FINRA

Published on: December 26, 2013

Unsuitable Sales of Managed-futures Funds

Investment fraud lawyers are currently investigating claims on behalf of investors who suffered significant losses as a result of investing in managed-futures funds offered by Morgan Stanley Smith Barney (MSSB). MSSB subsidiaries Merrill Lynch Alternative Investments LLC and Ceres Managed Futures also are being investigated, among others.

Unsuitable Sales of Managed-futures Funds

According to a recent Bloomberg article, U.S. Securities and Exchange Commission data indicate that in dozens of managed-futures funds, 89 percent of the gains were used to pay commissions, fees and expenses instead of being returned to investors. Furthermore, securities arbitration lawyers say that in light of the fees, stcckbrokers and financial advisors who recommended such funds may have and made that recommendation despite the investment’s unsuitability.

According to investment fraud lawyers, 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 their age, investment objectives and risk tolerance. If a firm fails to make suitable recommendations, investors may be able to recover losses through FINRA arbitration.

Published on: December 24, 2013

Two JP Morgan Brokers Barred by FINRA for Theft of $300,000 from Elderly Client

by InvestorLawyers

Two former JP Morgan Chase Securities Inc.-registered brokers, Fernando L. Arevalo and Jimmy E. Caballero are the subjecct of regulatory charges alleging theft. Reportedly, the Financial Industry Regulatory Authority (FINRA) permanently barred both Caballero and Arevalo from the securities industry.

Two JP Morgan Brokers Barred by FINRA for Theft of $300,000 from Elderly Client

FINRA’s investigation of the two brokers found that they allegedly collaborated to steal approximately $300,000 from one of their clients, a widow who had diminished mental capacity. Reportedly, the client held accounts at both JP Morgan and a related bank affiliate. She sold two annuities between April and July 2013 and deposited the proceeds — approximately $300,000 — into a bank account that had been opened for her by Arevalo.

Subsequently, the funds were allegedly withdrawn using two cashier’s checks. On the same day, the money was allegedly deposited by Caballero into a joint account he opened at a different bank in his name and the client’s name. When the deposits were questioned by the bank and further confirmation was required, Arevalo allegedly drove the client to the bank so she could confirm the source of the funds.

Published on: December 19, 2013

Exchange-traded Fund Investors Could Recover Losses

by InvestorLawyers

Investment fraud lawyers are currently investigating claims on behalf of investors who suffered significant losses in inverse and leveraged exchange-traded funds or ETFs. Inverse and leveraged exchange-traded funds are supposed to meet daily objectives. As a result, their performance can drop rapidly relative to the underlying index or benchmark.

Exchange-traded Fund Investors Could Recover Losses

According to securities arbitration lawyers, even ETFs with a long-term gain in index performance can result in significant losses for investors. When markets are volatile, the problem is often exacerbated. As a result, ETFs are unsuitable for many investors.

Reportedly, the Financial Industry Regulatory Authority recently ordered J.P. Turner & Co. to pay restitution to 84 clients regarding the unsuitable recommendation and sale of inverse and leveraged ETFs. J.P. Turner did not admit or deny the charges but agreed to pay $707,559 in restitution to settle the charges. The charges also included allegations of excessive mutual fund switches, failure to provide adequate training regarding ETFs and failure to implement an adequate supervisory system.

Published on: December 17, 2013

Clients of UBS’ David Lugo Could Recover Losses

by InvestorLawyers

Securities fraud attorneys are currently investigating claims on behalf of the clients of UBS Financial Services Inc. and David Lugo. Lugo allegedly made unsuitable recommendations and misrepresentations of Puerto Rico municipal bonds and UBS proprietary Puerto Rico municipal bond funds.

