FINRA

Published on: March 29, 2012

Promissory Note Scams: What You Need to Know

With promissory note scams on the rise, investors need to know both how to spot them and when they need to contact a stock fraud lawyer if they suspect fraud has occurred. Promissory notes are a type of debt sometimes used by companies in order to raise money. Through the note, the company promises to return the investor’s principal and pay fixed interest amounts. They have set terms and repayment periods that should be stated specifically in the note.

Promissory Note Scams: What You Need to Know

According to securities arbitration lawyers, fraudulent promissory notes come in three main forms:

Some are fraudulent from the beginning and exist only to convince investors they are entering into a contractual arrangement when, in reality, they are not.

Published on: March 28, 2012

Ziegler Healthcare Real Estate Fund Investors Could Recover Losses

by InvestorLawyers

Investment fraud lawyers are investigating possible Financial Industry Regulatory Authority (FINRA) claims against broker-dealers who improperly recommended the purchase of Ziegler Healthcare Real Estate Funds (ZHREF). ZHREF is one of many risky private equity funds that have been improperly recommended and could result in loss recovery through securities arbitration.

Ziegler Healthcare Real Estate Fund Investors Could Recover Losses

A series of four private equity funds, ZHREF are investments designed to take part in the development and ownership of medical office buildings and other medical facilities. ZHREF I was formed in May 2005, and is fully invested. Its portfolio includes 8 buildings, totaling 221,000 square feet and approximately $54 million. ZHREF II was formed in March 2006, and is fully invested. Its portfolio includes 8 buildings, totaling 340,000 square feet and approximately $76 million. ZHREF III was formed in June 2007, and is fully invested. Its portfolio includes 6 buildings, totaling 133,000 square feet and approximately $34 million. ZHREF IV’s portfolio currently contains two properties. In total, these funds are comprised of 23 properties across 12 states.

A recent investor alert from FINRA addresses how alternative investments such as private equity funds are marketed and sold. Securities fraud attorneys warn investors that brokers often market these investments to clients as safe, despite the risks of private equity funds. Individuals with a conservative portfolio or low risk tolerance may have received unsuitable recommendations from their broker to invest in ZHREF. Individuals who suffered losses as a result of an unsuitable investment may be able to recover losses through securities arbitration.

Published on: March 23, 2012

News: FINRA Fines, Enforcement Actions Up in 2011

by InvestorLawyers

According to a new study, in 2011 the Financial Industry Regulatory Authority’s (FINRA) enforcement actions and fines were significantly higher than in 2010. Enforcement actions rose from $45 million in 2010 to $68 million in 2011. Of that $68 million, the largest portion was for improper advertising penalties. Furthermore, the FINRA sanctions survey stated that 1,488 disciplinary actions were filed and 329 brokers were barred by FINRA in 2011 for broker misconduct. Both of these figures saw a rise from 2010.

News: FINRA Fines and Enforcement Actions Up in 2011

A common claim made by securities fraud attorneys for investors occurs when an unsuitable recommendation is made by their broker or financial adviser. Fines for suitability violations more than doubled in 2011, as did the number of cases filed. There were 106 suitability cases filed, with fines amounting to $7.7 million in 2011, compared to 53 cases and $3.75 million in fines in 2010. These fines do not include arbitration awards to investors for losses as a result of suitability violations.

FINRA hopes the new suitability rule will keep pressure on brokers to only offer investments that are in keeping with individual investors’ investment needs, risk appetite and timeline. The new suitability rule is scheduled to be finalized in the summer of 2012. According to Brian Rubin, the former deputy chief counsel of FINRA’s predecessor, the National Association of Securities Dealers, “We anticipate this will continue to be a hot area for FINRA. The new rule gives FINRA additional ammunition.”

Published on: March 22, 2012

Investors of Triple Net TIC Could Recover Losses

by InvestorLawyers

Individuals who suffered significant losses as a result of a Triple Net TIC investment may be able to recover losses through securities arbitration with a securities fraud attorney. In many cases, brokers may have committed broker fraud by unsuitably recommending these investments to investors.

Investors of Triple Net TIC Could Recover Losses

TICs, or tenancies-in-common, are investments in which multiple investors are sold a property. These investors are then co-owners of the property, and receive fractional interests in said property. The investors then enjoy their own share of the net income and expenses, proceeds of sale and appreciation of the property. TIC investors do not participate in the every day management of the property. However, they do have certain rights regarding the property’s management.

