FINRA

Published on: February 21, 2013

Hartford Floating Rate Fund Investors Could Recover Losses

Securities fraud attorneys are currently investigating claims on behalf of investors who suffered significant losses in the Hartford Floating Rate Fund. Hartford Investment Financial Services and Hartford Life Distributions LLC, now known as Forethought Distributions LLC, entered into a Letter of Acceptance, Waiver and Consent earlier this year regarding several violations connected with the fund and must pay a fine of $100,000.

Hartford Floating Rate Fund Investors Could Recover Losses

According to the Financial Industry Regulatory Authority, Hartford Life Distributors distributed a brochure which made statements that were “unwarranted and misleading in light of changing conditions in the bank loan market.” FINRA went on to say that “in particular, the brochure contained misleading statements that the fund was appropriate for bond investors concerned about the price stability of their investments, provided the potential for greater price stability compared with other fixed income investments, and was appropriate for investors seeking some degree of capital preservations.”

Launched in 2005, Hartford’s Floating Rate Fund had at least 80 percent of its assets invested in senior secured floating rate bank loans which were extended to companies and fixed income securities that were rated below investment grade. According to stock fraud lawyers, floating rate loans are subject to credit risks. Because of these significant risks, the credit crisis caused the fund’s NAV to suffer significant fluctuations and many of its holdings had to be sold at a discount to support fund outflows. Hartford’s Floating Rate Fund suffered a 40 percent decline by the end of 2008.

Published on: February 20, 2013

Gray Firm Wins Appeal Regarding Award of Attorney’s Fees Arising From $765,000 Arbitration Award Against Credit Suisse

by InvestorLawyers

Law Office of Christopher J. Gray, P.C. won an appeal to Florida’s Fourth District Court of Appeals in West Palm Beach concerning a client’s entitlement to attorneys’ fees under Florida’s Blue Sky law, Fla. Stat. § 517.301. The attorneys’ fees sought arise from a $765,000 arbitration award that the Gray firm won in Raubvogel v. Credit Suisse, FINRA Case No. 09-02906. In the underlying award the arbitration panel found that claimants were the prevailing party on their claim for violation of Fla. Stat. § 517.301 but further stated that it “chose not to award attorneys’ fees.”

Due to an unusual wrinkle of Florida law, however, a prevailing party under Fla. Stat. § 517.301 is entitled to seek an award of attorney’s fees in court after winning an arbitration award unless he expressly waives this right. The court below ruled that the Raubvogels waived their right to seek attorney’s fees in court by asking for an award of attorney’s fees in their arbitration papers. The Court of Appeals disagreed, stating that under its precedents an “express waiver” such as an on-the-record stipulation was required in order for a party to give up its right to seek attorney’s fees in court.

The Fourth District Court of Appeals decision is accessible below. The initial arbitration award is accessible at https://www.investorlawyers.net/wp-content/uploads/2017/08/1.pdf.13.2.20 order on appeal

Published on: February 19, 2013

Clock Ticking on KBS REIT I Claims

by InvestorLawyers

Securities arbitration lawyers are encouraging investors who suffered significant losses in KBS REIT I to act quickly if they believe they have a securities arbitration claim. According to the Financial Industry Regulatory Authority, “If too much time has elapsed between a broker’s conduct and your complaint to FINRA, the investigation may be hindered.” The initial public offering for KBS REIT I closed on May 31, 2008, so this May will mark five years since many investors were unsuitably recommended the KBS REIT I.

Clock Ticking on KBS REIT I Claims

With a new estimated value of $5.16 per share, the per share price has dropped drastically since its original offering price of $10 per share. However, investment fraud lawyers say that if investors need to liquidate for cash, they may receive even less for their shares. Because investors must resort to selling on a private secondary market, some investors may receive only 80 percent or less of the investment’s already-reduced estimated value.

According to securities arbitration lawyers, in many cases investors received unsuitable recommendations of KBS REIT I. Many were led to believe that the investment was a safe investment that would produce regular, dependable distributions while the investment’s value remained constant or increased. In addition, many were not made aware of the illiquidity of the investment that resulted from the fact that it was a non-exchange-traded investment.

Published on: February 15, 2013

Investors in Equity Linked Structured Products Tied to Apple Could Recover Losses

by InvestorLawyers

Stock fraud lawyers are currently investigating claims on behalf of investors who suffered significant losses in Equity Linked Structured Products which were tied to the Apple stock price. Apple stock has suffered a significant decline since last year, falling from more than $700 per share to less than $440 per share. While many Apple shareholders suffered losses as a result of this price decline, Equity Linked Structured Products, or ELSPs, that were tied to Apple’s stock price also suffered significant losses. Essentially, ELSPs are bonds that have a feature that allows them to be converted into other companies’ stocks.

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Features of ELSPs include high interest payments for a year or less. If the stock price of the company that the ELSPs are tied to remains close to the price of the stock at the time the bonds were issued, or increases, ELSP investors will get their money back when the investment comes due. However, if the stock price suffers a decline of more than 20 percent, the ELSPs can become shares of the stock — in this case, Apple — and the investor has no choice but to hold the investment until maturity.

