Suitability

Published on: February 27, 2014

LaRue Customer Loss Recovery for Unsuitable Exchange-traded Fund Transactions Possible

Investment fraud lawyers are currently investigating claims on behalf of investors who suffered significant losses as a result of doing business with William Wayne LaRue, a former Stephens Inc. stockbroker. The claims are regarding unauthorized and/or unsuitable trades in inverse and leveraged exchange-traded funds, or ETFs, as well as other products.

LaRue Customer Loss Recovery for Unsuitable Exchange-traded Fund Transactions Possible

Reportedly, in early 2012, one of LaRue’s clients made a complaint that LaRue had executed a series of unauthorized trades on her account prior to his departure. As a result of the complaint, the Arkansas Securities Department reportedly discovered similar problems in other customer accounts, as well as other violations.

“The unauthorized trading was occurring in margin accounts,” says Scott Freydl of the ASD. “In looking at this, we saw there were leveraged and inverse exchange traded funds. That’s when the issue of suitability came up.”

Published on: February 25, 2014

Customers of Wade James Lawrence 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 Wade James Lawrence. Lawrence, a former broker for Lubbock Investments, recently surrendered his securities license because the Financial Industry Regulatory Authority (FINRA) requested he give testimony regarding his conduct and Lawrence failed to appear for the on-the-record interview.

Customers of Wade James Lawrence, Merrill Lynch, Oppenheimer Could Recover Losses

Lawrence is also the defendant in two lawsuits filed in November. According to the allegations in these lawsuits, Lawrence failed to repay $1 million in loans made by private individuals. Reportedly, Lawrence stated in November 2013 that he would turn himself over to regulators “regarding allegations of illegal securities trading practices.”

According to FINRA reports, Lawrence has been accused of causing $140,000 in customer losses because of inappropriate trades during the time he worked with Southwest Securities and $71,000 in customer losses because of unauthorized trading when he was with Oppenheimer.

Published on: February 18, 2014

Oriental Financial Services Customers Could Recover Losses From Puerto Rico Closed-end Bond Funds

by InvestorLawyers

Securities fraud attorneys are currently investigating claims on behalf of investors who suffered significant losses as a result of doing business with Oriental Financial Services. Allegedly, Oriental Financial Services, part of OFG Bancorp, was responsible for investor losses sustained in at least two Puerto Rico Closed-end Bond Funds: Puerto Rico Investors Tax Free Fund IV and Puerto Rico Income Fund II.

Oriental Financial Services Customers Could Recover Losses From Puerto Rico Closed-end Bond Funds

A claim was recently filed on behalf of one couple who wanted to invest the money from their matured CDs in conservative investments. However, Oriental Financial Services allegedly recommended they invest 65 percent in the Puerto Rico Closed-end Bond Funds. According to the claim, the couple was unaware that this significant portion of their $1 million investment would be put into investments that were illiquid, concentrated, high-risk and leveraged. Reportedly, when the Puerto Rico market declined, their investment value declined by around 60 percent. In addition, the couple is unable to get out of their declining investments because there is no secondary market readily available.

Under FINRA rules, 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. According to stock fraud lawyers, many of the investors who have suffered significant losses in Puerto Rico closed-end bond funds were unaware of the risks, and these investments were unsuitable given their risk tolerance.

Published on: February 11, 2014

Losses Mount as Puerto Rico Bonds Downgraded to Junk Status

by InvestorLawyers

Securities fraud lawyers continue to investigate claims on behalf of investors who suffered significant losses as a result of the unsuitable recommendation and sale of Puerto Rico bonds and UBS Puerto Rico bond funds in light of the products’ downgrade to “junk bond” status. Reportedly, earlier this month Standard & Poor downgraded most of the Puerto Rico bonds to “high-risk junk bond” status.

Losses Mount as Puerto Rico Bonds Downgraded to Junk Status

This is bad news for a lot of investors, as about 70 percent of U.S. municipal bond funds currently hold some portion of Puerto Rico bonds and those funds that are required to hold investment-grade bonds will be forced to sell the Puerto Rico bonds at significant discounts. According to stock fraud lawyers, this selling pressure may result in bond holders seeing significant price drops. In addition, the downgrade could throw a wrench in Puerto Rico’s plan to borrow $1-2 billion in the near future. Puerto Rico would likely have to agree to a much higher interest rate for investors to accept the risks associated with the bonds.

Puerto Rico bond investors suffered losses of more than 20 percent in 2013, with even higher losses for investors who were exposed to the internal leverage (or borrowing of money to buy additional municipal bonds) in UBS Puerto Rico bond funds. Investors who were 50 percent leveraged reportedly experienced losses of around 40 percent. In addition, securities fraud attorneys say that many investors were convinced to use a margin account, a second mortgage or a bank loan to borrow more money for larger investments. Both of these recommendations carried significant risk and were unsuitable for many investors.

Published on: February 6, 2014

Icon Leasing Fund Investors Could Recover Losses

by InvestorLawyers

Investment fraud lawyers are currently investigating claims on behalf of investors who suffered significant losses because of the unsuitable recommendation and sale of Icon Leasing Funds. An arbitration claim was recently filed on behalf of a retired woman who was sold these risky, illiquid investments by WFG Investments Inc. and NFP Securities Inc.

Icon Leasing Fund Investors Could Recover Losses

Specifically, potential claims involve the Icon Leasing Fund Eleven LLC and Icon Leasing Fund Twelve LLC. Allegedly, the advisor who sold the investments did not adequately explain that the funds operated as an equipment leasing program. The nature of the investment, in which capital is pooled for equipment subject to a lease, made it very risky and illiquid.

