stock broker fraud

Published on: February 8, 2012

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

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 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 18, 2012

SEC Warning: Social Media Fraud

by InvestorLawyers

The Securities and Exchange Commission (SEC) has issued two investor alerts regarding the use of social media sites as a means for perpetuating investment fraud. Investors who have been the victims of fraud through social media are encouraged to seek the council of an investment attorney to find out about their legal rights and options for recovering their losses.

SEC Warning: Social Media Fraud

On January 4, 2012, the SEC charged an Anthony Fields with offering to sell fictitious securities. The Illinois-based investment adviser “offered more than $500 billion in fictitious securities through various social media websites,” according to an SEC press release. Fields’ two sole proprietorships are Anthony Fields & Associates (AFA) and Platinum Securities Brokers. “Fields provided false and misleading information concerning AFA’s assets under managements, clients, and operational history to the public through its website and in SEC filings.”

Furthermore, Fields claimed to be a broker-dealer but was not registered with the SEC, did not maintain proper books and records and did not have adequate compliance policies and procedures in place.

Published on: January 12, 2012

Investment Attorneys Seeking Victims of Self-Directed IRA Fraud

by InvestorLawyers

Stock fraud lawyers are seeking clients that have been the victim of stock broker fraud through the use of self-directed IRAs. Self-directed IRAs are held by a custodian or trustee and allow for investment in a broader set of assets than traditional IRAs. The custodial processes associated with self-directed IRAs gives investors a sense of security and protection. However, this is often not the case. Because self-directed IRAs’ owners are able to hold unregistered securities, due diligence is often neglected by custodians. As a result, these investments are often a vehicle of stock broker fraud.

Investment Attorneys Seeking Victims of Self-Directed IRA Fraud

The most common IRA custodians are broker-dealers and banks. In traditional IRAs, holdings are limited to mutual funds, CDs, firm-approved stocks and bonds. However, custodians for self-directed IRAs may invest in promissory notes, tax lien certificates, real estate and private placement securities. Investments that tie up retirement funds for a time period that is too long, fail to diversify in order to reduce possible loss or contain a risk for loss that is too high are in breach of advisers’ fiduciary duty and brokers’ suitability standard. In addition, early withdrawals come with a penalty that encourages money remains tied up in them longer.

Another significant danger of self-directed IRAs, and a reason they become a target for fraud promoters, is that they often do not require the custodian or trustee of the IRA to perform audits or keep accurate records.

Published on: November 25, 2011

Mutual Fund Fraud

by InvestorLawyers

Mutual funds are popular with investors because they consist of multiple stocks, meaning if one stock does poorly in the market, it doesn’t necessarily lower the entire mutual fund portfolio. Even so, mutual fund portfolios can be designed to be either very conservative or very risky. Mutual funds can include a variety of stock types or can be organized into specific industries like technology, healthcare, etc.

Mutual Fund Fraud

Two ways investors can be victims of fraud through mutual funds are churning and break point fraud:

Churning: As market condition change, a stockbroker may suggest switching to a different mutual fund. If the new fund is within the same company as the old one, the investor usually doesn’t have to pay a commission. However, if the new fund comes from a different company, the investor must pay commissions and fees on the transaction. If the stockbroker encourages switching to a different company despite suitable options within the same company or attempts to generate commissions by encouraging the investor to switch multiple times to different companies, they may be “churning.”

Published on: November 16, 2011

2010 Saw 51 Percent Rise in Securities Fraud Enforcement Actions

by InvestorLawyers

The North American Securities Administrators Association (NASAA) released its annual report last month on enforcement actions to fight securities fraud. The report compares the data on securities fraud enforcement actions from 2010 to that of 2009. According to the report, the number of actions pursued in 2010 rose 51 percent, a major jump from 2009. In addition, the report notes a 10 percent increase of securities fraud violations, a 9 percent increase in unregistered securities violations and a 24 percent increase in unregistered individual violations.

Other reported statistics include:

7,000 total investigations, 3,475 of which led to enforcement actions

Published on: November 10, 2011

Investors Beware of Promissory Note Scams

by InvestorLawyers

One of the most prominent ways fraudsters are currently targeting investors is through promissory note scams. According to Pat Huddleston, former Security and Exchange Commission enforcer and author of the book “The Vigilant Investor,” promissory note scams are “exploding” — in no small part due to the nature of the scam, which appears to be a reasonable business investment opportunity.

Investors Beware of Promissory Note Scams

What makes promissory note scams so tricky is that investors assume the contract is legally binding. In addition, the fact that the promissory notes promise a return of your investment within nine months, plus interest, promotes the investment as safe. According to Huddleston, “It’s usually a one-page, simple contract that says, ‘I promise to pay the investor this amount of money with these amount of gains at this interest rate by this date.’”

To make the scam seem more reputable, the scammers frequently quote part of the Securities Act which appears to say that the note doesn’t have to be registered with the Securities and Exchange Commission provided its duration is nine months or less. While this is an actual section of the Securities Act, what most investors don’t know is that the exception only applies to the kinds of things that major corporations exchange, like high-grade commercial paper. This section of the act does not apply to the types of notes the average investor can invest in.

Published on: October 21, 2011

FINRA Supports ‘Joining Forces’ Initiative

by InvestorLawyers

A press release from the Financial Industry Regulatory Authority (FINRA) Investor Education Foundation on October 6 announced FINRA’s support of the First Lady and Dr. Jill Biden’s “Joining Forces” initiative.

“Joining Forces is a comprehensive national initiative to mobilize all sectors of society to give our service members and their families the opportunities and support they have earned,” the release notes. “Joining Forces provides ways for all Americans to step up and show their gratitude to our service members and their families.”

The FINRA Investor Education Foundation will expand the Foundation’s Military Financial Education Project, giving 50,000 service members and spouses FICO scores, free of charge. This will double the number of persons currently receiving these scores, which are a vital credit tool. FICO helps drive smarter decisions by delivering superior predictive analytics solutions by predicting consumer behavior through the use of mathematics. A FICO score is the United States’ standard measure of consumer credit risk. In addition to the increased cost-free FICO scores, the foundation will be developing educational videos that will aid the National Guard in helping its service members avoid investment and stockbroker fraud and managing their finances. The videos even train military spouses so that they may act as financial counselors.