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Archive for May 2011

May/11

30

Have you Invested in Outrageous ETFs?

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In an article from Forbes.com, May 27, 2011, Zack O’Malley Greenburg writes that a little over a year ago, fund provider Direxion launched an ETF (Exhange Traded Fund) called the Daily Semiconductor Bull 3x Shares. Its aim was to triple the performance of the PHLX Semiconductor Sector Index. Not as simple a task as it seems, apparently: Over the next seven months the index rose 5%, while the Direxion fund returned -6.25%.

Maybe investors should have heeded Direxion’s own disclaimer: “There is no guarantee the fund will meet its stated investment objective.”

This is the way of things in the world of ETFs, writes Greenburg, where offerings have exploded in recent years. Nearly 900 ETFs have been launched over the past five years, leading to a preponderance of funds that straddle the line from obscure to downright bizarre. Among them are leveraged ETFs like the aforementioned semiconductor fund that seek to double or triple the performance of sectors–and don’t always succeed. Examples range from the ProShares Ultra KBW Regional Banking ETF, to the Direxion Daily Agribusiness Bear 3x Shares ETF, which trades under ticker symbol COWS. There is also a smattering of international offerings, which comprised half of all new S&P-based index funds launched last year. Market Vectors parent Van Eck recently announced plans to launch a Mongolia ETF.

Forbes.com writes that there are a few ETFs so outrageous that they’ve already been shut down–for example, the HealthShares Dermatology and Wound Care ETF, shuttered in 2008 due to lack of demand. Others, like the PowerShares Dynamic Brand Name Products Portfolio and the PowerShares Autonomic Allocation Research Affiliates Portfolio, never even made it past the planning stages.

We are reminded that many obscure ETFs like Direxion’s leveraged semiconductor fund can be hazardous to investors who aren’t careful. These leveraged funds are designed for day-traders and backed by derivatives. Though providers warn that these funds are not meant to be held as long-term assets, many investors miss the fine print.

The Forbes.com article says that the SEC launched a review of all funds last March, deferring applications for “actively managed and leveraged ETFs that particularly rely on swaps and other derivative instruments to achieve their investment objectives” in the meantime. There has been a lot of concern generally about derivatives in the last few years, and specifically in our division about the use of derivatives by investment companies, including ETFs,” says Elizabeth Osterman, head of the exemptive applications office of SEC’s Division of Investment Management. “Our decision to defer the review of exemptive applications for derivatives-based ETFs reflects concerns about whether granting exemptive relief for those funds would be consistent with required regulatory standards in light of those concerns.”

Greenburg goes on to say that the SEC hasn’t yet resumed allowing providers to launch new leveraged ETFs, but it hasn’t banned existing products or disallowed existing issuers from creating new ones. The three leading providers of such funds–Direxion, Rydex and ProShares–now have something of a lock on leveraged ETFs. And no matter how outlandish their products may sound, they continue to be popular.

If you have invested in an ETFs and lost your investment, you may have valuable legal rights to be compensated for your losses. Call a Securities Arbitration Lawyer at Soreide Law Group for a free consultation on how to potentially recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com.

Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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May/11

30

Puerto Rico and Global Income Targe Maturity Funds

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Puerto Rico and Global Income Target Maturity Fund, are two funds that are currently being investigated by Soreide Law Group, PLLC.

If you or a family member have purchased Puerto Rico and/or Global Income Target Maturity Funds, call Soreide Law Group, PLLC, for a free consultation about potentially recovering your investment losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com.

Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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May/11

30

Have you Purchased Church Bonds from Mainsail Asset Management, LLC?

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Soreide Law Group, PLLC, is currently investigating the purchase of church bonds from John Lovejoy or the Mainsail Asset Management, LLC, of Scottsboro, AL. 

If you or a family member have purchased church bonds from John Lovejoy or Mainsail Asset Mangement, LLC, call Soreide Law Group, PLLC, for a free consultation about potentially recovering your investment losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com.

Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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May/11

28

Multiple Chinese Companies Listed on U.S. Stock Exchanges Shut Down by SEC

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Throughout 2010, the Security and Exchange Commission (SEC) began an investigation into Chinese companies in the United States that became public through a process called “reverse mergers.”  The term, reverse merger, is also referred to as a reverse takeover or RTO. In an RTO, a Chinese company is acquired by an American “shell” company. An American shell company is a company which already has stock trading in the U.S., but the company does not operate a business or own assets. These Chinese companis merge into the shell. Through this process, the Chinese company can be brought public without the regulatory scrutiny of the Initial Public Offering (IPO) process in the United Sates.

On February 1, 2011, the SEC charged eight individuals and three RTO companies – China Digital, Global Peopleline and m-Wise – in a $33 million fraud. The SEC alleges that defendants engaged in schemes to pump up the price and trading volume  then dumped (sold) millions of shares of these securities into the market making millions of dollars in profits, leaving unsuspecting investors with shares worth next to nothing. Other such examples include China Energy Savings Technology, Fuwei Films, and China Water and Drinks.

The U.S. exchange trade officials have halted the trading of four Chinese companies brought public by WestPark Capital of California. WestPark brought the following four Chinese based companies public: NIVS IntelliMedia (NIV), China Intelligent Lighting and Electronics (CIL), China Century Dragon Media (CDM), and China Electric Motor (CELM). Allegedly to inflate their income statements and assets on their balance sheets.

If you or a family member have lost money in a Chinese company stock listed on a U.S. stock exchange call Soreide Law Group, PLLC, for a free consultation about potentially recovering your investment losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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May/11

26

Wells Fargo, BNY Mellon Corp., Sue Securities America, & other B-Ds over Medical Capital Holdings, Inc.

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In a May 26th., 2011, article from InvestmentNews.com, Bruce Kelly writes, that adding to the cascade of legal troubles for broker-dealers that sold private placements for Medical Capital Holdings Inc., two banks have now sued several independent B-Ds that hawked the failed offerings.

It was reported that the Bank of New York Mellon Corp. and Wells Fargo Bank NA, were trustees for Medical Capital. In fact, both were sued in a class action in 2009 in U.S. District Court for the Central District of California after the Securities and Exchange Commission charged Medical Capital with fraud. But Bank of New York Mellon and Wells Fargo want the broker-dealers to pay up money if they are found liable in those class actions.

On April 29, the two banks filed separate lawsuits against the broker-dealers, including struggling Securities America Inc., claiming that the broker-dealers “breached their obligation to MedCap investors” by selling the product to investors for whom it was not a suitable investment, and failing to make proper disclosure of the notes’ risks. Bank of New York Mellon has sued 13 broker-dealers, seven of which are no longer in business. Wells Fargo has sued six firms, as well as Ameriprise Financial Inc., which owns Securities America, the biggest seller of Medical Capital notes. Not all broker-dealers that sold the product were included in the suit. “We believe the banks’ actions are unwarranted and baseless,” said Janine Wertheim, a spokeswoman for Securities America. “The wrongdoing in this case lies with the principals of Medical Capital, who have been accused of fraud by the SEC.”

Kelly writes that the plaintiffs in the class action against the two banks claimed in a 2010 amended complaint that the two trustees signed off on a request by Medical Capital executives to take $325 million in fees — despite documents for the Medical Capital notes stating that fees were not supposed to come from investor funds. From 2003 to 2008, dozens of independent broker-dealers sold notes of Medical Capital, which raised $2.2. billion. Securities America sold about $700 million of the product and last month agreed to settle with investors who sued the firm in a class action. Investors have lost more than $1 billion in principal, and regulators and the Medical Capital bankruptcy trustees have said the operation was a Ponzi scheme.

