Securities Fraud Blog | Find out if your broker is liable for your losses

TAG | elder abuse

Jun/11

28

Did You Experience Significant Losses with Morgan Keegan?

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Morgan Keegan Fund Losses*
Ticker Bond Fund 2007 2008
RMH RMK High Income Fund (-)58.0% (-)39.0%
RHY RMK Multi-Sector High Income Fund (-)60.6% (-)44.5%
RMA RMK Advantage Income Fund (-)56.9% (-)39.1%
RSF RMK Strategic Income Fund (-)58.1% (-)42.0%
RHICX RMK Select High Income-C (-)59.9% (-)45.9%
MKHIX RMK Select High Income-A (-)59.7% (-)46.1%
RHIIX RMK Select High Income-I (-)59.6% (-)46.0%
RIBCX RMK Select Intermediate Bond Fund-C (-)50.6% (-)66.6%
MKIBX RMK Select Intermediate Bond Fund-A (-)50.3% (-)66.5%
RIBIX RMK Select Intermediate Bond Fund-I (-)50.1% (-)66.5%
*Information accurate as of July 1, 2008 (4:25 CST) c/o Morningstar.

Soreide Law Group, PLLC, is currently investigating, for several clients, Morgan Keegan fund losses.

Morgan Keegan allegedly marketed the funds as safe investments that were suitable for low-risk investors. When the housing market crashed in 2007, the funds fell in value. Investors meanwhile experienced huge financial losses.

Many lawsuits and arbitration claims have been filed against Morgan Keegan, as well as against several of the company’s top executives. Evidence has continued to back up investors’ claims that the Memphis-based brokerage allegedly misled clients when it marketed and sold the bond funds.

Additional charges came in April, 2010, when the Securities and Exchange Commission, (SEC) state regulators and FINRA charged Morgan Keegan and two employees – James Kelsoe and Joe Weller – with fraud for inflating the value of the risky securities held by the bond funds.

If you or a loved one have lost money in an RMK bond fund, call Soreide Law Group, PLLC at (888) 760-6552 and speak to a FINRA Arbitration Lawyer free of charge to discuss how you could potentially recover your losses, or visit http://www.stockmarketlawsuit.com.

 

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Jun/11

14

INVESTMENT ADVISER, FUND MANAGER, AND TWO INDIVIDUALS WITH CHARGED BY SEC WITH SECURITIES FRAUD INVOLVING CLIENT FUNDS

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Recently on the US Securities and Exchange Commission’s website, they announced the filing of a civil injunctive action in U.S. District Court in Los Angeles, California against MAM Wealth Management, LLC (MAM), MAMW Real Estate General Partner, LLC (MAMW), Alex Martinez and Ralph Sanchez, alleging fraud in connection with client investments in a $10.3 million risky real estate venture.

According to the Commission’s complaint, from July 2007 through March 2009, Martinez, a MAM and MAMW principal, and Ralph Sanchez, a MAM registered representative and MAMW principal, had 50 of their advisory clients invest in MAM Wealth Management Real Estate Fund, LLC (Fund). The complaint alleges that Martinez and Sanchez misrepresented to some clients that the Fund was a safe, relatively liquid investment, was earning 9% per year, and would show profits in three years. The complaint alleges that they used their discretionary authority over other clients’ funds to invest them in the Fund, even though it was unsuitable for their conservative investment goals. The complaint alleges that many accounts were retirement accounts and that the Fund was an unsuitable investment for clients who did not have the ability and willingness to accept the risks of losing their entire investment. The complaint further alleges that the defendants caused the Fund to use client funds to make risky mortgage loans.

On the U.S. Securities and Exchange Commission’s website they write that there was a complaint alleging that the defendants have violated the antifraud provisions of the federal securities laws, including violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder by MAM, MAMW, Martinez and Sanchez and Sections 206(1) and 206(2) of the Investment Advisers Act by MAM and Martinez and aiding and abetting violations of Sections 206(1) and 206(2) of the Investment Advisers Act by Sanchez. The SEC seeks permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest, and monetary penalties.

