investment attorney

Published on: February 9, 2012

Watch List Issued by FINRA

On January 31, 2012, the Financial Industry Regulatory Authority (FINRA) posted a letter on its website outlining its 2012 priorities for regulation and examination. According to the letter, “FINRA is informing its examination priorities against the economic environment that investors have faced since 2008, as these circumstances have steadily contributed to conditions that foster an increased risk of aggressive yield chasing, inappropriate sales practices, unsuitable product offerings, and misappropriation and fraud.” The letter goes on to state FINRA’s concerns that investors “may be inadvertently taking risks they do not understand or that are inadequately disclosed.”

This is a concern that is shared by investment attorneys as they are faced with client after client that have suffered significant losses as a result of insufficient disclosure or lack of understanding.

Top products on FINRA’s watch list for suitability problems include non-traded real estate investment trusts (REITs), residential and commercial mortgage-backed securities, municipal securities, variable annuities, structured products, exchange-traded funds using synthetic derivatives and significant leverage, life settlements and private placements.

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.

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

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: February 3, 2012

Affinity Fraud Rears its Ugly Head… Again

by InvestorLawyers

Affinity fraud is a scam in which personal contacts are used by the perpetrator to defraud a specific group of people. While religious fraud is common, church congregations are not the only breeding grounds for affinity fraud. Investment attorneys urge the public to be aware that any tight-knit community can be a target. Groups targeted can include professional circles, ethnic communities, rotary clubs or even social media groups. One case of fraud targeted a Persian language radio show’s listeners.

Affinity Fraud Rears its Ugly Head… Again

Ephren Taylor, who credited himself as the youngest black chief executive of a publicly-traded company in American history, appeared on CNN and NPR, and was a Democratic National Convention speaker, was endorsed at one of his “Wealth Tour Live” seminars by Eddie Long, pastor of the New Birth Missionary Baptist Church with the words, “[God] wants you to be a mover and a shaker… to finance you well to do His will.” Taylor then offered “low risk investment with high performances” to the Pastor’s flock. Taylor now stands (whereabouts unknown) accused of fraud. The full extent of investor losses as a result of Taylor’s fraud is yet to be determined because of the complicated web of companies, both legitimate and shell.

While many individuals that are targeted for stock broker fraud are elderly and/or uninformed, these are not the only victims of affinity fraud. One man who was taken in by Ephren Taylor had an MBA and was an electrical engineer. A Utah man in another affinity fraud case, who was taken for $50,000, had worked on white-collar fraud cases as a federal agent before his retirement.

Published on: February 1, 2012

Have You Been the Victim of Stock Broker Fraud?

by InvestorLawyers

While investors are told time and time again to inspect monthly statements from the broker or firm handling their investments, many are still victims of fraud that could have been detected before losses become so substantial that the victim may never recover. Careful evaluation of monthly statements and transaction documents can uncover discrepancies that indicate stock broker fraud has occurred.

Have You Been the Victim of Stock Broker Fraud? Check your Monthly Statements for Discrepancies, Irregularities, and Unauthorized Transactions

Ralph Edward Thomas Jr., Vice President of Harbor Financial from August 2000 through February 2004 and a financial advisor for Wells Fargo Advisors LLC from February 2004 through July 2010, is allegedly the perpetrator of a particularly heinous fraud. Thomas controlled a trust of $3 million that had been granted as a result of birth injuries that resulted in cerebral palsy for a child. According to allegations against Thomas, he stole more than $756,900 from the trust through cashier’s checks and unauthorized withdrawals and used the money to pay personal expenses and personal credit card accounts. How did he do it? The settlement funds were used to purchase an annuity which would pay the child at least $3,990 per month. In reality, the monthly payment actually averaged around $6,287 per month. However, when Thomas should have dispersed this monthly sum to the mother for care of the child, he only dispersed $1,000 to $1,500 a month. In addition, Thomas allegedly used forgery to initiate three mortgages in the name of the fund’s trustee. Proceeds from the mortgages were deposited into the account and then withdrawn by Thomas for personal use. In this way, Thomas obtained an additional $205,000.

Stock broker fraud lawyers strongly urge investors to keep a close eye on their monthly statements and any other documentation received from entities controlling their investments. Investors that have not, up to this point, been diligent in monitoring their statements should go back and review statements immediately. If any discrepancies, irregularities or unauthorized transactions are found that may indicate stock broker fraud has occurred, contact an investment attorney at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

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.

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

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 27, 2012

FINRA Awards Claimants More Than $9 Million

by InvestorLawyers

Securities Arbitration recently concluded in a private placement suit between CapWest and 30 claimants. The initial filing with the Financial Industry Regulatory Authority (FINRA) took place in December 2009 and was amended in February 2010 and June 2010. Claimants asserted breach of contract, breach of fiduciary duty, negligence and failure to treat claimants in an equitable and just manner. The allegations of the claimants arose in connection with their investments in Medical Capital Corporation, DBSI, Inc. and Provident Royalties LLC.

FINRA Awards Claimants More Than $9 Million

Including the investments issued by the three companies, tens of millions of dollars in private placements were sold by CapWest. CapWest’s closing in September 2011 was prompted by these private placements. The onset of the “Great Recession” marked the point at which the private placement securities became toxic and many investors holding them suffered substantial losses, they argue.

