FINRA

Published on: November 14, 2013

Customers of Wells Fargo Advisors, James Arnold Busch Could Recover Losses

Securities fraud attorneys are currently investigating claims on behalf of investors who suffered significant losses as a result of doing business with Wells Fargo Advisors and James Arnold Busch. Reportedly, Busch, a former Wells Fargo advisor, recently entered into a Letter of Acceptance, Waiver and Consent (AWC) regarding alleged misappropriation of funds from brokerage customers.

Customers of Wells Fargo Advisors James Arnold Busch Could Recover Losses

The AWC states that “at relevant times, Busch worked in various branch offices of WFA located in the Firm’s affiliated bank. Many of Busch’s customers had both Wells Fargo brokerage accounts and Wells Fargo bank accounts, and Busch had access to his customers’ bank account information. From approximately 2006 to 2013, Busch utilized his customers’ bank account information to misappropriate approximately $1.3 million from approximately eight of his Wells Fargo brokerage customers, most of whom were elderly women.”

Furthermore, according to the AWC, Busch primarily used several methods to misappropriate the money. He contacted his credit card company to request payments from the Wells Fargo bank accounts of his customers to his personal credit card account, providing his credit card company with the bank account and routing numbers of his customers. Prior to 2009, he used a manual process with paper debit memos and from 2009 to 2013 he called the automated system for his credit card company. In some cases, he allegedly generated cash by liquidating securities contained in the brokerage accounts of his customers and then transferred the cash to his customers’ bank accounts before misappropriating the funds.

Published on: November 12, 2013

Merrill Lynch, Sentinel Securities Fined for Failure to Supervise

by InvestorLawyers

Investment fraud lawyers are currently investigating claims on behalf of investors who suffered significant losses as a result of doing business with Merrill Lynch and Sentinel Securities Inc. Both firms have recently been fined by Massachusetts regulators for failing to adequately supervise employees who used customer funds for their own personal benefit.

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In one case, registered representative Jane E. O’Brien reportedly borrowed client funds amounting to more than $2 million. O’Brien allegedly used client funds that should have been invested in a software company for personal expenses. According to Massachusetts prosecutors and regulators, O’Brien has pleaded guilty to charges of fraud. She was sentenced to 33 months in prison and was barred from the securities industry.

In addition, regulators say that Merrill Lynch should have suspected that O’Brien was in financial trouble when she removed $380,750 from her retirement account prematurely, incurring tax penalties, but they didn’t inform regulators about a conduct review until almost a week after the Justice Department indicted her. Merrill was ordered to pay a fine of $500,000 for allegedly failing to adequately supervise O’Brien.

Published on: November 7, 2013

Law Office of Christopher J. Gray Files Arbitration Claim on Behalf of UBS Puerto Rico Investor

by InvestorLawyers

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Investment fraud lawyers at the Law Office of Christopher J. Gray P.C. recently filed a securities arbitration claim with the Financial Industry Regulatory Authority regarding UBS Puerto Rico investments. This case, which was filed on behalf of a retiree, focuses on one of a group of closed-end funds structured by UBS Puerto Rico, known as the Puerto Rico Fixed Income Fund I.

According to the allegations stated in the claim, Fund I was marketed and sold as a safe fixed-income investment, and was primarily invested in bonds issued by the Puerto Rican government. However, according to securities arbitration lawyers, because these funds suffered heavy exposure to the Puerto Rico government-issued bonds, there were substantial risks associated with the fund’s concentration these bonds in the event that they lost value. Due to their leveraged exposure to Puerto Rico government bonds, the value of the close-end funds has significantly declined as the underlying municipal bonds have dropped in price.

Fund I had a stated value of $8.55 per share as of July 2013. However, the value per share dropped to $6.06 in September and, as of October 1, shares of Fund I were only valued at $3.73. There are 23 closed-end funds currently in question, some of which have lost more than half their value, according to recent reports. Some of the funds currently being investigated by investment fraud lawyers are:

Published on: November 5, 2013

Oppenheimer, UBS, Fidelity Under Investigation Concerning Puerto Rico Bond Funds

by InvestorLawyers

Investment fraud lawyers are currently investigating claims on behalf of investors who suffered significant losses in U.S. mutual funds that contained Puerto Rico bonds. Massachusetts securities regulators are currently investigating these investments and claim that many investors may have been unaware of the exposure to the Puerto Rico fiscal crisis.