If you feel you or a family member has become an alleged victim of  MAM, MAMW, Alex Martinez, Ralph Sanchez or any of their brokers, or a similar situation, call a Securities Arbitration Lawyer for a free consultation on how to recover 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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Jun/11

12

Report Says That Structured Products Are ‘Absurdly Destructive’ for Retail Investors

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In a June 10, 2011, article in InvestmentNews.com, Liz Skinner writes that structured notes and other derivatives products have been marketed by Wall Street as safe and secure investments. Of course, Skinner writes, there’s safe and then there’s safe. Retail investors of all stripes have lost at least $113 billion by purchasing these purportedly safe instruments, according to a new study conducted by the nonpartisan policy center Demos and The Nation Institute, a media think tank.

“In my three decades of Wall Street experience, I have not seen any other product as absurdly destructive as retail investments linked to structured products,” securities arbitration consultant Louis Straney wrote in the report.

Considering financial institutions appear to be ramping up the sales of these products,that’s worrisome. Indeed, structured notes with principal protection are among the most popular products being pitched to income-oriented investors, the study said. These investments combine a zero-coupon bond and an option whose payoff is linked to an underlying asset, index or benchmark, or a basket of benchmarks. The notes, which pay off based on the performance of the linked index, can provide reasonable returns and upside potential — certainly attractive given today’s puny money market and CD rates.

Liz Skinner writes that last year, banks and brokers sold more than $52 billion in structured notes, according to the study. In the past, the notes were sold strictly to sophisticated institutional investors. In recent years, however, structured notes have been repackaged and sold to retail investors — often, senior citizens —as a principal protection tool. But as the name implies, structured products can be complex. Last week, regulators warned investors that structured notes with principal protection often come with confusing terms, low guarantees and can tie up money for as long as a decade. The alert from the Securities and Exchange Commission and the Financial Industry Regulatory Authority Inc. stressed that the investments are not risk-free.

The SEC said principal-protected notes vary wildly by issuer and that investors tend to ignore or don’t understand what is spelled out in prospectuses. Also, the commission warned that principal-protected notes do not always protect principal. Some issuers of principal-protected notes guarantee only a certain amount of the principal — in some cases, as little as 10%. Sometimes, the principal is protected only if a contingency stipulated in the prospectus is met. Other sellers of the notes do guarantee 100% of principal. But even that’s not a lock. If the issuer of the note goes bankrupt, the investor likely will lose all or most of the money invested.

The InvestmentNews.com article goes on to say that in April, for example, UBS Financial Services Inc. agreed to pay $10.7 million in fines and restitution to settle Finra allegations that its advisers misled investors about the “principal protection” feature of structured notes issued by Lehman Brothers Holdings Inc. that it sold a few months before that firm collapsed. In its complaint, Finra said that some UBS advisers didn’t understand the complexity of the 100% principal-protected notes that Lehman issued and failed to tell investors that they were unsecured obligations. In settling the case without admitting wrongdoing, UBS said that it was pleased to have the matter resolved and that most structured-product sales had been done properly.

Skinner writes that the Securities Industry and Financial Markets Association, which represents most Wall Street firms, did not respond to a request for comment Thursday about the suitability of structured products for retail investors.

They Are A Scared Group

The $113 billion that the report said individuals have lost includes more than just investments in principal-protected notes. It also included auction-rate securities, as well as certain municipal bond hedge funds (as reported by regulators or lawyers monitoring losses).

“Ninety-nine percent of the $113 billion cited is not to be attributed to the structured products industry, in particular principal-protected notes, which by and large have performed superbly in this volatile market environment,” said Keith Styrcula, spokesman for the Structured Products Association.The only losses from structured notes have been those from the Lehman bonds — probably less than one billion dollars in the U.S., he said.