The claimants have demanded the following amounts in compensatory damages, respective to each company, plus interest, costs and attorney’s fees: $6,055,763, $7,465,763 and $8,300,763. A comment on the decision stated that, “On September 23, 2011, the Panel conducted a hearing to consider Claimants’ motion for sanctions and to preclude. Respondent did not appear. The Panel determined that an attempt was made by the conference operator to contact Mr. H Thomas Fehn, counsel for Respondent, that Mr. Fehn had been notified by FINRA of the date and time of the hearing, and that the operator was unable to reach Mr. Fehn at the phone number provided.” The Securities Arbitration Panel ultimately found CapWest liable and ordered it to pay $7,925,763.00 in compensatory damages, $1,188,863 in attorneys’ fees, and $5,840 in costs. In addition, CapWest was ordered to pay 8 percent per annum interest on the sums awarded.

Published on: January 26, 2012

CPI Corp. Shareholders May Have Valid Securities Arbitration Claim

by InvestorLawyers

A class action suit alleging violations of federal securities laws by CPI Corp. has been commenced in the United States District Court for the Eastern District of Missouri. The class action is on behalf of CPI common stock purchasers from April 20, 2010 to December 21, 2011. As a result of this action, investment attorneys are seeking investors of CPI that have potential claims against the company. Through wholly-owned subsidiaries, CPI is a holding company that sells and manufactures professional portrait photography of individuals, families and young children.

CPI Corp. Shareholders may have a Valid Securities Arbitration Claim

According to the complaint, CPI is charged with violating federal securities laws and issuing materially false and misleading statements. These statements were regarding CPI’s business and financial results. According to plaintiffs’ allegations, CPI concealed the following facts:

The company’s business growing initiatives were not working as represented.

Published on: January 25, 2012

Securities Arbitration May be Only Choice for Defrauded Carlyle Group Shareholders

by InvestorLawyers

Earlier this month, a registration statement was filed with the Securities and Exchange Commission stating that The Carlyle Group L.P. shareholder disputes must be settled in securities arbitration proceedings conducted in Delaware. On January 10, 2012, the amended registration statement was filed as part of the company’s plan to raise a public offering this spring amounting to roughly $1 billion.

Securities Arbitration may be Only Choice for Defrauded Carlyle Group Shareholders

In the landmark arbitration ruling by the Supreme Court in AT&T Mobility v. Conception, the decision was made that courts could not refuse to enforce mandatory arbitration provisions in a consumer agreement. This decision was made on the grounds that the Federal Arbitration Act preempts California law, which viewed these agreements as unconscionable. It is not clear how this ruling applies to shareholder litigation, but the Carlyle Group wants to find out.

The Carlyle IPO is a partnership offering limited partner interests for sale. Because of the partnership structure, common unitholders are more limited than normal shareholders. According to the registration document, unitholder disputes must be conducted by three arbitrators in Wilmington Delaware in individual arbitrations. In the event that the amount at issue is under $3 million, only one arbitrator is necessary.

Published on: January 23, 2012

FINRA Ruling: Citigroup Global Markets Fined $725,000

by InvestorLawyers

On January 18, 2012, the Financial Industry Regulatory Authority — the entity which handles securities arbitration on behalf of investors who have been the victims of stock broker fraud — announced its decision to fine Citigroup Global Markets Inc. for failure to disclose conflicts of interest. The conflicts of interest occurred in research reports and research analysts’ public appearances. From January 2007 through March 2010, Citigroup, in some research reports, failed to disclose certain conflicts of interest related to its business relationships. In addition to the failure to make required disclosures in research reports, Citigroup research analysts did not disclose the same potential conflicts in relevant public appearances that mentioned the covered companies.

“Citigroup failed to make required conflict of interest disclosures which prevented investors from being aware of potential biases in its research recommendations,” says FINRA Executive Vice President and Chief of Enforcement Brad Bennett. “Firms need to provide investors with full and accurate information so they will be able to take it into consideration before making an investment decision.”

Conflicts of interest not included in research reports and analysts’ public appearances included the fact that Citigroup and/or Citigroup affiliates co-managed or managed public securities offerings, would make a market in the related securities, received revenue and/or investment banking from the related securities and/or had ownership in covered companies that amounted to 1 percent or more.

Published on: January 20, 2012

Study Explores Connection Between “Overly Optimistic” Disclosures and Investor Claims

by InvestorLawyers

A recent study published in Accounting Review explored whether firms that use “overly optimistic” language in their disclosures are more likely to be sued by investors. While it is unreasonable to expect a firm to deliberately use language that will cost them business, disclosures should always be grounded in reality — and there is a significant difference between “optimistic” and “overly optimistic.” Overly optimistic disclosures that are not grounded in reality are often cited in securities arbitration claims.

Study Explores Connection Between “Overly Optimistic” Disclosures and Investor Claims

The final sample of the study included 165 lawsuits. All the lawsuits were filed between 2003 and 2008. Types of disclosures that could be viewed as “overly optimistic” included SEC filings, earnings announcements, press releases, presentations at conferences and media interviews. Once the researchers controlled for performance-related and other traits, they found that substantially more optimistic language in disclosures was used by firms that had been sued. According to the authors of the study, “These results indicate a strong link between disclosure tone and litigation. The difference in tone between sued and non-sued firms’ disclosures is consistent with plaintiff allegations that managers issued overly optimistic disclosures during the damage period.”

While a significant portion of securities litigation cases cite material misrepresentations as part of the firm or broker misconduct, “a victorious securities lawsuit requires plaintiffs not only to provide evidence of a material misrepresentation but also to prove intent to deceive,” the authors note.