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According to securities arbitration lawyers, many state-specific municipal bond funds contained Puerto Rico debt and, as a result, other investigations may ensue. According to Massachusetts Secretary of the Commonwealth, William Galvin, the investigation includes three large fund managers: OppenheimerFunds (a unit of MassMutual Life Insurance Co.), UBS Financial Services and Fidelity Investments. The investigation is regarding how these managers sold and disclosed the risk of mutual funds containing heavy concentrations of the Puerto Rico bonds.

“Puerto Rico is currently on the verge of insolvency and many of its obligations are at or near junk rating, thus the risks associated with its municipal debt obligation are disproportionately high,” Galvin notes.

Published on: November 1, 2013

SEC Judge Decision In Ferrer Case Does Not Prevent Investors From Pursuing Claims Concerning UBS PR Closed-End Funds

by InvestorLawyers

Securities and Exchange Commission (“SEC”) Administrative Law Judge Brenda P. Murray recently issued an Initial Decision in In re Ferrer and Ortiz, Initial Decision Release No. 513, Administrative Proceeding File No. 3-14862. In the decision Judge Murray declined to order remedial action against former UBS Puerto Rico employees Miguel A. Ferrer and Carlos Juan Ortiz-Leon and also found that certain conduct by Messrs. Ferrer and Ortiz did not violate the federal securities laws. The charges of wrongdoing, which Judge Murray rejected, involved allegedly misleading statements that Ferrer and Ortiz made about the value of UBS PR closed-end funds, as well as certain UBS PR practices with respect to the pricing of UBS PR closed-end funds.

While no action was taken against Messrs. Ferrer and Ortiz, the SEC judge’s decision does not necessarily mean that investors in UBS Puerto Rico closed end funds do not have valid claims. The conduct charged in the SEC proceeding occurred during 2008 and 2009, and the decision was largely limited to addressing charges that Mr. Ferrer and Mr. Ortiz violated federal securities laws by making misleading statements concerning the value of UBS PR closed-end funds during the 2008-09 time frame. The full text of the SEC judge’s decision is accessible on this page.
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Investors may have valid claims that are different from those rejected in the SEC judge’s decision. Some investors reportedly received unsuitable recommendations to purchase the UBS PR closed-end funds based on representations by individual brokers. Some investors reportedly chose to buy the funds based on the representation that the funds paid a steady yield of dividends, but were safe, and that investors’ principal was not at risk because of the secure municipal bonds backed by the Puerto Rico government in which the funds invested. Such investors would be asserting claims under a completely different legal standard set forth in Financial Industry Regulatory Authority (“FINRA”) rules, and also may be complaining of conduct that occurred after 2009- even as late as August and September, 2013. Therefore, the decision in the SEC case against Ferrer and Ortiz does not mean that individual investors cannot pursue claims against brokers who sold them UBS Puerto Rico closed-end fund shares.

Published on: October 29, 2013

Massachusetts Orders $10.75 Million in Additional Restitution for Sales of Non-traded REIT

by InvestorLawyers

Investment fraud lawyers continue to investigate claims on behalf of investors who suffered significant losses as a result of an unsuitable recommendation of non-traded REITs, or real estate investment trusts. Last month, securities regulators of Massachusetts ordered five independent broker-dealers (IBDs) to pay an additional $10.75 million in restitution over sales of non-traded REITs. The relevant sales occurred beginning in 2005.

The five firms involved in this order are Ameriprise Financial Services Inc., Commonwealth Financial Network, Securities America Inc., Royal Alliance Associates Inc. and Lincoln Financial Advisors Corp. This order follows one made in May, in which the five IBDs agreed to pay $975,000 in fines and restitution of $6.1 million. Prior to that decision, LPL Financial agreed to pay restitution of $4.8 million to Massachusetts clients.

Of the $10.75 million, Securities America must pay $7.5 million, Ameriprise Financial must pay $1.6 million, Lincoln Financial must pay $841,000, Commonwealth must pay $534,000 and Royal Alliance must pay $125,000. This order, combined with the previous orders, requires restitution of $21.6 million to Massachusetts clients over improper sales of non-traded REITs. Non-Massachusetts investors will not benefit from this restitution. However, securities arbitration lawyers say that investors in other states can still recover losses sustained in risky non-traded REITs sold by these firms in securities arbitration.

Published on: October 22, 2013

Investors Could Recover Losses for Unsuitable Recommendation of Private Placements

by InvestorLawyers

Securities fraud attorneys are currently investigating claims on behalf of investors who suffered significant losses because of their broker or advisor’s unsuitable recommendation of private placements. In September, a new investor alert was issued by the Financial Industry Regulatory Authority (FINRA) titled “Private Placements — Evaluate the Risks Before Placing Them in Your Portfolio.” Unfortunately, many individuals have already suffered significant losses because they trusted the unsuitable recommendation of their investment adviser.