Abuses relating to structured products and/or derivatives have been reported in about a third of the 50 states. The director of Alabama’s securities commission, Joe Borg, said he’s looking into cases involving income-oriented investments that lost money.

“There’s no doubt that structured products are targeted toward older folks,” Mr. Borg wrote in the report. “There’s the issue of outliving their money when it is tied up in low-yielding CDs and bonds. They’re a scared group.”

If you feel you have been an alleged victim of  your broker/brokerage selling you unsuitable structured notes, please call a Securities Arbitration Lawyer for a free consultation on how to 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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Jun/11

8

Did You Invest In Simply Fit Beverage Company’s Private Placement?

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Soreide Law Group, PLLC,  is currently investigating the Simply Fit Beverage Company’s private placement offered by Rockwell Global Capital.

Simply Fit Beverage Company was located in South Florida and raised capital through Rockwell Global Capital. If you or a family member invested in Simply Fit through Rockwell Global Capital, 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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Jun/11

7

David Lerner & Associates Charged By FINRA With Soliciting Investors to Purchase REITs Without Fully Investigating Suitability

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WASHINGTON — On FINRA’s website, The Financial Industry Regulatory Authority (FINRA) announced May31,2011, that it has filed a complaint against David Lerner & Associates, Inc. (DLA), of Syosset, NY, charging the firm with soliciting investors to purchase shares in Apple REIT Ten, a non-traded $2 billion Real Estate Investment Trust (REIT), without conducting a reasonable investigation to determine whether it was suitable for investors, and with providing misleading information on its website regarding Apple REIT Ten distributions. DLA has sold and continues to sell Apple REIT Ten targeting unsophisticated and elderly customers with unsuitable sales of the illiquid security.

FINRA’s complaint goes on to say that since January 2011, as sole underwriter for Apple REIT Ten, DLA has sold over $300 million of an open $2 billion offering of the REIT’s shares. Apple REIT Ten invests in the same extended stay hotel properties as a series of other Apple REITs closed to investors. Apple REIT Ten and the closed Apple REITs were founded by the same individual, and are all under common management. DLA has been the sole underwriter for Apple REITs since 1992, selling nearly $6.8 billion of the securities into approximately 122,600 DLA customer accounts. DLA earns 10 percent of all offerings of Apple REIT securities as well as other fees. Apple REIT sales have generated $600 million for DLA, accounting for 60 to 70 percent of DLA’s business annually since 1996.

 This complaint against David Lerner & Associates (DLA) alleges that since at least 2004, the closed Apple REITs have unreasonably valued their shares at a constant price of $11 notwithstanding market fluctuations, performance declines and increased leverage, while maintaining outsized distributions of 7 to 8 percent by leveraging the REITs through borrowings and returning capital to investors. As sole distributor, DLA did not question the Apple REITs’ unchanging valuations despite the economic downturn for commercial real estate.

 The FINRA article goes on to say that in its solicitation of customers to purchase Apple REIT Ten, DLA’s website provided distribution rates for all of the previous Apple REITs. These distribution figures were misleading and omitted material information because they did not disclose recent distribution rate reductions or that distributions far exceeded income from operations and were funded by debt that further leveraged the REITs.

 FINRA alleges that DLA failed to sufficiently investigate the valuation and distribution irregularities of the closed Apple REITs prior to selling Apple REIT Ten. As the sole underwriter of all of the Apple REITs, DLA was aware of the Apple REITs’ valuation and distribution practices. Rather than conduct due diligence into those valuations and distribution irregularities to determine that they were reasonable and that the Apple REITs were suitable, DLA accepted the valuations and continued to record them on customer account statements.