Clients of UBS David Lugo Could Recover Losses

In one claim already filed by stock fraud lawyers, the claimant, one of Lugo’s clients, seeks to recover approximately $15 million. According to the allegations in this claim and others, Lugo reportedly recommended that his clients invest significant portions of their accounts in UBS proprietary Puerto Rico municipal bond funds and Puerto Rico municipal bonds. In addition, the amount invested frequently represented large concentrations of the total net worth of the client. Reportedly, these investments were marketed and sold as low-risk and clients were told they would be paid high, tax-advantaged dividends.

Lugo’s clients also allege that they were not warned that the UBS bond funds were highly leveraged. Lugo also allegedly recommended a UBS margin account in order to borrow funds to increase his clients’ Puerto Rico municipal bond investments. While this investment strategy was highly speculative and posed a high risk of principal loss, Lugo allegedly did not warn his clients of the risks and made unsuitable recommendations.

Published on: December 16, 2013

CRL Management, Charles R. Langston III Investors Could Recover Losses

by InvestorLawyers

Investment fraud lawyers are currently investigating claims on behalf of investors who suffered significant losses as a result of doing business with CRL Management LLC and Charles R. Langston III. Langston, a hedge fund manager, conducts business with Miami-based CRL Management. In October, a lawsuit was filed against both he and the firm, alleging fraudulent solicitation of more than $14 million in investor funds.

CRL Management Charles R. Langston III Investors Could Recover Losses

Allegedly, Langston made material misrepresentations about the nature of the fees, commissions and/or investments. Furthermore, he allegedly claimed that he would invest several million dollars of personal funds in an investment vehicle. According to the claim, CRL Management and Langston misrepresented an investment vehicle they were promoting. In addition, it was allegedly not registered with the Securities and Exchange Commission.

Securities arbitration lawyers say that as a result of the actions of CRL Management and Langston, one investor lost more than $3.5 million. In addition, it cost the investor more than $1 million in commissions and fees. Furthermore, a recent arbitration award from the Financial Industry Regulatory Authority ordered CRL Management to pay $1,312,949.31 for breach of contract.

Published on: December 10, 2013

SEC Investigates Two Firms for Failure to Disclose or Obtain Permission for Principal Transactions

by InvestorLawyers

Securities fraud attorneys are currently investigating claims on behalf of investors who have suffered significant losses because their broker, adviser or firm did not notify or obtain their permission before executing trades on their account. According to the Securities and Exchange Commission, Parallax Investments LLC and Tri-Star Advisors allegedly executed thousands of transactions through their affiliated broker-dealer without disclosing their actions to clients.

SEC Investigates Two Firms for Failure to Disclose or Obtain Permission for Principal Transactions

According to stock fraud lawyers, principal transactions usually involve an investment adviser who uses affiliate brokerage firms to act on behalf of its account. However, conflicts of interest frequently arise between adviser and client. Therefore, securities fraud attorneys say that advisers must disclose any monetary interest or conflicted role in written form when advising the client and obtaining permission.

Parallax Investments LLC, Tri-Star Advisors and three executives — John P. Bott II, Jon C. Vaughan and William T. Payne — all based in Houston, Texas, face securities charges regarding the unauthorized transactions. According to the SEC’s orders of administrative proceedings, Bott made at least 2,000 principal transactions without disclosing or receiving permission from clients from 2009 to 2011. Furthermore, for each transaction, the broker-dealer affiliate bought mortgage-backed bonds with its inventory account and placed them in the client accounts. Bott gained almost half the $1.9 million in sales credits the firm received on the transactions. Vaughan and Payne executed similar trades and received similar benefits.

Published on: December 5, 2013

Unsuitable Recommendation of Non-traded REITs and Other Unsuitable Investment Products

by InvestorLawyers

Securities fraud attorneys are currently investigating claims on behalf of investors who suffered significant losses as a result of the unsuitable recommendation of risky non-traded REITs and other products by their broker or financial advisor. Last month, another arbitration claim was filed with the Financial Industry Regulatory Authority regarding such risky products.