The banks’ suits against the B-Ds is at least the third time in the past year that broker-dealers that sold failed private placements or real estate deals have been sued by outside parties such as a trustee or receiver. Last June, the trustee overseeing the receivership of another failed series of private placements, Provident Royalties LLC, sued almost 50 broker-dealers seeking to claw back $285 million, including commissions.

And in November, the bankruptcy trustee for DBSI Inc., which packaged real estate deals and went bust in 2008, sued almost 100 broker-dealers looking to get back about $49 million from the firms.

If you or a family member have become a victim of the alleged fraudulent sale of private placements for Medical Capital Holdings, Inc. by your broker-dealer, call a Securities Arbitration Lawyer for a free consultation on how you could potentially recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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May/11

25

Nuveen Investments Fined $3 Million by FINRA for Use of Misleading Marketing Materials Concerning Auction Rate Securities

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WASHINGTON — On May 23, 2011, the Financial Industry Regulatory Authority (FINRA) announced that it has fined Nuveen Investments, LLC, of Chicago, $3 million for creating misleading marketing materials used in sales of auction rate preferred securities (ARPS). The Nuveen Funds’ ARPS were a form of auction rate securities, which are long-term securities with interest rates or dividend yields that are reset periodically through an auction process. In contrast to other types of auction rate securities, the Nuveen ARPS were preferred shares issued by closed end mutual funds to raise money for the funds to use to invest.

It was reported on the FINRA website that by early 2008, over $15 billion of Nuveen Funds’ ARPS had been sold to retail customers by third-party broker-dealers. Nuveen did not sell the ARPS to customers, but in its role as distributor for Nuveen Funds, it created marketing brochures that were used by the broker-dealers who sold the ARPS to retail customers. The brochures were the primary sales and marketing material Nuveen created for the auction rate preferred securities. FINRA found that the brochures, also available on Nuveen’s website, failed to adequately disclose liquidity risks for ARPS. Nuveen neglected to include the risks that auctions for the ARPS could fail, investments could become illiquid and that customers might be unable to obtain access to funds invested in the ARPS for a period of time should the auctions fail. Instead, the brochures contained misleading statements which described the ARPS as safe and liquid investments. Also, FINRA found that Nuveen failed to maintain adequate supervisory procedures to ensure that the materials it used to market the auction rate preferred securities accurately described the features and risks of the securities.

 Brad Bennett, FINRA Executive Vice President and Chief of Enforcement, said, “Nuveen was aware of facts that raised significant red flags about the ability of investors to obtain liquidity for their Nuveen auction rate securities yet failed to revise their marketing brochures to disclose these risks. This failure deprived investors of important information.”

It was reported that Nuveen failed to revise disclosures in their brochures after a lead auction manager responsible for approximately $2.5 billion of the ARPS notified Nuveen in early January 2008 that it intended to stop managing Nuveen auctions. On January 22, 2008, the lead manager did not submit support bids in an auction for a series of Nuveen auction rate preferred stock and that auction failed. FINRA found that the auction failure and Nuveen’s inability to find a replacement for the lead manager raised serious questions for Nuveen about whether investors in Nuveen’s ARPS would be able to obtain liquidity for the securities in future auctions. Despite this, Nuveen failed to revise its marketing brochures to reflect these risks and, thus, the brochures were misleading. In February 2008, widespread auction failures occurred throughout the auction rate securities market, including auctions for Nuveen funds ARPS.

The Nuveen funds have redeemed approximately $14.2 billion of the $15.4 billion of the ARPS that were outstanding on February 12, 2008. As part of the settlement, Nuveen agreed to use its best efforts to effect redemptions of any remaining outstanding Nuveen funds ARPS. Nuveen neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.

This information was obtained on FINRA’s website.

