Merrill Lynch

Published on: February 23, 2012

Fannie Mae, Freddie Mac Investors Could Recover Losses Through Securities Arbitration

Stock fraud lawyers are investigating potential securities arbitration claims for investors who suffered losses through their investments in Fannie Mae and Freddie Mac Preferred Securities. Claims are currently being filed against Merrill Lynch and other brokerage firms with the Financial Industry Regulatory Authority’s (FINRA) Office of Dispute Resolution. According to the allegations of claims already filed with FINRA, fraudulent misrepresentation and omission of material facts occurred when the investments were solicited to investors. The actual risks associated with Freddie Mac and Fannie Mae preferred stock investments were not fully and accurately disclosed to investors with a conservative portfolio.

Allegedly, retail investors were told that the investments were as safe as de-facto government-backed bonds. However, this was not the case. In fact, significant risks were associated with Fannie Mae and Freddie Mac-preferred stocks. In reality, preferred stocks are more volatile than bonds and have characteristics that make them much more risky than corporate bonds’ guaranteed status. These risks were not disclosed to investors.

Furthermore, in the event that the company should encounter a financial problem when waiting for the company’s assets, preferred stockholders would wait behind bond holders. In a company like Freddie Mac or Fannie Mae, if the company fails, bondholders would be the first to receive repayment. It is for this reason that holders of Freddie Mac and Fannie May-preferred stock suffered an extreme default risk. Preferred stock holders were not informed that they were not fully protected. In addition, Freddie Mac and Fannie Mae eliminated preferred dividend payments, which, for income purposes, was an important disclosure fact related to a product investment.

Published on: February 22, 2012

Bernoulli High Grade CDO-II Investors Could Recover Losses Through Securities Arbitration

by InvestorLawyers

Merrill Lynch customers who purchased Bernoulli High Grade Collateralized Debt Obligations could recover their losses through securities arbitration. Bernoulli High Grade CDO-II was sold to institutional and high-net-worth customers of Merrill Lynch. The Bernoulli High Grade CDO-II was underwritten by Merrill Lynch in 2007. However, all 30 of the CDOs underwritten by Merrill Lynch in 2007 were either in technical default, had their best-rated portion cut to junk, were in danger of being liquidated or were in the process of being liquidated by the summer of 2008. Stock fraud lawyers are now investigating how Bernoulli High Grade CDO-II was marketed and sold by Merrill Lynch.

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 Bernoulli High Grade CDO-II. Furthermore, the value of Bernoulli High Grade CDO-II may have been inflated and overstated 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: February 20, 2012

Lexington Capital CDO Investors Could Recover Losses Through Securities Arbitration

by InvestorLawyers

Merrill Lynch customers who purchased Lexington Capital Funding III Collateralized Debt Obligations could potentially recover their losses through securities arbitration. Lexington Capital was sold to institutional and high-net-worth customers of Merrill Lynch. The Lexington Capital CDO was underwritten by Merrill Lynch in 2007. However, all 30 of the CDOs underwritten by Merrill Lynch in 2007 were 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 Lexington Capital was marketed and sold by Merrill Lynch.

Securities that are backed by underlying pools of loans or bonds are called 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 Lexington Capital. Furthermore, the value of Lexington Capital 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: February 8, 2012

After Securities Arbitration, Merrill Lynch Must Pay $1.4 Million to Investor

by InvestorLawyers

Bobby Hayes, a Nevada retiree and wealthy investor, has been awarded $1.4 million in damages in securities arbitration against Merrill Lynch. According to Hayes’ allegations, Bank of America Corp.’s Merrill Lynch sold him collateralized debt obligations which were worthless at the time he purchased them.

The case was filed in 2011, and Hayes’ allegations included consumer fraud and breach of contract, among other misdeeds. The collateralized debt obligations, or CDOs, were purchased in 2008 from former Bank of America Securities LLC, which is now part of Merrill Lynch. The Financial Industry Regulatory Authority’s (FINRA) ruling, dated for January 31, 2012, was in favor of the claimant.

CDOs are securities that are backed by underlying pools of loans or bonds. While these investments are inherently risky, they are relatively common among qualified investors.” However, Hayes was unaware of the fact that at the time of purchase, the securities were already under water. The loans backing the securities were purchased by Merrill between November 2006 and June 2007. According to Hayes’ allegations, while in the company’s inventory, the securities lost a significant amount of their value. Regardless, Merrill sold the loans to investors like Hayes for the purchase price rather than what they were worth.