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A private placement, as defined by FINRA, is “an offering of a company’s securities that is not registered with the Securities and Exchange Commission (SEC) and is not offered to the public at large.” According to stock fraud lawyers, private placements are generally only suitable for accredited investors. Accredited investors have a net worth exceeding $1,000,000 and an income of at least $200,000 (individually) or $300,000 (jointly with spouse).

“Investors should understand that many private placement securities are issued by companies that are not required to file financial reports, and investors may have problems finding out how the company is doing,” FINRA officials note. “Given the risks and liquidity issues, investors should carefully assess how private placements fit in with other investments they hold before investing.”

Published on: October 17, 2013

$7 Million Awarded to Investor in FINRA Auction-rate Securities Dispute

by InvestorLawyers

Investors who suffered significant losses as a result of their auction-rate securities investment with Jeffries Group LLC may be able to obtain a recovery via FINRA securities arbitration. Jeffries Group is a subsidiary of Leucadia National Corp., another full-service brokerage firm. Recently, Jeffries was ordered to pay an investor $7 million regarding an auction-rate securities dispute.

In May 2012, a statement of claim was filed with the Financial Industry Regulatory Authority by Saddlebag LLC. The claim alleges that the firm wrongfully invested the client’s assets in illiquid auction-rate securities (ARS). According to securities lawyers, many financial firms sold auction-rate securities as short-term instruments with a highly-liquid nature, much like money market funds.

However, in 2008, the credit crunch resulted in a failure of the ARS market and investors with a piece of the $330 billion market were stuck holding securities that they were unable to sell. Other firms, including Morgan Keegan, have been accused of misleading investors regarding the liquidity risk of auction-rate securities.

Published on: October 10, 2013

Firm Fined for Allegations of Inadequate Supervision of Concentrated Client Positions in Alternative Investments

by InvestorLawyers

Securities lawyers are currently investigating claims on behalf of investors whose portfolios held by VSR Financial Services or other brokerage firms contained an unsuitable concentration of alternative investments. Reportedly, VSR Financial Services Inc. is being fined $550,000 by the Financial Industry Regulatory Authority (FINRA) over claims that a reasonable supervisory system was not set up, maintained or enforced regarding non-conventional investment sales.

Firm Fined for Allegations of Inadequate Supervision of Concentrated Client Positions in Alternative Investments

Reportedly, stipulations in VSR’s written supervisory procedures allowed only up to 50 percent of the exclusive net worth of their clients could be invested in alternative investments, unless there was a justifiable reason for exceeding these guidelines. In addition, VSR’s owner allegedly set up procedures that provided a discount through certain non-conventional instruments that artificially lowered the amount of the customer’s liquid net worth that was invested in non-conventional instruments.

However, the Securities and Exchange Commission stated in a letter to VSR that it had found that adequate written procedures had not been established for the program and this deficiency had not been corrected two years after VSR was notified by the regulator of the problem. The SEC also stated that reasonable actions were not taken to ensure the written supervisory procedures were implemented or, if they were not implemented, to eliminate the discount program.

Published on: October 9, 2013

Gray Firm Investigating Additional Claims Concerning UBS Puerto Rico Funds

by InvestorLawyers

Law Office of Christopher J. Gray, P.C. has filed a Financial Industry Regulatory Authority (“FINRA”) arbitration claim involving a retiree’s investment in a closed-end fund known as Puerto Rico Fixed Income Fund I (CUSIP No. 744907106, hereinafter “Fund I”). The fund was structured by UBS Puerto Rico, a unit of the Swiss banking giant UBS AG (NYSE:UBS). The case is pending in Miami, Florida.

Investors have reported that financial advisors in Puerto Rico sold them closed-end funds based on the representation that the funds paid a steady yield of dividends, but were safe and that investors’ principal was not at risk because of the secure municipal bonds backed by the Puerto Rico government in which the funds invested.

However, Puerto Rico municipal bonds have been anything but secure of late. Since 2000, the Commonwealth has experienced an imbalance between recurring government revenues and total expenditures. In 2009, the deficit reached a record $3.306 billion. Further, as of June 2010, the unfunded public employees’ retirement accounts reportedly had an actuarial shortfall totaling approximately $25 billion. As a result of these poor fundamentals, investors are concerned about the creditworthiness of the Puerto Rico government and as a result the prices of some Puerto Rico government bonds have dropped. Reportedly, certain ten-year Puerto Rico general obligation bonds had a yield of 4.89% as of September 30, 2013 (bond yields rise as bond prices fall).