If you or a family member have become a victim of the alleged fraudulent schemes of Nuveen Investments, LLC, call a Securities Arbitration Lawyer for a free consultation on how you could potentially recover you losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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May/11

25

Lloyd V. Barriger, Monticello, New York Investment Adviser, Charged with Multi-Million Dollar Fraud by SEC

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On May 13, 2011, it was reported on the SEC’s website that the Securities and Exchange Commission filed a civil injunctive action charging Monticello, New York investment adviser Lloyd V. Barriger with fraud in connection with two upstate New York real estate funds he managed – the Gaffken & Barriger Fund, LLC (the G&B Fund or the Fund), and Campus Capital Corp. (Campus). According to the complaint, the G&B Fund raised approximately $20 million from January 1998 until March 2008, and Campus raised approximately $12 million from October 2001 until July 2008. The Commission charged Barriger with defrauding the funds and their investors and prospective investors to whom he offered and sold interests in these funds.

The SEC complaint alleges that Barriger defrauded the G&B Fund itself by (a) allocating the Preferred Return to investors when the Fund did not have sufficient income to justify the allocation; and (b) by, when the Fund lacked the income to support those allocations and payments causing the Fund to pay cash distributions of the Preferred Returns to those Fund investors who requested them, and to redeem investors at values reflecting the purported accrued 8% per year Preferred Return.

Also, the SEC’s complaint, filed in federal court in Manhattan, alleges that from at least July 2006 until March 5, 2008, when he froze the Fund and disclosed to investors its true financial condition, Barriger defrauded investors and prospective investors in the G&B Fund by misrepresenting that the Fund was a relatively safe and liquid investment that paid a minimum “Preferred Return” of 8% per year. The complaint further alleges that Barriger made these misrepresentations knowing, or recklessly disregarding, that the Fund’s actual performance did not justify these performance claims, and without disclosing information about the Fund’s true performance and financial condition – which rapidly deteriorated in 2007 and early 2008 as Barriger continued to raise money from new and existing investors.

Lastly, the complaint alleges that Barriger defrauded Campus and its prospective investors by causing Campus to inject a total of nearly $2.5 million into the G&B Fund between August 2007 and April 2008 at a time when the G&B Fund was in distress, and by raising money for Campus without disclosing to investors his use of Campus’s assets to prop up the ailing G&B Fund. The complaint also alleges that Barriger caused Campus to engage in other transactions that personally benefitted Barriger, none of which he disclosed to prospective Campus investors.

On the Securities and Exchange Commision’s (SEC) website, the complaint alleges that Barriger violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940.

It was reported that in its complaint, the SEC seeks a final judgment permanently enjoining Barriger from future violations of the foregoing provisions and ordering him to pay civil penalties and disgorgement of ill-gotten gains with prejudgment interest.

This information was obtained from the SEC’s website.

If you or a family member have become a victim of the alleged fraudulent schemes of Lloyd V. Barriger, Gaffken & Barriger Fund, LLC, or Campus Capital Corp., call a Securities Arbitration Lawyer for a free consultation on how you could potentially recover you losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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May/11

25

John Hancock to Pay $1 millon to State of Louisiana in Death Benefit Fallout

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In an InvestmentNews.com article by Darla Mercado, May 24, 2011, it was reported that the State of Louisiana will collect about $1 million in a settlement with John Hancock Life Insurance Co. as part of a massive investigation into the insurer’s payment of death benefits. This agreement will go into effect next month, according to an announcement from Louisiana’s Treasury Department. Some 35 states are also participating in the settlement with the insurer.

This is the third such announcement for John Hancock, which last week reached a settlement with Florida that included a $3 million payment to three Florida regulatory agencies. They also agreed to return funds to beneficiaries and to establish a $10 million fund to facilitate payments to beneficiaries who can’t be contacted. In April, John Hancock reached a settlement with California valued at $20 million.

In the InvestmentNew.com article it was reported that an audit into John Hancock revealed that the insurer failed to report unclaimed life insurance benefits properly, according to Louisiana’s Treasury Department.

“In many cases, those who were owed benefits because of the death of a loved one were never even notified,” said Louisiana’s treasurer, John Kennedy. “We will do everything we can to find these families and return the money that rightfully belongs to them.”