Published on: January 30, 2012

Investment Attorneys Seeking Defrauded Investors Following Two Securities Arbitration Cases Against Merrill Lynch

by InvestorLawyers

Investment attorneys are investigating potential claims on behalf of investors against Merrill Lynch and the Phil Scott Team. Over the last seven months, the Financial Industry Regulatory Authority has awarded defrauded investors, in two separate securities arbitration proceedings, around $2 million. The $2 million awarded includes compensatory damages, attorney’s fees, forum fees, costs and interest. The first case, decided in June 2011, resulted in an award to claimants of around $880,000. The second case, decided in January 2012, resulted in an award to claimants of about $1.2 million.

According to claimant allegations, Phil Scott (a/k/a Walter Schlaepfer) recommended they place their assets in portfolios which were invested in 100 percent equities, an unsuitable recommendation. The portfolios recommended were the Merrill Lynch Phil Scott Team Portfolios. In addition, one claimant had pledged nearly two-thirds of the portfolio to three different Merrill Lynch loans, increasing the risks associated with the portfolio and leading to a forced liquidation of securities as a result of the declining market value on the account.

Two claimants, Douglas and Kristin Mirabelli, claimed Scott’s broker misconduct included breach of fiduciary duty and misrepresentation. The Mirabellis’ case, decided this month, was the case in which $1.2 million was awarded by the FINRA Arbitration Panel. According to one of the Mirabellis’ attorneys, Scott should have diversified the claimants’ money rather than placing it into the Merrill Lynch Phil Scott Team Income Portfolios.

Published on: January 4, 2012

Potential Loss Recovery for Weyerhaeuser Stockholders

by InvestorLawyers

A recent securities arbitration proceeding regarding Weyerhaeuser stock has investors seeking representation for potential claims. According to the recent claim, which was filed with the Financial Industry Regulatory Authority, a retiree who held a concentrated position in Weyerhaeuser stock sustained $200,000 in damages. The claimant inherited the stock upon the passing of his mother; he then sought investment advice from Merrill Lynch.

Allegedly, despite the risk management strategies available to them — such as stop loss orders, exchange funds, a collar and/or protective put options —Merrill Lynch failed to protect some or all of the concentrated Weyerhaeuser stock positions under its advisement. Protective Puts allow the investor to create, at the put’s strike price, a price floor. This allows the investor to participate in the stock’s appreciation, customize the maturity of the put and stripe price, while providing downside protection. A collar, on the other hand, simultaneously Sells a call and purchases a put so that the proceeds and cost of the call and the put offset one another, which allows for hedging without requiring out-of-pocket expenses.

In addition to the company’s failure to utilize risk management strategies, Merrill Lynch failed to explain the risks associated with the holding of a concentrated stock position to clients. Merrill Lynch had a duty to protect the investment but failed to do so. This arbitration claim is still pending, but others who sustained losses as a result of the same mishandling of funds also are encouraged to seek the recovery of their losses through securities arbitration.

Published on: December 28, 2011

BNY Mellon Investors Seeking Investment Attorneys for Securities Arbitration Claims

by InvestorLawyers

On December 14, 2011, a class action lawsuit was filed against Bank of New York Mellon Corporation, also known as BNY Mellon, in the United States District Court of the Southern District of New York. The lawsuit was filed for the class period of February 28, 2008, to August 11, 2011. Investment attorneys are encouraging individuals who acquired BNY Mellon stock through personal investment, inheritance or employment to explore possible securities arbitration claims as a means of recovering losses.

BNY Mellon Investors Seeking Investment Attorneys for Securities Arbitration Claims

Underwriters named in the lawsuit include BNY Mellon Capital, Barclays, Citigroup, Merrill Lynch, Goldman Sachs, UBS and Morgan Stanley. Under Section 11 and Section 12(a)(2) of the Securities Act of 1933, underwriters of public offerings may be held liable if they fail to conduct a due diligence investigation of the information provided in prospectuses and registration statements.

The class action lawsuit states that, “The Underwriter Defendants underwrote BNY Mellon’s May 11, 2009 and/or June 3, 2010 common stock offering which were conducted pursuant to materially false and misleading offering materials and are charged with violations of the Securities Act in their capacity as underwriters for such offering.” Furthermore, allegations of the class action state that “throughout the Class Period, defendants concealed and failed to disclose material adverse facts about the Company’s financial well-being, business relationships, and prospects,” and goes on to claim that as a result of the wrongful acts and omissions of the defendants, combined with the “precipitous decline” of the common stocks’ market value that resulted from the disclosure of a FX trading scheme, investors suffered damages.