TICs offer a relatively high dividend or interest and as a result, these investments are often attractive to certain retired investors. Generally though, TICs are unsuitable for income-seeking and retired investors for two main reasons:

Published on: March 21, 2012

Investors of Guggenheim Shipping ETF Could Recover Losses Through Securities Arbitration

by InvestorLawyers

Investors who suffered losses as a result of their broker’s recommendation of Guggenheim Shipping ETF are seeking the help of investment fraud lawyers in recovering their losses. Guggenheim Shipping ETF is a targeted ETF that tries to track the shipping industry. In general, the shipping industry can be a leveraged play — when there is a strong demand for freight transportation — on the global economy. However, as a result of the decreasing demand for raw materials from emerging markets, the need for shipping services has decreased. Reportedly, the Guggenheim Shipping ETF is down 46 percent, which is bad news for many investors. Luckily, investors who suffered significant losses may have a valid securities arbitration claim.

Investors of Guggenheim Shipping ETF Could Recover Losses Through Securities Arbitration

Brokers, and brokerage firms, have a fiduciary duty to their clients. They must research an investment prior to making a recommendation to an investor, to establish that the investment is suitable. It must be appropriate for each individual investor, taking into consideration the investor’s investment objectives, investment experience, net worth and age. The Financial Industry Regulatory Authority has a dispute resolution form where investors can settle disputes with their brokerage firms relating to unsuitability and other forms of stock broker fraud.

Brokers have been known to sell ETFs and ETNs as conservative ways to track a sector of the market, or the market as a whole. However, complicated trading strategies are necessary to accomplish this, and using these investments to track a sector of the market may or may not be a conservative trading strategy. This depends on the sector of the market and assets in the account relative to the investment’s concentration level.

Published on: March 19, 2012

Investors of Market Vectors Solar Energy ETF Could Recover Losses Through Securities Arbitration

by InvestorLawyers

Because of the attention received by the solar power industry, many brokers and financial advisers recommended the Market Vectors Solar Energy ETF to their clients. However, as a result of budget crises in Europe, subsides that were badly needed to develop solar technology were reduced or eliminated. As a result, technological advancements that would have made solar power economically viable did not materialize as expected. Reportedly, the Market Vectors Solar Energy ETF is down 67 percent, which is bad news for many investors. Luckily, investors who suffered significant losses can consult with a securities fraud attorney to see if they may have a valid securities arbitration claim.

Investors of Market Vectors Solar Energy ETF Could Recover Losses Through Securities Arbitration

Brokers, as well as brokerage firms, have a fiduciary duty to their clients. They must research an investment prior to making a recommendation to an investor in order to establish that the investment is suitable. It must be appropriate for each individual investor, taking into consideration the investor’s investment objectives, investment experience, net worth and age. The Financial Industry Regulatory Authority has a dispute resolution form where investors and their investment fraud lawyers can settle disputes with their brokerage firms relating to unsuitability and other forms of stock broker fraud.

Brokers have been known to sell ETFs and ETNs as conservative ways to track a sector of the market or the market as a whole. However, complicated trading strategies are necessary to accomplish this, and using these investments to track a sector of the market may or may not be a conservative trading strategy. This depends on the sector of the market and assets in the account relative to the investment’s concentration level.

Published on: March 16, 2012

Investors’ Behringer Harvard Losses Could Be Recovered

by InvestorLawyers

Many investors have suffered losses and received lowball offers on their Berhinger Harvard REIT I and Behringer Harvard Short-Term Opportunity Fund I investments. Investors facing this problem may be able to recover their losses with a securities arbitration lawyer. Statements made on the Behringer Harvard Holdings LLC website stated that unsolicited lowball offers have been issued for these two investments. The offers were for less than 5 percent of the shares outstanding.

Investors’ Behringer Harvard Losses Could Be Recovered

While the offers are likely less than the current market value of the investments, the major problem is the limited market for the sale of the funds. The Behringer Harvard REIT I Inc. is a non-traded real estate investment trust. A non-traded REIT is not traded on an exchange, unlike a traded REIT. Non-traded REIT investors may only be able to sell on the secondary market, which is notorious for deal seekers who only want to pay “bargain basement” prices.

If it can be proved that the broker or dealer that recommended the investment did so unsuitably, investors may be able to recover losses using a securities arbitration lawyer. Brokers, and brokerage firms, have a fiduciary duty to their clients. They must research an investment prior to making a recommendation to an investor to establish that the investment is suitable. It must be appropriate for each individual investor, taking into consideration the investor’s investment objectives, investment experience, net worth and age.

