk tolerance. Furthermore, securities fraud attorneys say brokerage firms must, before approving an investment’s sale to a customer, conduct a reasonable investigation of the securities and issuer.