Securities arbitration lawyers say that when Apple’s stock price increased substantially in 2012, full-service brokerage firms like Morgan Stanley, JPMorgan Chase and Barclays sold more than $722 million in ELSPs. In 2012, around 450 of the new structured products issued were tied to Apple, 75 percent of which suffered an estimated 15 percent decline in just one week. Most of these products are now underwater. In addition, many believe that investment banks were using ELSPs as an inexpensive hedging strategy against Apple’s stock price and benefited from these investments while investors were losing.

Published on: February 14, 2013

LPL to Pay Up to $2.5 Million to Settle Claims; Customers Continue to Explore Options

by InvestorLawyers

On February 6, 2013, securities fraud attorneys announced that LPL Financial has settled claims brought by the State of Massachusetts by agreeing to pay up to $2.5 million. The claims against LPL alleged that it failed to supervise registered representatives related to the sales of non-traded REITs, or real estate investment trusts.

LPL to Pay Up to $2.5 Million to Settle Claims, LPL Customers Continue to Explore Options

The following non-traded REITs were the focus of this complaint: Dividend Capital Total Realty, Inland American, Wells REIT II, Cole Credit Property Trust II, Cole Credit Property Trust III, Cole Credit Property 1031 Exchange and W.P. Carey Corporate Property Associates 17. Investment fraud lawyers encourage investors who suffered significant losses as a result of their investment in these non-traded REITs to explore all of their legal rights and options.

LPL was charged in December 2012 with unethical and dishonest business practices related to the sale of REITs. These charges are in connection with the sales of $28 million in non-traded REITs between 2006 and 2009, which were sold to nearly 600 clients. According to the Securities Division, 569 of those transactions had regulatory violations. According to Massachusetts’ findings, LPL’s REIT sales included violations of the State’s 10 percent concentration limits, prospectus requirements and LPL compliance practices. Furthermore, Massachusetts alleged that representatives of LPL received limited REIT training.

Published on: February 5, 2013

More Trouble for TNP Strategic Retail Trust Inc. REIT, TNP 12% Notes Program

by InvestorLawyers

Securities fraud attorneys are currently investigating claims on behalf of investors who suffered losses in the TNP Strategic Retail Trust Inc., a non-traded REIT, and the TNP 12% Notes Program. Both of these products come from Tony Thompson’s company, Thompson National Properties LLC. Reportedly, Thompson National Properties’ January Securities and Exchange Commission filings stated that TNP Strategic Retail Trust Inc. has two loans on which it is in danger of defaulting.

In addition to the difficulty with the non-traded REIT, stock fraud lawyers say that a new lawsuit has been filed in the U.S. District Court for the District of Colorado relating to the TNP 12% Notes Program LLC. According to the allegations, TNP “has failed to make required interest payments on the note.” In 2008, the plaintiffs purchased a $100,000 note, the principal of which TNP was obligated to repay by 2011. A guarantee signed by Thompson is an attachment to the lawsuit and states that TNP “hereby unconditionally guarantees the performance of all the company’s obligations under the notes, including, without limitation, the payment of principal and interest.” However, TNP allegedly missed the 2011 deadline to repay the principal and then ceased making interest payments the following year. A similar suit was filed in September, 2012.

According to an InvestmentNews article, Thompson downplayed the financial difficulties at his companies in e-mail messages to InvestmentNews. When asked specifically about TNP’s growing financial problems, Thompson reportedly wrote, “You are wrong.” For more information on securities fraud attorneys’ investigations into TNP investments, see the previous blog posts, “TNP Strategic Retail Trust Investors Could Recover Losses” and “Thompson National Properties 12 Percent Note Investors Could Recover Losses.

Published on: January 22, 2013

CommonWealth REIT Investors Could Recover Losses

by InvestorLawyers

Investment fraud lawyers are currently investigating claims on behalf of investors who suffered significant losses in CommonWealth REIT. Allegedly, between January 10, 2012, and August 8, 2012, CommonWealth issued false and misleading statements regarding its financial standing and prospects which, if proved to be true, would be a violation of the Securities Exchange Act of 1934.

CommonWealth REIT Investors Could Recover Losses

The CommonWealth real estate investment trust primarily owns and operates real estate, such as industrial buildings, office buildings and leased industrial land. Allegations currently being investigated by securities arbitration lawyers are that CommonWealth failed to disclose certain facts, including the fact that leased office spaces had fallen below expectations, existing tenants were receiving concessions which were eroding CommonWealth’s income and, as a result, CommonWealth’s positive statements about its occupancy rate, dividend payout and leverage ratio were not reasonably founded.

An announcement on August 8, 2012, stated that CommonWealth would likely be reducing its dividend payment. Among the reasons cited for this reduction were that its available cash for distribution payout ratio had increased and its occupancy rate had decreased. Following this announcement, the per share price of CommonWealth fell $1.57, or 9 percent, closing at $16.48 that day. Investment fraud lawyers say that by October 26, 2012, shares were trading at $13.58, a 52-week low. Furthermore, while CommonWealth REIT’s annual revenue increased from 2008 to 2011, its net income fell in that same period from $244.65 million to $109.98 million, a decline of $134.67 million.