Published on: March 15, 2012

Investors of C-Tracks ETN Citi Volatility Index Total Return Could Recover Losses Through Securities Arbitration

by InvestorLawyers

Investors who suffered losses as a result of their broker’s recommendation of C-Tracks ETN Citi Volatility Index Total Return are seeking the help of investment attorneys in recovering those losses. Reportedly, a unique methodology has caused a severe decline in the Volatility ETFdb Category. The C-Tracks ETN Citi Volatility Index Total Return combines short exposure to the S&P 500 Total Return Index to directional exposure of large cap stocks through third and fourth month futures contracts positions on the CBOE Volatility Index. When volatility spiked over the summer, this strategy worked well. However, CVOL has struggled over the long-term. Reportedly, the C-Tracks ETN Citi Volatility Index Total Return is down 48 percent, the most severe decline year-to-date.

Investors of C-Tracks ETN Citi Volatility Index Total Return Could Recover Losses Through Securities Arbitration

Luckily, investors who suffered significant losses may have a valid securities arbitration claim.

Brokers, and brokerage firms, have a fiduciary duty to their clients. They must research an investment prior to making a recommendation to an investor in order to establish that the investment is suitable. It must be appropriate for each individual investor, taking into consideration the investor’s investment objectives, investment experience, net worth and age. The Financial Industry Regulatory Authority has a dispute resolution form where investors can settle disputes with their brokerage firms relating to unsuitability and other forms of stock broker fraud.

Published on: March 12, 2012

Investors of Mars CDO I Could Recover Losses Through Securities Arbitration

by InvestorLawyers

Investment attorneys are seeking Merrill Lynch customers who purchased Mars CDO I, as they could potentially recover their losses through securities arbitration. Mars CDO I was sold to institutional and high net worth customers of Merrill Lynch. The Mars CDO I was underwritten by Merrill Lynch in 2007. However, each of the 30 CDOs underwritten by Merrill Lynch in 2007 was either in technical default, had its best-rated portion cut to junk, was in danger of being liquidated or was in the process of being liquidated by the summer of 2008. Stock fraud lawyers are now investigating how Mars CDO I was marketed and sold by Merrill Lynch.

Investors of Mars CDO I Could Recover Losses Through Securities Arbitration

Securities that are backed by underlying pools of loans or bonds are CDOs, or collateralized debt obligations. While these investments are inherently risky, they are relatively common among “qualified investors.” Currently, stock fraud lawyers are also investigating if Merrill Lynch properly disclosed the CDO risks to investors in the sale of Mars CDO I. Furthermore, the value of Mars CDO I may have been inflated and over-stated by Merrill Lynch. Many investment attorneys believe that Merrill Lynch either knew or should have known the 2007 CDO deals were bad in the existing mortgage market conditions, given the poor performance of the CDOs.

On January 31, 2012, a Financial Industry Regulatory Authority Arbitration Panel awarded $1.38 million to Bobby Hayes, an investor who purchased Collateralized Debt Obligations from Merrill Lynch in 2007. For more on this case, see the previous blog post, “After Securities Arbitration, Merrill Lynch Must Pay $1.4 Million to Investor Over CDO Loss.”

Published on: March 9, 2012

Investors of Chase Floating Rate Loan Funds and UITs Could Potentially Recover Losses

by InvestorLawyers

Investors of Chase Investment Services Corporation’s unit investment trusts and floating rate loan funds may be able to recover losses through securities arbitration. Chase Investment Services’ sales practices involving these securities are currently being investigated by investment attorneys.

Investors of Chase Floating Rate Loan Funds and UITs Could Potentially Recover Losses

In a recent Financial Industry Regulatory Authority (FINRA) ruling, Chase Investment Services was ordered to reimburse customers over $1.9 million in losses. These losses were incurred because of the unsuitable recommendation of UITs, or unit investment trusts, as well as floating loan funds. In addition to the $1.9 million reimbursement, Chase was fined $1.7 million. According to FINRA’s investigation, unsophisticated customers with conservative risk tolerances were recommended UITs and floating rate loan funds by Chase brokers. In addition, the brokers did not have reasonable grounds for belief that these recommendations were suitable for their customers. Furthermore, Chase failed to provide its brokers with adequate guidance and training regarding the suitability and risks of floating rate loan funds and UITs.

As a result of nearly 260 unsuitable recommendations of UITs made by Chase brokers, $1.4 million in losses were incurred by unsophisticated investors with conservative investment portfolios. Investors also suffered losses as a result of floating rate loan funds, which were subject to substantial credit risks. In addition, some of the funds may be illiquid. Investor losses amounting to almost $500,000 because of the unsuitable recommendations of floating rate loan funds remain unreimbursed.