Securities Fraud

Published on: November 26, 2013

Declining Credit Ratings More Trouble for UBS Puerto Rico Bond Investors

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 21, 2013

Alleged Unsuitable Recommendations of Non-Traded REITs by Surevest, Others

by InvestorLawyers

Investment fraud lawyers are currently investigating claims on behalf of investors who suffered significant losses as a result of doing business with Surevest Capital Management and employees of the firm.

Alleged Unsuitable Recommendations of Non-Traded REITs by Surevest Others

Allegedly, Surevest invested some of its clients in high-risk portfolios, allocating very little of these accounts into traditionally low-risk investments. These high-risk investments allegedly included equities, non-traded REITs and other private placement securities. Some Surevest clients have raised allegations asserting that the high-risk investment recommendations were unsuitable and implemented regardless of the age, risk tolerance and other considerations of the investors.

According to securities arbitration 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. Non-traded REITs are inherently risky and illiquid, which limits access of funds to investors and makes them unsuitable for many individuals with conservative risk tolerances as well as those who need easy access to funds. Other private placements and equities also carry significant risks.

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.

Published on: November 14, 2013

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

by InvestorLawyers

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: 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 24, 2013

SEC Charges ACI Capital Group Owner with Defrauding Investors

by InvestorLawyers

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Investment fraud lawyers are currently investigating claims on behalf of the victims of securities fraud perpetuated through schemes such as advanced fee scams. Reportedly, the Securities and Exchange Commission (SEC) has filed charges against Frederick D. Scott, a New York money manager. Scott owns ACI Capital Group, an investment advisory firm. According to the SEC, Scott made false claims regarding the company’s assets under management. He allegedly claimed the assets to be $3.7 million so that he would appear more credible when promoting “too good to be true” investment opportunities.

Allegedly, Scott targeted individual investors and small businesses with multiple financial scams. The SEC claims that he promised high rates of return in order to get money from investors and then stole their money. Reportedly, Scott used investor funds to pay his personal expenses, such as private school tuition for his children, department store purchases, air travel, dental bills and hotels, and his clients never received the promised returns.

According to securities arbitration lawyers, one of Scott’s alleged scams was an advanced fee scheme in which investors were told that the firm would give multi-million-dollar loans after a percentage of the loan amount was advanced to the firm. Reportedly, investors were told they would receive the remaining balance after the loan was made but they never received this sum.

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.”