Published on: January 17, 2013

Full-service Brokerage Customers Who Were Overconcentrated in Citigroup Stock Could Recover Losses

by InvestorLawyers

In light of Citigroup Inc. Securities Litigation, Case No. 07 Civ. 9901, a settled class action suit against Citigroup, Citigroup shareholders are encouraged to contact an investment fraud lawyer in order to explore all their legal rights and options for recovering substantial losses that resulted from holding a concentrated position in the stock. Investors with full-service brokerage firms, excluding Citigroup and its related parties, may be able to recover their losses through Financial Industry Regulatory Authority securities arbitration.

Full-service Brokerage Customers Who Were Overconcentrated in Citigroup Stock Could Recover Losses

Many claims related to the overconcentration in Citigroup stock in full-service brokerage accounts focus on the fact that many of these portfolios were mismanaged, given that risk management strategies were available that would have offered investors protection for the value of their portfolio. Securities arbitration lawyers say that protective puts and collars, stop loss and limit orders, “zero cost” collars and other “hedge” strategies are risk management strategies that could have been used to protect clients’ portfolios.

Protective puts, limit orders and stop loss orders are a way to give an account an exit strategy and downside protection in the event that a stock declines in value. A “zero cost” collar is a hedging strategy that creates a range of value, allowing the portfolio to maintain its value, irrespective of the direction and fluctuation of the price of the underlying stock. In many cases, investment fraud lawyers say that investors’ concentrated positions were directly exposed to fluctuations in the securities markets because of a failure of full-service brokerage firms to utilize these risk management strategies.

Published on: January 15, 2013

Behringer Harvard REIT I Share Price Cut Again

by InvestorLawyers

On December 20, 2012, Behringer Harvard REIT I officials stated that its per share price valuation was decreasing from $4.64 per share to $4.01 per share. Securities fraud attorneys say this last devaluation represents a significant decline from its original offering price. Behringer Harvard REIT I has assets amounting to $4.2 billion. Allegedly, the devaluation is a result of funding leasing and operating costs with the use of assets, distribution payments and reductions in the value of its real estate assets and debt.

Behringer Harvard REIT I Share Price Cut Again

Non-traded REITs, such as Behringer Harvard REIT I, carry a relatively high dividend or high interest, making them attractive to investors. In many cases, stock fraud lawyers say brokers may have represented Behringer Harvard REIT I as a safe, conservative investment. However, in reality, non-traded REITs are inherently risky and illiquid. Some of the factors that make REITs risky investments are that distributions are not guaranteed, valuation complexities and illiquidity can be created if there is a deficiency of a public trading market, redeeming the investment early is often expensive and restrictive and non-traded REITs’ valuation can be affected by many factors, including the trust’s balance sheet strength, cost of capital, overhead expenses and the portfolio of assets owned.

As a public non-traded REIT, Behringer Harvard REIT I may have carried a high commission which may have motivated brokers to make the recommendation to investors despite the investment’s unsuitability. The commission on a non-traded REIT is often as high as 15 percent. Securities fraud attorneys say that if Behringer Harvard REIT was misrepresented by their brokers as safe, clients may be able to recover losses through securities arbitration. Furthermore, some brokers allegedly put a substantial amount of some clients’ assets in the REIT, which resulted in an over-concentration that was unsuitable for investors.

Published on: January 10, 2013

Investor Recovers $1.38 Million from Morgan Keegan

by InvestorLawyers

On December 17, a Financial Industry Regulatory Authority arbitration panel reportedly sided with an investor against Morgan Keegan & Co. Inc. Stock fraud lawyers say the FINRA arbitration panel awarded the investor $1.38 million in settling his complaint related to Morgan Keen proprietary bond funds called the Intermediate Fund. Of the award, $851,000 was for compensatory damages and $400,000 was for other compensation and legal fees.

Investor Recovers $1.38 Million from Morgan Keegan

The claim, which originally requested $4.3 million in relief, was filed in 2010 by Lawrence B. Dale, an investor in the Intermediate Fund. The award stated that Morgan Keegan allegedly “represented to the claimants that the (bond fund) was a safe and conservative investment.” Further allegations by Dale were that the Intermediate Fund “did not match Morgan Keegan’s misrepresentations, failed to disclose material information, misrepresented values, and invested in structured finance and asset-backed securities” that were unsuitable for Dale. The firm also allegedly failed to adequately supervise its employees, according to Dale.

Securities arbitration lawyers say that Morgan Keegan and Regions Financial have been facing many problems because of the Intermediate Fund and its blowup during the financial crisis. This fund was one of a group that saw a significant decline in net asset value in 2007 and 2008, reportedly between 60 and 80 percent. Furthermore, the firm was later charged by regulators with overstating the value of the funds’ mortgage-backed securities. The firm agreed to pay a fine to regulators amounting to $200 million in 2011. In addition, a civil complaint was filed by the Securities and Exchange Commission against the funds’ former board members in December. According to this complaint, the board members allegedly failed to properly oversee the managers of the fund.