 This issuance of a disciplinary complaint represents the initiation of a formal proceeding by FINRA in which findings as to the allegations in the complaint have not been made, and does not represent a decision as to any of the allegations contained in the complaint. Under FINRA rules, a firm or individual named in a complaint can file a response and request a hearing before a FINRA disciplinary panel. Possible remedies include a fine, censure, suspension or bar from the securities industry, disgorgement of gains associated with the violations and payment of restitution.

This article was obtained on FINRA’s website.

If you or a family member have become a victim of the alleged fraudulent schemes of David Lerner Associates, Inc., 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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Jun/11

6

Broker-Dealers Often Keep Insurance Licenses After Being Fired

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In an article from InvestmentNews.com, May 29, 2011, Bruce Kelly writes that Neal Smalbach was fired by a broker-dealer in 2008 for selling securities while he was unregistered, an infraction that got him suspended by the Financial Industry Regulatory Authority Inc. (FINRA) for six months, according to the organization’s BrokerCheck system. It was the second time that a securities firm had let him go. Though he no longer had a securities license, Mr. Smalbach still had a license to sell insurance, and made good use of it — at least for himself, authorities said.

Kelly writes that on April 29, Mr. Smalbach was arrested in Florida by the Pinellas County sheriff and charged with one count of insurance fraud and one count of organized fraud. Each count carries a maximum of five years in prison, along with a potential $5,000 fine. The charges of insurance fraud against Mr. Smalbach, who also has 37 pending customer disputes from his time as a broker, according to BrokerCheck, highlight a persistent problem in the investment advice business:

Registered representatives who permanently or temporarily lose their license to sell stocks, bonds and mutual funds often retain a license to sell insurance.

Although state agencies that regulate insurance agents and securities brokers try to work together to keep an eye on brokers who get fired from either side of the industry, regulators are sometimes limited in their authority because of a lack of information sharing about reps and agents, observers said.

A common criticism among registered reps is that insurance agents who lose a license to sell securities products often sell equity-indexed annuities, an insurance product that is nonetheless marketed as an investment that can compete with a mutual fund or variable annuity.

“It’s been an issue, and still is, among states,” said Joseph Borg, director of the Alabama Securities Commission. “If you’ve been kicked out of one end of the financial markets, you probably don’t need to be in another.”

According to the InvestmentNews.com article, Mr. Smalbach, 48, was selling mortgage insurance policies that promise to pay the balance of a policyholder’s mortgage in the event that he or she dies, according to Jeremy Powers, an assistant state attorney in Florida’s Fifth Judicial Circuit. But instead of mortgage insurance, Mr. Smalbach’s clients were, in fact, sold whole-life policies that were worth no more than $20,000.

“Somebody who’s had the level of problems that [Mr.] Smalbach appears to have had would create a risk for consumers,” Mr. Powers said. “The activities alleged in this case are pretty serious and had the potential to create multiple hundreds of thousands of dollars in victim losses.”

 Smalbach, whose sales practices were profiled last month by the St. Petersburg (Fla.) Times, serve as a backdrop to efforts by lawmakers in Washington and regulators across the country to create a single fiduciary standard for investment advisers, registered reps and insurance agents. This year, a law went into effect in Florida that gives the state’s Department of Financial Services the power to revoke an insurance agent’s license immediately if the agent has his or her securities license revoked.

“Fraud is fraud,” said Nina Ashley, a department spokeswoman.

Kelly reminds us that when confronted with a broker whose securities license had been pulled — but who maintained an insurance license — regulators’ hands are, at times, tied. To take actions against a broker’s insurance license, Ms. Ashley said a specific insurance violation has to be found. “That didn’t always exist,” she said.

Florida already has used the new law to revoke the insurance license of a broker who misrepresented information when selling securities to a senior citizen, Ms. Ashley said. In February, the Florida Office of Financial Regulation permanently barred Jeffrey Donner on charges that he failed to disclose to clients that their accounts would automatically be billed advisory fees of 30% annualized, according to a statement from the agency. Approximately $40,000 in management fees were deducted from clients’ accounts. While Mr. Donner neither admitted nor denied the findings, Florida regulators revoked his insurance license this month according to the InvestmentNews.com article.