Mercado reports that the announcement happens to fall on the same day that regulators in California are holding a hearing with MetLife Inc. executives. State officials plan to question the execs about the carrier’s use of the Social Security Administration’s master death list, as well as its process for notifying beneficiaries who are owed money.

If you or a family member have become alleged victims of non-payment of death benefits through John Hancock Life Insurance Co, or MetLife, or any other life insurance company, contact an insurance fraud attorney for a free consultation on how to recover your investment losses.  To speak with an attorney, call 888-760-6552, or visit stockmarketlawsuit.com. 

We stand up and fight for the rights of consumers. Soreide Law Group, PLLC, representing Insurance Fraud Victims in Federal Court, State Court and before the Financial Industry Regulatory Authority (“FINRA”).

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May/11

23

Chinese Stock Losses

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Did your broker or financial advisor recommend Chinese stock? The past two months have brought a spate of de-listings and trading halts for these Chinese based companies — at least 24 according to the SEC. Forbes’ Walter Pavlo recently detailed a smattering of them:
  • China Electric Motor – Shareholders lawsuit filed claiming underwriters violated federal securities laws by issuing materially false and misleading information.
  • China Natural Gas – Class action lawsuit alleges directors and officers issued materially false and misleading statements. CFO of company resigned in late 2010.
  • Duoyuan Printing - SEC investigating company for fraud, NYSE delisted April 4, 2011
  • China MediaExpress Holdings, Inc. – Deloitte quit as auditor because “no longer able to rely on the representations of management”. CFO resigned. Stock trading halted March 11
  • China Agritech – Shareholder lawsuit pending. Dismissed its auditor Ernst & Young.
  • China Sky One Medical – Under investigation by SEC.
  • Orient Paper, Inc. – Reauditing previous financials due to license issues with previous auditor (Davis Accounting Group)
If your broker of financial advisor recommended the purchase of more than $100,000 of any of these or other “Chinese Corporations” contact Soreide Law Group, PLLC, at 888-760-6552, or visit our website at: www.stockmarketlawsuit.com.

Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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May/11

20

Susan Mae Karn Fined and Suspended by FINRA

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Susan Mae Karn (CRD #5218398, Registered Representative, Wimbledon, North Dakota)

submitted a Letter of Acceptance, Waiver and Consent in which she was fined $5,000 and suspended from association with any FINRA member in any capacity for six months. The fine must be paid either immediately upon Karn’s reassociation with a FINRA member firm following her suspension, or prior to the filing of any application or request for relief from any statutory disqualification, whichever is earlier. Without admitting or denying the findings, Karn consented to the described sanctions and to the entry of findings that she allowed a customer to sign relatives’ names on life insurance applications, and before Karn submitted them for processing, she signed the insurance applications and certified that she had witnessed each of the proposed signatures on the insurance applications. The findings stated that Karn falsely certified on the Representative’s Information Supplement document for each insurance application that she had personally seen each proposed insured at the time the application was completed. The findings also stated that one of Karn’s clients completed an application to purchase a municipal bond fund by signing her name on an electronic signature pad, and later that same day, Karn signed the client’s name on the electronic signature pad and thereby affixed the client’s signature on an application without the client’s authorization, consent or knowledge.

The FINRA findings also included that the application Karn’s member firm processed and sent to the client reflected the signature Karn had affixed rather than the client’s authentic signature. FINRA found that when the firm questioned Karn about the authenticity of the client’s signature, Karn initially stated it was the client’s original signature, but when questioned further, admitted she had signed the client’s name and in doing so, Karn misled her firm during its internal investigation into a customer complaint.

The suspension is in effect from March 7, 2011, through September 6, 2011. (FINRA Case #2010022067901)

This information was obtained on FINRA’s website.

If you or a family member have become  victims of the alleged fraudulent schemes of Susan Mae Karn, or have experienced a similar situation, call a Securities Arbitration Lawyer for a free consultation on how you could potentially recover you losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com.

Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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