According to securities arbitration lawyers, during the offering period, the funds paid healthy distributions. However, not long after the funds were no longer for sale to new investors, the investment’s value began to rapidly decline and dividend payments became erratic. On December 31, 2012, Icon Leasing Fund 12 had suffered a 53 percent loss in value from the original offering price. For the same time period, Icon Leasing Fund Eleven suffered a staggering 84 percent decline in value.

Published on: January 28, 2014

Loss Recovery: REIT Investors Suffer Significant Losses in 2013

by InvestorLawyers

Investment fraud lawyers currently are investigating claims on behalf of investors who suffered significant losses as a result of unsuitable recommendations of real estate investment trusts, or REITs. Though the risks of non-traded REITs are now well-known, publicly-traded REITs also are not without risks. Reportedly, many investors suffered significant losses in 2013 because they were invested in these products for the wrong reasons.

Loss Recovery REIT Investors Suffer Significant Losses in 2013

Reportedly, from January until May 2013, investors spent $10.3 billion on real estate funds. However, in May 2013, the Federal Reserve began discussing tapering its purchase of assets under the so-called “quantitative easing” policy, causing a spike in interest rates, and REITs suffered a loss of 5.9 percent in that month alone. As prices fell, investors pulled $2.5 billion out of REITs, suffering significant losses. Then, last month, the Federal Reserve tapered its bond-buying program from $85 billion per month to $75 billion per month.

According to a Wall Street Journal article last month, “You should own REITs because you want to diversify some of the risks of stocks and bonds and to combat inflation — not because you are chasing high dividend yields or because you think the hot returns of the past will persist.” The articles goes on to say, “Anyone who overpays for lower-quality, higher-yielding assets could be crushed if interest rates rise sharply.”

Published on: January 21, 2014

Unsuitable ETF Sales Lead to Restitution for Investors

by InvestorLawyers

Securities fraud attorneys are currently investigating claims on behalf of customers of full-service brokerage firms for unsuitable sales of leveraged and inverse ETFs, or exchange-traded funds. On January 9, the Financial Industry Regulatory Authority (FINRA) announced that it ordered Stifel, Nicolaus & Co. Inc. and Century Securities Associates Inc. to pay $475,000 in restitution and $550,000 in fines regarding the sales of leveraged and inverse ETFs to 65 customers.

Unsuitable ETF Sales Lead to Restitution for Investors

Stifel and Century, both affiliate broker-dealers based in St. Louis, are owned by Stifel Financial Corp. According to stock fraud lawyers, leveraged and inverse ETFs are designed to meet daily objectives and “reset” each day. As a result, the performance of these investments can diverge from the performance of the underlying benchmark or index very quickly. Naturally, this problem is exacerbated in volatile markets.

According to securities fraud attorneys, because of the nature of these investments, leveraged and inverse ETF investors can suffer enormous losses, even if there is a gain in the index performance over the long-term.

Published on: January 16, 2014

New Research Indicates Investors Already Lost Billions in Puerto Rico Bond Funds

by InvestorLawyers

New Research Indicates Investors Already Lost Billions in Puerto Rico Bond Funds

Investment fraud lawyers continue to investigate claims on behalf of investors who have suffered significant losses in UBS Puerto Rico closed-end municipal bond funds. Allegedly, UBS Puerto Rico has engaged in questionable sales practices related to certain closed-end bond funds, including leveraged fixed income funds. New research has indicated that investor losses now amount to billions of dollars.

According to InvestmentNews, 19 of these bond funds lost a total of $1.6 billion from January to September of last year alone. Reportedly, the funds that caused the most significant investor losses were the ones underwritten by UBS with large municipal bond holdings. Around $10 billion in closed-end bond funds were sold by the Puerto Rican unit of UBS Financial Services from 2002 to 2012.

The Puerto Rican economic downturn has caused the value of the funds — as well as the value of other funds not underwritten by UBS that purchased Puerto Rican debt — to significantly decline. Municipal market weaknesses and rumors regarding interest rates have led to illiquidity and value declines for these products. In many cases, the risks associated with these investments reportedly were not properly disclosed to clients prior to their sale. In these circumstances, some UBS Puerto Rico customers may have claims for unsuitable recommendations, over-concentration and/or improper use of leverage.

Published on: December 31, 2013

LPL Broker Barred for Improper Non-traded REIT Sales; Customers Could Recover Losses

by InvestorLawyers

Securities fraud attorneys are investigating claims on behalf of customers who suffered significant losses in non-traded REITs as a result of doing business with Gary Chackman, an LPL Financial broker. In December, the Financial Industry Regulatory Authority barred Chackman for violating securities industry rules related to the sales of non-traded real estate investment trusts.

LPL Broker Barred for Improper Non-traded REIT Sales Customers Could Recover Losses

The alleged misconduct relates to the time period from 2009 to 2012, but Chackman was registered with LPL between 2001 and 2012. In 2012, his registration was terminated by the firm for violating the firm’s policies and procedures regarding alternative investment sales.

According to the letter of acceptance waiver and consent, Chackman “recommended and effected unsuitable transactions in the accounts of at least eight LPL customers, by overconcentrating his customers’ assets in [REITs] and other illiquid securities.” The letter, dated December 12, 2012, also states that by submitting falsified documents, Chackman “was able to increase his customers’ accounts’ concentration in REITs and other alternative investments beyond the allocation limits established by [LPL].”

Published on: December 26, 2013

Unsuitable Sales of Managed-futures Funds

by InvestorLawyers

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.