THEY ARE FINDING LOOPHOLES

We’ve learned that Mr. Smalbach, however, still has a license to sell insurance products such as life and health policies, and variable annuities, according to the Florida Department of Financial Services’ website.

The broker in question exploited another loophole in the law when he sold stock in a firm called Transfer Technology International Corp., whose shares are currently listed at less than a penny a share. At least a dozen elderly investors, some in their 80s and 90s, bought nearly $1 million of the stock from Mr. Smalbach, according to the St. Petersburg Times. Although he didn’t have a securities license, Mr. Smalbach was an employee of Transfer Technology and could sell shares in the company to accredited investors legally, the newspaper reported.

THEY ARE SMOOTH OPERATORS

Bruce Kelly writes that one longtime client of Mr. Smalbach who invested in the Wesley Chapel, Fla.-based company was Bob Fox, 78, of Sebring, Fla. A client of Mr. Smalbach’s for over a decade, Mr. Fox said he has lost $100,000 in his Transfer Technology investment.

“He was a really smooth talker,” Mr. Fox said, adding that Mr. Smalbach often hurried him through paperwork when buying an investment.

Mr. Smalbach’s former accountant, Robert Ferreira, corroborated Mr. Fox’s statement said the ex-broker often rushed clients through the process of buying investment products, including variable annuities.

“His method was to say, “Sign here, fill in this and that — I’m in a hurry and will fill in the rest at the office,’” Mr. Ferreira said.

If you or a family member have purchased policies through Neal Smalbach or other brokers and experienced a similar situation, contact an insurance fraud attorney for a free consultation on how to potentially 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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Jun/11

5

Finra files complaint against David Lerner Associates For REIT Sales to Elderly

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In a June, 2011, article from Bloomberg News, it was written that David Lerner Associates Inc. has been accused of targeting unsophisticated and elderly customers while selling real estate investment trust (REITs) shares without considering whether the illiquid security was suitable for its clients.

David Lerner Associates is based in Syosset, New York, and known for its “Take a tip from Poppy” advertising slogan, misled investors who bought more than $300 million of shares in the $2 billion Apple REIT Ten offering this year, the Financial Industry Regulatory Authority(FINRA) said in a disciplinary complaint on its website. The firm denies the allegations, according to a statement.

It was reported in the Bloomberg News article that David Lerner Associates solicited customers for Apple REIT Ten, it provided misleading information about distribution rates for a series of predecessor securities that are now closed to investors, Finra said. The figures failed to show that distributions far exceeded income and were funded by debt that increased leverage in the REITs, which invest in extended-stay hotels, the regulator said.  David Lerner Associates has sold almost $6.8 billion of Apple REIT shares to more than 122,000 customers since 1992, according to the Finra complaint, the industry-funded regulator for U.S. brokerages. Those sales have generated more than $600 million, accounting for more than 60 percent of the firm’s business since 1996, Finra said.

This complaint is the first step in a formal proceeding, Finra said. It isn’t filed in court, and the firm can request a hearing before a disciplinary panel, the regulator said in its statement.

“The firm conducted thorough due diligence of Apple REIT Ten’s offering documents and audited financial statements,” DLA said in its statement. “DLA will vigorously defend these claims. It looks forward to the opportunity to set the record straight and expects to be completely vindicated.”

Also, in the Bloomberg News article it was stated that in September, DLA paid a $255,000 fine for failing to provide required information in connection with the replacement of variable life insurance policies and annuity contracts from November 1998 through February 2004, according to the New York State Insurance Department. A year ago this month, DLA was accused by Finra of overcharging customers on sales of municipal bonds and mortgage securities. That case is still pending, according to Finra’s brokerage records.

If you or a family member have become a victim of the alleged fraudulent schemes of David Lerner Associates, Inc., 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

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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