Published on: December 9, 2011

Bank of America, JPMorgan, Morgan Stanley, Others Charged With Misleading Marketing

by InvestorLawyers

The Federal Housing Finance Agency (FHFA), acting as conservator for Fannie Mae and Freddie Mac, has filed securities lawsuits against a total of 17 financial entities in both federal and state courts. States in which the lawsuits were filed are New York and Connecticut. Financial institutions affected by the lawsuits, which were filed in September 2011, include Bank of America, Credit Suisse, Citigroup, Countrywide, Goldman Sachs, JPMorgan Chase, Merrill Lynch, Morgan Stanley and Deutsche Bank. These institutions, along with 8 others, violated federal securities and common laws when selling mortgage-backed securities. This is not the first time many of these financial institutions have been charged with securities fraud, and investment attorneys are doubtful that it will be the last.

The FHFA is seeking civil penalties as well as damages. Allegedly, the financial institutions violated fiduciary duty by providing misleading loan descriptions as a part of their sales and marketing materials. The marketing materials did not reveal the true risk factors associated with the loans. According to the FHFA’s press release, “Based on our review, FHFA alleges that the loans had different and more risky characteristics than the descriptions contained in the marketing and sales materials provided to the Enterprises for those securities.”

Congress and regulators have put forth a continuing effort to deal with the practices of institutions that led to the financial crisis of 2008 and this lawsuit is part of that goal. It is similar to the one filed on July 27, 2011 against UBS Americas Inc. The Housing and Economic Recovery Act of 2008 gives the FHFA the authority to file complaints such as this one.

Published on: November 24, 2011

Merrill Lynch Pass-through Certificates

by InvestorLawyers

A class action lawsuit has been filed against Merrill Lynch and came from the sale of around $16.5 billion in certificates that were derived from pools of securitized home mortgages. Investment attorneys and investors nationwide will be watching Case No. 08-CV-10841, filed against Merrill Lynch. This case obtained class certification in June of this year.

Merrill Lynch Pass-Through Certificates

Securities like asset-backed pass-through certificates entitle the holder to income payments that come from mortgage-backed or asset-backed securities and/or pools of loans. The problem with the Merrill Lynch certificates was that the Offering Documents contained statements that were untrue; in addition, some information about the quality of the loans and the collateral’s adequacy within the loan pools was omitted. As a result, investors purchased riskier and lower-quality Certificates than other investments with equal credit ratings. In fact, almost all of the Certificates have now been downgraded by the Rating Agencies to below investment-grade instruments and, as a result, the Certificates are not marketable at the prices paid by investors.

Untrue statements in the Offering Documents had to do with the underwriting standards, maximum loan-to-value ratios, property appraisals, debt-to-income ratios and the Certificate’s ratings. Facts that were omitted included the fact that the loan originators did not follow their stated standards of underwriting, that the Merrill sponsor did not follow its guidelines for loan purchasing for many of the loans, the fact that the value of the underlying properties were overstated and the fact that the Prospectus Supplements ratings were based on relaxed ratings criteria, inaccurate loan information and outdated assumptions.

Published on: November 23, 2011

Notice to MF Global Noteholders

by InvestorLawyers

Investors who purchased MF Global Notes should consider securities arbitration against the underwriter broker-dealer from whom they purchased the Notes as a way of possibly recovering their losses.

Notice to MF Global Noteholders

Though it is unsure when and how much MF Global noteholders will receive from the firm’s bankruptcy, Fitch Ratings stated in early November that the amount received by owners of MF Global’s senior unsecured debt could be as low as 10 percent of their investment. Fitch Ratings estimates the maximum investors will receive at only 30 percent. Investors who purchased MF Global 1.875 percent Convertible Senior Notes due in 2016, MF Global 3.375 percent Convertible Senior Notes due in 2018 and Global 6.250 percent Senior Notes due in 2016 may have a valid claim against the underwriters of these Notes. Jefferies, Bank of America, Merrill Lynch, Lebenthal & Col, Sandler O’Neill + Panthers, BMO Capital Markets, US Bancorp, Commerzbank and Natixis are some of the underwriters of MF Global Notes.

It is possible that the underwriters of MF Global Notes knew or should have known more about MF Global’s financial problems and may not have adequately disclosed material information in the Notes’ prospectuses. Reports that the prospectuses may have been misleading have led to an investigation.