Unsuitable Recommendation of Non-traded REITs and Other Unsuitable Investment Products

According to the claim, Paul Larsen, a financial advisor, liquidated the claimants’ mutual funds, blue chip stocks and fixed income investments. Allegedly, he told his clients he was doing this to get away from the market risk of these investments. Furthermore, he represented the replacement investments as safe and claimed they would generate income and were opportunities he offered to his “best clients.” However, the products he invested his clients’ funds in were risky, unsuitable investments including:

KBS REIT

Published on: November 28, 2013

UBS Willow Fund Allegedly Deviated from Strategy, Declined 80%: Investors Could Recover Losses

by InvestorLawyers

Securities fraud attorneys continue to investigate claims on behalf of investors who suffered significant losses in UBS Willow Fund investments. Despite the fact that many customers were allegedly told the fund was safe and low-risk, it suffered a decline of around 80 percent. In addition, the fund may have deviated from the investment strategy it originally disclosed to investors, and this alleged deviation may have played a significant role in the decline of the fund.

UBS Willow Fund Allegedly Deviated from Strategy, Declined 80 Percent Investors Could Recover Losses

Created as a private hedge fund in 2000, the UBS Willow Fund was sold by UBS Financial Services. Reportedly, an announcement in October 2012 stated that the UBS Willow Fund would be liquidated. On September 6, 2013, the fund’s shareholder report stated, “The fund does not hold investments as of June 30, 2013.”

It’s possible that UBS did not adequately disclose the risks of the fund when making recommendations. Furthermore, many of the investors who received recommendations to invest in the fund reportedly had low risk tolerances and were seeking stable income. According to stock fraud lawyers, 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 their age, investment objectives and risk tolerance.

Published on: November 26, 2013

Declining Credit Ratings More Trouble for UBS Puerto Rico Bond Investors

by InvestorLawyers

Investment fraud lawyers continue to investigate claims on behalf of investors who suffered significant losses in Puerto Rico municipal bonds and closed-end mutual funds exposed to losses in such bonds, even as declining credit ratings threaten to drastically increase the losses suffered by many investors.

Declining Credit Ratings More Trouble for UBS Puerto Rico Bond Investors

Both Standard & Poor and Moody had already put Puerto Rico’s general obligation municipal bonds on negative watch when Fitch Ratings joined them on November 14. The Puerto Rico bonds are already rated by all three agencies at just one step above “junk,” or non-investment grade. Currently, Puerto Rico has outstanding debt amounting to around $11 billion in this category, and securities arbitration lawyers say that the negative watch given to the bonds by all three rating agencies is an indication that the debt will likely be downgraded in the coming months to junk-bond status.

If these bonds are downgraded to junk status, the resulting flood of sales could cause another drastic drop in the bonds’ price, and could also result in losses in closed-end mutual funds invested in the bonds. Unfortunately, most buyers are unwilling to accept the risk of purchasing these bonds unless significantly discounted, leaving many investors forced to keep the investment or sell it at a significant loss.

Published on: November 19, 2013

BBVA Securities of Puerto Rico Ordered to Pay $1.2 Million to Investors

by InvestorLawyers

Securities fraud attorneys are currently investigating claims on behalf of investors who suffered significant losses as a result of the unsuitable recommendation of investments sold by BBVA Securities of Puerto Rico representatives. Reportedly, a Financial Industry Regulatory Authority arbitration panel recently awarded $1.2 million to claimants Felix Bernard-Diaz, Julian Rodriguez and Luz Rodriguez. The defendants in the hearing were BBVA Securities of Puerto Rico Inc., Rafael Colon Ascar, Jorge Bravo, Sonia Marbarak and Julio Cayere.

BBVA Securities of Puerto Rico Ordered to Pay $1.2 Million to Investors

The claimants asserted gross negligence regarding a naked option trading strategy that was allegedly unsuitable. In addition, they alleged breach of fiduciary duty, churning, margin use and excessive trading.

According to stock fraud lawyers, 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 their age, investment objectives and risk tolerance. Churning, on the other hand, is a form of broker misconduct in which the broker performs excessive trading to generate personal profit.